Claiming business expenses can be intimidating when you are not clear if you are allow to claim the charge or not. 
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First we need to understand that there are 2 scopes here: business and taxes. As a business owner all your Meals and Entertainment expenses are 100% included on your Profit and Loss expenses. Yes, the full amount is business related (conditions apply) and must be shown as part of your results because the expense is incurred for the purpose of earning income. 

Now, as CRA rules only 50% of the expense, or a reasonable amount (always lower than 50%) is eligible to be claimed as a deduction from your income. Same for the HST you pay on meals, you can claim the Input Tax Credits (ITC) only for 50% of the HST paid.

Conditions apply? YES! as per CRA tax rules to be eligible the meals expense must be:

• meals eaten with customers
• the cost of tickets for a theatre, concert, or athletic event, or other performance
• the cost of private boxes at sports facilities
• the cost of room rentals to provide entertainment, such as a hospitality suite
• the cost of cruises
• the cost of admissions to fashion shows
• the cost of entertaining guests at clubs (night, athletic, social, and sporting), as well as on vacation and similar trips
• taxes, gratuities, and cover charges are included in entertainment expenses

What can't be included?

• costs incurred for use of recreation facilities and club dues
• purchase of season tickets for sporting events (unless satisfactory proof is provided that the tickets are a promotional expense)
• meals claimed while outside a sales territory or on a vacation

Best practices for calculating, claiming and keeping records of Meals and Entertainments Expenses are: 

• Keep clear records of the transactions - both receipts, the one showing the payment, and the one showing the details and HST.
• Write down details on the receipt - client name, contact, purpose.
• Add to your calendar the meeting date and client
• Take a picture of you receipt or scan it ASAP - ink fades and maybe at year end you are not able to see the details.
• Keep daily records on your accounting books.

Always remember, the burden of proof is on you. Work efficiently each day and keep your records organized. 

Still having questions? No worries! Send me a message and we can chat! Let's keep your business organized and on track.

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Our business closes today for the holiday season.  We''ll see you again on Jan 6, 2020

2019 has been amazing: a year of growth and learning (from studies and mistakes), meeting new clients and strengthening relationships with the loyal customers who have been with me for these 5 years in business.

Closing my year with my goals met and many more dreams to achieve. ✅

Next year will be better. We'd planned for new services packages to help our clients reach their goals too using the power of numbers, because business not only need bank reconciliation and HST reports. Business also need planning and management reports to be aware of changes and be able to correct the strategies to reach their goals. We are giving you some tools to make your life easier:
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• Compliance Reports to comply with rules and standards
• Advisory reports to draw your attention to important data
• Financial reports to support your business plans
• Organizational systems to be able to always find what you are looking for.

I'm so excited for what the 2020 is bringing in: new opportunities and chances to learn and grow, to build meaningful relationships, and build a community of entrepreneurs wanting to grow and reach their financial goals. 🙋‍♀️🙋‍♂️

Happy holidays to all of you, your family and team members!

Tell me what's been your best part of 2019? What are your business plans for 2020?

#holidays #business #goals #numbers #celebrating #Ottawa

Big and sad news for you: getting a big refund when filing your taxes is not always a good thing for you. Sometimes is due to lack of planning. Imagine if with each paycheque you could pay less taxes and get more money! It's a possibility.

Canadian Tax Law based its rule on fairness, you pay what is fair for your personal and family situation. There credits and benefits you can apply to depending on your amount of income. Then, let's do that, pay only what's fair, no more, no less. 

When getting your paycheque you have some deductions applied, that is way your earned amount is not the same as your collected amount (net pay). The basic ones are: Canada Pension Plan (CPP), Employment Insurance (EI) and Income Tax (IT). There are additional benefits depending on your job: Pension Plan, Group insurance plan, RRSP savings Plan, etc. 

EI and CPP contributions are calculated on earned income and usually you can't change them due to tax rules. But you can calculate the exact amount of Income Tax you would pay at year end and this is the way to increase your paycheque. How?

