7 year-end tax tips for small business

thebalance-logoThis article from The Balance caught our eye because it offers some simple, straightforward advice for small business owners about wrapping up the current year and preparing for the new year. What’s nice is that the advice is applicable to different types of businesses, and it is not specific to a given region or country necessarily. Of course, for advice more specific to your area of business, your part of the world and your requirements, that’s where a good accountant is your best resource.

The Balance advises that your year-end checklist should include:

  1. Review your reports.
  2. Defer income.
  3. Make purchases.
  4. Run an inventory check.
  5. Start or contribute to a retirement plan.
  6. Contribute to charity.
  7. Start preparing for next year now.

Click here to read the complete article.

What else would you include as a good year-end practice? Add your suggestions to the comments on this post. Thanks!

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Logging allowable business mileage

question50I would like to maintain an accurate log but am struggling with determining what qualifies as allowable business mileage.

I work mainly from my employer’s office but use my personal car to see customers and suppliers, but do not get compensation from my employer. If I see a customer/supplier on my way to the office in the morning, does that leg count as 100% business mileage or does the leg from the customer/supplier to the office? Or does it only count as business mileage if I go to the office first and then visit the customer/supplier and then return to the office?

Can you please advise?

R.S.

answer50Business mileage is sometimes not cut and dried. First, for you to be able to claim the mileage, your employer needs to complete the form T2200 Declaration of Conditions of Employment. Once this is completed, you are then able to claim your mileage.

Travelling from your home to the office is not considered business travel, but personal. But in saying that, if you go to a customer or supplier on the way to the office that would be considered business mileage. You have one of two ways to keep track of this: you can use the whole trip and then deduct the mileage used from office to home, or just use the mileage from the customer/supplier to the office (times 2 for a round trip – this one is easier to use, in my opinion).

When calculating the actual expenses deductible, remember to use all the expenses of the car for the full year, including, gas, maintenance, and parking if any, and then it is prorated between business and personal. Also, I would keep some sort of diary (either a planner in the car or electronic record) of the trip and who you went to see. Also, the proration is total km driven for business divided by total km driven in the year.

Expenses travelling from home to work

question50I live in Barrie, Ontario and work in Ajax. The drive is 130 kms one way – that’s 260 kms per day – 1300 kms/week and 5200 kms/month. I keep all my gas, maintenance and car insurance receipts. Should I claim the mileage rate or the exact amount of my expenses per year? Can I expense both? Also, I will be moving to Oshawa in the next four months. What expenses can I write off with the sale of my home and moving expenses that will reduce my drive to 40 kms per day?

B.B.W.

answer50Hi. Thanks for writing. The travel from your home to work is not deductible as it is considered a personal expense. For the moving expenses, it depends on whether this is a new job for the expenses to be deductible. If you are just moving closer to your current office, the moving expenses are not deductible. However, if you are moving to a new office (within your company) or for a new job, then the moving expenses become deductible.

Writing off vehicle depreciation

question50My employer pays for my personal vehicle including loan payment/gas/maintenance. The vehicle is in my name and is used for business and personal use (approximately 80/20). Can I write off vehicle depreciation or anything else on my tax return?

My employer adds this as income to my taxable income on my T4; as this my personal vehicle used for both business and personal use, should the entire loan payment amount be added as income?

S.B.

answer50Yes, if the reimbursement is added to your income, then the allowance you are getting is considered unreasonable (which is why it is taxable). If it is not to be taxable, the reimbursement would have to be based on a per km usage of your car. You can deduct all expenses of the car using the form T777 Employment Expenses, and you will need to get the form T2202 (Conditions of Employment) signed by your employer so that you are able to claim your auto expenses. Auto expenses include: gas, maintenance, insurance, parking, license plate and drivers license payments, depreciation, interest on car loan, or lease payments.