RKG Tax & Accounting Inc. CPA

What are common mistakes a businessman can do without an accountant or accounting & tax knowledge.

Operating a business without proper accounting and tax knowledge can lead to a range of potential mistakes that could have significant consequences. Some common mistakes include:

1. Improper Recordkeeping: Failing to maintain accurate and organized financial records can lead to confusion, errors, and difficulties in tracking income, expenses, and taxes.

2. Mixing Personal and Business Finances: Using a single bank account for personal and business transactions can make it challenging to differentiate between personal and business expenses, potentially leading to tax issues and financial inaccuracies.

3. Missing Tax Deadlines: Not being aware of important tax filing and payment deadlines can result in penalties and interest charges from tax authorities.

4. Inaccurate Tax Filings: Incorrectly reporting income, expenses, or deductions on tax returns can lead to audits, fines, and legal complications.

5. Not Tracking Deductions: Failing to keep track of deductible business expenses can result in missed opportunities to reduce your taxable income and pay more in taxes than necessary.

6. Ignoring Sales Tax Obligations: Neglecting to collect and remit sales tax when required can result in liabilities and penalties from tax authorities.

7. Underestimating Quarterly Taxes: For self-employed individuals, not paying estimated quarterly taxes can lead to large tax bills at year-end and potential penalties.

8. Misclassifying Workers: Incorrectly categorizing employees as independent contractors or vice versa can result in legal and tax issues.

9. Not Reconciling Bank Statements: Neglecting to reconcile bank statements with your financial records can lead to discrepancies and errors in your financial reporting.

10. Lack of Budgeting: Operating without a proper budget can lead to overspending, cash flow problems, and an inability to cover essential expenses.

11. Ignoring Financial Trends: Without proper financial analysis, you may miss important trends or warning signs in your business's financial health.

12. Not Seeking Professional Advice: Relying solely on guesswork or internet advice without consulting professionals can result in poor financial decisions and missed opportunities.

13. Failure to Plan for Taxes: Not setting aside funds for taxes can leave you unprepared to pay your tax obligations when they come due.

14. Overlooking Deductible Expenses: Without proper knowledge, you might miss out on claiming legitimate business expenses as deductions, increasing your tax burden.

15. Non-Compliance with Regulations: Failing to adhere to relevant business regulations and compliance requirements can lead to legal issues and financial penalties.

To avoid these mistakes, it's highly recommended to either educate yourself on basic accounting and tax principles or enlist the services of an accountant or financial professional. Their expertise can help you navigate these complexities and ensure the financial success of your business.

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Transcript - How to register for My Account - Canada.ca Learn about the different services available in My Account, and how to register.

IF YOU ARE SELF-EMPLOYED:

In this case individual will run their business as sole proprietorship / unincorporated partnership i.e., not a corporation.

It is your responsibility to track all income and expenses, to manage self-employed business e.g., invoices, receipts other document to support in case of audit by CRA.

Best practice is to use self-employed accounting software.

The best part is self-employed can deduct expenses against income, but only those were related to earn self employed income.

Then a profit & Loss is calculated, and that will be treated individual’s annual wage.

At the end of tax year individual will report all these to file their tax as professional or business income.

After this, taxes for employee and self-employed are calculated in a similar way as tax bracket for that year

Also, self-employed must pay Canada Pension Plan premium. EI is optional.

A self-employed have to file additional forms and schedules to file their tax return.

Self-employed taxes are a bit more complicated than traditional income taxes, so be sure you understand what to expect before this year’s tax filing deadline.

You need below information:
• Personal Information
• Your Partner’s information in case partnership and partnership number.
• All Slips
• Business Name & Address of business
• Industry code
• Business Number, GST Number
• Calculations of Income & Expenses for whole year.

IF YOU ARE EMPLOYEE:

You work for another business or entity, which will be your employer.

From Your gross earnings, your employer is responsible for remitting your tax deductions like CPP, EI and income tax and your employer will also pay CPP and EI contribution as employer contribution.

At the end of the year, your employer will provide you T4 slip including summary of pay and employee will use this T4 to file their personal tax return.

Are you Employee & Self-Employed for Tax Point of View?

Read Next Two Post to understand difference between employee & Self-employed.

How to register for My Account with Canada Revenue Agency (CRA)

Click on below link for step by step process.

Transcript - How to register for My Account - Canada.ca Learn about the different services available in My Account, and how to register.

Tax Planning for 2022

You need to plan ahead to be ready to file your taxes for the 2022 tax year without too much hassle.

One of the most important things to do all year round is to keep all your tax documents in one place. I prefer to keep electronic versions of all documents and have one "folder" for each tax year, with sub-folders for tax receipts, donation receipts, etc. in electronic form.

Tax-Free First Home Savings Account (FHSA)

- The First Home Savings Account (FHSA) is a new tax-sheltered registered account, similar to an RRSP and a TFSA, to help you save for the purchase of your first home.

- Your annual contribution limit will be $8,000 and your lifetime limit will be $40,000. Unlike an RRSP or a TFSA, the annual limit will not be cumulative, meaning that if you contribute less than $8,000 in one year, your limit will still be $8,000 the following year.

- Just like for your RRSP, contributions to your FHSA will be tax deductible.

- any gains earned within the FHSA will be exempt from tax.

- Amounts withdrawn from the FHSA will be non-taxable as long as you use them to buy your first home. Withdrawals made for any other purpose would be taxable.

- If you have not purchased your first home within 15 years of opening your FHSA, you will be required to transfer the funds to an RRSP and close the account.

- When you purchase your first home, you will have to choose between the Home Buyers’ Plan and the FHSA.

Tax Tips for Students - WhatsApp Group
Join with below link

The Canada Revenue Agency is offering more information in their Slam the Scam campaign to help Canadians protect themselves from fraud.

If you think you might be a victim of identity fraud or have given away personal or financial information, you can:

Report the case to the Canadian Anti-Fraud Centre online or by calling 1-888-495-8501;

call CRA to ask for extra security to be placed on your account;

contact Service Canada at 1-800-206-7218 if your social insurance number has been stolen;

call CRA to cancel online access to your information in the CRA login services; and

find out if you qualify for taxpayer relief for interest or penalties you are charged because you are not able to meet your tax obligations as a result of the fraud.

If you have specific questions as per your situation, DM me.