Beat the Taxman!: Easy Ways to Save Tax in Your Small Business, 2006 Edition, Updated for the 2005 Tax Year

by Stephen Thompson (CA, CFP)

• ISBN13: 9780471747178
• ISBN10: 0471747173
• Format: Paperback
• Copyright: 2006-05-01
• Publisher: Wiley

Summary

"If you have always suspected the self-employed know something you do not, this is where the secrets have been hiding." Jonathan Chevreau, The Financial Post "[Beat the Taxman's] easy-going style and avoidance of the more mind-numbing details make for a solid primer on the perks and pitfalls of self-employment. The...one-sentence tips in the appendix are probably worth the price of admission alone." Gordon Powers, The Globe and Mail "Beat the Taxman is a book for every Canadian in a small or home-based business who is struggling with complex tax rules and regulations." Dale Ennis, Canadian MoneySaver "...one of the better books I've seen on the market for small-business owners and better yet, it's all Canadian content." Linda A. Fox, The Toronto Sun Beat the Taxman!Easy Ways to Save Tax in Your Small BusinessAs a small-business owner or a home-based entrepreneur, you have lots of questions about taxes, but very few answers. In your constant battle to be successful, the Canada Customs and Revenue Agency can seem like one of your biggest adversaries. But with Beat the Taxman in your corner, you're sure to come out a winner in the fight to save taxes in your business. Packed with tax tips that will save you hundreds, or even thousands, of dollars year-round. Written in a question-and-answer format that's easy to understand, practical, and easy to apply. Features 166 "Tax Beaters"--quick-reference tips that highlight key points. Explains how to save taxes in every aspect and at every stage of your business. Features a Year-Round Tax-Planning Calendar. Includes new and updated information on: reasonable expectation of profit rules; maintaining electronic records; GST rules for customer discounts and late payment charges; non-taxable car allowances; as well as changes in the last federal budget, and to the tax rules throughout the year. The ultimate "tax coach" for every Canadian in a small or home-based business, this book will help you to Beat the Taxman at his own game!

