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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.

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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.

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Response from the owner:Dear Eliyas Thank you for the positive Google review and the kind words. We heave dealt with many CRA audit cases. We have delivered the best services to our clients as we are confident with our work and its quality. Please feel free to reach out us if you require our services in the future. Sam Faris
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Response from the owner:Said Thank you for the kind words and the 5 stars Google review. CRA issues may get very complicated. I am glad that everything worked out perfectly with you. Feel free to reach out to us any time you require our services. Sam Faris
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Response from the owner:Thank you Omar for your positive feedback and the five stars Google review. We have more than a decade of experience in dealing with the CRA audits and helping our clients and providing all the required support. As you noticed, we provide a high quality of work to support our calculations and to save our clients from an unfair assessments by the CRA. Thank you again and will remain at your disposal if you require our services in the future.
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Response from the owner:Anjan Your positive feedback is much appreciated. Providing a high quality services and submit the packages on timely basis is essential especially once it comes to cases which involves voluntary disclosures program. We prioritize these cases and we do our best to file the packages asap and before CRA contacts our clients. Thanks again and let us know if you have any question in the future. Sam Faris
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Response from the owner:Sangeet Thank you for the five stars review. Filling multiple years of personal and corporate tax returns is one of our specialties. We have been helping clients catching up with their taxes for more than 15 years now. While we are doing the work, we perform tax planning to minimize taxes owing and at the same time we prepare a high quality package to protect our clients and protect our work in case CRA decides to perform tax audit. Thank you again and feel free to contact us in the future if you have any question regarding our work. Sam Faris
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Response from the owner:Anish Thank you for your positive feedback. When it comes to CRA issues, meeting deadlines is extremely important and at the same time providing a top quality package is as important. This will avoid escalation with the CRA and as you realized, will save money to our clients. As in all cases, we took your case seriously and we aggressively worked on it to meet the deadline at the same time we did not compromise our work quality. I am glad that you are satisfied with the results. Posting the Google review is rewarding to our hard work too. Please feel free to contact us in the future if you have any questions. Sam Faris
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Response from the owner:Thank you for the positive five stars review and your kind words. Net worth audit is the most complicated audit that CRA performs where CRA has doubts that taxpayers under reported the income. This kind of audit is one of our specialties. Over the years, we have developed a unique and sophisticated strategy to defend our clients from the CRA excessive numbers. In many cases, CRA auditors acknowledged and complemented our work and our approach. We will remain at your disposal if you need our services in the future. Sam Faris
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Response from the owner:Thank you Don for the five stars Google review. We are glad that we met your expectations and your case is closed now. Happy to answer any questions in the future and we will address all queries CRA may have regarding our work. Sam Faris