Tax Tip Thursday

At The Mad Accountant, we offer bookkeeping and tax services amongst many other things. This gives you a leg up in terms of compliance and accuracy of your books as our accountants support our bookkeeping team, thereby able to address difficult or accounting complex situations. Our accountants also review the bookkeeping prior to starting any Small business or Corporate tax returns.

The benefit is the level of accountability of our bookkeeping team, knowing that the accountant preparing the taxes works in the same place! Small business bookkeeping is rarely correct if done by themselves.

Not all accountants will delve into the bookkeeping, but we do. We have not found a single set of books that didn’t need extra work. Usually 5-10 hours, at least! This means that the client has 5-10 hours worth of bookkeeping mistakes that need to be resolved before we can do their taxes. This can translate into hundreds, thousands, or even 10’s of thousands of tax $ that would have been wrong. I have personally uncovered $40k at one client in a single accounting item that they had missed!

Real-Life Example

As an example and a real life situation, I had a client come to me a few years ago to complete their corporate taxes. They really did not have any books to speak of and provided me with not much more than a scrap of paper with their expenses categorized and a number beside each along with a sales number. This is no where near adequate to complete a corporate tax return. We have to be able to create a balance sheet for the business which is very difficult without all the information and poorly understood by business owners.

The other big problem we encounter is NOT having access to client’s CRA accounts. We WERE able to get access to the client’s CRA accounts! And this, combined with the bank statements is what allowed us to save them $40k in taxes!!! (If you don’t have access to MyCRA, solve that by reading this blog post!)

It turns out that the client had paid off some CRA taxes, penalties and interest ($200k). They paid it off personally, but had not said anything or even put it through the business bank account. Because we were able to access their account – we were able to start asking questions.

The other thing that we uncovered and this is where the tax savings came in – they had been paying themselves and claiming the payments as dividends to themselves personally and paying personal taxes on them!

We were able to set up the books and tax return with a proper balance sheet and help them recover the $40k in taxes. While they did have an accountant preparing their tax return previously, they had not done their due diligence and uncover the opportunity.

Other Benefits

Some other examples of things that owner operator bookkeepers miss or do not address correctly:

• Home office expenses
• Vehicle expenses
• Reconciliations
• Shareholder loans
• Remuneration strategies including spouses/family
• Banking
• Receipt management
• Cash flow management
• HST reporting and filing

Many business owners think taxes are a number crunching exercise at the end of the year. There is so much more to it and it can be extremely advantageous to have a bookkeeper and accountant take care of your businesses’ financial bookkeeping, reporting and taxes.

Don’t waste any time! Call us to set up your appointment and potentially save thousands today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.