All of us, we clearly root for the small business owner who manages a hundred tasks on their own. From admin activities to part-time recruitment activities and from presenting hard-nosed sales pitches to clients to cutthroat bargaining with vendors – the small business owner does it all. But, there are things that the small business owner can’t pull off just as convincingly. And, the only reason why it matters so much is that it can cost them hundreds and thousands of dollars, which threatens to undo all the savings and revenue that the small business owner has generated so far. We are talking, of course, about the common mistakes that small business owners make while filing tax returns. The arrival of the tax return date is a mere inevitability; it’s time we prepare well in advance. And, with that goal, we welcome you to part II of our 3-part ‘Accounting Blunders’ series.
You know you are essentially taxed for all income you generate. Inaccurate reporting of all income you generate is a bad idea since it directly affects the integrity of your tax returns. This also applies to any income you may generate from any freelance venture you partake in. The one thing you can be certain about is that the Canadian Revenue Agency or the CRA keeps a close watch on your transactions and an inaccurate display of the income you generate is a direct cause of concern for the CRA.
New business owners might be forgiven for their lack of information on the subject. But, most small business owners have a vague idea about the list of small business deductibles that are eligible for a tax deduction. Tax specialists or tax shelter accountants never fail to account for all these deductibles, which add up to save you a tremendous amount of money. For instance, were you aware that you were eligible to deduct some of the traveling and food expenses that you incur whilst on a business trip? Not every business owner is aware of these deductibles and that results in genuine taxation blunders.
As a rule, it’s always important to remember that both the sides of the spectrum have its problems. You might end up in serious trouble with the CRA if it comes to their notice that you’re hiking the extent of tax deductions you’re entitled to. For instance, inaccurate documentation of the value of your assets is problematic since that compromises the accuracy of your statement. We have also witnessed instances of business owners attempting to take unfair deductions from their real estate property. For example, consider a business owner claiming 100,000 dollars in real estate losses whilst generating a profit of 200,000 dollars. The end result was a hefty penalty; courtesy of the CRA tax specialists. Approach tax shelter accountants to learn more about what you can and can’t deduct.
Are you handling the tax returns for your own company? Or, have you hired a railroad accountant to oversee the ‘dirty business’? In that case, you’re probably more vulnerable to the sillier mathematical and computing errors that otherwise wouldn’t escape the eye of a hawkish tax shelter accountant.
Mathematical errors that you make while transferring figures from one system to another or making a silly error such as misreading ‘3858 dollars’ as ‘5358 dollars’ can turn out to be a potentially fatal mistake as you realize your balances just don’t seem to meet. Even if you manage to spot the mistake before you turn to a tax specialist, it would happen after wasting hours and hours of valuable time better spent elsewhere. On the other hand, business owners are also prone to making computation errors, as they fail to adequately differentiate the sum of essential taxable income from estimated tax payment. Also, there is uncertainty about the accuracy of the figure of the ‘estimated tax payment’ the business owner has arrived at.
Our world functions in patterns, and more patterns. The CRA has identified a certain set of patterns that are relevant to its populous. Consistency is crucial, and any attempt at a deliberate divergence is certain to catch the notice of the CRA. For instance, a sudden increase in entertainment expenses is sure to attract attention. The problem with attracting unwanted attention is that your business will also be monitored with further minuteness during the next accounting cycle, and the one after that.
How to counter this problem of apparent irregularity? By being regular with your paperwork, of course. You need not worry about CRA scrutiny if you’re sure you’ve filed your tax returns to the best of your knowledge. The CRA can’t help but accept any irregularities they might witness in your paperwork if you come prepared with all the requisite slips and receipts to back up the results you’ve arrived at. After all, it is a fraud that the CRA is trying to detect, not pester honest, hardworking businesses owners such as you.
By all means, you can file your returns on your own. But, the lack of specialization on your part renders you vulnerable to making potentially costly errors. Yes, it’s certainly an investment to hire a specialist team, such as that of Altitude Accounting. But, that investment will validate itself when you realize how you breezed through the tax returns process, how you avoided personal audits, and how you managed to save your hard-earned dollars where there was scope to save them. So, if you find yourself struggling with tax management, contact us, and we’ll take away your worries.
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