Why Outsource Bookkeeping Services for Your Business Maintaining financial records in-house becomes challenging for business owners. Some consider the option to outsource bookkeeping services to local or virtual bookkeepers. This helps the business address the challenge while giving time and opening other resources to focus on what you do best. Keep reading our blog to understand how, why, and when outsourced bookkeeping services can help your business succeed. Why Outsource Bookkeeping Services? Effectively managing your financial records lets your business stay prepared for tax obligations but also creates opportunities for insights on the business’ financial health. This can take a significant number of resources, depending on how much transactions occur in the business but either way, that’s time taken from concentrating on other aspects of operating the business. This can include growth opportunities or even time to yourself! A professional bookkeeper enables the business to have up-to-date financial reports. These range from balance sheets, income statements, and cash flow statements, all helping the business make informed decisions. Additionally, it streamlines the tax filing process, ensuring the reports are accurate and ready on time for the CRA’s deadlines. When to Outsource Bookkeeping Services If any of the following situations apply to your business, it is important to outsource your bookkeeping services. Making this decision depends on whether: If any of the above situations apply to your business, outsourcing your bookkeeping services may just be what you need. Outsourcing your bookkeeping too late can leave the business with consequences through inconsistent record-keeping and obstacles in scaling. Types of Outsourced Bookkeeping Services There are two main ways to outsource your bookkeeping. The first is to hire a local bookkeeper, while the other method would be to hire virtual bookkeeping services. Local Bookkeepers If you prefer face-to-face interaction and manage your business’ financial records through physical documents, this is the ideal way to outsource your bookkeeping. It can be done through either of the two main types, freelancers and firms. Virtual Bookkeeping Virtual Bookeeping services small business work for you if you’re comfortable with online banking and prefer meeting digitally. It combines traditional bookkeeping with online software so that you always have real-time access to financial data. Some benefits include: Services by accounting firms connect you with professional bookkeepers who manage your books and provide tax-ready financial statements each month, allowing you to track finances and communicate with your team effortlessly. In-House Bookkeeping When a business has a more complex bookkeeping system or needs bookkeeping to be done in coordination with the operations, hiring an in-house bookkeeper may be a better option. It generally costs more than outsourcing and an annual salary for a full-time bookkeeper in Canada costs an average of $53,679 per year. Keep in mind, this doesn’t consider any other benefits offered, training costs, and other HR or management needs. Alternatively, a part-time bookkeeper can be hired, or the bookkeeping and administrative roles can be combined. Should Your Business Outsource Bookkeeping Services? Based on your business strategy, making the decision to outsource bookkeeping services can save time, reduce stress, and provide accurate insights to your finances. Each business has unique needs that work better with either local, virtual, or in-house bookkeeping solutions. Talking to a CPA can help you make that decision, especially when considering any business’ tax, bookkeeping, and accounting needs. If you’re unsure of what to do, reach out to our team to find out what financial systems and processes are best for your situation. We’ll give your business the support it needs so that you can focus on growing the business and achieving your goals.
Author Archives: Advanced Tax
Car Lease Tax Deduction Rules for Employees and Businesses in Canada In Canada, there is a car lease tax deduction in specific situations. This comes with various rules and regulations that are set out by the CRA. Its purpose is to provide the tax deduction for employees and businesses using a vehicle for work. This could involve either a vehicle used for transportation in business activities or even a fleet used operationally. Maximizing the deduction gets you more tax savings if it adheres to the following criteria we describe in the blog below. Understanding the Car Lease Tax Deduction in Canada Basically, the Canada Revenue Agency (CRA) allows deductions for car lease payments when used for income-earning purposes. This helps employees using a leased vehicle for employment and business owners save on taxes. There are different rules for employees and business owners, but they follow the same general guidelines. Car Lease Tax Deduction for Employees As an employee leasing a vehicle for work, they can deduct the amounts paid towards the vehicle lease. They vehicle must be used to earn employment income and comes with the following rules: Car Lease Tax Deduction for Businesses Businesses can also deduct costs incurred from leasing vehicles used to earn income. These deductions are claimed under different lines depending on the type of income earned: Special Considerations How We Can Help You Save on Your Car Lease If you’re looking to get a new vehicle, this deduction should be something to consider. If you use a vehicle to earn income, your tax savings could increase when the deduction is used right. The guidelines above are a highlight of the CRA rules to consider when doing so, but they are an opportunity to maximize your allowable deductions by reporting expenses accurately. You might still be unsure of how to use this deduction best, but that’s why we’re here. Working with our team of experienced Richmond BC accountants at Advanced Tax gets you personalized assistance. This is the best way to ensure compliance with all tax regulations. At the same time, they can make sure you’re getting the most out of your tax returns. Contact our team at Advanced Tax to get the advice you need to start making the most of your tax return filing.
