Canada is a country built on small businesses.

Canada’s Small Business Information Hub

The Canada Revenue Agency’s Small Business Checklist provides updated information for business owners in any stage of their business’s lifecycle. It contains links, articles, videos and graphic content organized by the chronology of a business’s lifecycle. Since it is maintained by the government, it contains the latest changes and updates to information, regulations and policies.

Starting a Business

The checklist has information for people who are just considering becoming entrepreneurs. In this section, potential business owners can learn how self employment is different than owning a business; they can determine whether or not they need a business number and determine whether or not they are an employer.

Maintaining a Business

The act of launching a business never really ends. Reporting incoming, keeping track of expenses, keeping records and bringing assets into the business are all covered. Business owners can learn how to hire employees and get a better understanding of their responsibility as a business owner. Business owners can also learn how payroll works and gather information on tax credits.

The End of a Business’s Life

For business owners who are planning to close their business, or whose business has stopped operating, the checklist can make sure they exit the small-business world smoothly. The checklist covers the difference between suspending and stopping operations, how to sell a business, how to close accounts, and provides information on bankruptcy.

Entrepreneurs can use the checklist to help them plan, maintain or close a business.

Canada has one of the world’s most thriving small-business cultures. The Canada Revenue Agency’s Small Business Checklist can guide business owners from the planning stages through the sale or transfer of the business. With business ownership comes responsibility, and one of those responsibilities is to stay informed.

Andrew Lisa is a freelance business writer who covers small-business management. He also profiles top content sites, such as MediaShower.com, for other writers.

How do you manage valuable company records?

A typical office has a dedicated room where important business files are stored, neatly arranged in boxes, folders and envelopes. Many office workers have had several trips to this room, but it is unlikely anyone’s favorite spot.

But does this filing system effectively help manage the ever-growing number of paper works?

Easing the Overwhelming Paper Burden

Imagine if you can get rid of all these papers but still get quick access to important documents through a smart gadget or device smaller than a notebook. It may have been unthinkable a few decades ago but with most current transactions done electronically; this innovation is never that far off.

For example, if you’re running a lending business, would you choose paper-based loan transactions over a trusted loan servicing software? Innovative business owners would obviously choose the latter while the traditional bunch remains leery of anything virtual. Who do you think made the smart choice?

To harness, if not maximize, the benefits of technology, we need to keep an open mind. Thus, it’s worthwhile looking into the benefits of digital records management before ignoring this alternative altogether.

1. Increased Efficiency

If company records are in electronic formats, it would be easier to create, receive, maintain, use, and dispose them. This transition can also reduce problems with duplicate records. With electronic files, correcting entries would be faster and easier than the manual systems. Think of the increased productivity your company will enjoy by simply going digital.

2. Reduced Costs

Save on office supplies and products with virtual forms and portable electronic document formats. No need to buy expensive file cabinets, drawers, or file boxes saving your company precious office space. The room previously allotted for files can serve other functions – perhaps a new meeting room or an executive’s office. Most conventional business owners worry about the cost of setting up digital system of records management but it is more often than not, less expensive than expected.

3. Improved Security

Cloud computing technology gives businesses stable and reliable back–up system and services. Not only is access fast and easy, it’s also secure. For instance, natural calamities such as earthquake or fire can bury or burn traditional paper-based files while digital records remain safe. Having a back-up (i.e. database) is also beneficial to businesses during audits and other instant requests for records. Data corruption or loss is virtually easier to avoid with digital management system as opposed to conventional methods of file management.

These are just few of the compelling reasons why replacing paper-based or manual records management system with a digital system will pay off. A complete switch to digital records management system can inevitably revolutionize how businesses operate.

We see a few entrepreneurs slowly riding the digital wave while other business owners cling to old, inefficient methods.

Privacy, up-front costs and other concerns make some people reluctant to embrace change. But it won’t be long before they do. The potential productivity improvement digitizing office records provide far outweighs any risks or excuses. Thus, it’s an upgrade that undoubtedly deserves thoughtful consideration.

Both Canadians and Americans have access to lucrative tax-deferred investment vehicles.

