This is the year you get all your ducks in a row!
Essential Bookkeeping Habits For Audit Ready Books in Canada
Bookkeeping Compliance Help For The Work From Home Business Owner
Publisher: L. Kenway BComm CPB Retired | Modified October 2024
This website is all about essential bookkeeping habits for audit ready books. It's a free resource for Canadian work from home - WFH business owners and bookkeepers who want to have audit ready books. Let me take you on a journey to solve the puzzle of good bookkeeping compliance practices in Canada ... because KNOWLEDGE puts money in your pocket and keeps you off the Canada Revenue Agency's (CRA) radar.
Help getting all your ducks in a row
- What to do if you can't pay your taxes?
- Did you get more tax slips after you filed your tax return?
- Want to pay Revenue Canada online?
About This Site
I'm a retired certified professional bookkeeper. I launched Bookkeeping-Essentials.com in 2009 to help small business owners who couldn't afford a bookkeeper get their books in order. It took on a life of its own over the years.
As I retired from bookkeeping in 2020, I am restructuring the content to ensure that it remains relevant and easy to navigate while giving me more playtime in my retirement. My first major change was the separation of content about essential bookkeeping habits for audit ready books in Canada from my original site, which now resides on this site. This shift allows me to provide targeted and specific bookkeeping compliance habits and information that caters to the unique needs of Canadian businesses.
My second step in restructuring the site content was to introduce a fresh new look to both sites. While both sites are designed to have similarities in their aesthetics, each has its distinct subtleties that reflect their dedicated audience focus—kind of like the Property Brothers, identical twins with distinguishing personalties.
Now the redesign is complete, I have begun the final step of updating and consolidating the remaining content on the original site. With currently over 700 pages of good bookkeeping practices information, this is no small task, but my commitment to providing up-to-date, reliable resources remains unwavering.
This site will provide general and time sensitive information about essential bookkeeping habits for audit ready books that self-employed and small business owners need to run their business effectively; and assist their often isolated work from home bookkeepers with answers to the practical stuff that isn't covered in bookkeeping classes. I aim to be the go-to hub for self-employed Canadians seeking to understand and comply with Canada Revenue Agency's tax and bookkeeping compliance rules and deadlines with confidence.
Each article on the site will include:
- a publication date, and if applicable;
- a revision date - content has been reorganized, expanded, and updated to improve the quality or accuracy of the article;
- an update date - material is substantially the same but has been modified to make it current such as links, dates, rates, or correct errors or reflect changes to compliance rules; and
- an editing date - minor edits on formatting, grammar, or spelling errors.
Watch for good compliance practice tips and pointers throughout the site. I hope you find my new site practical in nature as well as being a useful resource of developing essential bookkeeping habits for audit ready books in Canada.
Just Breathe, Laura
Mediocrity is a choice;
it’s not always made consciously, but it is still a choice.
Gary Ryan Blair
Essential Bookkeeping Habits Resources
Where do you want to go next?
Jump To >> Canadian Bookkeeping Tax Rates | Cash Management System To Help You Save For Retirement | How CRA Defines The Platform Economy | Vehicle Expense Reimbursement Options | What is Tax Compliance? | Why You Need A Basic Understanding of Compliance Tax Rules
Surprise! To Be A Successful Business Owner, You Need To Have A Basic Understanding of Compliance Tax.
Even if you "don't do taxes", as a small business owner, you or your bookkeeper need to understand the basics to prepare a CRA compliant set of books. Think GST HST PST, payroll taxes, excise tax, income tax installments ... these are all forms of tax ... so surprise, you do "do tax"!
As a small business owner in Canada or as a bookkeeper working from home, YOU know small business tax planning doesn't happen when you file (or not!) your mandatory tax compliance returns ...
Tax planning happens EVERY day throughout the year ...
Good compliance practices don't happen on any one particular day. They aren't an event; they are a HABIT.
By taking the time to learn and know the rules ...