The Penalty for Late Tax Filing in Canada Adds Up to Impactful Consequences The personal income tax filing due date for this year was at the end of April, leaving those who haven’t filed wondering what happens now. A penalty for late tax filing in Canada can result in fees, interest, and other consequences to those responsible. There are other factors to consider like how much tax is owed, and which type of tax return it is. For example, self-employed individuals have until June 15 to file, but they are still expected to pay their tax owing by April 30. Not paying by the date incurs interest until it is paid off, even it if it is filed on time. Keep reading to find out what the penalty for late tax filing and payments are for their respective returns. Penalties for Late Tax Filing for Personal Income Tax Returns Paying for your tax owing late results in interest being accumulated on the amount owed. In addition, if there’s a balance owing and you file the return late, you’ll get charged with a late-filing penalty. Interest is compounded daily from April 30, the date at which the payment is owed. It collects until the balance is cleared. Late filing can also cause delays to any of your benefit and credit payments. Even if you can’t pay the full amount on time, make sure you file anyways to avoid the late-filing penalty. The late filing penalty for personal income tax returns for 2023 is 5% of the tax owing from the 2023 tax filing. On top of that, there is an extra 1% late fee charged per month after the due date it was filed. This can increase to a maximum of 12 months. In the case where you had a late-filing penalty charged for any of the previous 3 years, like 2020, 2021, or 2022, and the CRA requested a formal demand for a return, your penalty increases significantly. The penalty becomes 10% of the balance owing. On top of that, there’s an additional 2% additional per full month that you filed after the due date. This can increase until the maximum of 20 months. Penalties for Late Instalment Payments This penalty applies to tax instalments as well. If you are required to pay instalments, the payment due date of the instalment that is missed starts the compounding of interest. If your tax instalments are under $1,000, then you will not face the penalty for late fees, but interest will still be charged. Penalty for Late Tax Filing of GST/HST Returns If you didn’t file on time, but there is no GST/HST owed to the CRA or they owe you a refund, there is no late filing penalty. If you have an amount owing for the GST/HST return, the late filing fee is 1% of the amount owing plus 25% times the number of full months the return is overdue. This accumulates up to the maximum of 12 months. In the case where the CRA demands that you file and you don’t, the late filing fee is $250. If you are required to file electronically but don’t do it, there is a $100 penalty for the initial return and $250 for each subsequent return not filed electronically. For cases where the return was filed inaccurately, the penalty is 5% plus 1% for each month of the difference between what was reported and what should have been reported. The maximum penalty in this case is 10%. Interest on Late GST/HST Tax Payments For returns that have overdue balances owing, interest is compounded daily based on the prescribed interest rates. When the CRA owes a refund for an overpayment or refund of net tax claimed on a GST/HST return, the interest is also compounded daily. This begins from the option that is latest of the following: For instalments, if they match the expected payments from the previous year, you will not have interest owing. This is the case even if your total tax owed is higher than the previous year. In the situation where you paid less than what was owed for the required instalment payments, you can eliminate or reduce the instalment interest by overpaying the next instalment or paying early. Interest on instalment payments is charged at the end of the fiscal year. It is calculated starting the day after the instalment payment was due until the earlier of the day the amount and interest is paid or the day the net tax owed for the year is