Saturday, April 19, 2008

Never Ask for an Audit

It’s spring, so entrepreneurs’ minds are naturally filled with thoughts of – taxes.

Visa Canada’s small business site has a slew of articles targeted at Canadian entrepreneurs, but none is more timely than “Beat the Taxman,” by Roger Pierce of

He reminds us that financing your taxes isn't just a chore in small business: it’s also a revenue opportunity. “Having business income gives you more options for tax reductions than a T4 slip... (But) without proper knowledge, tax reduction can quickly become tax evasion.”

Here are Roger’s top timely tax tips:

Organize. “Speak to your accountant. Learn how they want to receive your information, which reports are useful and how you should organize your back-up material.”
Know your Deductions. “You can deduct all reasonable expenses that you incur for the sole purpose of earning business income…. and keep the evidence for six years.”
Use tax splitting as a way of reducing tax liability
Employ your family
Draw a salary package that minimizes your tax liability.
Talk to your accountant about such “pleasant tax surprises” as :
* Using a provision for bad debts as a means of deferring the payment of tax.
* Certain household expenses are deductible if you work from home.
* If you operate as a sole proprietor, you can apply losses against other income.
And in the category of “Don't Even Think About It,” Roger reminds you not to cheat by trying to deduct:
* Personal and domestic expenses not eligible for the "business-use-of-home" deduction
* Investments purchased for personal use
* Fines for illegal acts, including traffic violations, and professional fees paid to defend these fines in court
As Roger warns, “Attempt to include the wrong deductions and you may be asking for an audit.”

Click here to read the article at
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