Tax tips for small business/solopreneurs in 2025

Basically, since we're at the beginning of tax season, I thought it would be a good time to share some tax tips for everybody I know. Certainly for accountants, this is the beginning of a stressful period and also for small business owners, solopreneurs, etc. And I totally get that. So hopefully I will help you guys myself to de stress a little bit by going through some, some of these tax tips today.

All right, so let us get started.

First of all, thank you again for joining and for being here and in case you can't stay till the end or. This will be available as a replay on my YouTube channel, so you can watch it kind of pretty much anytime.

And so the webinar will really be. I will, I have some slides to go through. It'll be approximately 30, 35 minutes, I think. And after that I have some. I've already received a few questions from you and you can put some questions in the chat and I will try and answer them to the best of my ability.

And a little about me. So for those of you who don't know me, my name is joann. I am a cpa, a CFA, and the founder of Montreal Financial.

And so I basically, I started my career, I moved to Bermuda for a few years. I worked for some multinational companies there. I moved back to Montreal. I worked for another large company here. And then I just decided that I wanted to sort of start my own small business and, and deal with small businesses. And so I became an accountant for small businesses, which is very different from being an accountant for larger organizations. But I learned over the years, I started blogging, I started taking on clients, and.

It was very interesting time. And over the past couple of years, I've started transitioning to providing more educational services to, to small businesses. So some of you might know I've written some books. I currently have five books for small business owners on taxes and dividends and how to start your business.

And I also have a blog, I do some YouTube tutorials, and I also provide consulting services. And I have created my first ever course, which is exciting.

So really I'm, you know, as much as I can say this, I'm passionate really about helping small businesses sort of understand their finances take control of it. It's a common refrain that I hear from people that they're not very good from with numbers, but I think most of us, especially those of us with small businesses can be good with numbers. And so I'm just constantly striving to, to help people like you, you know, sort of just, just be Better to the extent possible. And know that a lot of it is instinctive, is just putting a vocabulary around it. Okay, so let us take a look at the agenda for today.

So we are going to look at.

First of all. Oops, sorry. So we're going to look at how to prepare your business finances for tax season. Some key tax deadlines that you need to know for 2025. Very important, everyone's favorite topic, expenses. You can essentially claim deductible expenses and that can help you reduce your taxes. Some tips for those of you who are registered for sales tax, some tips for your GSTHST and if you're in Quebec, your QST filings. I'm just going to talk briefly about my new course just to see if it's helpful for you. It might be, it might not be. Whatever, that's totally fine. And then after that I will answer some questions and we will have a real time Q and A session. Hopefully you guys can hear me. Hopefully the tech is working. I really have no idea. So you can let me know in the chat if everything sounds good. Good. And then.

And I guess let's begin.

Okay. So first of all, we are going to look at how to prepare your business finances for tax season. And first of all.

You know, and this may be a little obvious, but you want to get your records in order. And some of you may have been doing it during the year. Some of you are using accounting software or spreadsheets, and that's amazing if you've been doing that, but if you haven't, and a lot of people save it, you know, to year end or early in the year, and that's totally fine. But at this is the point at which, and I recommend that you start this as soon as possible, is to start to gather all of your documentation. And in terms of documentation, you want to have your income, which are your sales invoices, anything that's relating to that payment, etc. And then you want to keep your bills, your receipts, and everything relating essentially to your income and expenses, ideally. So you have two options and you can use both. You keep them on an accounting folder on your computer. So there, no matter what, there are things that you are going to have that are simply that are just available online and so you can save them. Create an accounting folder. And my recommendation for that is, look, everyone is a little different with how they like to see things organized. But my recommendation for that is to, you know, title it accounting folder, tax folder, whatever, and then have all of your document documentation by year. So Set up a year and Then so for 2024 you would save all the documentation and then you can have subfolders called invoices or sales and then expenses and then by month, by date, alphabetically from there you have some flexibility in terms of how you like to see things.

Next thing, and this is just sort of a general tip for some of you. And before I say this, I just want to make a note that most of the tips I'm giving you are for sole proprietorships and corporations. So unincorporated versus incorporated, where there is a difference, I will make that clear. But I think all of these tips are useful for owner managed as well as corporations.

And sole proprietorships. So you want to separate your personal and business. Generally if you're a corporation, you've already set up a business bank account, so that's great. But if you're a sole proprietorship, a lot of people simply just use their personal bank accounts. And I think this is a mistake. I think everybody needs to have a separate business bank account because, well, first of all, if you're ever audited, you don't want to give them all of your personal data because then that becomes difficult. They, they start query it and there can be a lot of confusion. And CRA does not like confusion, but also for yourself because it's sort of a rudimentary accounting system. You can look at the balance in your bank account and kind of see how you're doing. And you should also have a separate credit card for your business. And that way everything is maintained. And, and perhaps most importantly, you won't forget your income, your expenses, things that you can claim because they're all in one of these two accounts. You're not scrambling at the end of here to go through, through different accounts to, to do this.