Table of Contents

Year-Round Tax-Planning Calendar	ix
Preface	xii
Acknowledgements	xv
Round 1 -- Get Off to a Good Start	1	(10)
What Is a Business?	1	(6)
Should I Keep My Losses Low in the Start-Up Years?	7	(1)
When Did My Business Start?	8	(1)
What Types of Expenses Can I Deduct?	8	(1)
Am I Really Self-Employed or Still an Employee?	9	(2)
Round 2 -- Keep Accurate Records---and Save!	11	(16)
Why Should I Take the Time to Keep Records?	11	(2)
For How Long Do I Have to Keep My Records?	13	(1)
What Information Should I Keep?	14	(1)
What If I Don't Get a Receipt?	14	(1)
What If There Is No Description on a Receipt?	15	(1)
How Can I Develop a Simple Record-Keeping System?	15	(6)
How Do I Know If I Made Money?	21	(1)
Can I Use the Cash Method for Reporting Business Income?	22	(1)
What Is the Cash Accounting Method?	22	(1)
What Is the Accrual Accounting Method?	23	(1)
Do I Have to Use Accrual Accounting throughout the Year?	24	(3)
Round 3 -- Start with the End in Mind	27	(10)
Must I Have a December Year-End?	28	(1)
Why Would I Want a Non-December Year-End?	28	(1)
Should I Have a December or a Non-December Year-End?	28	(2)
What Happens If I Elect to Have a Non-December Year-End?	30	(1)
What If This Is My First Year in Business?	30	(3)
How Can I Minimize the Non-December Year-End Tax Problems?	33	(2)
When Can I Choose a December Year-End?	35	(1)
What Year-End Should I Choose for My Corporation?	35	(2)
Round 4 -- The Tax Rate Stairway: Easy Steps to Saving Money	37	(24)
How Do I Use the Tax Rate Stairway to Save?	38	(1)
What Are the Income-Splitting Techniques?	39	(1)
The Family Income-Splitting Technique	40	(12)
The Personal Income-Splitting Technique	52	(6)
The Corporate Income-Splitting Technique	58	(3)
Round 5 -- To Incorporate or Not? A Taxing Question	61	(16)
What Are the Common Business Structures That I Can Use?	62	(1)
What Is a Sole Proprietorship?	62	(1)
What Are the Advantages of a Sole Proprietorship?	62	(1)
What Are the Disadvantages of a Sole Proprietorship?	63	(1)
What Is a Partnership?	64	(1)
What Are the Advantages of a Partnership?	64	(1)
What Are the Disadvantages of a Partnership?	65	(1)
What Is a Corporation?	66	(1)
What Are the Advantages of a Corporation?	66	(1)
What Are the Disadvantages of a Corporation?	66	(2)
What Tax Savings Can Be Achieved By Using a Corporation?	68	(2)
Is There a Tax Advantage to Selling Shares of My Corporation?	70	(1)
Should I Take Advantage of the Capital Gains Exemption Now?	71	(2)
Can I Increase the Capital Gains Exemption?	73	(1)
So Which Structure Is Best for Me?	73	(4)
Round 6 -- GST: Friend or Foe?	77	(26)
What Is an Input Tax Credit?	78	(1)
Do I Have to Register for the GST?	78	(2)
Should I Register for the GST?	80	(1)
Can I Simplify the Administration of the GST?	81	(4)
Can I Still Claim Input Tax Credits If I Forgot to File My GST Return?	85	(1)
Can I Be Denied a Legitimate Input Tax Credit?	85	(2)
Can I Claim an Input Tax Credit on Capital Purchases?	87	(1)
Can I Claim an Input Tax Credit on an Asset Purchased Before I Registered For the GST?	87	(1)
Can I Claim Input Tax Credits on Personal Capital Property?	88	(1)
Can I Claim Input Tax Credits on Personal Vehicles?	89	(2)
Can I Claim Full Input Tax Credits on All General Business Expenses?	91	(1)
Are There Any Other Restrictions on Claiming Input Tax Credits?	92	(1)
When Do I Have to File My GST Return?	93	(1)
When Are the GST Returns Due?	94	(1)
What Happens If I'm Late in Filing My GST Return?	95	(1)
What Happens If My Customer Doesn't Pay His Account?	96	(1)
What If I Offer My Customer a Discount for Early Payment or Charge Interest on Late Payments?	97	(1)
Do I Charge GST on the Sale of Used Capital Assets?	98	(1)
What Is the HST?	98	(1)
Do I Have to Register for the HST?	99	(1)
I Reside in a Participating Province. How Will the HST Affect My Business?	99	(1)
I Reside in a Non-Participating Province. How Will the HST Affect My Business?	100	(3)
Round 7 -- 365 Days to Save	103	(34)
When Is My Tax Return Due?	103	(1)
Why Should I File My Tax Return on Time?	104	(1)
What Are Tax Instalments?	105	(1)
Do I Have to Make a Tax Instalment?	106	(1)
When Are the Tax Instalments Due?	107	(1)