• Via your employer: make sure every year you sign the appropriate forms regarding your personal and family situation
  • There are federal and provincial forms. TD1 Personal Tax Credit Forms: This form will allow you to report your current situation and calculate the right amount of taxes to pay.
  • It’s important to file this form if you change your marital status, have a new child, you have more than one job, or you are a student
  • This form will recalculate the tax to pay and help you get ore money now instead of waiting to get a big refund
• Via CRA: there are situation when you can directly request CRA to reduce your tax bill:
  • If you are excepting significant deductions as: Huge RRSP investments, rental losses, child care expenses, employment and medical expenses. Use this form only for situations not contained on the TD1
  • You can file then the form T1213 Request to Reduce Tax Deductions at source and if approved CRA can give authorization to reduce your paycheque tax bill.

You always need to update your current situation with your employer and CRA to get a fair deal. If you get marry, or divorced, or got sick or have a child. Don’t wait until the tax season time to declare your changes and receive a refund. On the other side of the spectrum, you can also fill out the TD1 and provincial forms if you always have a bill to pay at the end, you can increase the amounts by each paycheque and the you won’t have a debt to CRA.

As you see, having a great refund is not always good news, you can plan and have more money on your side during the whole year, then you can use it to save on RRSP, TFSA, pay old debts or going on holidays with your family. 

Here are the 4 tips to avoid paying more taxes during the year and save/gain money:

1. Always update your personal/family situation with CRA
2. Ask your employer to calculate your tax expenses using the TD1 Personal Tax Credit Forms 
3. If your situation is changing dramatically ask CRA for an adjust with the T1213 Request to Reduce Tax Deductions
4. The extra money you get on each paycheque save it for the future using RRSP, TFSA or buying the insurance you need to protect you and your family

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Hope this can help you plan better for the next tax season. Contact us today for an appointment and we can help you plan for your tax bill. 
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Yes, we are here again: getting ready for the 2018 Tax Season. It's that time of the year when we start to panic if we are not organized or we don't like dealing with paperwork. We'll be helping your during this month to plan and be ready!

The best way to deal with tax season is to be one step ahead, then you can take your time, plan and compile all the documents you may need to file properly. Why is so important to get ready and file your taxes the earliest possible?

• You can get faster refunds if you overpaid taxes during the year with your paycheque (I'll be taking about this next week: how to reduce the tax taken from your paycheque)
• If you owe taxes, then you'll have time to plan for the payments. Due date is April 30, any payment you can make before that date is not subjected to interest or penalties. You can pay your debt by instalments and avoid the extra charges.
• You can avoid delays receiving tax credits and benefits: Canada Child Benefit, GST/HST tax credit, Working Income Tax benefit and Guaranteed income supplement. You can find more information on how to apply here:  https://www.canada.ca/en/services/taxes/income-tax/personal-income-tax/doing-your-taxes.html
• You have more time for reviewing the rules and changes, then you can find all the documents you need and do it right.

The due dates for this 2018 tax season is April 30, 2019. This date apply to most of the taxpayers, except for self-employed individuals and their spouse or common-law partner. If you are in this situation you both have until June 15 to file, but any owing balance must be paid on or before April 30. Then we go back to the beginning: the best way is to file the earliest and always plan for your taxes.

This month I'll be sharing due dates, benefits of planning for this season, examples, check lists and tips on how to navigate this tax season pain-free. Follow our blog and let us know if you have any question. 

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Audits are scary and may have a devastating effect on your business if your books are not up-to standards: you can be penalize with high fines, you can loose your operating licenses, and you can loose your business. Plus, the stress of having someone breathing on your neck and you not even been sure your accounting records can hold the scrutiny. Now with that image in your mind, I want you to meet Max.