Next. It's important to reconcile your accounts. And so, and what this means is you want to make sure that you capture all of the information, all of your expenses, all of your sales from your bank statements, from your credit card statements and, and reflect them. And so, and that takes us to our next point. So you have two choices where it comes to your accounting really. One, you can use a spreadsheet. And spreadsheets are relatively easy. You can use Excel or you can use, excuse me, Google Sheets, which is free. There's tons of tutorials online on how to set one on how to set up spreadsheets for your business. And I'll give you some tips at the end of this webinar. But so I highly recommend at the very least having A spreadsheet. If your business is a little more complicated, an accounting software is a really good idea. I usually recommend QuickBooks Online or Xero. Both are good accounting softwares and they're relatively easy to use. Also lots of resources online. And the thing with.

With accounting software is that while there's a cost associated with you, it can associated with it, it can save you a ton of time. So you almost have to determine what is your an hour of your time worth, right? And how much are you saving in terms of time and is it worth getting that accounting software. You also have history and there's all kinds of. There's really an endless number of things you can do with accounting software. From invoicing to reporting to profit and loss statements. Analys all of that. And finally, in terms of preparing your business finances for taxes for your tax season, you want to start thinking about how you are going to do your tax return this year. So again, you have a couple of choices. You can either do it yourself and there's all kinds of attack software that is available out there. I personally, my preference is new file, but a lot of people use TurboTax. That's totally fine. Some people use simple tax whatever you're comfortable with. And the thing about most of these accounting software is they're free to try. You can do your entire tax return without paying for it. It's only when you have to print or file it that you have to to pay for it. So you can see if you're comfortable doing it on your own. And for people who have simple situations or who feel confident they can do it on their own, I highly recommend that because it's a great way to kind of take control of your finances. Right? To understand. And nobody understands your business better than you do. But alternatively, I totally understand a lot of you are not that comfortable doing it on your own. So in that case, this is it. In case you don't already have an accountant, this is the time to start looking. You do not want to leave it any longer because accountants tend to get very, very busy at this time of year.

Talk to a few accountants, find someone who's the best fit for you. There's also, there's the accounting services, the H and R blocks and all of that, which is fine, but there's, you know, little to be. It depends. It depends on the complexity of your situation. But you're not going to have any kind of interaction with an accountant.

With a general service.

Okay, so let us take a look at some deadlines for.

The year. And okay, so in 2025, your first deadline, if you only have a personal tax return, it's April 30, 2025. And this is for people with T4s and essentially anybody who does not have self employment.

And by self employed income, we me, I mean anyone who has a sole proprietorship or a partnership, I. E. Someone who is unincorporated, who reports their income on the T2125 of their tax return. If that is your case, if that is your situation for you or your spouse, then you actually have till June 16 this year. It's usually June 15, but it's a Sunday, so it's extended to June 16. But keep in mind, payment is due by April 30 and that means after April 30 they start to charge interest. So you can just always send an estimate because interest and penalties are charged on the balance that you owe. So if you don't owe anything, there will be no interest and penalties. Or the lower, the less that you owe, the less interest and penalties. Corporate income taxes are due six months after year end. Your GST, HST, QSD, if you're unincorporated is also due on June 16, but also the payment is due by April 30. If you're a corporation, your GST HST depends on your year, on your year end and the end of the period for your GST and HST, which may be different from your year end. So just make sure you know what that date is and then it is due within three months. If you have an annual filing after that year end, if you have a quarterly filing, if you've been doing it probably already, it is due one month after the period end. And keep in mind there are interest in penalties that apply if you do not submit these returns by the deadline. So it is really, really important to do that if you can. If you cannot submit the return, at least send an installment payment estimating for what again, for the amount that you owe. Because as mentioned, interest and penalties are based on the balance owing. So if you pay that down, then your interest and penalties will be much lower. And interest and penalties are just a huge waste. So I really, you know, want to do everything you can to avoid having to pay those. And finally the final deadline for 2025 is it relates to RRSP contributions. And so this means you can contribute to your RRSP for 2024 and have it count as a deduction from your 2024 income up to March 3, 2025, because there's a weekend, it's usually the end of February, March 1, but it's March 3 this year. So again, I highly recommend that everyone who can contribute at least a little bit set up an rsp. If you don't already have one, contribute as much as you can because it reduces your taxes payable. So it's a great, it's a great deduction available to Canadians.

Okay, so the next, our next, next slide is about tax deductible expenses. So I've broken this down up into two slides. The first one, I've just listed some common expenses that everybody you know who has them can deduct. And then in the second one, we are just going to talk about more expenses that are a little more complex like home, office, etc. Okay, so first of all, my general comment for expenses twofold, one.

