Canadian Bookkeeping Resources
Basic Tax Articles for Bookkeepers in Canada
Even if you don't do "tax", you need to understand the basics.

by L. Kenway BComm CPB

YOU don't have time to spend looking for basic Canadian bookkeeping and tax information that may affect your business ...

... so I go hunting and find it for you to ensure you have it at your finger tips ... when you need it.


As a bookkeeper working from home and / or small business owner in Canada, YOU know tax planning doesn't happen when you file your tax return ...

YOU know tax planning happens every day throughout the year ...

By taking the time to learn and know the rules ...

So YOU can do all the little things needed to LEGALLY reduce your net taxable income.


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The Tax Article Index for Canadian Bookkeepers.

What You'll Find In This Chat ...

An index or table of contents ... for each series of basic Canadian bookkeeping articles focus on different aspects of tax compliance are outlined.

I begin by chatting about how governments raise tax revenues to give you a better understanding of the different types of tax and their purpose.

Click on any image below to go to the Executive Summaries for each series.


Series One

Income tax return reporting for the sole proprietor

Series Two

Corporate tax issues for the owner managed business
  • Corporate Tax
  • Issues for the owner managed business.

Series Three

Improving your understanding and options with regards to tax audits
  • Tax Audits
  • Your options
  • Improving your understanding 

Series Four

Basic Canadian bookkeeping tax compliance information you really, really, really need to know
  • Tax Compliance
  • Basic Canadian bookkeeping information you really, really, really need to know

Series Five

Payroll tax notes many small business owners need to know about
  • Payroll Tax Notes
  • Stuff small business owners need to know about

Series Six

Canadian sales taxes ... GST HST in Canada and BC PST
  • Canadian Sales Taxes
  • GST/HST in Canada
  • BC PST Basics



GOOD TO KNOW

Claim tax credits in year paid

Claims for the Children’s Arts and Children’s Fitness tax credits are based on when the payment is made, NOT the year in which the activities are scheduled.*

The programs must be for 8 consecutive weeks or 5 days in a row. This means if you register your child for classes that run 4-6 weeks, they are not eligible for the credit. If your community center is running programs that do not meet CRA's requirements, speak to them about it.

*Source: The Knowledge Bureau, December 9, 2012 News


Let's make this clear for all my visitors before I get started ... I am not a tax expert like a tax accountant or lawyer but I do have some tax education classes under my belt.

While doing bookkeeping, I have learned a bit about small business taxes along the way. I do prepare tax returns for sole proprietors in Canada.


Welcome to Bookkeeping Essentials - The Tax Articles Index!

For your convenience ... and to help you deepen your tax knowledge, this section is all about basic Canadian bookkeeping and tax information relevant to doing your books.

That means you won’t find a lot about personal taxes here unless it relates to your business somehow. I will however provide a link to a highly reputable site where you will be able to find what you are looking for.

I provide some American (U.S.) small business tax information in The Tax - U.S section of this website.

I also try to provide references to U.S. tax pages near the top of some pages. A site I like for personal U.S. tax rates information is US Tax Tips.

I'm going to start this chat out by talking about how governments raise tax revenues then move on to an executive summary index on all the articles ... so fill up the teapot and let's get begin.




LET'S CHAT ABOUT ...

How Governments Raise Tax Revenues

To do Canadian bookkeeping requires some basic knowledge of taxes so you can properly record sales tax or payroll tax.

Let me say that again. To do Canadian bookkeeping requires some basic knowledge of taxes so you can properly record sales tax or payroll tax.

I think ... no, I know... it helps YOU to keep a better set of books if YOU understand a little bit about the kinds of taxes there are in Canada ... and the reason governments use one type of tax over another.

GOOD TO KNOW

Tax Filing Due Dates
For 2015

Click here for due dates on:

  • GST/HST
  • BC PST
  • Payroll, T4, T4A
  • BC WCB


Click here for due dates on:

  • self-employed business taxes for T1-T2125
  • corporate taxes for T2


Looking for tax rates? Click here.

