All self-employed persons are required to annually prepare and file a tax return to report their business activities. If you have earned self-employment income from a business you operate yourself (or with a partner), you will be required to declare your earnings on your personal tax return. Business income is money that you have earned by selling products or performing a service. Sometimes people have other revenue streams which add to their income such as rental, investment, employment or pension income.
How people record their business transactions is as individuals as the businesses they operate. Most businesses have good records of their income as they usually have invoices, till tapes, or deposits but expenses often end up piling up for input or stuffed in a shoe box for the accountant. Even people who keep every receipt forget what they’re for. The effort taken to set up a structured system will save you time in the long run. It doesn’t have to be fancy; it just has to work whether it’s a spread sheet or software.
You’ve likely spent cash over the year to run your business. A few common business expenses are promotion, meals and office supplies. If your vehicle is used for business, you may be able to claim a portion of the vehicle’s fuel, repairs, insurance, etc. If you operate your business from home, a portion (relates to the size of your dedicated office square footage) of your home expenses can also be expensed. Claiming all of your business-related expenses is especially important for two reasons: You are subtracting your expenses from your income which translates to less tax due. As a self-employed person, you are responsible for both your share of Canada Pension Plan contributions as well as the employer’s share.
Ultimately, by annually filing your income tax you will get a much clearer idea as to the overall health of your businesses. As an agency that supports small business, we advocate keeping up on annual filings of income tax, GST and PST filings and Employee Source Deductions. Government remittances are the primary area that we see small businesses struggle. Often, they come to us seeking advice on how to get back on track. Financial institutions require up to date financial statements and evidence tax submissions if you are seeking financing or as a routine maintenance of your current financing.
Tax time can be good time to step back, take account and determine if your business record keeping is set up in the most efficient way. Maybe it’s time to bring a professional bookkeeper and or an accountant in, leaving you to do what you do best.
Jolynn Green is Executive Director of Community Futures Central Island. Jolynn can be reached at firstname.lastname@example.org or 250-591-7499.