Generally speaking, if the expense that you incur relates to your business, you can deduct it with a couple of specific exceptions. One of the ones that comes to mind is clothing. You cannot deduct clothing expenses unless it is a uniform. It doesn't matter if it's a suit or, or something that you wear to work, or you only wear to work if you can use it for another purpose other than work, it is not deductible. But other than that, again, if your expenses relate to business, they are often generally deductible. Second of all, be reasonable with your expenses. And this is a really important tip. When CRA looks at your tax return and they look at your expenses, red flags are raised when a certain expense category is very high. And that's not to say, say that you shouldn't deduct anything that you're entitled to. But there are some gray areas, some softer expenses. So you just want to make sure that you are careful and you have all of the receipts for your expenses, all of the backup for your expenses. So some things that you can deduct. Professional development courses. I will. There's a question about this, so I'll address this at the end. Marketing and advertising. So this is one that, you know, some people sometimes overlook. They might have a website for their business. So all of you know the web hosting that you pay, the domain costs, etc. Are deductible ads, promotional materials. I have Canva below. So many of us use canva. That is, you know, if you use it and you pay for for it, that is deductible as a marketing and advertising expense. Or it could also be under software and subscriptions. It's not necessarily black or white. The category in which it goes so another often overlooked expense are bank fees and interest on business loans. Bank fees particularly, and this is another reason you should have a separate business bank account, is because you can deduct the fees on that business bank account because it relates to your business. So in fact it cost you less because you are actually getting a deduction from your taxes for those bank fees. And if you've taken out a loan for your business and the interest is also deductible. Software and subscriptions. We all of us have many software subscriptions that we use. I use Google Drive, Dropbox, QuickBooks, online tax software. There's all kinds of subscriptions that I have that relate specifically to my business and that I need for my business. So those are deductible. You want to track those and again, ideally pay for these on your business. Credit card, salary, subcontractors, business insurance. These are all direct business expenses, travel expenses. You have your transportation, your accommodation. If you are traveling specifically for work, if there is a leisure component that you should prorate the travel expenses. So figure going, you know, for three days out of 10 and three days are personal, then you deduct 70% of your travel expenses and meals and entertainment. A couple of notes. First of all, only 50% of these are deductible. And second of all, but on your tax return, if you're using tax software, you put 100%, don't put 50%, because the tax software will automatically calculate that for you. And second of all, for meals and entertainment is it's you have to be discussing a business. You have to have a business purpose for the meals and entertainment. So maybe you're meeting with a customer or supplier or your accountant or bank manager, etc. That's when it's deductible, generally speaking, not if you're just going for a coffee and working in cafe. Okay, so let's look at tax deductible expenses number two. So here these are three kind of special categories and I've separated them because they are kind of separately listed on the T2125, which is a tax return for sole proprietorships and unincorporated businesses. So for home office expenses, if you work from your home and you don't have another office, you can deduct your home office expenses. You should delineate a portion of your home that is exclusively for your office. That's what I recommend. It could be in a whole other room, or it could just be half a room. You take the square footage of that space divided by your total home. That is your percentage that you can deduct. And then you can deduct rent or mortgage interest, utilities, property taxes, etc. Internet and telephone are a little different. You would apply a different percentage that is based on personal versus business use. So if you use your Internet like 50% of the time for business, then you would take 50% of the expense expense. Same for telephone expenses. Vehicle expenses work a little differently for sole proprietorships versus corporations. If you're a sole proprietorship, you have to track all of your vehicle expenses. So gas and repairs and insurance, registration, all of that. You should have a spreadsheet to do that. And you also have to track the business kilometers during the year. Divide that by the total kilometers that you drove during the year to get a percentage percentage. You apply that percentage and that is what you can essentially deduct if you're a sole proprietor. If you are a corporation, it's a little different. You can actually take a per km rate which is just changed approximately 70 cents per km. That's it. No other expenses. Or you can have the corporation purchase the car. That gets a little complicated. There's some taxable benefits. That's really only worth it if you're using your vehicle. Probably around 70% for business, certainly no less than 50%. Otherwise you're paying way more in taxes because there's a taxable benefit associated with that. And finally you have capital cost allowance. And what capital cost allowance means is that that these expenses, these are high value expenses like a computer or printer, furniture for your office, your home office or whatever. And you cannot take the full deduction, you cannot expense it all in one year. Instead you have to depreciate it. And Revenue Canada has very specific rates depending on what class it belongs to. But you should certainly track these and perhaps in a separate spreadsheet spread separate tab in your spreadsheet or in your accounting software. It's actually on your balance sheet. And so you would.

Calculate the depreciation. It's not hard to do. Again on the T2125 if you're a sole proprietorship. If you're a corporation, it goes on a separate schedule. And that the CCA or capital cost allows.