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e-ccounting
February 2008

in this issue

Business Scenario(s)
- It's Tax Time Again !

Answer(s)

Accounting Tip

Did You Know ?

Definition

Sandy's Recommendations

Next Issue - Accounting Software Packages


 

about e-ccounting

e-ccounting is a monthly newsletter focusing on accounting tips and solutions. Our mission is to educate our clients, students and readers by offering these resources in response to your ongoing questions.

It is our objective to gather information and provide easy access for your current and future needs.
Back-issues are available on the accountrain website.

These tips are not complete answers to complex questions. We therefore recommend, when in doubt, contact the professionals or government agency.

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accountrain specializes in the how's and why's of accounting.

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Sandy's Question Corner

Do you have an accounting question? Send it to us at accountrain@magam.ca




  • Business Scenario(s)
    - It's Tax Time Again !
  • I just started a business, when do I have to pay taxes?

    My brother and I started a business together this summer, how do we file our taxes?

    I have a corporation who's year-end is March 31st, when are the taxes due?

  • Answer(s)

  • Three different businesses, three different business types, two different answers:

  • When you own a business on your own, it is recognized as a sole proprietor (business).


  • The taxes for a sole proprietor are done at the same time as your personal taxes. Therefore you follow the January to December calendar year, with taxes being due on April 30th.

    There is no special tax return, you merely file out a T2120 (Statement of Business Activities) as part of your normal T1 General return. Also note, if you do not owe taxes, the tax return is due on June 30th.

  • When you own a business with one or more people, it is known as a partnership (business).


  • The taxes for a partnership are also done at the same time as your personal taxes. Therefore you follow the January to December calendar year, with taxes being due on April 30th.

    There is no special tax return, you merely file out a T2120 (Statement of Business Activities) as part of your normal T1 General return. Unlike a sole proprietor business, you only claim the percentage of revenue and expenses that pertain to your involvement in the company. (for example if you own 70% and your partner owns 30%, you record 70% of the revenues and 70% of the expenses on your return, while your partner records the remaining 30% of the revenues and expenses).

    If you do not owe taxes, the tax return is due on June 30th. Also note, a partnership can have any number of partners.

  • A corporation, on the other hand, is very different because it is not attached to an owner, but recognized as a separate entity.


  • What does that mean, well for tax purposes, it means a separate return is completed just for the corporation. This separate return is usually done by a professional accountant and is due 6 months after the fiscal year end. Unlike sole proprietorships and partnerships, a corporation's year-end can be at any time.

  • Accounting Tip
  • Five key words that will keep you our of trouble:

  • Setup: Create proper records right away.
  • Organize: Take control of your paperwork and keep it up.
  • Maintain: Enter your transactions on a regular basis.
  • Understand: Feel in control by learning how and why things need to be done.
  • Professionals: Don't be shy (or cheap), get help to setup, organize, maintain and understand all aspects of accounting that pertain to your business.

    This will eliminate year-end stresses and suprises, as well as ensure you don't miss deadlines.

  • Did You Know ?
  • Once a business has been earning a profit, it may be required to submit tax instalments throughout the year, as opposed to paying the total amount at tax time. (your tax preparer will suggest the amount as well as a payment schedule).

    For more Did You Knows?
  • Definition
  • T2120 - The additional form needed when claiming a business as part of your tax return, for sole proprietors and partnerships. Also known as Statement of Business Activities. This form enables the CRA to determine the difference between your gross and net profit by expanding on the following:

  • Sales (including GST) & Expenses (excluding GST)
  • Capital Costs (big ticket purchases, ie, computer, machinery, equipment, etc.)
  • Vehicle expenses (relating to business)
  • Home expenses (relating to business)


  • For more definitions ...
  • Sandy's Recommendations
  • Check with an expert from the get go, not at the end of the year.

    If you do your own taxes, have them checked by a professional. Chances are the cost of this service, will be covered by something they find or recommend. And, it's a business expense!

  • Next Issue - Accounting Software Packages
  • What to consider when choosing software for your accounting needs.

  • Why spreadsheets aren't enough!
  • Two very popular packages: Simply Accounting versus Quickbooks, which is better for what?
  • Hints on professional training.
  • How to know if you need something more robust, or industry specific?
  • 613-789-2623