due. Penalty for Late Tax Filing of Corporate Tax Returns Late filing of corporate tax returns results in a penalty for late tax filing of 5% of the unpaid tax due on the filing deadline. In addition to the 5%, 1% of it is owed for each full month that it is late, up to 12 months. If the CRA issued a demand to file, the percentages are doubled. The penalty becomes 10% of the unpaid tax when it was due. An additional 2% per full month that the return is late is also owed. The maximum in this case is 20 months. In instalment penalties in which the interest is more than $1,000, the penalty is calculated by subtracting the instalment interest from the larger of either $1,000 or 25% of the instalment interest which is calculated if no instalment payment was made for the year. Half of this difference is what the amount of the penalty would be. Non-resident corporations face a different set of penalty calculations. This is a penalty that is equal to the larger of either $100 or $25 per full day the return is late. The maximum is 100 days. Late Payroll Remittance Penalties When you make deductions that meet the following criteria and are past the due dates, there are consequences. The CRA applies significant penalties and interest that is compounded daily. The criteria for remittance amounts include: Depending on your remitter type, due dates […]
Federal Budget 2024 Canada Summary: Key Highlights for Businesses and Individuals The Canadian Federal Budget 2024 announcement was recently made, and we’ve highlighted the key areas in this article. It affects anyone residing or operating a business in Canada, along with other areas of foreign impact. When working with expert accountants, you can trust that they’re up to date with what’s happening across the country. This makes sure than any financial and tax planning done always considers the full scope of your situation and upcoming changes. The Federal Budget brings economic changes which can really affect your livelihood; that’s why we’re here to break it down. Federal Budget Housing Initiatives: Building for the Future One key focus area of the 2024 Federal Budget is around the Canadian housing crisis. The proposals come with a vision to construct around 3.9 million new homes by 2031. To do so, the following measures have been introduced: Tax Reforms: Impacts on High-Worth Individuals and Corporations Taxes in the coming years will be significantly changed by the 2024 budget. It targets high-net-worth individuals, corporations, and trusts primarily with these changes: Federal Budget Support for Students and Healthcare Professionals The federal budget prioritizes support for education and healthcare sectors: Environmental Initiatives and Business Incentives Environmental sustainability and business growth are focal points of the budget: Indigenous Communities and Foreign Policy The budget outlines substantial support for Indigenous communities and foreign policy endeavors: Artificial Intelligence and Future Readiness The government is investing heavily in artificial intelligence (AI) to enhance technological capabilities and prepare for the future: Navigating the Changes of the Federal Budget 2024 Canada With the Federal Budget 2024 in Canada announced, this summary highlighted key areas that may affect your situation. Whether you’re in business, or just concerned with how it affects you as an individual, there are changes coming up to consider. Housing initiatives, tax reforms, investments in healthcare, education, and AI bring new opportunities across the board. The budget is a detailed roadmap for where Canada’s growing economically and socially. At the end of the day, you need an expert to give the right advice based on the upcoming changes. This helps with tax planning, financial reporting, and strategic consulting. That’s why the team at Advanced Tax is just a message or a phone call away to get you to your goals. Book a consultation with us today to get ahead of the upcoming changes from the 2024 Federal Budget in Canada. It’s better to be proactive and informed over scrambling when you feel the effect of the changes. We’ll get you the personalized guidance you need.
