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Taxes can indeed take a large chunk of your profits. Your profits minus the tax may leave you with very little money for yourself. This is, even more, a worrying sign for self-employed people who operate from their home. However, with the help of home office tax deduction, you can get home business tax saving. Thus, you are able to reduce your tax amount. But, how do you reduce it? An accounting assistance in Edmonton will be able to help you to get the home office tax deduction. Some of the ways to get home business tax saving are mentioned as follows.
When you operate from your home, you are allowed to deduct some of the expenses such as a part of the electricity cost, heating, and maintenance. Some of the expenses that would not be deductible include mortgage interest, home insurance, capital cost allowance and property taxes. So if you have missed out on the deductible expenses before, make sure you add them to the deductible taxable amount to get the exemptions.
Area of the Work Space
You can deduct work space expenses by calculating the percentage of the work space and the entire area of your house. For this purpose, the area of the work space should be divided by the total area of your home. This will give you the percentage of the work-space-in-the-home expenses that can be used as a deduction and thus, save you from paying additional tax. When it comes to maintenance cost, the expenses incurred in maintaining only the office space can be used to deduct. Any expenses incurred which are not part of your work space are not allowed to be deductible.
Is your apartment or house rented? If you have a rented apartment or house where you work from, then you are able to save some tax as well. In this case, again you can deduct taxes by calculating the percentage of rent and other maintenance expenses that are paid by you. The expenses used in deduction should form the part of your work space expenses alone, and not the expenses of the entire apartment or house.
Apart from these tax savings option for those having offices at home, you can also carry forward the expenses that were not deducted in the previous year to the current year. Moreover, there are quite a few conditions for getting home office tax deduction. Your office space should be utilized to carry out more than 50% of your work time. If you do not fulfill this condition, then you should use the workspace to earn your employment income itself. Additionally, it must be used on a regular basis for meeting clients, customers, and other people for work related purposes. To know more about home business tax savings, get in touch with an accounting assistance in Edmonton. The accounting assistance in Edmonton will help you to deal with all your tax related matters and ensure you get home office tax deduction accordingly and save you some dollars.
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If you have a payroll account, then you should be aware of the payroll deductions. As an employer, you need to have the payroll remittance schedule prepared. The Canada Pension Plan (CPP), the Employment Insurance (EI) premiums and the income tax deducted from your employees’ salary should be remitted together with your CPP contributions and EI premiums. Let’s take a look at remitting payroll deductions in detail.
The remittances are deemed to be made on the day when it is received by the Receiver General. Therefore, as an employer it is critical to choose the right method of remittance that is suitable for you as per your due date. Your remittance form and deductions should be sent to the Canada Revenue Agency (CRA) on or before the remittance due date.
Steps to Running Your Payroll Account
You need to follow the six steps to run your payroll account. They are:
In case your remittance due date falls on a Saturday, Sunday or any public holiday recognized by the CRA, then you need to remit on the following working day. For new small businesses, you need to remit on a quarterly basis. To know more about the new remitter, get in touch with a professional accounting firm to help you in this matter.
For a regular or new remitter, you need to remit your deductions on or before the 15th day of the month after the month you have made the remittance. For a quarterly remitter, you need to remit your deductions on or before the 15th day of the month immediately following the end of the quarter. The quarters begin from January to March and vice-versa. There’s another form of remitter known as accelerated remitter for which the due date depends on a number of other factors.
All the information relating to your payroll accounts should be kept either at the place of your residence or at the place of your business. If you do not comply with the payroll remittance schedule, then you will have to face some hefty fines. As a small business organization, you would not want to face these penalties. To clear all your doubts relating to payroll deductions and complying with all the procedures of payroll account, it is recommended that you consult a specialist bookkeeping firm in Edmonton.
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A bank reconciliation statement provides information relating to your banking and business activity that reconciles your business organization’s bank account with its financial records. The statement summarizes the deposits, withdrawals, and other activities that have an impact your business’ bank account for a specific period of time. All businesses, whether big or small, take the help of this tool for various reasons. The importances of your bank reconciliation statement for your business are mentioned below.
