What Documents Do I Need to File Taxes?
Corporate Information
1. Corporate Identification
Business Number (BN): Make sure your corporation has a valid Business Number (BN) from the CRA.
Corporation’s Name & Address: Ensure the legal name and business address are correct with the CRA.
Legal Structure: Confirm your corporation is registered properly (e.g., CCPC if you’re a small business).
2. Ownership Information
Shareholders: Keep a record of who owns the corporation’s shares, even if it’s just you as the owner.
Director Information: Ensure that you, as the director, are listed and meet legal requirements.
3. Corporate Filings
Annual Returns: Ensure your corporation has filed the necessary annual returns with the provincial or federal government.
Compliance: Check that your business is complying with all necessary legal obligations (e.g., permits, licenses).
Source of Income
Revenue from Operations (Core Business Income)
1. Sales Revenue:
Goods Sales: If your business sells physical products, track the total income from product sales.
Service Fees: For businesses providing services (consulting, legal, marketing, etc.), this is the income earned from offering those services to clients.
Contract or Project Revenue: If you enter into contracts for a defined period or project, ensure that the revenue for each contract is properly reported as it is earned.
Recurring Revenue: If your business has subscriptions or membership models, track recurring payments (e.g., monthly or yearly).
2. Investment Income
Interest Income:
Income earned from business-related savings accounts, bonds, or other interest-bearing investments.
This could include interest from loans made by your business to others (e.g., a loan to a related entity).
Dividend Income:
Earnings from investments in shares of other companies. If your corporation holds shares in another company, report any dividends received.
Capital Gains:
Income from the sale of business assets like real estate, vehicles, equipment, or securities. This includes:
Realized Capital Gains: Profits from selling business assets.
Unrealized Capital Gains: These are not taxed until the asset is actually sold.
Foreign Investment Income:
Income earned from investments or business operations outside Canada. This should be converted into Canadian dollars for tax reporting purposes.
3. Rental Income
Real Estate Rental: If your corporation owns rental properties, the rent collected from tenants is taxable income. This could include residential, commercial, or industrial properties.
Equipment or Vehicle Rentals: If your business rents out equipment, machinery, or vehicles, the income from these rentals must be reported.
4. Other Business Income
Government Grants or Subsidies:
If your business receives government grants, subsidies, or relief funds (such as COVID-19 support), these are generally considered income and need to be reported.
Franchise Income:
If your business operates under a franchise, report any royalty income or fees received.
Income from Licensing or Royalties:
If your business licenses intellectual property (e.g., patents, trademarks, copyrights), any royalty payments are considered income.
5. Miscellaneous or Other Income
Insurance Proceeds:
If your business receives insurance payouts (e.g., property damage, business interruption insurance), these are typically considered taxable income, unless they replace capital assets.
Legal Settlements:
Any income or damages received through legal settlements are also taxable, depending on the nature of the settlement.
- Section 3: Deductions for Small Corporations
Deductions are vital for reducing taxable income. Below is a detailed list of common deductible expenses that can help lower your business’s tax liability:
Deductions
1. Operating Expenses
Rent: If your corporation rents office or commercial space, the rental payments are fully deductible.
Utilities:
Electricity, gas, water, and other utility costs are deductible, especially if you rent or lease office space.
Internet and Phone: Business-related internet and telephone charges are deductible.
Office Supplies:
Costs for office materials like paper, pens, printer ink, and other everyday supplies.
Software & Subscriptions:
Deduct the cost of business software (accounting software, CRM systems, etc.) and any relevant subscriptions (e.g., cloud storage services).
Advertising & Marketing:
Advertising expenses, including digital ads (Google, Facebook), print ads, business cards, and website costs.
2. Employee-Related Expenses
Salaries & Wages:
Any wages paid to employees, including yourself if you’re drawing a salary from the corporation.
Includes bonuses, commissions, and performance-based pay.
Employee Benefits:
Health insurance premiums, pension contributions, life insurance, and other employee perks are deductible.
Payroll Taxes (EI & CPP):
Employer contributions to Employment Insurance (EI) and the Canada Pension Plan (CPP) for employees.
Employee Training:
Costs related to training programs, seminars, or certifications for employees.
3. Home Office Expenses (if applicable)
Proportional Home Costs:
If you work from home, you can deduct a portion of your rent, utilities, mortgage interest, property taxes, and insurance.
For example, if your home office is 15% of your home’s total square footage, you can deduct 15% of these expenses.
Home Office Supplies:
Any supplies or office furniture bought specifically for the home office are deductible.
4. Vehicle and Travel Expenses
Business Use of Vehicle:
Deduct fuel, repairs, insurance, and maintenance for a vehicle used for business purposes.
Depreciation (CCA) for Vehicle: If you own the vehicle, you can depreciate its value over time and deduct it through Capital Cost Allowance (CCA).
Travel Expenses:
Airfare, hotel stays, transportation, and meals (50% of meal costs) while traveling for business purposes are deductible.
Meals and Entertainment:
Deduct 50% of meal expenses when meeting with clients or on business-related travel.
5. Depreciation and Capital Cost Allowance (CCA)
Capital Assets:
Depreciate capital assets like equipment, furniture, computers, or vehicles over time. This is done via CCA, which allows you to claim a portion of the asset’s cost each year.
Different types of assets fall into specific CCA classes, each with a different depreciation rate.
Example: A computer may fall under Class 50 (55% CCA), while office furniture may fall under Class 8 (20% CCA).
Improvements to Leased Property:
If you make improvements to your rented or leased office space, those expenses may be depreciable.
6. Interest and Financing Costs
Business Loan Interest: Deduct interest paid on business loans or lines of credit.
Credit Card Interest: If business-related purchases were made using a business credit card, the interest paid on that card is deductible.
Bank Fees: Deduct any bank fees for business accounts (e.g., monthly account fees, transaction fees).
7. Professional Fees
Legal and Accounting Fees: Fees paid to lawyers, accountants, or consultants for services directly related to running your business (including tax advice) are deductible.
Financial Services: Deduct fees for any financial planning, tax consulting, or financial statement preparation.
8. Insurance Premiums
Business Insurance: Premiums for general liability, property insurance, business interruption insurance, and other business-related policies.
Health Insurance for Employees: If you offer health or dental insurance to employees, those premiums are deductible as business expenses.
9. Miscellaneous Business Expenses
Charitable Contributions: Donations to registered charities made by the corporation are deductible.
Bank Charges and Fees: Any business-related banking fees (e.g., monthly service fees or credit card processing fees) are deductible.
Startup Costs: If you’re in the early stages of business, costs like legal fees, licenses, permits, or market research may be deductible.
Final Considerations:
Keep Detailed Records: Maintain organized records of income, expenses, and receipts to ensure you can substantiate all claims.
Separation of Personal and Business Expenses: Avoid mixing personal and business expenses. Always use a separate business bank account and credit card for business-related transactions.
Tax Planning: Work with a tax professional to ensure you’re taking advantage of all eligible deductions and credits.
This detailed breakdown will guide you through identifying your income and allowable deductions while keeping the process manageable for a small corporation. Let me know if you need additional details on any specific item!