As we roll into June we’re getting down to the wire on the 2014 year-end tax return deadline for unincorporated businesses. If you own or run an unincorporated business your year end was December 31, 2014 but you have until June 15, 2015 to file your business tax return. If you haven’t filed your business tax return yet it’s time to get started because penalties and fees for late returns can get costly. Check out this unincorporated year end checklist for a quick guide to getting started!
Step 1 – Get Your Accounts Up-to-Date
Start by making sure that all of your accounts are up-to-date. Hopefully you’ve been keeping things somewhat current through the year, but it’s not uncommon for us to see small business owners fall behind on things like entering credit card receipts and reconciling bank statements.
The first step in your business year end checklist is to get your accounts current right to the end of the year, and hey, since you’re doing it until the year end you may as well keep going and get caught up until today. It has to be done anyway and having an up-to-date income statement can help you understand how your business is performing on an on-going basis.
Step 2 – Review Your Receivables and Payables
Next, review your accounts receivables and accounts payables.
You might have customers that have not paid you for the products and services that you provide and won’t – it’s an unfortunate part of running a business. You might also have invoices from suppliers that you have not and will not pay, for whatever reasons.
For the sake of accuracy, you should identify any such invoices to be removed from your books. This not only paints a more accurate picture of the financial performance of your business, but it can also improve your tax situation – if you have recorded revenues that you do not expect to collect then by reversing them as a ‘bad business expense’ you can reduce your profit and pay less income tax. You might also be able to recover some of the HST you may have charged, which means that you’re not paying out of pocket for the business your delinquent customer refuses to pay for.
Step 3 – Take Inventory of Your Assets and Product Stock
Before you can turn your books over to an accountant you should take an inventory of your capital assets and product inventory levels.
When your business purchases a major asset such as computers, vehicles and production equipment, CRA assumes that the asset will provide value to your business for a number of years. The cost of the asset is spread out over its useful lifetime. This also relates to the declining cost of an asset – the older it is and the more wear and tear it has absorbed, the lower the residual value. The decrease in the value of capital assets is an expense of running your business and has to be included as part of your year-end tax return. By accruing these expenses you’re reducing your business profitability and decreasing the amount of income tax you pay.
Product inventory levels also affects your profitability and the amount of tax you pay. Your year-end financials should reflect the amount of product purchased and consumed during the year – the opening inventory at the beginning of the year plus everything you purchased less your closing inventory. If you don’t know how much product you have left in stock then this definitely affects your cost of goods sold and profitability.
Step 4 – Hand Your Books Over to your Bookkeeper
The final step is to have a bookkeeper review your books.
This is a step that many business owners don’t consider, but your bookkeeper will make sure everything is in line before handing them over to the accountant for your year-end adjustments and filing with CRA.
If you skip this important step then your accountant will have to find and fix any discrepancies in your books, and accountants charge a lot more than a bookkeeper does, so it makes sense to let a bookkeeper find and fix any errors you may have made throughout the year.
Don’t Have Time? Let Your Bookkeeper Do It All!
If you’re like many of our small business clients, you probably don’t have time to play catch up, review your receivables and payables, and take inventory in your business. That’s okay, you shouldn’t worry about such things, and instead you should be focused on running and growing your business.
Your bookkeeper can help take care of your business finances throughout the year, but if you find yourself in a jam when it’s time to file your year-end tax return then call your bookkeeper and they’ll take care of all of your year-end preparations and help get your tax return filed on time.
The Bottom Line
If you own or run an unincorporated business then you have until June 15, 2015 to file your 2014 business tax return. If you haven’t started preparing your books for year-end yet, you should start by getting your accounts up to date, reviewing your receivables and payables, taking an inventory of your capital assets and inventory, and finally turning your books over to your bookkeeper for final review before sending them on to your accountant.
Simply Bookkeeping1 provides professional bookkeeping services for freelancers, solopreneurs and owners of unincorporated and incorporated businesses. We customize our services based on your needs – we only see some of our clients a few hours a month but others we see on a more regular basis. Our services are reasonably priced and we tightly track the amount of time we spend working for you so you only pay for the services you get.
To learn more about us, please visit our website at www.simplybookkeeping1.com or contact Michele Hyde by phone at (647) 668 – 9363 or by email at firstname.lastname@example.org.
Have Your Say
Have you not filed your year-end yet? What’s your plan of attack for filing before the June 15 deadline? We’d love to hear from you. Also, please share this article using the social media share buttons – other people might be feeling the pressure of the deadline and might benefit from your input.