Year End Tactics to Reduce Taxes
Although the deadline for filing your tax return may be months away, there are things you can do before the end of the year to help minimize the amount of tax your business owes to the Canada Revenue Agency.
Explore these simple tax-saving strategies before December 31.
1. Invest in your business now
If your business plan includes investing in technology, training, or advertising you may elect to engage these expenses now – providing you have the cash on hand to do so.
Take a look at the categories listed by the Canada Revenue Agency as allowable business expenses. You may find some areas where you could increase spending such as advertising, meals and entertainment, or professional fees.
- Got a project you’ve been anxious to complete? For example, you may want to update your business logo with a better design. Spend extra cash on it before the year end.
You’ll lower your taxable income for this year by engaging any legitimate business expenses now. It’s always a good idea to consult with your accountant or bookkeeper to obtain their recommendations for your business.
2. Defer income to the next year
If your business income is high this year you can reduce it by putting off some December receivables. Here are a few ways to delay receipt of receivables until the New Year:
- Offer your clients the opportunity to pay in mid-January for services rendered in December; many will appreciate the “gift” of deferred payment.
- Invoice later in the month than usual. An invoice received the last week of the month likely won’t be processed until January.
By the same token, you can accelerate your deductions for the next tax year by paying bills due in January before December 31 – providing you have enough extra cash on hand.
Be sure to consult with your accountant to make sure these strategies are right for your business.
3. Don’t forget write-offs
Many business owners lose out on allowable deductions simply because they don’t know about them. Take note of these losses you can claim:
- Bad debts such as unpaid invoices.
- Capital loss from a poor business investment.
- Stolen inventory, equipment, and supplies.
- Moving expenses if your business or a worker relocated.
A final tip: consider the benefits of hiring a tax specialist to handle your income taxes. That way you won’t miss any hidden opportunities to further reduce your taxes – and you’ll be able to write off the professional fees as a business expense.