Do I need a business number (BN) for my small business tax?
You don’t have to get a business number to start your business. If you want to get a tax accounts such as GST/HST account and payroll account, CRA will give you a business number with your tax account.
What is GST/HST?
The goods and services tax (GST) and harmonized sales tax (HST) are taxes that applies to most supplies of goods and services.
What does GST/HST account mean to my small business tax?
Once you have a GST/HST account, you HAVE to charge your customers GST/HST. For example, if you serve a client in Ontario for $100, you have to bill him $113 to account for the 13% HST.
On the other hand, when you purchase goods or services for your business, you can deduct the GST/HST you pay, called an input tax credit.
When you prepare your small business tax, you have to file your GST/HST return.
Should I register for a GST/HST account?
If you provide only exempt goods and services, which that are not subject to GST/HST, you can not register for a GST/HST account.
Some examples of exempt goods and services include used residential housing, most health care and dental services, certain childcare services, and many educational services, Y To find out if you provide exempt goods and service, see Taxable or exempt.
If your annual revenues are $30,000 or less,You do not have to register for GST/HST.
When your total taxable supplies of goods and services exceed $30,000 in a single calendar quarter or in four consecutive calendar quarters, you have to register GST/HST account.
My annual sales is below $30,000 and my service is not exempted, should I register GST/HST account?
You don’t have to. But if you want to claim input tax credits (ITCs) to recover the GST/HST you pay on your business purchases, you need to register GST/HST account.
What do I have to do if I have GST/HST account?
- You have to charge, collect, and remit GST/HST on your sales of taxable goods and services.
- You will also have to file GST/HST returns on a regular basis.
What are the advantages to incorporate my business?
If you are considering incorporating your business, here are the main advantages of incorporation:
- Limited Liability. Your liability is limited to the amount you invested in the company.
- Income Control. You can determine when you will personally receive income and what type of income(salary or dividend) you will receive.
- Potential Tax Deferral. Because you can defer paying some tax until a later time, you may be able to realize tax savings if you choose to receive income when you are in a lower tax bracket.
- Income Splitting. Your spouse and/or your children could be shareholders in your corporation, so you can pay dividend to them.
- The Small Business Tax Deduction. Canadian-controlled private corporations (CCPCs) are entitled to claim a small business deduction on active business income.
What are the disadvantages to incorporate my business?
The main disadvantages of incorporation are:
- Another small business tax return. You have to file two tax returns each year, one for your personal income(T1), and one for the corporation(T2).
- Increased Paperwork.
- No Personal Tax Credits. Every dollar a corporation earned is taxed. A corporation can not claim tax credits, which a self-employed person can claim.
How to use T4, T4A and T5 tax slip?
When you are doing your small business tax, you should know how to use different tax slips to report income to CRA.
- If you hire someone as an employee, use T4.
- If you pay someone as self-employment commission, such as sales commission and sub-contractors, use T4A.
- If your company issue dividend to you or other shareholders, use T5.
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