4. Net income before adjustments
All expenses incurred in running the client’s business will need to be reported at this time. Expenses should be entered by categories, such as advertising and marketing costs, payroll and wages, business insurance, meals and entertainment, travel expenses, and office expenses such as rent and utilities.
Listing all business expenses here is part of the process of claiming tax deductions from those operating costs. It’s essential to gather as much information from your clients at this time to ensure the proper classification and deductions of business expenses.
For example, to write off vehicle expenses, you will need specific details from your client, such as the mileage on their motor vehicle that was used for business purposes versus personal use. This will help you calculate the amounts for the expense categories with the corresponding deductions.
It is also important to note the capital cost allowance section, including buildings, furniture, and office equipment used for the business or professional services that will depreciate over time. You can claim a percentage of depreciation on these assets as a deductible expense for your client each year by calculating the capital cost allowance of these depreciable assets.
For example, should you buy a computer and you use it to conduct both your personal and business activities, you will need to apportion what is appropriate between the two activities to determine what is reasonable to deduct against the gross income one derives from their business activities.