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Tax Tips 101 - The Basics


Income Tax 101 Basics

 
1.  Prepare Yourself and Stay Organized
•Business expenses separate from personal.   
•Business Credit Card
•Use a Separate Bank Account designated for your business.  
 
Keep BUSINESS Business & Personal PERSONALDon't mix the two in case of an Audit!
 
2. Saving Your Receipts and Finding Them!
•Scan or take a picture of your Receipts
•Create an Email just for your Accounting items  
•Meals and Entertainment are 50% deductible.   So on each receipt just remember to put down the Clients name.  
Every Dollar Counts at the end of the year!
 
3.   Never Pay Cash for Anything!!!  Nothing!  Without a Receipt!
 
NEVER! NEVER! NEVER!
 
 
4.  Buy at Home Depot vs Loews. Why?  
 
•Home Depot will email you your receipt immediately so you have a copy.   Try and find more vendors that provide that service so you never loose one valuable receipt.
 
5.  What are some of the items normally missed at tax time?  
•Groceries for Your Open Houses
•Gifts you purchase your client for a closing
•Pizza you ordered for your clients as a home warming
•Cleaning Supplies you needed to freshen up your listing
•Paint you purchased for your client - or the gift card you got them at Home Depot
•Referrals you paid your clients - such as reimbursement for their Home Inspection.  
Never give anyone any money unless it is by Cheque or Bank Draft
 
6.  Car Expenses
•Never Pay cash for that car repair.  
•Keep a Mileage Log.  
 
Keep every receipt, for every single dollar you spend on your vehicle   
 
•Downtown Parking Tickets, car washes, plate stickers, renewals, insurance, wiper replacements, oil changes,EVERYTHING!
 
7.   Office Expenses
•We make it super easy each year - you are provided a T4A that is your NET Commission.  
Do NOT attempt to use your trade record sheet gross amounts.  Revenue Canada already knows your T4A reflects the net.  So don't double dip.
•In case of an audit, keep all your trade records. (email them to your accounting email!)  
If you worked with 20 people and only 15 actually purchased, it may be helpful to show Revenue Canada all your attempts at offers to show them why your car expenses were so high.
 
•To figure out your HST Earned... simply take your net income on your T4A x 13% and that is your HST earned.
 
•We do not issue T2200's for your car expenses.   
 
Remember you are an Independent Contractors and on your tax return you need to specify your are Self Employed or some of your expenses will be disallowed.
 
 
8.   Home Office
•Make a floor plan of your house and show your accountant the room your are deducting for your home office.   You do not want to do this calculation alone.
If you right off too much
it can trigger an audit L
 
9.   Taking a Trip?
•Planning a Vacation?   Check to see if there is a Conference related to your field.  
 
You are entitled to Trip Expenses related to a certain Conference per year.
 
10.   Hiring Family
•If you pay your wife or kids - remember to set up an account for their CPP contributions.  
•If someone is distributing your flyers - get them to provide you with an invoice.  
 
Remember paying cash is eaten up fast! 
 
 
11.  Staging a House
•Items purchased for Staging - Keep those receipts.  
•Mark down on the receipt the sellers name and property address
 
Don’t Lose it! EMAIL a copy to your accounting email account
 
12.   Make Installments!
•If you can't file on time ... at least make a nominal good will pre-payment.
•EXAMPLE: You owe $20,000 in taxes this year -- next year you will divide that amount in 4 quarters and pay them $5,000 quarterly.  
If you forget -- Revenue Canada will Remember
 
Don't forget HST is also paid quarterly, after your first year filing
 
 
Some good sound ADVICE 
1.Get a good accountant you can trust! Use regularly from year to year. Switching is not always worth it.
 
2.Is it really worth you doing it yourself? The average accountant will cost you about $450.00 a year
 
3.Never Ignore phone calls from Rev. Canada! Even if you can't deal immediately give them a time frame for response. Then call your accountant 
 
 
PLEASE REMEMBER:
 
Review with Your Accountant in Full!!!