Identifies Difference Between Bank and Book Balance
With the help of a bank reconciliation format, you can identify the difference between the bank balance and the cash book balance. This is necessary as sometimes the transaction may not be settled in your bank account due to various reasons and your cash book may show a different figure. As a result, there can be a mismatch and this mismatch is easily identified with the help of a bank reconciliation format. Moreover, it helps your accountant to make any necessary adjustments and correction in the books of accounts.
Acts as a Control Mechanism
For any business, the funds are the most important assets, and the purpose of bank reconciliation statement is to act as a control mechanism to protect this valuable asset. A detailed copy of your bank reconciliation format indicates if there has been any unauthorized withdrawal of funds from the bank account. Thus, if someone has withdrawn your business funds without your consent, then you can easily spot the person with the help of your bank reconciliation statement.
Checks the Accuracy of Entries
Another purpose of bank reconciliation statement is to enable you to check if the entries are correctly entered in the books of accounts. Thus, you can use your bank reconciliation statement to check if the accountant has entered the figures correctly in the book and that there are no misleading entries in the financial statement.
Update Your Cash Book
Sometimes, it is not possible to remember all the transactions and record them in your cash book. This is where you can take the help of your bank reconciliation statement to update your cash book. Moreover, your bank reconciliation statement will be error-free. So if there are some entries that you have incorrectly entered in the cash book, you can correct it.
Indicates Delay in Payment
You can use your bank reconciliation statement to understand why certain check payments have still not been settled. So if there has been any undue delay or clearance problem with respect to the checks, then the reason for the delay can be understood with the help of your bank reconciliation statement.
The purpose of bank reconciliation statement is to ensure that there is no problem with respect to your financial transactions and that the accounts are settled correctly. If you are too occupied to get your bank reconciliation statement and make changes in your books of accounts, then it is recommended that you take the help of a professional accountant to help you out.
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Are you concerned about what will happen to your family owned business after your death? You want to ensure your family’s future is secured even after your death. For this purpose, estate planning for family owned business is crucial. An estate plan describes how your company assets are passed on to your family members in the most cost effective way as possible. The estate plan you create now can affect the accounts and finance your business substantially.
Here’s some estate planning strategies that you can use to plan for your estate accordingly.
Immediately after your death, you are deemed to dispose the entire capital property at fair market value. As a result, the liability of income tax is huge. It is also known as death tax. In such a scenario you can limit the death tax by using the estate freeze method. In this method, you transfer the assets to a younger generation. As a result, the value of these assets is frozen to the transferor as on the date of transfer. Furthermore, the amount of potential capital gain on death also gets frozen. Thus, you are able to estimate the potential tax liability on death and there is a better planning for payment of income tax.
Life insurance is one of the basic tools used for estate planning strategies. You can fund the potential income tax by purchasing the life insurance policy. If your insurance policy is properly structured, then any income tax occurring on the deemed dispositions of assets on your death can be paid without any sale of the assets. Therefore, you should get in touch with an accountancy firm providing you with tax related services to help you out.
Updating Your Will and Power of Attorney
While you start estate planning for family owned business, it is necessary that you keep an update of your Will or power of attorney. A Will is prepared so that in the event of owner’s death, the executors are provided with the power and authority to act as mentioned in the Will. Also, a properly developed Will can be used by executors to hold and operate the business after the death of the owner in a convenient manner. Thus, the business is passed on to the right person and it also minimizes the taxes through the use of capital gain exemptions, trusts and rollovers.
In the same way, small business owners should consider having valid powers of attorney for financial assets and personal care, during their lifetime in case they are unable to make decisions for themselves.
Drawing Up Partnership Agreements
Drawing up partnership agreements is useful when there are multiple people involved in the business. Such agreements helps to pre-determine what should happen to the business in case of death or retirement of one of the partners. For example, in the case of a buy-sell provision, it directs the surviving partners how to buy out the deceased partner’s share of business, the price to be determined and when the proceeds has to be paid.
These were some of the estate planning strategies that you can use for the benefit of your family members. Estate planning for family owned business or other small businesses would ensure that the ownership rights goes to the right person. However, the estate planning is a complex process and therefore, it is recommended that you take help of professional tax service providers in this regard. Want to secure the future of your business and family? Then start with your estate planning as soon as possible.