Registered Retirement Savings Account vs. Traditional IRA

The closest Canadian equivalent to the American traditional IRA (Individual Retirement Account) is the Registered Retirement Savings Account (RRSA). An RRSA gives a tax deduction to investors on their yearly contributions, which Canadians can make until they turn 71, at which point the account must be cashed in or rolled over. The government puts a limit on how much can be contributed annually. Account holders can withdraw money any time, but when they do, it counts as taxable income.

In America, traditional IRAs operate under a similar set of rules and provide a similar set of benefits. As discussed in the article “Six Tips on Retirement Account Withdrawals,” it is crucial to keep track of your age. Americans may contribute until they are 70.5 years old, but the amount they are allowed to contribute – $5,000 – is much lower than that of their Canadian counterparts. The difference, however, is that wealthier Canadians, who are able to save more than $5,000 a year, are generally taxed at a higher level.

Tax-Free Savings Account vs. Roth IRA

Tax-Free Savings Accounts (TFSAs) offered to Canadian investors are similar to Roth IRAs, which are utilized by Americans planning for retirement. Both are tax-exempt accounts, which means that both are funded with after-tax money and provide tax-free growth – this is true even when funds are withdrawn. Canadians older than 18 can contribute $5,000 to TFSAs every year. Virtually anyone of any age can contribute to a Roth IRA up to a maximum of $5,000. For investors over 50, “catch-up” contributions are allowed up to $6,000.

Canadians and Americans are both offered lucrative tax incentives to save for retirement.

Both Canadians and Americans have several options for retirement saving. The most common, however, are Roth and traditional IRAs in the United States, and TFSAs and RRSAs in Canada. How much do you have to invest each year? When do you plan to retire? Will you need to withdraw money before retirement? These are all crucial questions that you will have to ask yourself when it comes to right investment vehicle. The only certainty is that doing nothing is not an option.

Andrew Lisa is a freelance personal finance writer. He covers personal investing and retirement planning.

Getting an early jump on your taxes can help you avoid mistakes made in haste.

Late Filing and Repeat Failure to File

Canadians who file taxes after the deadline are penalized five percent of what they owe, plus one percent per month in interest. If no tax is owed, however, there is no penalty.

The late filing penalty, however, is relatively minor compared to the much more aggressive penalty for repeated failure to submit. If a taxpayer forgets to submit two T-slips in any four-year period, they may be hit with a 20 percent penalty. This is not 20 percent of the tax bill, but 20 percent of the entire amount of the earnings that were not submitted. This penalty applies even if the intent wasn’t to avoid taxes.

Failure to Claim Eligible Medical Expenses

When it comes to medical deductions, according to one expert, many Canadians simply don’t know what they may and may not deduct. Taxpayers can write off everything from batteries for hearing aids to widening a door to make enough room for a wheelchair. If you missed some of these deductions the first time around, don’t worry! The Canada Revenue Agency (CRA) allows most people to go back for up to 10 years on most federal provisions and deduct items that they missed.

Investment Income

Nearly 60 percent of Canadians aren’t sure how to handle investment income. From capital gains taxes to charitable donations, Canadians can find help they need to correctly file investment income with basic tax software. Investment tax law changes frequently and many of the most commonly reported mistakes are made by people who file on their own.

A Second Chance for Those Who Made Errors

If you have made in error in reporting, the Canada Revenue Agency’s Voluntary Disclosure Program gives Canadians a second chance to re-submit previously undisclosed income. Any taxpayer can participate, including businesses and corporations. All taxpayers will receive a letter of approval after notifying the CRA about any details that had been previously omitted.

Communicate with the CRA if you foresee a problem paying taxes. They will work with you to establish a plan that accommodates your capability to pay. Don’t, however, attempt to conceal income or procrastinate, which can lead to costly errors.

Andrew Lisa is a freelance business writer who covers personal finance and taxes. He also profiles content sites for other writers such as Mediashower.com.

If you’re investing in a life insurance policy, clinic paying regular premiums, sales you want to make sure that your beneficiaries get the most possible benefit when you die. After all that’s what the money is for; to make sure they are not financially disadvantaged by the fact that you are no longer around. This being the case you will probably want to know if the lump sum paid out from your life insurance is subject to tax.

Taxation is often an important consideration when it comes to finances as it can reduce the amount received in a transaction by a substantial amount. So is life insurance taxable?

What is the tax situation with life insurance?

