From the Wires
REPEAT-BMO Says 'Make a List and Check it Twice': 5 Year-end Tax Tips for Small Business Owners
By: Marketwired .
Dec. 22, 2012 09:00 AM
TORONTO, ONTARIO -- (Marketwire) -- 12/22/12 -- BMO Bank of Montreal encourages Canadian small business owners to be proactive and make use of a few simple year-end tax tips and strategies that can be beneficial come tax time.
"This year, businesses owners have shown a remarkable resiliency and moved forward with plans to invest and grow their business, and many small business owners we talk to are confident about their ability to finish out 2012 on solid ground," said Steve Murphy, Senior Vice President Commercial Banking, BMO Bank of Montreal. "Before the holiday rush, now is a good time to do a quick financial check-up with a small business specialist and your accountant to consider some straightforward tips and strategies to help minimize the amount of 2012 income tax payable."
For small business owners in Canada (most commonly a sole proprietorship or partnership), there are a number of year-end strategies that can be applied to reduce the amount of income tax payable, including:
1. Do a 'Financial Check-Up': A small business specialist, accountant, and investment advisor can help owners make sure they have a clear understanding of their current financial situation. These professionals can also help develop or adjust existing plans based on new needs or changing circumstances. 2. Defer Income: Depending on a number of factors (e.g. future tax rates, projected profit or loss for 2012, cash flow), small business owners may be able to reduce the current taxes they will be paying by deferring some of the income they expect to receive in December into January 2013 instead. 3. Gather Business Receipts and Increase Expenses: Maximize income tax deductions by ensuring all allowable receipts for business-related expenses (e.g. gas, stamps, customer lunches, coffee for the office) are kept and accounted for. Over the course of a year, those receipts for the little things can add up. Business owners should consult the guidelines available from the Canada Revenue Agency, or speak to their professional tax advisor about eligible business expenses. If it makes sense for their current business situation, businesses can also increase some expenditures now on things they plan to need early in 2013 in order to maximize 2012 deductions. For example, small business owners can consider accelerating the purchase of new equipment or other depreciable assets before the end of the year to benefit potentially from a claim for tax depreciation in the current year. 4. Consider Inventory Write-offs: A drop in the value of inventory may also provide an opportunity for an additional income tax deduction for the current year. It is important to speak to a banking advisor and your accountant about the tax rules that apply to your particular situation. 5. Set-up a New RRSP or make that Maximum Annual RRSP Contribution: For unincorporated small business owners, income earned by the business becomes personal income when filing taxes using the T1 form. However, many small business owners fail to take full advantage of the best income tax deduction available to Canadians - the Registered Retirement Savings Plan (RRSP). RRSP contributions are deducted from annual income, thereby lowering income tax payable at the individual's marginal tax rate. Now is a great time to set-up a new RRSP or make a contribution to an existing plan for 2012 to benefit from the tax-deferred growth right away. The process is simple, quick and can be done at any bank branch.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $525 billion as at October 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.
Latest AJAXWorld RIA Stories
Subscribe to the World's Most Powerful Newsletters
Subscribe to Our Rss Feeds & Get Your SYS-CON News Live!
SYS-CON Featured Whitepapers
Most Read This Week