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Volume 1 Issue 10 | October 2013

2013 Tax Check-up For Owner Managed Businesses with December 31 Fiscal Year-end     

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You may think it's too early to start talking about taxes, however, now is the time to fine tune those tax planning strategies you agreed on with your accountant earlier in the year, or implement some strategies that can help reduce your 2013 tax liability. Let's look at a few that you still have time to implement.

 

Business Income

 

Review your business net income to date, then do a rough calculation of taxes that would be due. As long as net income is below $500,000, it is an acceptable to estimate taxes due by multiplying the net income by 15.5%. With this information in hand, do the following:

 

Tax Breaks For Employees: Eight Strategies That Can Save You Money  

bills_coins.jpg Canadian tax law offers little in the way of tax breaks. As we near year-end, however, consider the following eight ideas that can save you tax as an employee.

 

1. Reduce your tax deductions at source. If you know that you'll be claiming certain tax deductions or non-refundable tax credits that will give rise to a refund when you file your tax return, consider applying today for a reduction in the taxes withheld from your pay. Now is the best time to make that application for 2014. Use federal form T1213 (form TP-1016-V in Quebec) to make this application.


Just for laughs

Review Your Outstanding Debt To Ensure That You Make Your Interest Expense Deductible To The Maximum Extent Possible    

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To be deductible, interest expense must relate to debt incurred to earn business or investment income. Interest on personal debts, such as mortgages or car loans and interest incurred to make RRSP contributions, are not generally deductible. Another point to keep in mind is that investment income doesn't include capital gains. The CRA takes the position that interest on funds borrowed to invest in assets producing only capital gains isn't deductible.

 

Review your loans outstanding at year-end and your overall cash position. Where possible, pay off non-deductible debt as quickly as possible. Avoid using excess funds to pay off business or investment loans, if you know you will have to make large personal expenditures in the near future. Where you have a choice, always borrow for investment or business purposes over personal uses.

 

Also, note that where you've sold an investment at a loss and continue to carry debt incurred to purchase the investment, you should leave these loans outstanding as long as you have other non-deductible debt that could be paid off first. Interest from debts relating to the loss on an investment (other than real estate or depreciable property) continues to be deductible as long as those debts remain outstanding and all of the proceeds from the loss asset are reinvested.

  

Credit: This is a weekly tax tip published in the October 18, 2013 issue of BDO's Weekly Tax Tip.

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Green, Meikle & Smith
Chartered Accountants
1020 Matheson Blvd. E., Unit 10,
Mississauga, ON L4W 4J9
Tel: 905 919 3543 Fax: 289 210 0728
This newsletter is intended for general informational purposes only and should not be construed as personalized accounting, tax or investment advice. Particular tax tips or strategies discussed here should be evaluated relative to each individual's situation and objectives. Please contact us directly if you need specific advice on your accounting, tax or business situation.
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