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Tax Planning Tips for Business Owners in the U.S and Canada

July 13, 2016

Being a business owner is not easy, especially if it is at a growing phase; and at this stage it is all the more difficult to concentrate on other aspects, such as: tax payments, miscellaneous expenses or county/local taxes. AG Tax has summarized a few of these issues based on some of our clients’ situations, and some measures to avoid them. Nonetheless, it is best to consult your tax adviser for tax planning and recommendations based on your personal situation.

Tax Payments

As the filing date nears, most business owners are short of cash as they already have the existing business expenses to take care of. Thus, it is always a good practice to consult your tax return preparer and estimate your year-end taxes, and set aside a particular sum every month to pay off the tax due before the deadline since the tax authority spares no one, and one can avoid unnecessary expenses that would occur in the form of interest, and/or penalties.

Canada requires that corporations make monthly payments of tax installments, while the U.S. requires quarterly estimated advanced tax payments.  Failure to make these payments may result in both interest and penalties.

Sales Taxes

In the U.S., individual states, counties and cities may impose sales taxes. In Canada, sales tax is imposed at both the Federal (GST) and provincial levels.  Performing business activities or sales to different localities may cause a business to be taxable in more than one jurisdiction.  Most business owners forget to account for these taxes while estimating their overall tax bill. Therefore, it is advisable that one should provide all necessary details to their return preparer so that the tax professional can ensure a fully tax compliant return.

Plan Your Expenses & Transactions

There are certain deductions/tax breaks, available in both countries. One such example is the Section 179 for U.S. taxpayers, which allows business owners to deduct rather than depreciate expenses incurred when purchasing or leasing certain equipment or software during a tax year. The U.S. also allows bonus depreciation as well as various business credits that  can significantly help one reduce their tax liability. Please consult your tax professional for advice based on personal situation since the timing of purchase/lease could possibly impact the eligibility for these tax claims.

Categorize Your Employees Correctly

Both countries have strict rules in respect of what constitutes an employee versus an independent contractor. As an employer, you are responsible for tax withholding including employment insurance and Canada pension plan contributions in Canada and Social Security and Medicare contributions and health care premiums in the U.S.  Categorizing your workers as contractual, permanent, or independent contractor could also support certain deductions and claims.  Do NOT take such measures without consulting a tax professional since if all the rules are not followed and the taxpayer is found non-complaint, he/she could face strict penalties.

Hire A Professional

In order to minimize your tax burden, it is crucial to hire a tax professional, who can guide you with your taxes throughout the year and help save on taxes, instead of approaching last minute help only when you have your tax return filed.

Maintain Records

Proper bookkeeping is highly important since all the receipts or other documents would be necessary to substantiate any deduction or credit claims made on the tax return. Often business owners are unable to provide the supporting documents for an expense, and thereby miss the opportunity to claim them as tax deductions. Therefore, it is good to have someone keeping a constant record of all the transactions taking place, and the slips/receipts supporting these transactions.

These are some of the measures that a business taxpayer may consider while planning his/her taxes, and should always keep in mind that tax planning is an on-going process and not a one-time discussion with your tax advisor. It requires significant time for the measures to be executed accurately, and avoid tax errors.

Aylett Grant Tax LLP Can Help

If you have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.

Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.

We can assist with:

  • Canadian Personal and corporate tax returns
  • Cross Border Taxation and Business Planning
  • U.S. Personal and Corporate Taxation
  • Disclosure of Foreign Assets and other information filings
  • Retirement planning
  • Estate Planning, Inheritance tax advice

To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:

  • 416-238-5920 (Greater Toronto Area, ON)
  • 604-538-8735 (Greater Vancouver Area, BC)
  • 780-702-2732 (Greater Edmonton Area, AB)


Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.

ABOUTAylett Grant Tax, LLP
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1

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