January 18, 2023
The Canadian tax system has always been a significant challenge for small businesses. Its complexity and constant evolution make it hard for entrepreneurs to keep up with regulations and ensure compliance. The complexity of the tax system and ever-changing regulations make it especially difficult for them to stay on top of their taxes and ensure they are compliant.
While the federal government pledged to simplify the process by introducing automatic tax filing for simple returns, the reality is that the current tax regime is too complicated. A report from the C.D. Howe Institute suggests that automatic filing may not be a practical option considering additional details, such as the various tax credits available, must be accounted for.
Large enterprises typically have a dedicated finance department to address these tax concerns. However, small businesses in Canada often do not have the same luxury. With multiple forms to fill out and submit, complex calculations, adjustments and remittances to consider, small business owners must dedicate a lot of time and resources to file taxes.
Fortunately, startups can turn to tax advisors for help. A tax advisor is a professional with specialized knowledge of the tax system and can help file small business taxes, claim deductions, set up a tax-efficient business structure, and more.
By tapping the services of tax professionals, startups can gain benefits that go beyond simple assistance in filing taxes. Additionally, there are tax experts who work specifically within the domain of tax credits and rebates. They advise SMBs on unlocking the benefits of investment tax credits that can act as a line of credit with associated rebates to help SMBs optimize their cash flows and tax liabilities when they invest in the growth of their business through R&D or creating jobs.
While a regular Canadian tax accountant will help prepare for tax season, a tax advisor will work with your business throughout the year to ensure you comply with all regulations. They will keep you updated on tax rules changes and advise you on how to take advantage of them.
A tax advisor can also help identify areas for improvement, such as reducing taxable income or enhancing deductions, which could save your business money throughout the year. In other words, a tax advisor is like a financial planner who helps you with your personal portfolio investments with the aim of protecting your capital, saving toward retirement or planning for important milestones in your life. The difference here is the tax advisor works for your business.
The Canadian Revenue Agency (CRA) offers a wide range of tax credits for small businesses, but entrepreneurs often overlook these. Tax experts can help small businesses identify and take advantage of all the tax deductions available, thereby reducing the overall burden on Canadian startup taxes.
For instance, Canadian small businesses can benefit from credits such as the Scientific Research & Experimental Development (SR&ED) Tax Credit or the Small Business Deduction (SBD). Some tax services in Canada go a step further and assist in applying for government grants and subsidies, which can help startups save money.
Though complete automation of SMB taxation is still tough, good tax advisors can help small businesses maximize their tax efficiency by providing access to the latest accounting and filing software. This helps streamline the preparation, analysis, and submission of tax returns with improved accuracy.
For instance, a business may use an automated system to generate statements for GST/HST or payroll taxes. By automating these processes, business owners avoid having to manually account for these expenses, saving time and effort.
In addition, many software programs offer features such as budgeting templates that can be used to build comprehensive financial plans based on historical data over multiple years, helping companies keep track of their finances in one place.
A vital component of an excellent tax advisory service is providing operations advisory. Tax advisors can help small businesses identify inefficiencies and provide expert opinions on improving their operations. This includes recommending strategies for cost reduction, ways to leverage tax credits and deductions, and methods to maximize profits.
Additionally, a tax advisor can assist in formulating a plan that is tailored to the business’s financial goals, such as managing cash flow or reducing taxes owed. By developing an effective strategy that accounts for current economic conditions and regulations, small businesses can ensure greater profitability in the long run.
Expert guidance on taxes is invaluable for small businesses, especially at a time when the tax system is so complex and ever-changing. As such, startups should consider seeking out professional help from experienced tax advisors to ensure they remain compliant with all their tax obligations and maximize their deductions. Talk to us to discuss more on how you can delegate your daily accounting and focus more on your business.
Accountero is a tech-powered service provider offering bookkeeping, tax advisory, and fractional CFO. Accountero is not a public accounting firm and does not offer services that require a public accounting practice licence. As part of its tax advisory service, Accountero guides its clients’ plans for Investment Tax Credits, R&D credits and similar rebates available to SMBs and startups.