YOU can do all the little things needed to LEGALLY reduce your net taxable income.
SMALL daily habits CAN move mountains.
SMALL BUSINESS COMPLIANCE RESPONSIBILITIES
Aiming For Consistency Not Perfection
Owning and operating a business in Canada means you have some legal responsibilities. Canada Revenue Agency (CRA) requires regular reporting of Canadian sales tax, payroll taxes, and income taxes. Each province and territory has their own tax related requirements as well. These regulations are often referred to as government compliance requirements.
Isn't it the perfect time to get all your ducks in a row?Tax compliance returns and payments should be filed on time. Failure to report and remit by due dates leads to costly penalties and interest charges. This site provides information about essential bookkeeping habits for audit ready books you need to know to put more money in your pocket and avoid these charges (i.e., stop flushing your hard earned money down the toilet!).
Isn't it the perfect time to get all your ducks in a row? If not now, when? At first it seems overwhelming. But once you go through the process a few times, you will be able to relax and find it just another part of your paperwork routine in operating your business.
WHAT TO DO WHEN YOU CAN'T PAY YOUR TAXES
What to do when you can't pay your taxes.Even if you can't pay the taxes owing, strive for tax compliance by always filing compliance returns by their due dates to avoid pricey penalty charges and a loss of personal benefits such as the carbon price rebate or Canada child benefit. Interest charges on the balance owing will still apply and are set every three months.
Late filing or failure to file penalties for tax returns are 5% of the tax owing plus 1% for each month your return is late to a maximum of 12 months. You could potentially be paying up to 17% on the balance owing before interest charges are calculated.
If you were charged a late-filing penalty on three prior year returns, your late-filing penalty may be 10% of your current year balance owing, plus 2% for each full month your return is late to a maximum of 20 months.
Beginning May 1st, interest charges on the balance owing will still apply and compound daily.
If possible, pay what you can when filing even if it isn't the full balance. That's how you establish essential bookkeeping habits for audit ready books in your business. It's how you stay in control and stay on track of your compliance responsibilities. Make payment arrangements with CRA for the remaining balance.
- Did you miss ANY of your prior year filing deadlines? It is much better to file NOW than wait for a CRA demand letter.
- Your books are a mess. Where do you start?
- Are you more than one year behind in filing? Learn about Voluntary Disclosure.
- Are you behind on your tax compliance responsibilities because life events were out of your control... things like a divorce, death, illness? You may qualify for taxpayer relief from interest on unpaid taxes.
- Do you file your GST return annually? Check out this GST tip.
This year, decide you are going to operate a Canadian bookkeeping compliant business. By making bookkeeping compliance part of your identity, it will just become a habit and who you are as a business owner. Do what needs to be done to get all your ducks in a row. Give yourself the gift of less stress in your business life.
Some small business owners choose to close for a day or half a day each week to take care of their back office duties and compliance reporting obligations ... just like small businesses used to do in the "old" days. Does anyone else remember when small businesses were closed on Mondays and Wednesday afternoons? Choose a day when business is normally slow as your paperwork day.
Key Takeaways
- File on time even if you can't pay to avoid pricey late filing charges.
- Pay as much as you can manage to reduce interest charges.
- Be proactive and call CRA to arrange a payment plan for the remaining amount owing.
It's Easier to File and Pay Online Than Ever Before
Small business owners often catch up on their paperwork at night after a long day. Filing and paying online makes an efficient use of your time. Modern technology advances means more and more small businesses can transition easily and affordably to a paperless system. What's holding you back?
Be Tax Compliant This Year
Did you make a mistake on a tax return you filed with CRA ... or get some more slips after you sent in your tax return?
Find out why you should amend it ... and what form to use.
CRA initially expanded their system in 2013 to begin the move to a paperless system. Each year they make improvements which helps you run your business more efficiently. You can sign up to receive your notices online ... it's a timesaver! They also accept source documents requests from audits online. Features like this are why fax machines are no longer a necessity in most offices these days.