Max is a lawyer and runs his own legal practice; we met on 2009 when I was updating my foreign accounting credentials on Canadian payroll and income taxes. He was in a panic state looking for someone to clean-up his accounting books as the Law Society of Upper Canada was reviewing his practice. In the middle of the audit Max had the bad luck of loosing all his database as his computer decided to crash. No back-ups! He hired me to re-construct his books and provide all the information to the auditors with the goal of not loosing his licence.

I came back home that day with a giant bag containing 5 years of receipts, bank statements, client’s ledgers and a laptop with PC Law installed to recover all the data and the responsibility of doing everything right. My living-room became my office and step by step I was able to sort out and properly file all the receipts, record all the entries on his legal software and provide accurate reports for the auditors. Max reached his goal of keeping his licence as the accounting standards of the Law society were met.
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By offering support and providing him with the reports he so desperately needed, I discovered I really enjoyed the whole process. I love cleaning-up messy books, recovering data and providing management reports that help business owners make better decisions and be covered and totally prepared when the auditors knock at their doors. Seeing the change on people from the panic state to feel comfortable and safe with their accounting reports is a prize on its own.

Yes, Max is still my client and we’d navigated together numerous audits: CRA and Law society, and he is happy with the results. The first thing he does when he receive the regular letter from the legal board, is to call me, and we then prepare all the reports: Stress-Free process.

When you are in business chances are, you’ll get audit by Canada Revenue Agency or your professional board. But you also need to make sure everything is recorded properly, and you have an efficient archive system where you can find what you are looking for at any given time. We can help you, we can offer you solutions to keep your accounting records up-to date and you can count on management reports that free your time to focus more on your business.

What tips can I give you after sharing Max’s story? Here they are:

• Always have back-ups systems in place
• Keep tidy records and efficient archives
• Hire a professional to run you bookkeeping and managements reports
• Be proactive and prepared for any review
• Follow-up with your bookkeeper regularly: it’s your business!!

Is there anything more relaxing that knowing that your records are audit-proofed? Imagine the free time and the comforting peace of taking that pain out of your mind. Now you can enjoy running your business and have better results. As I did with Max's practice, we can offer this peace to you too: a set of up-to date and accurate records that will make you feel protected from an audit. We are your shield.

​Book a free meeting today to check the bookkeeping health of your business. Don't panic if the auditors call you.

Why is so important reconciling your bank accounts?
You can always hear your bookkeeper whispering in you ear to send the bank statements on time. Why are they so obsessed? They are taking care of you and your business!
Why all the fuss about the reconciliation? Why is so important reconcile your accounts on time?

1. Don’t forget to report all your income: reporting ALL your income is the best way to avoid audit and build a business that fulfill its responsibilities. It’s is your duty as a taxpayer to report all sources of income, and when you keep track of your income periodically you can make sure you are avoiding non-reporting penalties. On the other hand, measuring your income against your goals give you the answer if you are on the right track to reach your financial goals.
2. Identify your personal contributions: when reconciling you need to distinguish your personal contributions from the business income. Remember to keep track of them and document the transactions to support your claims.
3. Don’t forget to claim all your expenses: as important as reporting all your income is also identifying and reporting ALL your business expenses. When you claim all your eligible expenses you are reducing your taxable income and then saving on taxes. Review on detail you bank accounts, credit card statements and any cash receipts you have and send the to your bookkeeper on time. The expenses, of course, need to be all business related and supported by the proper source documents. https://www.dcastro.ca/blog/record-keeping-requirements-from-cra-perspective
4. Keep track of receivables: comparing your sales and deposits at the bank helps you plan your cash flow, but also give you a rough idea of how much money are you owed. The best way is creating detailed reports and collect your funds periodically, but a quick look at your bank account and your invoices lets you know who well (or not) you are doing strategically.
5. Avoid errors: not frequently, but the bank can make mistakes too. Duplicated transactions not cashed cheques, incorrect charges to your account. When you get into the habit of reviewing periodically your credit card and bank accounts charges you can detect these mistakes or fraudulent charges on time and deal with the bank accordingly.
6. Be sure you have enough money: chequing your bank balances and debts give you the chance of savvy planning for the future. it's really important to know how much money do you have today and how much of that is owed to third parties. You can separate funds to pay HST, income taxes and save money for yourself and your business.

