Tax time need not be so stressful, as demonstrated by Bev Roth (Bev Roth Accounting Services) at the January Saskatoon Chapter meeting. Members visibly relaxed and pens busily scratched as Roth shared her small-business income tax expertise. Following are some of Roth's pearls of wisdom.
When you operate a home-based business, said Roth, deductions are pro-rated, based on the amount of space actually consumed by your business. But that space must be wholly dedicated to your business, so don't store your kumquats beside your computer or your jockey shorts inside your file cabinet - you could lose the right to claim that space. Once you determine how much space you do use (less the kumquats and jockey shorts,) calculate what percentage of your entire floor space that usage consumes. Use that percentage to calculate allowance expenses. For example, Roth explained, if you claim 15% of your home for hbb usage, claim 15% of allowable expenses.
What are these allowable expenses? You can claim a portion of your telephone, property taxes, utilities, renovations and repairs and so on. If some items such as cell phones and Internet service are used 100% for business purposes, they are 100% deductible. Also claim 50% of business meals and 100% of your health care plan and advertising costs.
And don't forget your vehicle - you can claim a portion of its maintenance, registration, and insurance based on mileage.
"The key is to keep a log book," said Roth. "If you don't and you claim 90% for example, you could be in trouble. Keep track." If you prefer, she said, you can claim $.33/kilomere but you still must keep accurate records.
Roth cautions taxpayers to pay attention to their RRSP potential. You can actually harm your long-term investment opportunities by claiming too many deductions, she said. Besides you won't necessarily lose these potential deductions because losses can be carried forward seven years or backward three.
If you're like some people who prepare their own tax returns, you may find you've made an error. Don't panic - you have up to three years to file an amended claim. But why take that chance - and why waste valuable working time doing badly what someone else can do well in two or three hours? Reduce stress and hire a professional - the service is 100% deductible.