When you sign up for your new Canadian franchise, it...
As a small business owner, you're likely no stranger to stress. Tax filing, however, can take this to a new level if you let it. As a franchisee in Canada, you can make it through tax season without losing your hair by preparing in advance.
Determine what return you need to file
The type of tax return you should file depends on your company's legal structure. A sole proprietorship or partnership reports income on personal returns (the T1). Income that comes from your business goes onto the Statement of Business of Professional Activities (Form T2125). Keep in mind that although the deadline for you to file with business income is June 15th, you still need to pay any taxes due by April 30th.
For an incorporated business, the process is a bit different. Business income has to be reported on a corporate income form, the T2. It is due six months after your fiscal year ends, but taxes owed still have to be paid within 90 days of your fiscal year ending. You still need to file a T1, too.
Decide how to prepare your return
Once you've determined which forms to file, you have to decide who will prepare it and how. Although you can download forms on the official Canada Revenue Agency website, most people opt for electronic returns these days rather than paper ones.
You can use a tax software program to prepare the return yourself, and there are many different programs available. Be sure to check whether your province is supported before you decide on a program!
In addition, an accountant can handle your return for you. If you are uncertain about anything in the tax process, it's best to go with a professional for now.
Get paperwork organized
It's best to keep on top of important tax documents over the course of the year and not just when tax time is looming. When you make a habit of filing all of your records, receipts and other paperwork, you can avoid scrambling around at the last minute to try to find paperwork you need for your return.
Budget for installment payments if necessary
If you end up owing a balance above the threshold--usually $3,000 a year--you will probably have to pay tax in quarterly installments from now on. If this applies to you, account for this in your franchise's budget by putting money to the side to handle this payment. This will also help you avoid having to deal with a large tax bill each time you file.