Tag: tax accountant

Back to School & Back to Business 2020

Under normal circumstances at this time of year, kids start feeling that “back-to-school” anxiety. This year has a whole different kind of stress attached to it. And even if you’re not a parent, these feelings also apply to your business.

We may be in Stage 3 of reopening, but many small business owners are still unsure how to move forward. We find that the best way to work through anxiety is to assess and plan based on real information. Here are a few ideas on how you can get a handle on things, and prepare for everything Fall of 2020 has in store.

It Starts with Your Books

Facing your books is the beginning of planning and moving forward in this pandemic world. Don’t have a panic attack. The best thing you can do is understand your numbers, assess the health of your business, and make informed decisions.

If your business was closed throughout the first stages of the pandemic, the state of your books will reflect that—it’s not fun, but this is data you need to face.

To figure out how to pull yourself out of the hole that the pandemic has may have put you in, you need to know everything about your current financial situation. We can help you analyze the information. With our experience with small businesses, we can often find places where they can cut costs and correct deficiencies to save you money. And every cent matters in this market.

Oh, and if you’re worried about your personal finances, we can help with that too.

Invest in Online

It’s crazy to think that only six months ago, few people had ever heard of Zoom. Now, it seems to be the video conferencing app of choice for countless businesses around the world.

Even though things like schools and businesses are reopening, there will still be an increased emphasis on the digital side for the foreseeable future—or maybe even forever! With this in mind, it’s important to invest in your digital assets.

For example, if you haven’t updated your website in years, you should get on that immediately. Your website is your digital storefront, and given that many people will still be remaining inside, it’s the only storefront they will see! Also, take a look at reinvigorating your social media accounts to engage directly with your clients and customers. What about sprucing up or starting a new email marketing campaign? Since face-to-face contact is out, finding new ways to keep in touch with your customers can help. And with digital advertising, you can gain visibility with new customers at a fraction of the cost of traditional marketing.

If you sell products, a great online shop could completely transform your business. These days there are so many options to choose from; Shopify, Woocommerce on WordPress, and Squarespace are just a few options. A great online shop combined with some savvy social media marketing could push your business ahead this fall, just in time for the holiday season.

If you run a restaurant or a service-based business, make sure your menus and offerings are clear and appealing. A good copywriter can help you entice potential customers while also optimizing your keywords for Google. And now might be the right opportunity to consider an app for your business.

Now is also a good time to invest in some upgraded technology for both you and your children. For example, most laptops’ webcams are terrible, resulting in a horrible image for digital conferences and remote learning. Similarly, the built-in microphones usually aren’t great either. By investing in a decent quality webcam and microphone/headset, you can vastly improve your digital networking capabilities. In this environment, it’s an investment worth making.

Create a Revamped Business Plan

If you wrote a business plan before March 2020, you’ve likely thrown it out the window by now!

Even though the world has changed, it’s still essential to have a business and financial plan in place to chart your path for future growth, with your goals, hopes, dreams, challenges, and solutions assessed and prepared. We’ve been helping many small businesses with the financial side of their new business plan, giving them some direction moving forward into the fall.

We Can Help

If you’re experiencing some anxiety about your business right now, that’s entirely natural. After all, things are still changing and we don’t know where this pandemic will end. But by starting to make some plans for your business, you can take back some control and get a better grasp on things. This will certainly help reduce that anxiety!

If you need help understanding your numbers and your business’s financial health, contact The Number Works today. We can help you take control of your finances and create a financial plan for the months to come!

Bookkeeping New Year's Resolutions

Bookkeeping New Year’s Resolutions

Do you always keep your New Year’s Resolutions?

Unfortunately, studies have shown that most new year’s resolutions simply don’t work. We enter into the new year with the best of intentions, planning on making significant changes to our lives, but before we know it… it’s February, and we haven’t taken any steps towards our resolutions.

One of the reasons for this is because most resolutions resemble wishes rather than actual goals. They are too general, e.g. “I want to lose weight,” or overly ambitious, e.g. “I want to be able to run a marathon by February.” If you want to make a new year’s resolution that you’ll keep, it needs to be both realistic and actionable.

This year, why not make your new year’s resolution about your small business’ bookkeeping? There are a ton of concrete steps you can take to make your bookkeeping habits and practices even better for the upcoming year. Take on any of the following resolutions, and you’ll not only be able to keep them, but you’ll also see some major positive changes to the way you handle your personal and small business accounting!

