Filing your small business or farming Canadian tax return can be confusing.
The Canada Revenue Agency (CRA) lists more than 300 different deductions, credits, expenses, and entitlements that you can claim. Unfortunately, it varies depending on where you live.1
No wonder the majority of Canadians and small business owners don’t like filing their tax return and are afraid of being audited. This might explain why a number of tall tales have arisen when it comes to filing taxes.
Below you’ll find a list of 5 common Canadian tax myths you shouldn’t believe.
1.You Don’t Need to File a Tax Return If You Didn’t Earn Enough
In Canada, you only technically have to file a tax return if you made over the basic personal amount which just exceeds $10,000.
However, failing to file a tax return below the minimum income tax level means you will be missing out on potentially thousands of dollars in benefits and credits, including GST/HST credits and the Canada Child Tax Credits.
You need to file a tax return to be eligible for benefits. You also build up RRSP contribution room by reporting employment income.
2.Why File Taxes on Time If You Can’t Afford to Pay Your Bill?
If you don’t have enough money to pay your taxes owing by April 30, it’s important to file anyway and pay when you can.
The CRA imposes a 5% penalty on any balance owing—not for paying late. You will still be subject to interest on the unpaid balance, but there will be no penalty.2
3.You Can Make a Deal with the CRA to Pay Less Tax than You Owe
You might think you can negotiate a deal with the CRA to only pay 50% or 60% of what you owe in taxes, but that’s not how it works.
The CRA does provide some leeway to help taxpayers who are in a difficult financial situation; however, it is only in very precise, limited situations.
The fact of the matter is that you won’t get a break on taxes owing.
4. You Can Deduct All of Your Business Expenses
There are a lot of rules when it comes to deducting business expenses.
Some things you think should qualify may not be considered business expenses at all by the CRA.
In other cases, you may only be able to claim a portion of a business expense. It might seem tempting, but you can’t write off all of your expenses.
5. You Don’t Need to Charge or Remit Taxes If You Sell Online
It would certainly be nice if this were the case, but it isn’t.
If you own a small business and sell GST/HST taxable products or services online, you need to collect and remit taxes just like those who operate a traditional bricks-and-mortar storefront.
FBC, Helping Small Business Owners File Their Tax Returns
If you find tax preparation difficult, confusing, or time-consuming, you should consider talking to a professional tax consultant.
The tax experts at FBC will help you every step of the way, from tax planning to filing the tax return, and meeting all deadlines with the goal of minimizing your income taxes and maximize assets.
FBC has been helping small business owners and farmers across Canada with their annual tax filing process since 1952. From Nova Scotia to British Columbia, the tax consultants at FBC provide complete tax preparation, accounting, and bookkeeping services.
For more information on how an FBC tax consultant can help your small business prepare and file your annual income taxes, call us today at 1-800-265-1002 or submit an online form and an FBC tax specialist will contact you at your earliest convenience.