Common Accounting Mistakes People Make
Accounting can be quite challenging, and usually gets quite hectic towards the end of the accounting season. To avoid the stress during tax season, certain processes have to be implemented throughout the year. To assist with setting these processes in place, it helps to have the assistance of a chartered accountant.
Your accountant, or the accounting firm your company works with, will be able to advise you on how to maintain the accounts for your firm all through the year. Running a business while handling accounts might prove to be too much to manage, so working with a chartered accountant gives you peace of mind to run your business, while their team handles your accounts. An experienced team would be in the position to help maneuver your firm through unintentional tricky situations you may find yourself or help you avoid any hiccups altogether.
Whether you're currently working with an accountant or not, you need to be wary about committing some costly errors. To help you keep your books in tip-top shape, here is a list of four accounting mistakes to avoid.
1. Treating your employees as subcontractors. Business owners (proprietorships and corporations) often treat their employees as subcontractors. This exposes their business to payroll deduction assessments by the CRA. Business owners should consider the status of workers carefully to ensure they are not otherwise considered employees in the view of the CRA assessments.
2. Discarding expense receipts. Small business owners often toss away expense receipts and prefer using their bank statements and credit card statements to determine their business expenses. However, upon review or during an audit, the CRA will very often disallow business expenses and GST Input Tax Credits if the actual business receipts are not provided. Business owners should track their expenses based on actual receipts (and retain all receipts) to avoid facing similar issues.
3. Failing to submit Form T1135. Taxpayers often overlook the requirement to file Form T1135 “Foreign Income Verification Statement” with respect to foreign asset holdings. This is usually due to a lack of knowledge of the importance of the disclosure form or assuming it does not apply to them. A CPA in the tax preparation business will know what to ask their clients to ensure the taxpayer is correct.
4. Misunderstanding the difference between the terms ‘resident’ for income tax purposes and for immigration. Immigrants and new Canadians generally confuse the term ‘resident’ for immigration purposes with ‘resident’ for income tax purposes and assume that the two are used interchangeably. Although an individual may hold a permanent resident card, they may not be a resident for Canadian tax purposes and vice-versa. In general, the tax filing obligations of Canadians are little to do with the status of their immigration, and more about their particular situation such as where they live and where they go about their daily lives.
If you’re looking to avoid these and other mistakes, reach out to us at Gray & Associates. We are a firm of well experienced Chartered Professional Accountants based in North Vancouver, British Columbia. We provide creative solutions for our clients, making sure we abide by the guidelines of our profession. We pride ourselves on delivering timely, reasonably priced services and quality services to our clients.