It's no secret that small-business owners put in long hours. A typical day can include anything from hiring new employees to overseeing marketing campaigns and even cleaning out a rank staff room fridge.
With so many responsibilities gobbling up an entrepreneur's time, no wonder Statistics Canada data shows that more than 40 per cent of owners work 50 or more hours a week – while just 6 per cent of employees work that amount.
But many owners would gladly take the fuzzy fridge over dealing with befuddling tax matters any day. In 2013, 79 per cent of small businesses answered a Canadian Federation of Independent Business (CFIB) survey listing their tax burden as the biggest challenge they faced.
"I can say quite authoritatively that almost every business in Canada is not fully [tax] compliant – and in 99 per cent of those cases it's because the rules are so incredibly complicated. Implementing them perfectly is near impossible," says Dan Kelly, president and chief executive officer of the CFIB.
To help make tax filing a little less taxing this year, here are some tips, tricks and good-to-know facts so you can focus on what you know best: your business.
Confounded by the complicated tax structure and filing requirements in Canada? It's not just you. According to an annual study conducted by the World Bank, International Finance Corp. and PricewaterhouseCoopers, a medium-sized Canadian business can expect to spend 131 hours a year complying with Canada Revenue Agency tax requirements.
That's better than the 175 hours U.S. businesses spend or the whopping 872 hours a Vietnamese company would take to pay up on time. Even so, Canadians are allocating more hours to the task than businesses in Hong Kong (78 hours), the Bahamas (58 hours) and the United Arab Emirates (12 hours).
1. Get it in writing
If you have a small-business tax question for CRA, rather than phoning up the call centre, use the My Business Account online service instead. A CRA agent will respond to your question in writing. That's helpful if you want to have a record of advice and information provided by CRA in case there are problems later.
To register for an account, visit cra-arc.gc.ca/mybusinessaccount.
2. Keep your records
In most cases, you need to hold on to all those receipts and records and supporting documents for a period of six years from the end of your tax year. But if you file your income tax return late, keep your records for six years from the date you file the return.
While CRA auditors will generally ask to see records that are less than three years old, if they suspect problems or inconsistencies, they may ask to examine your older records, too.
3. In case of disaster
Floods, fires and earthquakes can cause havoc with a business's tax records. If your books and records have been destroyed as the result of a natural disaster, contact CRA at 1-800-959-5525.
This month, CRA stated on its website that there are designated telephone agents available to speak to those affected by the wildfires in Alberta.
4. Accountant or lawyer?
You're being audited. Do you turn to your accountant or tax lawyer to help you through the process? That depends. An accountant's job is to understand what files and records CRA needs and can speak the lingo to get the job done, while a tax lawyer's main concern is protecting the client.
"An accountant may not get suspicious when the auditors seem to be asking questions that have a criminal tone to them," says Dale Barrett, a tax lawyer with Barrett Tax Law in Toronto.
5. Circle the date(s)
Sure, private incorporated businesses might have six months after a corporate year-end to file a return, but if they owe tax, that money must be handed over within 90 days. Avoid paying three month's worth of interest and pay up when it's required.
The same goes for non-incorporated businesses. Self-employed folks have until June 15 to file their returns, but taxes need to be paid by April 30 (or May 2 this year, because of the filing date landing on a weekend).
Know you owe money but haven't filed yet? Time to get cracking. As far as interest, penalties and fees go, better late than later.