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Essential documents to give your accountant for tax season in 2024

Are you gearing up for the tax season and wondering, "What do I need to provide my accountant to file my small business taxes effectively?" As a Canadian small business owner, you juggle numerous roles, from visionary to marketer.

But when it comes to taxes, the complexity of the Canadian tax system might warrant the expertise of a tax professional.

This guide explains the documents you'll need to give your accountant for tax preparation, ensuring you're well-prepared and stress-free during this crucial time.

Preparing for tax season: A checklist for Canadian entrepreneurs

As the calendar turns towards tax season, Canadian entrepreneurs face the annual task of organizing their financial affairs for efficient and compliant tax filings. Preparing for tax season doesn't have to be a daunting endeavor.

Armed with the right checklist, you can transform this period from a stressful time into an opportunity for financial review and strategic planning. Whether you're a startup owner in Vancouver or you run a thriving business in Toronto, our checklist will ensure you have all the necessary documents and information at your fingertips, paving the way for a smooth and successful tax season.

Here's a comprehensive checklist of what you'll need to provide your accountant:

1. Identification information

Every Canadian small business owner must provide their Social Insurance Number (SIN) and business registration details. These numbers are what the Canada Revenue Agency (CRA) uses to track your personal and business tax details.

If you have a spouse or common law partner, you will also need to provide your accountant with their identification. The same goes for dependents, although — depending on their age — they may not have a SIN yet. 

2. Previous year's tax return

Your last year's tax return offers a snapshot of your business's financial history, aiding your accountant in maximizing deductions and expediting this year's filings. Even if you don't have a business, your accountant will use last year's tax return as a way of reviewing the tax deductions and credits you claimed and determining what you are eligible for in the current taxation year. 

3. Relevant tax forms

There are a number of slips your accountant will need to prepare your tax return. Key among these are T4/RL-1 slips, which detail employment income and deductions — crucial for both employees and employers.

Equally important are donation receipts, which serve as proof of charitable contributions, potentially unlocking valuable tax credits. For those with investments, T5/RL-3 slips capture interest, dividends, and other investment income.

Additionally, forms like T2202/RL-8 for tuition and education amounts, or medical expense receipts, are integral for claiming personal credits. If you're unsure if you need a certain receipt or T/RL-1 slip for your taxes, save it and check with your accountant.

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4. Income records

You'll need to provide a summary of your business income. In addition, your accountant may ask for business income records such as bank statements, deposit slips, and sales invoices. This way, they can look at what you've recorded and check that there aren't any bookkeeping errors that may be causing you to pay more tax than you should.

A common mistake business owners make is using a single bank account for both personal and business transactions. This can lead to confusion and inaccuracies in tracking business income, such as recording all deposits as revenue when that's not truly the case. 

5. Expense records

In addition to income summaries, you will need to summarize your expenses. Keep detailed records, including receipts, bills, and credit card statements, which are essential for claiming deductions. Depending on the type of business you have and the volume of transactions you have during the course of a year, your accountant may not ask to see all these records.

You still need to keep them, however, because if you're ever audited by the CRA, it's up to you to prove you incurred those expenses. The CRA recommends keeping your business and tax records for six years.

6. Capital asset activity

Keep track of any sales or purchases of capital assets like equipment, buildings, or vehicles during the year. Canadian tax laws allow businesses to claim depreciation (referred to as a Capital Cost Allowance, or CCA, on your tax return).

This is calculated based on the value of the asset, so it's important to keep accurate records of any sales and purchases of capital assets. The CCA is a deduction from business income that reduces taxable income. Reporting capital asset activity allows your accountant to accurately calculate and adjust CCA claims.

7. Business loan and grant information

Provide details of any business loans or grants, including funding receipts and accrued interest statements. Grants can be taxable or non-taxable. Therefore, it's vital to report any grants received to accurately determine your business's taxable income. Failing to report this could result in incorrect tax calculations and potential issues with tax authorities.

Business loans aren't deductible from taxable income, but the interest you pay on them is. By providing the details of your business loans, you enable your accountant to accurately calculate and claim an interest expense deduction, which can significantly lower your taxable income.

8. Payroll information

If you have employees, you'll need to provide their identification and payroll details so your accountant can prepare their T4s/RL1. These details include:

  • Employee name, address, SIN, and birth date
  • Employee earnings
  • Employee deductions, such as income tax, CPP/QPP, and EI, QPIP
  • Any taxable benefits or other deductions from the employee's income

9. Inventory information

If you run a business where you sell products, it's important to keep track of your inventory. Accurate inventory numbers are crucial for calculating the cost of goods sold (COGS). This is a key figure in determining your business's gross profit.

Cost of goods sold represents the direct costs associated with producing the goods your business sells. This includes the cost of the materials and labour directly used to create the product. Accurate inventory counts help in determining how much inventory was purchased and sold during the accounting period, so your accountant knows what to deduct from your income.

10. Potential deductions

Business expenses are often referred to as deductions from business income. But there are other types of deductions that will save you from paying more tax. These deductions are not limited to taxpayers who have a small business.

For example, contributions to registered retirement savings plans (RRSPs) result in a deduction that reduces taxable income and thereby also reduces tax. Although these contributions are not a business expense (as they are personal in nature and not directly related to running the business), they can still be deducted from your taxable income.

Discuss with your accountant potential deductions like home office expenses, business travel, and marketing costs, providing relevant documentation.

11. Investment information

Inform your accountant about any business investments, including stocks, bonds, and real estate. Investment income can have a substantial impact on your overall tax situation.

It's important to understand how different types of investment income are taxed and to plan accordingly, possibly with the help of a financial advisor or tax professional, to optimize your tax outcomes.

Concluding your tax preparation

With this checklist in hand, you're off to a great start for a successful tax season. Many accountants have their own checklists they provide to clients at the start of tax season. If you're unsure what else they might need from you, just ask.

Remember, good record-keeping throughout the year is key to a hassle-free tax filing experience. QuickBooks offers tools to streamline this process, ensuring you're always prepared and making gathering your tax documents a breeze.

Ready to optimize your financial tracking and tax preparation? Discover how QuickBooks can be a game-changer for your business. Start tracking your small business expenses with QuickBooks today and transform your tax season from daunting to done!

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