5 Tax Tips That Challenge The Status Quo
Small business people would be doing themselves a huge favour at tax time by becoming what I call ‘receiptaholics.’ If you become a receiptaholic, then at least you have the backing to deduct something if it can be claimed as a business expense. I don’t pay for anything in cash because cash receipts get lost and don’t get deducted. I pay for everything with a credit card so I have documentation of what I’ve spent money on. That all being said, you can easily find a rebuttal arguing credit cards are horrible, and for some people that may be true.
The Art of Responsible Credit Card Usage
Credit cards are fantastic if you use them properly. If you use a credit card correctly, it is one of the best inventions to hit the market because it keeps track of everything you spend your money on. I’ve suggested this to some clients and it usually freaks out financial planners, but I’ve converted them from being cash spenders to credit card spenders. The next thing I generally hear…
“Ken, that’s horrible! You can’t do that!”
My answer is always the same. Yes, you can but you have to be aware of what you are spending money on and how much money you are spending. In addition, you have to commit to seeing that credit card at a zero outstanding balance at the end of every month and if it is not at zero, cut up your credit card tomorrow. If you can’t handle your own finances then considering hiring somebody to handle them for you.
As a business owner, I think the key is to always be keeping track of your expenses and analyzing them. When I keep track of my family’s expenses on my Quicken software at home, we spend 10-30% less than when I don’t do this. What we do is simple, everyone knows that they have to hand DaKed a receipt and because they have to hand Dad a receipt, they know they have to be spending money appropriately.
Is there any particular industry that has the most unexpected write-offs?
I don’t believe there is any specific industry, what I do believe is that there are specific people. I believe that you’ve got people who will push the envelope too hard and then you’ve got people who don’t push it enough. The trick is to find the right balance.
Don’t Let Your Bookkeeper Tell You What Is or Isn’t Deductable!
I have sat down with business owners far too many times and said, “Why is this going through your shareholder’s loan account?” and the answer is “I don’t know. It was a trip to Vegas for a conference.”
When I ask why it isn’t going through travel it’s generally the bookkeeper who assumed that they just went on a holiday.
As a business owner you need to take ownership of your expenses. Is it deductable or is it not deductable? Either way, don’t let your bookkeeper make that decision for you.
How much is too much when claiming taxes?
If you don’t ask for a write off, then you aren’t going to get it. Revenue Canada is not going to come after people to remind them they haven’t deducted their vehicle expenses so you better do that.
If You Don’t Ask For It, You’re Not Going To Get It — But Be Reasonable With What You’re Asking For
You’ve got accountants on both sides of the fence, the fence being tax evasion vs. tax avoidance vs. tax planning. You don’t want to be involved with a professional that is giving you tax evasion advice for the obvious reason, that it is against the law.
Avoid Paying For The Decisions of a Passive Accountant
You have two choices when it comes to selecting an accountant or professional advisor and it’s either someone who is going to push the legal envelope for you or somebody that is just going to do what you ask them to. Talk with your accountant/advisor and see what they feel is deductible.
You have to have accountant that will guide you into what is deductible and what isn’t deductible. If they’re waiting on you as a business owner to make all the decisions then why did you hire an advisor?
About the Author
Ken Davidson is a Chartered Accountant with BDO Canada LLP, with their Kelowna accounting firm. Ken specializes in helping Kelowna businesses that are in start-up mode, companies in Kelowna that are in their growth phase and are ready to take their revenues to the next level, and professionals to secure their financial future with solid investment advice. Ken is best known for his strategic planning advice that positions him as a trusted advisor above and beyond being a Kelowna accountant that gives typical tax planning advice. To contact Ken for a Strategic Business Review to learn how he may be able to help your Kelowna business, email him at firstname.lastname@example.org.
Last 5 posts in Accounting, Taxes and Finance
- How To End Your Fight With Canada Revenue Agency (CRA) - January 29th, 2013
- What You Should Know About The Canadian Tax Free Savings Account (TFSA) - January 21st, 2013
- 6 Things That Can Trigger a CRA Audit - January 15th, 2013
- How Much Should You Being Paying Yourself? - December 10th, 2012
- 4 Important Tax Tips To Handle Before New Year's Eve - December 6th, 2012