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 tax professionals 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.