Establishing essential bookkeeping habits for audit ready books was made a little easier in October of 2009 when the CRA introduced the My Payment service. This service allows you to pay your business (and individual) taxes online instantly from your bank account through a secure link with approved Canadian financial institutions. No more mailing in a cheque or going to the bank. It's important to note that no banking information is shared with CRA when you use My Payment services unless you choose the payment option for CRA to take a preauthorized payment from your bank account. Just follow the instructions and make your selections as prompted.
There have been many revisions to the service since 2009 ... a more recent one was integrating the filing of a compliance return with setting up a post-dated pre-authorized payment at the same time. If you use My Payment to pay after hours, or on the weekend or a holiday, the online payment will be credited the following business day.
2016 introduced the ability to pay with Visa Debit cards (ATB, CIBC, BNS, RBC, TD) and later MasterCard Debit cards (BMO and Servus CU). I'm NOT a fan of this payment method if you have more than one bank account as it often doesn't let you chose the account to pay from. Interac was the better option but now only TD business clients plus many credit unions offer the Interac option now.
RBC discontinued Interac payment as of May 2023. However, they introduced a virtual debit card as a replacement to the Interac payment option. The virtual debit card gives you the option to select which account you want to make a payment from.
My favourite My Payment option was introduced in May 2022. As mentioned above, CRA now offers the option to make a post-dated preauthorized payment at the time of filing. You can set the date you want the payment taken directly from your bank account with 5 business days as the default option. This means you have to file at least a week in advance of any deadline to avoid late payment charges.
The My Payment service allows you to pay:
- GST/HST
- payroll deductions
- corporate income tax
- excise duties and taxes
- individual income tax ... and more.
Your first step is to register for My Payment. Once you follow CRA's instructions for that process, sign into My Payment. Sounds like it should be an easy thing to do, doesn't it? It's not in a prominent place anymore. It's a bit tricky to find the My Payment option on CRA's website because the government site is so large. How you get to it ... Canada.ca/en/revenue-agency.html> Payments to the CRA ... then keep clicking until you reach the correct option for you.
Your other option is to just google CRA My Payment ... however, these days you have to cognizant you are not clicking on a fraudulent or copycat site. Make it a habit to look at the top line of your browser to check the URL address. It should have a lock to indicate it is an https site ... and the URL must end with canada.ca. There should be nothing else between canada and .ca.
Since May 2022, a third option is to sign into your My Account or My Business Account and file your return from there. Once you submit it, it takes you to My Payment. This makes it seamless to file and pay.
CRA's service gives you an alternative to paying the banks' administration fee that banks charge businesses for their service to pay CRA online. The banks' payment systems allow you to make post dated filing and payment transactions which is valuable if your payments are significant or one of your employees is doing the filing and setting up the subsequent payment arrangements.
Vehicle Expense Reimbursement Options
CRA has three distinct sets of rules for vehicles used for business purposes. Choose the one that fits your circumstances to keep on the right side of Canadian compliance requirements by learning about essential bookkeeping habits for audit ready books.
How CRA Defines The Platform Economy
One of the essential bookkeeping habits for audit ready books is to learn the CRA rules. If your business is online (and who isn't these days?), CRA explains that the platform economy is facilitated by digital platforms and usually involves three separate parties:
- sellers of goods or services;
- consumers buying these goods or services; and,
- platform operators that use technology to facilitate transactions between sellers and consumers.
Adhering to your Canadian compliance obligations means all income from the platform economy must be reported on your annual tax return including gifts and donations. The platform economy has four areas where you can earn income online:
- Sharing Economy: using and sharing assets like cars and spaces
- Gig Economy*: short-term contracts, freelance work, or other temporary work that is arranged online or through a mobile application.
