Last week we had an overall discussion around tax time and things you can do to keep the stress to a minimum. Now we are going to see what tax time looks like in a small business. When you think of the term small business, there is a lot of misinformation that is floating around such as:
- Must make a certain amount of money yearly
- Have employees
- Pay into GST/HST
- Have a business license
The list can go on with the misinterpreted information. None of these facts are true. If you are making an income then you are a small business and the income needs to be claimed during tax time. Whether you are babysitting on the side, walking dogs, construction, etc., these are considered small businesses and must be claimed. Many work under the table, and the problem with this is if someone were to report you or if the CRA were to come across the information it can be considered tax evasion. This is illegal and can have some major consequences. Now in knowing this information it is important to record and claim your income no matter if it is small or large.
When moving forward in completing your taxes, there are differences in how you will claim. If you are incorporated, then you are going to file your business taxes separate from your personal taxes. If you are not incorporated, then you are considered a sole proprietor and will file your business taxes with your personal taxes.
Another good question that may come up when you are completing your taxes is should you be charging GST. Do you make enough to charge that to your customers? Here in Alberta it is important to note that we do not have HST. The regulation for having to charge GST is when you predict you are going to make $30,000 yearly. Even if your income predictions are at that gross amount it is important to charge that GST because as soon as you hit that point you must charge it. If your predictions are low and you are surprised with having the income of $30,000 in a quarter then you must charge GST on the amount that brought you over the threshold and continue to do so. At that point you are going to need to register for a GST number through the government. It is important to note that as a small business making these projections and keeping up with them is needed to ensure you are filing properly. That leads us into why it is needed to keep up with our bookkeeping and accounting that we have previously talked about in blogs prior.
For more information or if you have any questions regarding your bookkeeping, accounting or questions regarding your small business, please don’t hesitate to contact us at BitLedger.