Governments use taxes not only to raise revenues but also to direct social policy. The trend in the world today is to tax consumption more than income.

David Robertson, a Canadian tax lawyer explains ... in a paper entitled Sales Tax Harmonization: The Facts & Nothing But The Facts ... that there are only three ways for a government to raise revenues:

  1. When money is earned by a taxpayer ... for example income taxes, payroll taxes and profit taxes.
  2. When money is spent by a taxpayer ... for example consumption taxes, sales taxes, land and property transfer taxes.
  3. On the value of a taxpayer's assets ... for example property and estate taxes.


Provincial governments have four sources of revenue:

  1. provincial taxes ... for example personal income taxes, corporate income taxes and sales taxes;
  2. federal government transfers;
  3. income from investments and government businesses ... for example the liquor board;
  4. other income ... for example natural resources, fines and permit fees.

Mr. Robertson points out that "the choice between which of these taxes to impose and when is generally driven by not only the need to raise revenues for government purposes, but also the behaviours the particular government wishes to encourage or discourage.

Amongst OECD member countries, the trend has been to place more emphasis on taxing consumption and to reduce taxes on business profits and investments.

The policy reasons for this are clear. Taxation of income and profits provides a disincentive for citizens to earn more.

By reducing income taxes, government place more after-tax dollars into taxpayers’ hands, allowing them more flexibility to choose to invest that money in further income-earning activities or to use it for personal consumption.

If the taxpayer chooses the former, no further taxation is imposed. If the taxpayer chooses the latter, a consumption tax applies. In this way, the tax system provides an incentive to taxpayers to invest in further income-earning activities with the added benefit of discouraging excess consumption."

Mr. Robertson is with the firm Fasken Martineau. His paper was presented in September 2005 at the CICA Commodity Tax Symposium ... and can be found at fasken.com under Publications. Set their publication search box to 2005> Taxation> Other Resources.

I came across a reference to the article while researching something else to do with Canadian bookkeeping ... and decided to check it out.

The 75 page paper is written in a user friendly way ... which means it didn't sound "legalize" to me. I could actually follow what he was saying ... and it was really interesting and informative ... so I thought I'd share just a piece with you. I hope you enjoyed it. :0)


Executive Summaries For Each Series ...

Basic Tax Knowledge For Small Business Recordkeeping

Tax filing deadlines and due dates ... to Canadian sales taxes guide ... as well as tax planning opportunities you work at 365 days a year.

Just click on any link and you'll go right to the page.

Series 1 - Five Basic Canadian Bookkeeping Articles on ...

Tax Primer for Sole Proprietors

Tax Deduction Checklist
Home Business Taxes Part 1

A tax planning opportunity for the self-employed home based business owner so you are not caught with your pants down (so to speak) at tax time. Be aware of what is NOT tax deductible on Form T2125.

Here are the basics discussed from a Canadian bookkeeping perspective:

  • Reasonable expectation of profit
  • How a sole proprietor is taxed
  • 13 items that are not deductible
  • 8 tax deductions that have limitations
  • A sidebar chat on ... What are prepaid expenses?



Self Employment Tax Deductions
Home Business Taxes Part 2


Canadian bookkeeping done properly assists in tax preparation. This article looks at basic tax savings and tax benefits for the self-employed work from home business owner.

Be ahead of the game this year, and find out what is legally deductible for income tax purposes. Then implement bookkeeping procedures so you capture what you need throughout the year.

Here are the basics discussed from a Canadian bookkeeping perspective:

  • General rules of deductibility
  • Lines 8521 through 9270 on Form T2125
  • A sidebar chat on ... the difference between the accounting treatment and the tax treatment of bad debts
  • A sidebar chat on ... bad debts and how they affect your GST return
  • A sidebar chat on ... where to classify cash outlays on domain registration, web hosting and web design services
  • CRA guides on Canadian business and professional income

A question was asked in The Bookkeeping Forum on capital cost allowance. It is an optional tax deduction that you should be aware of if you are doing Canadian bookkeeping.