- Peer-to-peer (P2P): selling goods online like clothing or jewellery
- Social media influencers: individuals with influence or significant presence on social media
*Fiverr, Clickworker, Crowdsource, Uber Eats, Skip the Dishes are included in CRA's definition of the gig economy.
Source: CRA website - Taxes and the platform economy, Gig economy, How earning from online platforms can impact your taxes
Everyone Has To Save For Retirement
Even the Self-Employed and Small Business Owners
Start Early To Cushion Future Setbacks
Small business owners in Canada have several tools and strategies at their disposal for saving for retirement outside of their businesses. It's smart to diversify and not rely solely on the sale of your business to fund your retirement.
More >> A few options for your consideration
Start the habit of treating yourself like you were still an employee with retirement benefits. Don't think you'll ever have the cashflow to setup your own retirement savings plan?
More >> Simple cash management system for the self-employed
Canadian Bookkeeping Tax Rates
Quick Links
Interest & Tax Rates
- Prescribed quarterly interest rates - used for shareholder loans, spousal and employee loans
- Capital Gains Inclusion Rate (June 24, 2024)
- Lifetime Capital Gains Exemption (LCGE) and Canadian Entrepreneur's Incentive (CEI)
- CCPC Tax Rates and Limits | Small Business Deduction
- Common CCA Rates - used to classify your capital assets and depreciate them using a declining balance method
- Annual CRA indexation adjustments
Payroll Tax Rates
- Employment Insurance Premiums - used for employee source deductions
- Canada Pension Plan Contributions - used for employee source deductions
Sales Tax Rates
- PST QST GST HST Rates - includes territories
- BC PST non-regular rates - varies between 7% and 12%
- Simplified Rates - used as an alternative method of claiming input tax credits
- Quick Method Rates - used as an alternative method of claiming input tax credits
- Out of Province Customer Rates - how to determine the rate to charge
Canadian Travel and Vehicle Mileage Rates
- Per Kilometre Tax-Free Automobile Allowance
- Self Employed - must used detailed method to claim car expenses
- Simplified Non-Business Travel Rates - used for medical and moving expenses not business expenses
- MORE >> Canadian Travel and Vehicle Mileage Rates
Start a Habit With This Resource For Essential Bookkeeping Habits For Audit Ready Books in Canada
My hope is you BUILD THE HABIT of checking in here regularly while you have a coffee, a cup of piping hot green tea or in keeping with the times, a healthy smoothie or cool glass of water.
Take the time to reduce your stress by establishing habits so you know the essential bookkeeping rules that apply to your business. You'll be happy you did once those refund cheques come rolling in or CRA notices and late filing penalty charges disappear.
Most of all, remember to JUST BREATHE! Deep breath in for the count of four. Hold your breath for four counts. Exhale in four counts. Pause for four counts. Repeat five times. You've got this! You just need to get all your ducks in a row.
I'll leave you with a work life balance suggestion to give you the energy boost you need to improve your chance of setting up essential bookkeeping habits for audit ready books this year ...
Dr. Will's Breakfast Smoothie | A Meal In A Glass
If you are trying to have a better work life balance (Jeff Bezos prefers the term work life harmony) and promised yourself you were going to eat healthier this year; try Dr. Will Bulsiewicz's (a gastroenterologist and author of Fiber Fueled) fast and easy breakfast smoothie.
Just throw these four ingredients in the blender and blend until smooth.
- blueberries (fresh or frozen) - [1/2 cup - prebiotic fibre]
- bananas (fresh or frozen) - [1/2 banana - prebiotic fibre]
- soy milk - [1 cup - prevents inflammation to improves bone health]
- broccoli sprouts - [handful or 2 - reduces inflammation]
To bring it to the next level, Dr. Will says you can top it off with some ground flaxseed (for the fiber) and walnuts (for the healthy fats). He encourages you to customize the smoothie to your taste and nutritional goals.
My comments are in [square brackets] as Dr. Will didn't give amounts.
S H A R E T H I S P A G E :
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