We solve serious CRA tax problems

Accessing the CRA Small Business Deduction for your Business

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction that a Chartered Professional Accountant can help you consider. There are also complex exceptions that could get you in trouble in a CRA Audit Toronto, but which a Chartered Professional Accountant can help you navigate.

In 2016 some changes were made to the small business deduction that impacted payments from private corporations to Canadian Controlled Private Corporations. Goods and services provided between private corporations results in ineligible income if there is any related shareholdings or interests in the two corporations. The rules can be very broad and you may be caught without even knowing it. A Chartered Professional Accountant can help you figure out areas of risk and avoid a CRA Audit. The details are not yet clear for the final provisions, but a tax lawyer in Ottawa or anywhere in Ontario can identify major issues that can affect many small business owners.

The goal for the changes is to stop high-net worth individuals to lower their family tax rates by using multiple corporations owned by family members to earn income that related to the same business or business operations. Despite this beneficial intention to make the tax system more fair for middle income taxpayers, there may be some inadvertent traps that capture legitimate operations in separate companies owned by related persons. A CRA Audit Toronto can result in your or your family member being denied the deduction and as a result owing taxes, penalties, and interest. Get a Chartered Professional Accountant to review your business dealing with corporations where a family member has any interest to make sure you are safe in case of a CRA Audit Toronto. A little advice now can save you a lot of headache tomorrow.

Accessing the CRA Small Business Deduction for your Business FAQs

What qualifies for small business deduction in Canada?

You should spend money on your business to qualify for the small business deduction on your taxes. Money spent on personal use doesn’t count. For example, you bought a desk for the office of your business. It counts as a business expense and a deduction. However, buying a desk and using it at home isn’t qualified for these kinds of deductions.

What is the small business deduction limit in Canada?

Your limit for a taxation year is $500,000. It’s prorated for the number of days in the year if there are less than 51 weeks. Business limits should be allocated amongst corporations associated in a year and are reduced by the share that the Canadian-controlled private corporation assigns to another corporation. Then, the remaining limit is further reduced on a straight-line basis if the combined taxable capital is between $10 million and $15million.

How much income can a small business make without paying taxes?

Entrepreneurs don’t have the formula that will help calculate how much their business can earn without paying taxes on it. Your annual business income will be combined with other non-business and business income on your tax return. Your potential itemized deductions, filing status, and other allowable deductions will determine your taxable income and resulting tax bracket. You may also have to consider whether an alternative minimum tax will apply to you and erase a portion of your deductions.

How is small business deduction calculated in Canada?

While the federal income tax rate is 28%, a small business will be taxed at 9%. Essentially, this is a deduction of 19%. However, this is the federal small business deduction and each province or territory may have different rules that apply.

How much can a small business earn before paying tax in Canada?

There is no minimum threshold. This means that any income generated by a small business is taxable. However, there are small business deductions at both the provincial and federal levals.

What qualifies as a small business in Canada?

A small business in Canada is any company that has between 5 to 100 employees.

About the Author

pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

This is an announcement from Aaron Baer, legal counsel to Faris CPA.

I have been working with Faris CPA for more than 10 years.

Faris CPA is being attacked by Kenneth John Weakley (Oct 1969).

I am posting this review because Kenneth John Weakley has been deleting his reviews and has been reposting them, so that Faris CPA's responses don't always show up.

Faris CPA's position is as follows:

Faris CPA is a well-regarded firm that is compliant with CPA Ontario obligations and has a good track record.

Under no circumstances will Faris CPA be paying Kenneth John Weakley any amount.

Kenneth John Weakley's claims do not have any merit.
Response from the owner:Thank you Aaron for your help with this matter. Please see below my entire response to Kenneth John Weakley (DOB: October 20, 1969). “Attention all readers: Faris CPA and 3 other reputable lawyers in the GTA are being aggressively attacked with fake Google reviews posted by Kenneth John Weakley (DOB October 20, 1969). Unfortunately, his repeated blackmailing and extortion attempts for the past few months have failed and he is still hoping to be successful by keep posting those false and fake reviews. Please note all personal information mentioned in our response is available online, publicly available and anyone can access it and none of the information was obtained while doing business with Kenneth John Weakley. Feel free to Google his name and see the below link to confirm. As such, there is no breaching confidentiality issue whatsoever. https://find-and-update.company-information.service.gov.uk/officers/EfbNEs5kNSRQeb9uq8kdZL0LGm8/appointments This is a fake review posted by Kenneth John Weakley (DOB: October, 20 1969). Address: 821A Fulham Road, London, U.K. SW6 5HG
Had a very good experience with Sam and his team. They dealt with my CRA audit in the most efficient way possible. I admire their professionalism and expertise in providing answers to the CRA and providing a perfectly reconciled package which was a key to resolve the tax issue. If you look for a tax consultant firm, hire Farid CPA. 10 stars
Response from the owner:Thank you for the five stars and the positive review.
I was referred to Sam Faris by a family member who highly recommended him to deal with my CRA audit matter which has been ongoing for almost 2 years. Considering that this was a sensitive issue, I needed to make sure that Sam would be the right fit to handle my case. I requested an in-person meeting. I met with Sam for more than 2 hours. He went through CRA proposal letter and immediately identified the weaknesses in CRA’s calculations. He immediately advised on the best approach to dispute this proposal and provided a time line when he will submit the counter analysis. I was impressed with his confidence and his expertise and decided to retain his services. He worked on my file around the clock to ensure meeting the deadline. At the end, Sam was able to reduce the tax bill and I was able to pay it with no hesitation. While Sam was working on the file, he was in a full control with the situation by communicating with the auditor on timely and professional manners. I never felt that I was left in the dark as Sam was always providing me with an update. I do recommend to hire Sam for any dispute with the CRA. Thanks
Response from the owner:Thank you for your positive reviews and kind words.
Had a consultation with Sam about a tax situation and very glad I got professional advice on how to proceed.
Response from the owner:Many thanks for taking the time writing this amazing review.