Resolve to: Digitize Everything

The days of keeping your receipts and invoices in a series of shoeboxes are long gone. Nowadays, thanks to digital technology, you can make sure that everything is optimally organized so that you can find any document in a matter of minutes (if not seconds).

While you do need to keep paper copies of all your receipts, you should be creating digital copies that are correctly named and organized on your computer. It isn’t as difficult as you might think, as there are dozens of high-quality apps that allow you to simply take a photo of a paper receipt with your phone. These apps will then automatically name and file that record into the proper place in your bookkeeping system.

Creating a system like this can have countless benefits. First, searching for a necessary receipt is going to be easy as pie. Just type the name into the search, and the corresponding document will pop up. If you’re using accounting software, it will help you keep track of all your receipts, organizing them for you by date and type.

It’s also going to be easier to work with a bookkeeper or accountant when your financial documents and records are already “filed” and organized on your network!

Resolve to: Hire a Bookkeeper

One of the biggest time sucks for small business owners is doing their own bookkeeping.

Bookkeeping is something that needs to be constantly updated and maintained. If you’re a super busy small business owner, that can result in updating your financial records being put on the backburner. Over time, this ends up becoming a huge backlog of work that you MUST do to keep your business happily humming along.

When you hire a professional bookkeeper, you’ll have the time to focus on the job of growing your business rather than having to monitor and update the books every day. The cost of hiring a bookkeeper is often more than covered by your increased productivity, and that’s not even mentioning the levels of stress that you’ll be avoiding!

If you don’t currently have a bookkeeper, you’re probably dreading going over all of your year-end financial records. By hiring a bookkeeper, you can instead rest easy and enjoy the start of the new year!

Resolve to: Modernize Your Bookkeeping Software

Do you keep all of your financial records in an Excel spreadsheet? Now, there is nothing wrong with that—Excel is a fantastic program! But wouldn’t it be better if you could use a program designed specifically for bookkeeping and accounting, rather than continually having to customize spreadsheets to your desired specifications?

By using online cloud-based accounting services like Xero or Quickbooks Online, you’ll be streamlining the way you input your financial information and records. You’ll also be ensuring that everything will be safely backed up to the cloud. If the unthinkable were ever to happen, all of your financial information would be secure.

At the start of this blog, we told you that most people don’t keep their new year’s resolutions. Why not be an exception to that rule this upcoming year by making your resolutions into actionable plans and strategies that will simplify your life? At The Number Works, it’s our goal to help you keep all of your finances in order with exceptional accounting services. If you want to get the new year started right, please feel free to contact us today! We can’t wait to make 2020 the year that you get all of your accounting under control!

Financial Tips for Freelancers: How to Keep Up with Quarterly Taxes

Financial Tips for Freelancers: How to Keep Up with Quarterly Taxes

Being a freelancer comes with so many benefits. You’re in charge of your own schedule, you can work from home, choose your clients, and you’re even in charge of paying your own taxes!

Ok, so that last one isn’t the most fun. But it’s important!

When you’re a freelancer, taxes are a bit more complicated as most freelancers pay their taxes throughout the year instead of just in April.

So, should you pay your taxes quarterly, or once a year?

The answer is… both!

If you’re a freelancer who owes $3,000 or more to the CRA in the current and previous two tax years, you must pay quarterly-estimated tax payments. In general, payments are due on March 15, June 15, September 15, and December 15. Phew, that’s exhausting!

At The Number Works, we understand how hectic it can be to file your taxes once a year, let alone making payments four times, so here are our best tips for freelancers to help you pay your quarterly taxes without any headaches:

1. Put Money Aside for Taxes

The best way to stay stress-free come tax time is to budget for it.

Unlike salaried employees, income tax and payroll deductions, such as the Canada Pension Plan and Employment Insurance, are not withheld at the source. This means that, as a freelancer, you’re responsible for paying all of your income taxes while simultaneously contributing to the employee portion and the employer portion of CPP and EI.

It’s a lot to keep track of. That’s why it’s essential for you to set aside money each time you get paid to cover your quarterly income taxes. For example, if your marginal tax rate is 30%, you should set aside 30% of your earnings from each invoice.

We recommend taking 30% of each payment you receive and putting it in a separate bank account. This way, you’ll have enough money saved to cover those quarterly instalments every time tax time rolls around.

