Tax season is here. As the deadline to lodge your tax return approaches, small business owners and sole traders need to be aware of some important dates, as well as what’s new for 2016.
While incorporated businesses need to file taxes no later than six months after their fiscal year end, unincorporated small businesses, including self-employed people and their spouses or common-law partners, have until June 15, 2016 to file their return.
Be aware that the Canada Revenue Agency (CRA) is tough on latecomers. You’ll be forced to pay an extra 5% on the balance owing, plus 1% of the balance owing for each full month that your return is late to a maximum of 12 months. If you have incurred late-filing penalties in any of the three preceding taxation years, your late filing penalties are doubled.
A Reprieve for the Self-employed? Not Necessarily.
While the June 15 deadline for unincorporated businesses might tempt business owners to put tax time out of mind for a couple of months, it’s important to remember that any taxes owing must still be paid by April 30, 2016. So if you need to get square with the CRA, then do it well before the June filing deadline or you’ll be paying some interest. Keeping track of taxes using accounting software such as QuickBooks Online will help you determine whether you owe tax, and how much.
What’s New for T1 Filers in 2016?
Sole proprietors must report all revenue generated by the business and claim all expenses incurred to earn their income on their T1 income tax and benefit return. The net income or net loss forms part of the sole proprietor’s overall income for the year.
You may also be eligible for a refund of employment insurance premiums paid for 2015 and 2016 under the new Small Business Job Credit, a two-year measure introduced to help small businesses by lowering their Employment Insurance (EI) premiums. For more information, click here.
New Self-service Online Services
The CRA has embraced technology with online services that are fast, easy and secure. Once you register for an account, you can manage your tax matters online. Not only can you file your income tax and benefit return electronically, but you can now make a payment and track the status of your return.
For incorporated businesses that want to streamline the process, you can authorize the CRA to withdraw an amount from your bank account on a specific date or dates, enroll for direct deposit or update banking information and view capital gains and losses.
Auto-fill My Return
Alleviate some of the time-consuming tasks at tax time by using the new Auto-fill my return service. It automatically fills in parts of your income tax and benefit return, making the tax filing process faster and simpler. To learn more about Auto-fill my return, visit the CRA website.
Other Key Dates
- March 31, 2016: Most partnerships with individuals as partners are required to file a partnership information return by this date.
- June 30, 2016 or the period end date plus six months: If your business is involved in the construction industry and hires subcontractors, you may have to file a 2015 T5018 information return as well as some other forms.
QuickBooks Online helps small businesses and self-employed people stay on top of their tax situations so they can file with ease and get back to business. To learn more, click here.