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Are you able to manage your accounts effectively? Are you aware of all the latest tax policies and accounting standards? If the answer to both those questions is no, then no need to panic. You would rather want to focus on your core business activity than keep up with the latest updates on manage your business accounts. Rather, it would benefit you if you outsourced your bookkeeping to a bookkeeping service in Alberta. Apart from this, here are a few more benefits of outsourcing bookkeeping services.
1. Focus on Your Work
As mentioned above, one of the benefits of outsourcing bookkeeping services is that you can concentrate on your work. Sometimes, it’s not possible to be aware of latest changes in tax policies or accounting standards. Moreover, you may shift your focus from accounting work and concentrate on your main business activity. Thus, your productivity decreases. Hence, it is better to outsource your bookkeeping to a firm that deals in bookkeeping services in Alberta. Such bookkeeping experts have a clear understanding of the latest changes that are taking place in tax and accounts related matters.
2. Expert Advice
A firm dealing in bookkeeping services in Alberta will give you expert advice regarding your financial status. These firms are experts in professional accounting and therefore will guide you relating to different subjects in bookkeeping. Some of them include:
3. Reduces Scams
When you have your own accounts department, there is a possibility of manipulation in the financial transactions which can lead to scams. This is one of the common problems in small companies when they do not have a separate accounts department to manage bookkeeping. Outsourcing your bookkeeping will help you keep effective control of your various transactions. Thus, it prevents scams and fraudulent incidences and there is a proper management and accountability of funds.
4. Saves Money and Time
Want more reasons to outsource your bookkeeping? Saving time and money are other benefits of outsourcing bookkeeping services that you will get. It helps you to reduce cost. You do not need to hire a permanent accountant to take care of your bookkeeping. You can outsource your bookkeeping as and when required. Moreover, your bookkeeping requirements are taken care of by the professional, so you save time. This is essential, especially when it comes to filing your tax returns which consume most of your office time.
Apart from these reasons to outsource your bookkeeping, you get access to top accounting systems used by these outsourced bookkeeping firms. If you want to avail of all these benefits, then you may want to outsource your bookkeeping. Get in touch with professional bookkeeping services in Alberta to help you out.
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In order to increase the profitability of your firm, many factors come into play. Accounting services in Edmonton may tell you that you can increase profitability by improving your sales, raising the prices of your goods and services or by reducing your expenses. A company does not have much control over increasing its sales and prices as much as, it has on lowering its expenses. If you want to increase your profits by reducing expenses, then you should have some knowledge about expenses. There are two types of expenses, variable expenses and fixed expenses. The difference between variable expense and fixed expense is described in detail below.
The expenses which vary with a change in the number of units produced are known as variable expenses. Examples of variable expenses include the cost of raw materials, wages paid to labor, packaging of products and others. These expenses are incurred only when you start producing the units.
The expenses which remain constant irrespective of the change in the number of units for certain period of time are known as fixed expenses. However, fixed expenses will change when the production of units increases a certain number of units. Examples of fixed expenses include rent, power consumption, depreciation, insurance and others. These expenses are incurred even if there are no units produced.
Nature of Costs
Variable expenses vary as per the volume of units. An increase or decrease in the number of units has a direct effect on variable costs.
Fixed expenses remain the same for a long period of time. These expenses are based on time. Over time, the expenses such as electricity bills, factory rent will increase and so does the fixed expenses.
Another difference between variable expense and fixed expense is the cost per unit. In the case of variable expenses, the cost per unit will remain the same. This is because the total variable expenses vary with each unit. Therefore, the overall cost varies with each unit but the cost per unit is the same irrespective of an increase or decrease in the volume of production.
In the case of fixed expenses, the cost per unit decreases with the increase in the volume of production. For example, the cost of fixed expenses is $1000 for 100 units. Thus, the cost per unit will be $10. If the volume of units increases to 200 units, then the cost per unit will reduce to $5.
These were some of the basic difference between variable expense and fixed expense that any accounting services in Edmonton will tell you. In order to increase profitability, a firm should try to reduce both types of costs. Fixed expenses can be reduced when you produce an optimal number of units. Similarly, when there is a large volume of production, you can get economies of scale for raw materials or packaging. This helps in reducing the variable expenses. To know more about these expenses and their various implications on your business performance, get in touch with professional accounting services in Edmonton.