Why Should I Make Tax Instalments?	107	(2)
What Are My Instalment Options?	109	(4)
What If I Miss a Tax Instalment?	113	(1)
What Is the Penalty for Forgetting to Remit Employee Deductions on Time?	114	(1)
When Are Employee Remittances Due for Filing?	115	(2)
When Are Employee Information Returns Due for Filing?	117	(1)
What Is the Contract Payment Reporting System?	118	(1)
What Fines and Penalties Are Tax Deductible?	119	(2)
How Can I Maximize My Deductible Interest?	121	(1)
Can I Deduct the Cost of Life Insurance?	122	(1)
As a Self-Employed Entrepreneur Can I Deduct Health and Dental Premiums?	123	(1)
As a Self-Employed Entrepreneur Can I Deduct CPP/QPP Contributions?	124	(1)
How Much Can I Deduct for Meals, Beverages, and Entertainment Expenses?	125	(1)
Can I Deduct the Costs Associated with Entertaining Clients at a Club, Camp, Lodge, Yacht, or Golf Course?	126	(2)
Can I Deduct the Cost of a Meal Before or After a Round of Golf?	128	(1)
Can I Give a Tax-Free Gift to My Employees?	129	(1)
How Can I Maximize My Tax Savings on the Courses I Take?	130	(1)
What Are the Tax Results If I Pay for an Employee's Training?	131	(1)
How Can I Maximize My Tax Savings on the Conventions I Attend?	132	(1)
Why Is Some of My Business Advertising Not Tax Deductible and How Can I Ensure 100% Will Be Deductible?	133	(1)
What Are Some Year-End Tax-Saving Tips?	134	(3)
Round 8 -- Home Sweet Home	137	(10)
Am I Eligible to Deduct Home Expenses?	137	(1)
How Do I Calculate the Home Expense Deductions?	138	(2)
What Kind of Home Expenses Can I Deduct?	140	(1)
Are There Any Limitations on Deducting Home Expenses?	140	(2)
Can I Claim Moving Expenses?	142	(1)
What Moving Expenses Can I Deduct?	143	(1)
Do I Need to Keep Receipts?	143	(2)
Are There Any Restrictions to Claiming Moving Expenses?	145	(2)
Round 9 -- Capital vs. Expense: A Wealth of Distinction	147	(18)
What Is a Capital Expenditure?	148	(2)
What Is Capital Cost Allowance (CCA)?	150	(1)
Are There Any Special Rules in the Year of Purchase?	151	(1)
What Happens When I Sell an Asset?	151	(1)
Do I Have to Claim Full CCA?	152	(1)
Is There a Right Time of the Year to Purchase Assets?	153	(1)
Is There a Right Time to Sell Capital Assets?	154	(1)
How Can I Save Tax Dollars with Capital Assets?	155	(3)
Can I Deduct the Cost of a Personal Asset That Is Now Being Used in the Business?	158	(2)
Can I Claim CCA on Assets Used Only Part of the Time in My Business?	160	(1)
Should I Claim CCA on My Personal Residence?	161	(1)
What Is an Eligible Capital Expenditure?	161	(1)
Can I Deduct Eligible Capital Expenditures?	162	(1)
Can I Deduct My Own Goodwill?	162	(1)
Am I Taxed on the Goodwill I Sell?	162	(3)
Round 10 -- Auto-matic Savings	165	(16)
What Automobile Expenses Can I Deduct?	165	(3)
What Is Considered ``Business Travel''?	168	(1)
Can I Deduct the Cost of My Car in the Business?	169	(4)
Are There Any Restrictions on Lease Costs?	173	(1)
Can I Deduct All Interest Charges on My Vehicle?	174	(1)
Should I Own My Passenger Vehicle in My Corporation?	175	(2)
How Can I Reduce the Amount of the Standby Charge?	177	(2)
If I Own My Car Personally How Should the Company Reimburse Me for Business Travelling?	179	(2)
Round 11 -- Saving by Spending	181	(12)
What Is an Investment Tax Credit?	182	(1)
Who Can Claim Investment Tax Credits?	182	(1)
How Do I Claim an Investment Tax Credit?	183	(1)
What Expenditures Qualify for SR&ED?	184	(3)
What Are the Tax Benefits of Claiming SR&ED?	187	(2)
How Do You Claim a SR&ED Tax Benefit?	189	(1)
How Long Do I Have to File the SR&ED Forms?	190	(1)
What Happens When I Receive the Refund?	190	(3)
Round 12 -- Surviving a Visit from the Taxman	193	(14)
What Happens After I File My Tax Return?	194	(3)
What If I Disagree with the Notice of Reassessment?	197	(2)
Should I Pay Tax That Is Under Dispute?	199	(1)
What If I Have Discovered an Error in a Prior Year's Tax Return?	200	(2)
Is There Any Relief If I Have Never Filed a Tax Return or Did Not Report All of My Income?	202	(1)
Can Penalty and Interest Charges Be Reduced?	203	(1)
What Are Some Do's and Don'ts If I Get Audited?	204	(3)
Round 13 -- And the Winner Is...	207	(2)
Quick Reference to Tax Beaters	209	(11)
Appendix	220	(5)
Index	225