2. Keep Your Payment Options Simple

Did you know the CRA gives you three options to calculate the amount of your quarterly tax instalment? The first two options base your instalments on your 2018 taxes or an estimate of your 2019 taxes. But, be careful! If you underestimate your 2019 taxes, the CRA will charge you interest based on a higher instalment than was needed.

That’s why the third option is our favourite. With this option, the CRA calculates the amount of your instalment and sends you that calculation as a reminder. The total for the year will equal your previous year’s instalment base. By paying the amounts shown on the CRA notice, you won’t be charged any instalment interest, so long as you pay on time.

The CRA should send you two reminders. One in February for the March and June instalments, and one in August for the September and December instalments. Keep in mind that even if you don’t receive a reminder, you still have to pay. In this case, call the CRA and confirm the amount you owe.

The CRA also has a calculation chart for the current year that will help you determine your taxes, credits, Canada Pension Plan contributions, and Employment Insurance premiums, so you can figure out how much you owe.

3. Opt for Automatic Deductions

Did you know that if you fail to pay your quarterly taxes in full, the CRA charges interest on the deficient amounts as if you owed the money? Yikes! And if this interest charge adds up to more than $1,000, the CRA will add an extra fee on top of that. Bottom line: Always pay your quarterly taxes on time!

And the best way to make sure you don’t forget to pay your quarterly taxes is to set up automatic payments from your bank account directly to the CRA.

If you’ve followed our first tip and put 30% of your earnings into a separate account, you can grant the CRA permission to debit this account automatically. It’s the best way to have a stress-free tax time.

4. Hire a Professional Accountant

Sure, freelancing comes with its fair share of perks, but it also takes a lot of work. You have to find your clients, market your services, and plan everything in between. So, it’s probably safe to say that accounting isn’t at the top of your to-do list.

In fact, 23% of small businesses fail because they don’t have the right team behind their business and 29% fail because they ran out of cash.

It’s clear to see why having a professional accountant on your team is the key to success. Not only can a professional accountant help you by properly managing your cash flow, but they can also stay on top of your quarterly taxes for you.

Plus, investing in a professional accountant can save you money in the long run by maximizing all your tax deductions and avoiding late fees. A professional accountant will ensure that your quarterly payments are noted on your annual tax return so you get credit for them and don’t accidentally pay them twice. It’s well worth the cost.

If you’re looking to hire a professional accountant or need help reviewing your quarterly taxes, contact The Number Works today! We love helping freelancers build a thriving business and giving peace of mind to all our clients. Knowing a professional accountant is in charge of your books is priceless, if not tax deductible!

Getting Your Business Ready Well *Before* Tax Season

Getting Your Business Ready Well *Before* Tax Season

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Did you know that a survey conducted by The National Small Business Association (NSBA) discovered that 33 percent of small business owners spend over 80 hours on federal taxes? That adds up to two full weeks!

Although getting your papers in order so you can file your taxes isn’t very exciting, it’s one of the most important things you can do for your business. Believe it or not, tax time doesn’t have to be a burden so long as you start to prepare well in advance.

So here are four things you need to know to get your business ready and help ease the stress of filing your taxes come April:

What Will My Accountant Need Come Tax Time?

As a business owner, there are no shortage of important forms and records that your accountant will need to properly file your taxes. Pulling all of these documents together can be one of the most time-consuming parts of their job if you aren’t already properly organized. And, as you know, accountants are usually paid by the hour. So if you want to cut down on accounting fees for your business, preparing well in advance of tax season can make a big difference on how many hours you’re paying for – and, trust us, your accountant will love you for being so organized.

Here’s a list of common business records you’ll need to give your accountant for tax season:

  • All of your business’ financial statements, such as income statements, balance sheets, and cash flow statements.
  • If your business has employees, your accountant will need your payroll information.
  • Your accountant will need the receipts from your travel expenses, advertising expenses, rent, utilities, office supplies, maintenance, telecommunications, internet costs, raw materials, shipping, etc.
  • If you have a company car, you’ll need motor vehicle expense information, such as your business’ use of the vehicle, operating expenses, vehicle driving log with business kilometres driven, etc. 
  • Having asset additions or disposals during the year, including land, buildings, vehicles, machinery, etc. is also crucial.