The simple answer is that the majority of life insurance lump sum payments are not subject to tax. This is mostly because the insurance is paid for with income that has already been subject to tax. If the payout was then also taxed this would lead to a double tax situation. This is the type of situation that the IRS likes to try and avoid. If you happen to be a wealthy individual then it’s possible that estate tax may come into play.

The estate tax ceilings (the amount above which tax is payable) are in the millions of dollars, so they do not apply to the vast majority of people. If they do apply to you then it’s worth taking action to remove your life insurance policy from your estate; this means that it will escape being subject to estate tax.

How can you prevent your life insurance being included in your estate?

Your estate at the time of your death consists of everything that is owned by you, both money and items and property that are of value. This is why, if you think that estate tax may be an issue, you need to make sure that your life insurance is not in your name. You will need to transfer the insurance to a responsible adult. They then became responsible for payment of the premiums and only they can make any changes to the policy.

This is why it’s import to consider the transfer very carefully. Any change has to have been made at least three years before you die, so it’s important you find someone who is reliable and who you are going to have a continuing stable relationship with. If you die within three years after the transfer is made then the lump sum is included in your estate as it would have been if the transfer had not taken place.

Is there any other situation where taxation will be an issue?

The only other time that you may have to worry about tax on a life insurance payout is if you choose for the sum to be paid to a company to then be paid to your beneficiary at a later date, or if your beneficiary elects to receive the amount in installments. In these cases, any interest accrued is subject to taxation.

Canadian businesses stand to save a lot of money in the form of deductions for contributing to health plans.

Private Health Service Plans

As discussed in the article “Saving on Individual Health Insurance,” health insurance raises many issues – most of which are positive – for businesses filing a Canadian tax return. Many of these considerations revolve around Private Health Service Plans.

A Private Health Service Plan (PHSP) is defined as “a contract of insurance in respect of hospital expenses, medical expenses or any combination of such expenses, or a medical care insurance plan or hospital care insurance plan or any combination of such plans, except provincial and federal government health care insurance plans.”

If a business made payments to a PHSP on behalf of their employees or their dependents, those payments may be deducted. Payments are not taxable to employees, and if an employee contributed to the PHSP premiums, those payments are considered a medical expense under the medical expense tax credit provision.

Corporations vs. Unincorporated Businesses

Under the Income Tax Act, unincorporated businesses (and self-employed people) may deduct any payments they make to a PHSP from their business expenses. The stipulations, however, are that he or she must be actively engaged in the business and that they must have earned at least half their income from that business the previous tax year. He or she also must not have earned more than $10,000 from other sources. If unincorporated businesses make payments directly from employer to employee, this will not count as a PHSP.

For corporations, there is no limit on deductions for contributions to PHSP accounts, and corporations that only have shareholders as employees are allowed to set up PHSPs. Deductions will only be allowed, however, if the beneficiary received medical benefits in his or her capacity as an employee, not as a shareholder. Although they aren’t required to collect a salary, shareholders must have actively engaged in business activity.

If you’re a business that contributes to a health plan, make sure you take all the deductions that are coming to you.

Your Canadian tax return will be handled differently depending on whether or not your business is incorporated or unincorporated – especially if you are a sole proprietor. Business tax law is complicated and perpetually changing – when health care issues are entered into the mix, things become much more complex. If you have tax questions, seek the advice of a qualified professional. Getting it wrong could mean the loss of lucrative deductions.

Andrew Lisa is a freelance finance writer. He covers personal and business tax.

In Canada, businesses must act in accordance with the Canadian Payroll Association, an organization that’s known as an authoritative source of payroll information. It represents the payroll interests of employers in the country. Its actions and decisions influence the various processes of payroll software providers, employers, tax authorities and service bureaus.

Whether you are an employer, payer or trustee, you must know your payroll responsibilities. Understanding it and its intricacies will help you avoid consequences, such as interests and penalties. Fortunately, there are plenty of payroll software and systems that can help.

As an employer, you must provide employees with appropriate remuneration. The first step is opening an account for payroll program. Up next are the deductions, which include Employment Insurance premiums, Canada Pension Plan contributions and income tax, all of which are based on the salaries of employees. These deductions should be remitted to the Canada Revenue Agency (CRA) at least 24 hours before the due date and reported on a T4 or T4A slip.

