Tax season has started and that means British Columbians are trying to make sense of the changes for the 2015 tax year. The Chartered Professional Accountants of British Columbia (CPABC) have put together a series of tax tips for the 2015 tax year and here are three tips that have important implications for B.C.’s small businesses.
1. What kind of expenses can I claim?
Here are two expenses that you can claim on your income tax return:
If you are required to use your passenger vehicle for business or employment purposes, you are permitted to deduct reasonable expenses for operation and ownership of the vehicle. Such expenses include fuel, licence fees, insurance, repairs and maintenance, depreciation, finance charges, and lease payments. The deductible portion of automobile expenses is based on the proportion of your total kilometres driven in the year for business or employment purposes relative to the total kilometres driven in the year.
To support your automobile expense deduction you should maintain a careful record of your business and employment kilometres driven for the year, including the date, destination, the distance driven, and purpose for each business trip.
Home Office Expenses
In order for you to deduce your home office expenses from self-employment income (business income), then your home office must be your principal place of business or it must be used on a continuous basis exclusively by you to earn business income including meeting clients, customers, or patients as part of your normal business activity.
Visit: www.rrspandtaxtips.com for more information and if you believe you might be eligible to claim automobile and/or home office expenses on your personal income tax return, consult a Chartered Professional Accountant to help you calculate your allowable deduction.
2. I’ve incurred capital losses on shares or debt of my small business in 2015. Is that deductible on my tax return?
Losses from the sale of certain small business corporation shares or debt may be considered “allowable business investment losses” (ABIL), which is a capital loss. Normally a capital loss is only deductible against a capital gain, but an ABIL is deductible against other sources of income (albeit at a 50% inclusion rate). The ability to claim an ABIL may be limited by previous years’ capital gains exemption claims. The CRA will audit the claim of an ABIL; you must be able to prove the amount of the investment, the type of investment and provide evidence of the investment loss.
For more information about capital losses, Visit: www.rrspandtaxtips.com for more information about capital losses and consult a Chartered Professional Accountant on how to claim a capital loss on shares of a bankrupt or insolvent corporation.
3. I run my own business. How long do I have to retain my books and records for the 2015 tax year?
If you run your own business, you are required to retain books and records that relate to a specific taxation year for a minimum of six years after the end of that year. If a particular year is under appeal, books and records for that year should be kept until the appeal is resolved and the time for any further appeal has expired. If a return has been filed late, the records must be kept for six years from the actual filing date.
Records include minutes of meetings, accounting records, and source documents such as invoices, receipts, cheques, bank statements, etc. The books and records must be sufficient for the Canada Revenue Agency (CRA) to confirm revenue, expenses and taxes paid. They must also be stored at a Canadian location available for audit.
Visit: www.rrspandtaxtips.com for more information on retaining your business records. As records over six years old might contain information that is still relevant for tax purposes, you might wish to consult a Chartered Professional Accountant or the CRA prior to destroying your records.
Visit http://www.rrspandtaxtips.com for more tax tips for small business owners and others.
By Chartered Professional Accountants of British Columbia (CPABC)
Disclaimer: Tax rules relating to these tax tips are complex. This is not intended as tax advice and you should not make tax decisions based solely on the information presented in these tips. You should seek the advice of a chartered professional accountant before implementing a tax plan or taking a tax filing position.
About CPA British Columbia
The Chartered Professional Accountants of British Columbia (CPABC) was formed through the amalgamation of the Institute of Chartered Accountants of BC (ICABC), the Certified General Accountants Association of BC (CGA-BC), and the Certified Management Accountants Society of BC (CMABC). CPABC was officially established when the CPA Act came into effect on June 24, 2015. CPABC represents over 34,000 members and 6,500 legacy and CPA students and candidates.