 
Reconciling your bank accounts gives you an amazing planning tool that can be using to improve the financial situation of your business. Making sure you report all your income and claim all your expenses can save you money, time and stress when the tax season arrives. You will be ready! 

Do you reconcile your bank accounts periodically? Are you using it as a planning tool? 

We can help!

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When running your business is important knowing the expenses you can claim not just to reduce any amount of tax to pay but also to be able to manage your business properly, making decisions on which expenses to reduce to save money. The main goal of having your own business is paying yourself and be able to pay the business expenses with the business revenues.

All the expenses that you incurred to run your business you are eligible to claim them: office expenses, supplies, salaries, bank charges, insurance, utilities, vehicle expenses, etc. Always providing copies of the receipts and proving that the expense is actually related to your business. If you are in the food business buying supplies like sugar and oil are totally fine, not the same with a software business that the amount of sugar is just related to supplies to giving coffee or tea to your clients when visiting your office. All expenses need to be justified and supported by the nature of the business and the proper supporting documents.

At CRA website you can find a long list of expenses you are able to claim: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html, just be careful with which ones are actually necessary. Remember that the goal is not pay for all the expenses in the list but expend the necessary amount of money to run your business and still be able to pay yourself. I once met with a client that bought anything she can find for her business, her justification “it is eligible, it’s a business expense”. When I asker if she can actually afford all that expenses she was surprised that she could only pay “in cash” for just part of the expenses and the other part she didn’t actually need it. Her business now is running better, she is able to pay herself, have a profit to invest and find the cutest toy for her daycare business.

If you have a web design business you need top of the notch software, but if your business is a daycare you can do it, for starters, with a free version of FreshBooks. Sometimes is not the expense per ser, the main point is if we need it or if we can afford it. We totally understand we need to invest to sale, but are you aware of smarter ways of running your business?

• You can use free software - even accounting software - that help you be organized and run your business. Once you grow enough and are able to pay you can upgrade.
• Even if they are not free you can use technology on your favor: online payment services, teleconference services. Buy the software you really need.
• Don’t buy what you don’t need, even if is on sale.
• Plan, use budgets to track your expenses. If is not in your budget don’t buy it.
• Go paperless, print only what is necessary
• Reduce your credit card debt, reduce your interest payments.
• Instead of renting an office, be creative. Use co-working spaces (if appropriate for your business model) or work from home.

When buying supplies or incurring in expenses for your business you must also consider the source of money. How are you paying for that? Are you incurring in more debt? Are you able to recover that amount with your sales? This is a topic for next blog.

In summary, we can always plan for ways to afford the business expenses and run a profitable business which can support our life style. 

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After our blog about the importance of keeping records we’ve been contacted this week by 2 business owners with doubts regarding record keeping. What documents are important? What business records we must keep and for how long to comply with Canada Revenue Agency’s requirements?

First, we need to define what a Record is for a business. We can identify a Record as a document containing accounting or financial information that must be kept in an organized way. Usually they are called “books and records”. Records can include: ledgers, journals, vouchers, financial statements and accounts, and income tax and excise tax records. They help you determine your tax duties. Records are generally validated by Supporting Documents, which provide evidence of the transactions.

As per CRA website, Supporting Documents include (not limited to):

• sales invoices;
• purchase receipts, contracts;
• guarantees;
• bank deposit slips, cancelled cheques;
• cash register slips, credit card receipts;
• purchase orders;
• work orders;
• delivery slips; emails; and
• general correspondence in support of the transaction.

There are various methods of record keeping: paper files, electronically accessible and readable format converted from the original paper (scanned), or electronic documents produced by software. The main objective here is that the document must be readable, reliable and complete. The Supporting Document must provide you with the correct information to backup any tax claim.

