Filing Your Own Business Taxes? Avoid These Common Mistakes

Read this article to help you avoid these common tax mistakes business owners make. Keep in mind, however, that probably the biggest mistake you can make as a business owner is not consulting a tax planner like the experts at Taxpage, who can increase your bottom line without you breaking a sweat. 

How Do You File Taxes as an Unincorporated Business?

If your small business is a sole proprietorship or a partnership, you will need to fill out a T2125 tax form to report all business and self-employment income and include it as part of your personal tax return. You will use the business income, or loss, as your income or part of your income if you have multiple sources of income or are in a partnership.

Common Tax Mistakes to Avoid

These mistakes are commonly made by small business owners when they file their taxes:

Not Filing a Return if Your Business Loses Money

As a sole proprietor or partnership, you can use this business loss to reduce your overall income. If you’re self-employed, filing a tax return also allows you to claim the GST/HST credit, Canada Child Benefit, provincial tax benefits and several other credits and benefits you’re eligible to receive. Filing a return also allows you to increase the amount of your RRSP contributions.

Not Reporting Business Income 

Many people take advantage of online marketplaces, home- and ridesharing apps and other ways to make money as a side hustle. Any activities that generate income are generally considered as self-employment and you’re required to report the income you earn.

Not Keeping Your Documentation 

You must keep all your receipts, invoices, sales slips, financial records and report your income and expenses accurately. Many small business owners lose track of their paperwork and enter estimates on their returns. 

If the CRA requests more information or proof and you don’t have it, those entries will be rejected which can result in a costly re-assessment.

Using an Old or Incorrect Form 

You must use the forms specific to each tax year as they change every year. This CRA page has links to personal income tax packages for every year. Read the instructions in the guides carefully, especially if you’re required to fill out other schedules or forms.

Not Registering for a GST/HST Account 

It’s important to know when you are required to register for a GST/HST account. Most businesses are generally required to charge, collect and remit GST/HST unless they do not exceed $30,000 over four consecutive calendar quarters. Check the link as there are other exemptions and to confirm the dollar-amount threshold is still current.

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