Question and Answers Forum
Home Business Taxes Part 3


Canadian bookkeeping basics is closely tied to home business taxes. Sometimes you need help ... I've put together some frequently asked questions and answers for the home based business owner who does their own bookkeeping in Canada ...

Here's a sampling of basic Canadian bookkeeping questions that relate to tax:

  • Does the $.52/km employee mileage allowance include GST? Can we claim GST tax credits on this expense when paid to us personally?
  • Are bookkeeping service fees tax deductible in Canada?
  • Do you have to charge GST/HST on internet sales in Canada?
  • Do you charge GST/HST on the sale of a business asset such as office equipment?
  • Don't I pay more income tax if I voluntarily register for GST/HST?
  • How do you input/report owner's draws on your personal tax return?
  • Are life insurance payments a tax deduction in Canada?
  • Are tax penalties a deductible expense in Canada?
  • What are the rules for business use of my home phone in Canada?
  • Can I claim auto expenses if I do not have business coverage?

You'll also find links to all the questions asked in The Bookkeeping Forum that relate to tax.



Claiming Your Home Office Expense Tax Deductions
Home Business Taxes Part 4


How sole proprietors claim home office expenses as a tax deduction when preparing their Canadian tax return. This is part of a series on Home Business Taxes - A Tax Planning Opportunity.

There is a section on "things to consider" when doing your Canadian bookkeeping so you can claim your home office expenses properly.

You will also find information on how HST affects you if your home office is in BC.

On this page, there are also links to discussions on home office expense in the The Bookkeeping Forum.



Business Use of Your Personal Vehicle
Home Business Taxes Part 5


Canadian bookkeeping and tax for business use of your personal vehicle is different than the U.S. ... so don't confuse U.S. rules with Canadian rules.

This article explains how to claim your business vehicle expenses on your personal income tax return using form T2125.

The rules are complicated and inflexible. Advance tax planning is necessary to take advantage of these potential tax benefits.



Series 2 - A Basic Canadian Bookkeeping Article on ...

Owner Managed Corporations

Canadian Controlled Private Corporations
CCPC Part 1

Use the information in The Bookkeeper's Notes on CCPC as talking points with your accountant ... so you have a better feel for what kind of information you are seeking. Some of the talking points are:



Loan To Shareholders
CCPC Part 2


This chat reviews some of the very specific rules that apply when a corporation loans money to its shareholders and owner-manager remunerations.



Corporate Minute Book
CCPC Part 3


You will find information on maintaining your corporate minute book as well as your annual registration requirements.

  • What is it
  • What Should It Contain
  • Do You Need A Lawyer
  • CCPC Annual Registration Requirements
  • The Consequences of Not Maintaining Your Minute Book



Series 3 - Four Basic Canadian Bookkeeping Articles on ...

Tax Compliance Audits

Canadian Bookkeeper's Reference Page
Understanding Tax Audits in Canada


Reduce your fear of tax audits by understanding the process.

It is your responsibility to have knowledge of and apply the tax laws correctly, whether your return was prepared by a professional or not.

In Canada, we have a self assessing tax system. If you are caught evading tax, it is a criminal offense. Under tax law (unlike criminal law), you are guilty until proven innocent.

Your best defense is due diligence through accurate record keeping.

Included in this article is a sidebar chat on Amending Your Tax Return to Avoid Penalties if you received some additional tax slips after you filed your return.



More Tax Audit Articles


Three additional articles that may be of interest to are:

(1) What to do when you receive a notice saying you are going to be audited.

(2) Your rights as a taxpayer in Canada. Under taxpayer relief, you will find information on forms:

  • RC4288 Request for Taxpayer Relief
  • T1213 Request to Reduce Tax Deductions at Source
  • ISP3520 Request for Income Tax Deductions.

(3) If you haven't filed past tax returns ... or you filed an inaccurate return, learn about CRA's Voluntary Disclosure Program which grants taxpayer relief to those who satisfy the conditions.

There is information for bookkeepers on how to protect themselves against third party civil penalties ... need to know when doing Canadian bookkeeping.



I thought you might find this information interesting and informative. Check out these links!



It's been great chatting with you about your books today!


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