You as an entrepreneur are solely responsible for the record keeping and maintenance of all documents, even when you hire a third party to do your filing, admin, bookkeeping and/or accounting work. Keep in mind that you are also responsible to provide those records to CRA at any moment. That is why is important to keep an efficient system where you can find any document at any given moment.

How long do you have to keep your records? Usually, for income tax purposes you need to keep all records and supporting documents for a period of six years from the end of the last tax year to which they relate. It’s important to indicate that the documents that support long-term acquisitions and disposal of capital, share registers, and other documents that will have impact upon sale or liquidation of property must be kept indefinitely. Similar rules apply to GST/HST documents, CPP, EI, ROE.

There are also special situations, some of them are: of you file your taxes late, you need to keep your documents six year from the date you file the return. You must also keep all documents concerning notice of objection and appeals.

All the business records and supporting documents must be maintain in Canada, or made available in Canada at CRA request, always in any of the 2 official languages. The documents can be kept outside of Canada only with a previous authorization from CRA.

Keeping proper records is both an obligation and a useful tool for all business owners. When you maintain archives that support every claim you made you make your business transparent and avoid unnecessary penalties due to loss of supporting documents. Records also helps you identify all sources of income and make better business decisions.
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If you still need help or have any question just let us know, we are here to help you and support your business.

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One of the obstacles that we find most frequently when we are creating or expanding our business is lack of concentration and motivation to keep pace and not get bored, quit in despair and throw everything away. For everything that have actual value you have to invest time and patience.
 
The lack of concentration can be adjusted with short-term goals, create tasks or lists of goals to be met. Some people prefer this on paper, others rely on software and others do Dreams Boards. You must find what is that keeps yourself focused, so that you can achieve your goals. By concentrating better on what we do, we increase the productivity and quality of the tasks we perform. There are many business studies and business books that deal with this topic, but the best thing is that everyone can use the system that works for them and generates better performance.
 
In the other hand, motivation is an emotional state that activates us, and helps us maintain a behavior that helps us meet our goals. It is an impulse that moves us to perform tasks and persist in them until we finish them. There are several "types" of motivations, but all studies agree that it is vital to achieve our purposes and dreams.
 
As you can see, the word we use the most here is: GOALS. The goals help us to draw the path, but first we must know where we are going. If we do not know where to go, no matter what path we take, we will never get there.
 
Discipline and perseverance in meeting our goals are the keys for our businesses to grow successfully.
 
In your business: do you work with goals? A question that we think so many times silly (but it is not): where do you see yourself and your business in 5 years? 📔📚🏷️💰💲

Today we will talk about another advice to improve your business: The need of keeping detailed records.
 
The registers - Accounting books - in which we record quantitatively all the commercial and operational operations of our businesses, in chronological and orderly manner, have the purpose of showing us the financial situation of the company at any time of the year and its results allow us to make the right decisions.
 
Example: when reviewing how much it costs you to produce a certain article, you can see if the sales prices are adequate and the sales have a favorable economic result. Thus, we can analyze different areas such as: cost of services, prices, reduction of expenses, to which products / services we should dedicate more attention and the ones we must even eliminate since they are not profitable at all.
 
"During a fiscal year there are a lot of economic movements. Beyond the income and expenses of the company, all properties and assets owned by a company must be taken into account, so it is not enough to keep a record of the movements in the company's account in an Excel file "(Judith de Quipu)
 
When keeping records is important that you keep track of all your bank accounts and credit cards movements, as well as your Account Receivables and Accounts Payables cycle. It’s possible that you have money in your savings account, but you owe must of the funds to third parties: CRA, vendors, Credit Cards balances, that is then an indicator that you need to plan better with cash flows, collect the money your clients owe you and even increase your sales!
 
It is also important to maintain detailed records that can demonstrate that our income and expenses are adequate when filing tax returns. In this way we avoid paying penalties and more taxes than we really need.
 
I hope your records are up to date!
 
Your comments are welcome!


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