Opening and operating a payroll account with the CRA is required for the remittance of your payroll deduction. If you have a Business Number, the account will be added to it. If you still need to register for a number, you should contact the CRA.

Obtaining the required information from employees should always be part of the hiring process. Ask for their SIN card so you can record their social insurance number, and have them fill out the provincial and federal TD1 form. Known as Personal Tax Credits Return, it determines the amount of tax that should be deducted from one’s employment income.

Deducting the appropriate amount from employees’ pay is perhaps the most tedious part of the process. You must first add the taxable benefits, which may be a low-interest loan, board and lodging, or anything provided to the employees other than money. These should be added to the income before deductions are made. The total amount is subject to pension contributions, insurance premiums and income tax deductions.

• To deduct income tax, use the provincial or territorial tables for the province or territory where the business is located. The CRA has a Payroll Deductions Online Calculator which can be used for this. You can turn to the CRA’s Payroll page to see the necessary deduction tables.
• For the Canada Pension Plan (CCP) deduction, you can go to their website to see the contribution rates, exemptions and other essential info. Generally, contributions are deducted from the pay of employees who are between 18 and 70 years of age, have a pensionable job, have no disability and is not currently receiving pension from Quebec Pension Plan (QPP) or CPP.
•  For the EI premium deductions, there is no age limit. The deductions stop only when they reach the yearly maximum amount. You can also use the online calculator to determine the amount that must be deducted for Employment Insurance. Keep in mind that EI premiums are deducted from each dollar of insurable earnings.

When the payroll deductions and contributions are due for remittance, the CRA sends a remittance form. This is not the case for new Canadian businesses that must send cash or a cheque payable to the Receiver General. It should include a letter that states that the remitter is new, its name and contact info, its business number, and the period covered by the payment.

A T4 slip for each employee must be filled out so it can be given to all employees before the last day of February. It may be completed using the T4 Web Forms Application or a PDF fillable T4 form.

Keep in mind that essential payroll documents and other business records must be kept at your office or place of residence in Canada. Be aware of the penalties for failure to comply with the payroll requirements, which can range from thousands of dollars to years of imprisonment or both. Lastly, get the necessary help you need especially with new payroll services so you are spared from any inconvenience non-compliance will bring.

Tax time is hard enough. Make it as easy as possible by getting organized.

Desk Organization Tools

Investing in home office organization tools is good for tax time – and throughout the year leading up to April, when most Canadian income tax filings occur. Filing systems, surface shelves, drawers, organizers, separators and dividers can all help you stay organized, so when tax time comes, you know where everything is and you don’t have to do the last-minute scramble.

Paper Scanners

The Canadian income tax system is all about saving money through deductions. Deductions are all about proof, and proof is all about receipts. Paper clutter is the bane of the organized taxpayer’s existence – and receipts pile up fast. A paper scanner, like those in the line offered by Neat, enables you to scan all of your paper into searchable files that can be stored as PDFs on your computer. If you get a cloud scanner, you don’t even need to worry about storing and securing them on your hard drive. Everything you scan will be stored on remote servers automatically.

They’re Your Walls – Use Them!

Wall-mounted oragnizers like the Wall Control Office Wall Mount Desk Storage and Organization Kit offered by Walmart free up your desk and get your clutter under control. Clutter is the enemy of easy tax preparation, and with a wall-mounted organizer, you’ll have the resources to dedicate an entire section to receipts and other important tax-related items.

Tax Return Organizer

Organize and store all of your Canadian income tax returns in one place with the Smead All-in-One Income Tax Organizer. Not only does it have dedicated pockets for current and past returns, but it has a checklist, instructional sheet and blank sheets for personalization of each section. It is sturdy and secure for easy transport.

Clutter is the enemy of tax preparation – get organized!

Getting ready for tax season means getting organized. You don’t need a tax accountant, but you do need to know where all of your receipts and other supporting documentation are located in order to make sure that you don’t miss any deductions, misplace any necessary documents or submit any incorrect information. Stay organized all year long to make tax time easy.

Andrew Lisa is a freelance business writer. He covers home-office management and entrepreneurial taxes.

Worry more about your accountant’s professional reputation than you do his or her degree.

