According to the prestigious accounting firm PwC, Canada ranks as the ninth among 157 countries worldwide that has a high level of tax payment ease.
This report attests to the efforts of the Canada Revenue Agency (CRA) to improve the rate of tax compliance among Canadian taxpayers. Unfortunately, there are still some who are not working out their taxes well. Could you be among those who are committing expensive tax mistakes? Take a look at these to find out.
1. Insisting the DIY Method
Tax compliance is a numbers game -- that is an understatement. With the amount of money at stake in annual tax payments, you should consider the best way to round up your taxes. While you can do the number crunching on your own, hiring an accountant to keep an eye on your tax planning strategy will significantly cut your tax bill. Of course, it also minimizes the chance of accounting errors.
2. Putting Expenses In A Single Category
Some business owners get too busy with their business that they tend to put off tax matters until the last minute. In doing so, they do their taxes hastily -- to the point of putting a chunk of different expenses in one category. While you may not be penalized for this practice, it will surely add strain on your business finances as it will make tax deductions more difficult for you.
3. Keeping The Donations Off
Did you know that your business can get deductions from your current tax bill when you make donations to charitable institutions? To avail those much-needed tax deductions, you should make donations prior to the deadline of filing and paying taxes. Otherwise, the anticipated cut in your tax bill will come in the next financial year.
4. Failing To Document
Keeping track of your financial documents is one of the golden rules of tax planning. In fact, the CRA recommends holding on to your receipts, invoices and financial statements for at least five years. Having a record of your financial documents will help you prove and win over possible tax disputes in the future. It will also put ease and convenience to you in case the CRA does a random audit on your business.
Filing and paying your taxes is not all that there is to tax planning. More than anything else, you should also make sure that you are following Canadian taxation best practices to avoid wasting money on skyrocketing tax bills.
Need an extra hand in keeping your taxes in order? Contact us at D&V Philippines today.