Guide to Tax on Crypto Gains in Canada Cryptocurrency is becoming a more common investment tool day-by-day, with coins like Bitcoin and Ethereum leading the way. Other crypto assets are making their way into regular dealings for investors as well, but there are taxes to consider on crypto gains. When dealing in crypto assets, you need to understand the tax implications that come with their income and profits. Read our guide below to understand the tax obligations crypto investors and businesses face in Canada. Types of Crypto-Assets Leading to Crypto Gains Crypto-Assets Crypto assets are any digital assets that are on a cryptographically secured distributed ledger. While there are many types of crypto assets, the most used ones are cryptocurrencies (fungible tokens) and NFTs (non-fungible tokens). Crypto-asset exchanges are online platforms for users to buy, sell, and trade crypto-assets. Lending and staking arrangements occur on these platforms as well, while servicing Canadians from around the world. Cryptocurrency Cryptocurrency is a type of virtual asset protected using cryptography and often recorded on a blockchain. It operates independently of traditional financial institutions but still has a history of transactions recorded. Cryptocurrencies like Bitcoin, Ethereum, Tether, and other crypto coins are independent and are not backed by governments, central banks, or other authorities. Cryptocurrencies change in value due to supply and demand. They are traded through exchanges and held in digital wallets. While cryptocurrencies offer opportunities for investment and financial transactions, they come with tax obligations that investors need to consider and comply with. Crypto Transactions and Crypto Gain Tax Implications In general, just holding cryptocurrencies does not result in any taxes. Crypto transactions can result in either capital gains or business income, depending on the nature of the activity. Capital gains are incurred when disposing of cryptocurrency, such as selling, trading, or using it to purchase goods or services. On the other hand, if crypto activities are considered part of a business, the profits are classified as business income. Capital Gains Tax Treatment of Crypto Gains When selling, trading, gifting, converting, or exchanging any cryptocurrency, you need to make sure you have records of the following: If you sell a cryptocurrency for more than the original purchase price or adjusted cost base, it results in a capital gain. Make sure to keep track of how the fair market value of the crypto asset was calculated in case of a CRA review or audit. Fifty percent of capital gains are taxable income and must be reported on the tax return using T1 Schedule 3 – Capital Gains (or Losses). Valuation of Cryptocurrency Determining the value of cryptocurrency is key to report your capital gains or losses accurately. Whether classified as capital property or inventory, investors must track acquisition costs and fair market values to calculate capital gains or business income accurately. If it’s considered capital property, the cost from acquiring it is used to evaluate the value. If the cryptocurrency is inventory, the valuation is based on: Capital Losses on Crypto Half of your capital losses or your allowable capital losses can be deducted from your taxable capital gains. It can’t be deducted from other sources of income like employment. If you were scammed when dealing in crypto assets, you can claim a loss. In this case, it’s especially recommended to work with a tax professional to find out more information. Tax Treatment of Crypto Business Income For investors in crypto-related businesses such as mining or trading as a primary source of income, profits are business income. Business activities need to be reported on their tax returns, and expenses incurred in conducting the business may be deductible. Crypto in Goods and Services If a taxable property or service is exchanged for cryptocurrency, GST/HST still needs to be considered. To calculate the GST/HST on the transaction, use the fair market value of the cryptocurrency when the exchange occurred. Tax Implications of Mining Cryptocurrency miners’ group valid transactions into blocks. When these blocks are accepted by the cryptocurrencies network, they become part of the blockchain’s public ledger. This is done through computers and specialized hardware and can have tax implications. Payments occur through income in the form of the cryptocurrency from the creation of a new cryptocurrency and successful validation. Tax treatment depends on whether it’s considered a hobby or business activity. Income from mining is taxable, while associated expenses can be deductible for businesses. In addition, any capital gains from selling the newly validated cryptocurrency are taxable. Reporting Requirements on Crypto Gains To meet tax obligations, investors need to keep accurate records of all crypto activities, including purchases, sales, and mining. This is because capital gains, losses, or business income leads to an impact on taxes owed. Make sure you have accurate information about any of your activities on crypto-asset exchanges. Because exchanges can stop operating without notice, locking account holders out, it is crucial to download and keep information on transactions related to exchange accounts as they happen. Activities to keep records for include: The information on crypto asset activities should include details such as: Failing to maintain proper records results in challenges during tax filing and potential audits by the Canada Revenue Agency (CRA). Filing Deadlines and Penalties The deadline for most Canadian tax return filing and payments is on April 30, unless you or your spouse are self-employed or have business income. In that case, the deadline to file is on June 15 but the payment due date is still on April 30. Keeping these dates in mind, make sure your crypto transaction records are accurate much before the deadlines to avoid delays to your tax filing. Late returns and payments lead to penalties and interest, and not reporting crypto income or capital gains can cause audits as well. Avoiding and Reducing Penalties If you are in the situation where your income or capital crypto gains were not reported in previous tax returns, you can still get ahead of any issues with the CRA by: Working with a Professional on […]