Lastly, your tax accountant will require your tax records including:

  • Last year’s Notice of Assessment
  • Amounts paid by instalments
  • A copy of your income tax return filed in 2017 (if you’re a new client)

Phew! So now you see why it’s important to get your business ready for tax time before you end up in a time crunch!

By preparing well in advance, you won’t feel the stress of having to gather all this information at the last minute. If you have any questions about these forms or receipts, your accountant will have ample time to answer them before they’re drowning in a mountain of paperwork come March.

How Can I Legally Deduct My Business Expenses?

This is where preparing well ahead of tax season can really benefit you and your business.

In order to maximize your deductions, you must have all your business-related receipts. In fact, the Canada Revenue Agency (CRA) requires that all of your business expenses be backed up by receipts, and you actually need to keep these receipts for at least six years, as the CRA can ask to see them again if needed.  

To prepare your business for tax season early, you should get in the habit of asking for a receipt after every transaction, no matter how small. Train yourself to look at your receipts when you first get them to ensure they clearly show what the purchase was for and that they include a legible vendor’s name and date.

As our experts here at The Number Works know, illegible or incomplete receipts are a hassle when it comes to accurate record-keeping, especially if you or your bookkeeper are trying to record what an incomplete receipt was for months later.

Creating a habit of checking all your receipts as you get them is a crucial first step to maximizing your business income tax deductions.

What Else Should I Do Right Now to Prepare My Business?

Get organized! Being as organized as possible will ensure a stress-free tax filing for both you and your accountant.

If you’re looking for a place to start, try creating a system where you clip groups of receipts together by type, using post-it-notes to show each category of receipt on the top. If your accountant isn’t wasting their time trying to figure out what the receipts are for, you’ll actually be saving money!

It’s essential that all your records are accurately summarized and tallied. Cheques, invoices, and business expenses should all be categorized and totalled. If you have a system where you sort all your information slips by type, you’re bound to save more time come tax season and, therefore, more money!

Ask your accountant what will make their job easier. Trust us, they will have lots of ideas! Together, you can find ways to better organize your records and documents based on the type of business you run. By figuring out potential problems with your accountant in advance, you’re sure to have their full attention and work out any kinks in the system well before it’s too late.  

Remember, your accountant is here to help by giving you tax planning advice such as how to maximize your credits or deductions or ways of restructuring your business finances to reduce your tax exposure. So don’t be shy to pick up the phone!

What Kind of Income Tax Return Does My Business Need to File?

It’s important to determine which form you’ll be filling out well in advance because the paperwork you will need can change based on how your business is structured. For example, if your business is a sole proprietorship or partnership, you must report your business income on your T1 personal income tax form because, in this case, your business is you. For a sole proprietorship or partnership, you’ll want the T1 income tax return package, which includes Form T2125 (Statement of Business or Professional Activities), for you to report your business income.

What if your business is incorporated? In that case, you will report your business income on a T2 corporate income tax return. By law, your incorporated small business is a separate entity, thus it needs to complete and file its own Canadian income tax return. However, don’t forget to file your own separate T1 personal income tax return. If your business is incorporated, then you as a person are a separate legal entity, and that’s why you’ll need to fill out both the T1 and T2 forms.

If your business needs to file a T1 return, your tax accountant will also need your relevant personal information slips and tax-related documents in addition to the business ones.

Some of these forms may include:

  • T4 slips (if you have employment as well as business income)
  • T4A commissions & self-employed
  • T5013 Partnership Income
  • T3 Income from Trusts
  • T5 Investment Income
  • RRSP contribution slips
  • Charitable donations
  • Medical and dental receipts
  • Child care information

How Can I Save Even More on Accounting Fees?

Another great way to prepare your business well before tax season is to start using cloud-based accounting software (if you haven’t already).

With current cloud-based accounting packages, you can have all of your accounting information in one easy to access place, and your accountant can even access it online at any time.

Not only will cloud-based accounting software keep track of your expenses and revenue, it can even do payroll and time and billing, as well as generate income statements, cash flow statements, and balance sheets as needed.

By switching over to a cloud-based system now, you’ll have ample time to get used to the new system and test out all its features long before tax season, making tax time even easier!  

The Bottom Line

So, what are you waiting for? If you want to make sure that all of your tax documents will be in order with every form filed on time, don’t hesitate to contact us today! Here at The Number Works, we’re more than happy to answer any and all of your tax-related questions to help you get your business ready well before tax time.