Don’t Let Xmas Blow Your Tax Budget
It may seem a little strange to refer to tax as a tax budget, but it really is in reference to being tax conscious and using a little strategic tax planning. During the holiday season many businesses have a lot more expenses. There is extra client entertaining, office parties to cover the costs of, business gifts to buy and perhaps Christmas bonuses to hand out.
So are these tax deductible? In many cases when reasonable yes they are, but sometimes some business owners get a little carried away at Christmas and fall into the trap of overspending just assuming it’s all tax deductible so why not.
Any dramatic increase in your expenditures is sure to raise a red flag with the CRA. Although they do realize that businesses do have more responsibilities to clients and employee’s at Christmas they still have what they call within reason.
One of the tendencies is to squeeze in a few of the personal Christmas purchases as a business expense. You are leaving yourself at risk of getting caught at doing this. The CRA if they decide to scrutinize your records for this time of year will be very wary and on the lookout for this type of behavior.
It is a big risk to take for the price of a few gifts because it could now mean that your entire records for the year are going to be scrutinized and anything that could be in doubt about a valid expense could now be challenged.
The best approach for your Christmas expenditures is an honest and reasonable one. Know what you are allowed to deduct by way of expenses and bonuses and stick to the tax rules.
If you are in the habit of making New Years resolutions then you may want to think if there are any that would be applicable to your tax situation. Perhaps you haven’t been astute at your bookkeeping methods or you have not yet hired your Toronto accountant. You may want to consider adding these to your resolution list and really start your year off right. We all have to pay taxes when applicable but it doesn’t have to be as bad as you think when you approach it properly and in a professional manner.
Also, although this is a really busy time of year both on a business and personal level, don’t get careless with gathering your receipts or losing track of them. If you do then you could end up losing out on a lot of valid expenditures.