According to the GAO (Government Accountability Office in the United States) it is estimated that a “typical” small business person overpays their taxes by (on average) $11,000 per year. I dare say that, on average, we Canadian small business owners leave just as much money on the table.
As contractors, small business or home-based business owners, we are in the business of making money… yes? So, if we captured an additional $10,000 in legitimate deductions, and hypothetically were in a 25% tax bracket, that could translate to an annual increased cashflow of $2,500. Money we can put back into our business or our jeans, as the case may be.
It is imperative that as small business owners we take full advantage of every tax deduction allowed. To do this we need to make sure that we:
- Track and log all of our business related mileage. The CRA states that to “support the amount you can deduct, keep a record of the total kilometres you drive and the kilometres you drive to earn income.” We might as well be throwing Loonies out our car window if we aren’t tracking this one.
- Log each and every business related expense. I’ve been told to keep receipts for every expence, even the ones I’m not sure about; my accountant will let me know what’s allowed. And, it’s imperative that we make sure that the receipt has all the required information – particularly the vendor’s name and the date of the purchase – and that all information on the receipt is clear. If the receipt doesn’t contain this information you are creating headaches for yourself and/or your bookkeeper/accountant when it comes time to compile your records.
- Talk to our accountant or tax specialist. Get their advice and let them help maximize your business related tax deductions.
The bottom line: obtain receipts (and keep them safe) and track/log your business related mileage. To accurately track expenses there are countless options out there including the primordial pen & notebook or, if you look, you’ll likely find “there’s an App for that” too.
How much of your business income are you going to donate to Ottawa in 2012?
Deborah Bose is an owner of Meridian Fortune Alliance. A lifelong entrepreneur, her passion is turning goals into results and implementing wealth creation strategies. Take action to increase your net wealth – capture your mileage and expenses as they occur: using TaxBot …. or not.