Answer These 3 Year-End Tax Planning Questions Before Closing Books In 2023
Stay updated with current accounting standards, business compliance, tax preparation tips, and latest news.
24 Jan 2024
EIFEL Rules are set to restrict a taxpayer’s ability to deduct interest and certain other financing-related expenses before EBITDA.
On August 4, 2023, the Canadian government released a revised draft legislation for the EIFEL rules, and there may be further development in 2024.
Will the EIFEL rules impact your business? Get our services of year-end tax planning for small businesses in Canada to find out.
Overall, the EIFEL rules will have a significant effect on tax compliance obligations and financial decision-making for those trusts and corporations that fall into the criteria.
Thus, it's also important to keep an eye out for your Business deductions while closing the books.
Year-end tax planning for small businesses is incomplete without utilizing any government relief for which your corporation is eligible. Check whether any of these relief measures are set to expire by the end of this year.
For instance:
Answer These 3 Year-End Tax Planning Questions Before Closing Books In 2023
As the fiscal year-end date fast approaches, many entrepreneurs like you will be preparing to close their books. However, it is also the right time for corporations to hire professionals for year-end tax planning for small businesses in Canada. Why? Profits from flipping residential properties will be taxed as business income instead of capital gains starting in 2023. In 2024, the alternative minimum tax (AMT) will be implemented, limiting tax preferences. For tax years ending 2023 or later, most trusts will be required to file an annual T3 income tax return. Finally, the deadline for filling the 1% annual tax on underused or vacant residential properties owned by non-Canadian citizens or permanent residents will end on April 30, 2024. Basically, a lot is happening, or about to happen that can influence your business revenue & taxes. Taking the initiative to plan your taxes now can help you meet deadlines and position your business for tax savings in 2024. That’s why, we’ve compiled a year-end tax planning checklist for Canadian small businesses with our top 3 questions. Now stay alert of new or changing rules that could apply to your situation easily! Also, you can now close your books like a pro with CJCPA. Secure your *FREE 30-minute consultation with a CPA in Surrey, Canada today! *Valid Till 31 December 2023Q1: Have I examined my family business’ payroll?
If you are self-employed or running a business with your family members, how do you pay the salaries? Paying salaries this way is a tax-efficient method for taking funds from the business. Salary optimization should be in such a way that both your RRSP contributions and CPP contributions are at a maximum level. Pay your family members and yourself a reasonable salary. The amount should be justifiable as you would have been paying a non-family member for the same job. Also, find out what combination of salary and dividend optimization will benefit your business the most. Here are a few things to note:- Salary is deductible before taxes, whereas dividend is receivable after paying the taxes.
- Dividends paid to family members are subject to TOSI rules, triggering tax at a higher marginal tax rate.
- To claim a deduction on accrued bonuses, the business has to pay them within 180 days of the following year-end.
Q2: To what extent the proposed EIFEL rules will influence your business strategy?
EIFEL Rules are set to restrict a taxpayer’s ability to deduct interest and certain other financing-related expenses before EBITDA.
On August 4, 2023, the Canadian government released a revised draft legislation for the EIFEL rules, and there may be further development in 2024.
Will the EIFEL rules impact your business? Get our services of year-end tax planning for small businesses in Canada to find out.
Overall, the EIFEL rules will have a significant effect on tax compliance obligations and financial decision-making for those trusts and corporations that fall into the criteria.
Thus, it's also important to keep an eye out for your Business deductions while closing the books.
Q3: How can your business maximize the benefits of relief measures before they expire?
Year-end tax planning for small businesses is incomplete without utilizing any government relief for which your corporation is eligible. Check whether any of these relief measures are set to expire by the end of this year.
For instance:
- If buying a capital property is in your cards, try acquiring it before the end of this year.
- Have you paid off the outstanding balance of your Canada Emergency Business Account (CEBA) loan?
- Is your firm eligible for the Canada Recovery Hiring Program (CRHP) relief?
