While many of our neighbours here in Grande Prairie, Alberta, may have just put away their personal tax returns from 2023, there are many small businesses with fiscal year ends that don’t line up with the calendar year.

As a business owner, there are cash management strategies and tools available to you that, when used correctly during the year, can positively affect your financial stability while reducing the taxes owed at year-end.

Below, we present a few methods that can be easy to implement but have the potential to make a big impact on your bottom line in each year of your business operations. If you have questions about any of the strategies presented, and for personalized tax planning advice, one of the tax specialists here at McNabb Lucuk LLP is here to serve.

Check the Balance Sheet

As year-end approaches, one of the easiest ways to change cash flow is to adjust when revenues and expenses are recorded. If the upcoming year is expected to have higher income, expediting receivables in a year with significant expenses may be advantageous to benefit from a lower tax rate.

Consider specific federal tax deductions for capital purchases as part of your tax plan too. Specific incentives may be available that allow for full deduction of capital investments in their first year.

Plan to Claim Deductions

Keeping accurate business financial records is more advisable  than ever for its importance at tax time.

Office expenses are one of the most common deductions claimed by businesses of all sizes. This includes costs of running a physical office at a public place of business and is also available to those who work from home or remotely.  Claim a portion of home-related expenses, such as rent, utilities, and internet as business expenses if the home is the principal place of business.

Health, dental and wellness benefits for employees are employer deductions too. This includes life insurance and retirement savings plans which can be sizeable, yet valuable business deductions that can be claimed on just one employee. For employee RRSPs, the timing of contributions will affect when the recipient can claim the contribution as a personal deduction.

As mentioned earlier, there may also be industry specific deductions and incentives available. Speak with an accountant early in the tax year for information on current business deductions.

Consider Business Structure

There are variations in individual and business tax liabilities based on the structure of the business. A sole proprietor who has experienced growth could face a higher personal income tax bracket on all business income and increased personal liability. Incorporation in this instance can offer limited liability protection and the option to claim less personal income through dividends or salary from the corporation. If the corporation in Canada is a small business making under $500,000/year, it may also qualify for a reduced federal corporate tax rate through the small business deduction.

Taxes are an inevitable part of any business. optimizing tax liability can be a strategic business decision but it requires planning and implementation throughout the year, not as an after thought as the year comes to a close. Whether you’re a Canadian business new to Grande Prairie or an established corporation of many years, the team here at McNabb Lucuk LLP are here to answer all your tax questions.