Don’t Obsess Over Degrees

Do you really love a candidate, but they don’t have a degree in accounting? Don’t worry! As discussed in the article “5 Graduate Degrees That Are Worth It,” people who get accounting degrees can and often do go on to find success in a wide range of industries and occupations. But it works both ways. Many successful accountants went to school for something else and pursued undergraduate – and even graduate – degrees in a different field altogether.

Types of Degrees Accountants May Have Pursued

Obviously, a degree in accounting indicates your prospective hire may be knowledgeable regarding the subject. But also look for people with degrees in economics, marketing and mathematics. Any degree that either stresses a head for numbers or a knack for organization – or, like marketing, both – could apply to a real-world career as an income tax accountant, a business accountant or any other subcategory.

Consider Hiring a CPA

“Accountant” and “CPA” are not interchangeable. Certified public accountants are qualified accountants who passed the CPA examination and who met additional requirements regarding education and experience. There are great accountants who are not CPAs, but if you do hire a CPA, you know you’re getting someone who is regulated and repeatedly tested by the federal government, and who is obligated to continue their professional education in order to keep up with evolving rules and regulations.

Know Who You’re Looking For

Do you want an accountant who is self employed, or one who works for a firm? Do you want the name recognition, backing and guarantees that only a larger business can provide, or do you want the intimacy and personal touch of a sole proprietor? Firms have more resources than individuals, and they do all of the vetting and background research for you when they hire an accountant. Their work is much more likely to be guaranteed.

On the other hand, self-employed accountants may work harder for less, as each client they gain is a direct boost to the business they’re building. But they may be more likely to take on any work that comes their way, meaning they could be overburdened. If you choose a sole proprietor, make sure to ask how many other clients they are serving simultaneously.

Decide if you want a self-employed sole proprietor or an accountant who works for a larger firm.

A good income tax accountant can do everything from answer basic tax questions to find you deductions you never knew you could take. Don’t focus solely on the what degree they pursued in college, remember that they don’t necessarily have to be a CPA, and think about whether you want to hire a self-employed hustler or a pro with the backing of an established firm.

Andrew Lisa is a freelance business writer. He covers tax preparation and accounting.

Worry more about your accountant’s professional reputation than you do his or her degree.

Don’t Obsess Over Degrees

Do you really love a candidate, but they don’t have a degree in accounting? Don’t worry! As discussed in the article “5 Graduate Degrees That Are Worth It,” people who get accounting degrees can and often do go on to find success in a wide range of industries and occupations. But it works both ways. Many successful accountants went to school for something else and pursued undergraduate – and even graduate – degrees in a different field altogether.

Types of Degrees Accountants May Have Pursued

Obviously, a degree in accounting indicates your prospective hire may be knowledgeable regarding the subject. But also look for people with degrees in economics, marketing and mathematics. Any degree that either stresses a head for numbers or a knack for organization – or, like marketing, both – could apply to a real-world career as an income tax accountant, a business accountant or any other subcategory.

CPA – Know Before You Insist

Don’t necessarily worry about whether or not your prospective accountant is a Certified Public Accountant, or CPA. All poodles are dogs, but not all dogs are poodles – and the same rule could be applied to CPAs. Every CPA is an accountant, but you can find a great accountant that doesn’t have the required educational background or licensing to be a CPA. CPAs are an absolute must for many businesses and industries, but not all people or sole proprietorships require that level of expertise. One thing about CPAs is certain – they almost always cost more.

Know Who You’re Looking For

Do you want an accountant who is self employed, or one who works for a firm? Do you want the name recognition, backing and guarantees that only a larger business can provide, or do you want the intimacy and personal touch of a sole proprietor? Firms have more resources than individuals, and they do all of the vetting and background research for you when they hire an accountant. Their work is much more likely to be guaranteed.

On the other hand, self-employed accountants may work harder for less, as each client they gain is a direct boost to the business they’re building. But they may be more likely to take on any work that comes their way, meaning they could be overburdened. If you choose a sole proprietor, make sure to ask how many other clients they are serving simultaneously.

Decide if you want a self-employed sole proprietor or an accountant who works for a larger firm.

A good income tax accountant can do everything from answer basic tax questions to find you deductions you never knew you could take. Don’t focus solely on the what degree they pursued in college, remember that they don’t necessarily have to be a CPA, and think about whether you want to hire a self-employed hustler or a pro with the backing of an established firm.

Andrew Lisa is a freelance business writer. He covers tax preparation and accounting.