2014 Small Business Tax Tips from Liberty Tax

It’s that time of year again! Tax time! If you’re a Canadian “micro” small business owner, you might be able to benefit from the variety of tax write-offs that the Canada Revenue Agency has designed just for you. Our guest blogger, Karthiga Ram , Tax Support and Customer Service Assistant of Liberty Tax Service‘s Canadian office reviews some simple tax tips that can help you stave off the tax man.

Tax Tip #1 – Maximize Your Allowable Home Office Expenses
Most Canadians operating a home office will already know about the benefits of writing off the portion of the house being used for business. But did you know you can write off a portion of your cleaning services, home insurance, gas, hydro, mortgage interest and property taxes too? In addition to that, you can write off reasonable purchases you need to equip your home office, such as a coffee maker, office supplies, pictures and furniture. And, don’t forget to claim the depreciation on your major office equipment, such as copiers and computers as capital cost allowances.

Hint: The easiest way to keep track of these office expenses is to use a dollar-store accordion-style file folder, labelled with each expense per tab. Keep the file folder somewhere handy and simply file the receipts for your expenses, as you incur them, over the course of the year.

Tax Tip #2 – Maximize Your Allowable Car Expenses
Most micro-entrepreneurs use personal vehicles to conduct business. So be sure to keep all your gas receipts, oil change and repair receipts and interest on your car loan in that handy file folder, as the CRA will allow you to write off a percentage of those expenses, too. In addition to the expense write-offs, you can calculate the annual depreciation of your car, another great capital cost allowance.

Tax Tip #3 – Maximize All Other Expenses
Do you use an independent group health plan? Do you take clients out to lunch? Do you spend money to advertise your small business, incur website hosting fees and business phone bills? Do you incur bank fees? Do you attend industry conferences, events and have professional membership dues? CRA will allow you to write off all of these types of expenses.

Tax Tip #4 – Make a Charitable Donation
If you operate as a sole proprietor, you can get a larger-than-usual tax deduction for being a first-time donor to a Canadian registered charity. It’s called a super-credit and you qualify if neither you nor your spouse has claimed the Charitable Donations Tax Credit (CDTC) in any of the five previous tax years. This new credit gives an ADDITIONAL 25% to the rates used in the calculation of the CDTC for up to $1000 of monetary donations. We are privileged to live in a country of such wealth – share yours with someone who needs a hand, and the government will reward your generosity. Only donations of money that are made after March 20, 2013 will qualify for the FDSC. An individual can only claim FDSC once from the 2013 to 2017 taxation years.

Tax Tip #5 – Consider Using a Professional Service
Small business owners are conditioned to doing everything DIY, but smart business owners will consider using a professional service provider. Tax laws change considerably every year and it is a professional tax service provider’s job to understand how to help you get the most back from your tax return. A professional’s fees range from the hundreds, if you are a sole proprietor, to a few thousand if you are incorporated. But a good tax service provider should be able to offset their fee with their ability to find you savings in your tax return (and you can write off the expenses on next year’s return).