News Releases
“While the year started off with a few economic storm clouds on the horizon, many small business owners are now expressing a growing optimism and an increased level of confidence about their ability to finish out 2010 strongly,” says Cathy Pin, Vice President Commercial Banking, BMO Bank of Montreal. “Before the holiday rush, now is the time to do a quick financial check-up with a banking advisor and your accountant to consider some straightforward tips and strategies to help minimize the amount of 2010 income tax payable,” added Ms. Pin.
For small business owners in
1) Do a ‘Financial Check-Up': A business banking advisor, accountant, and investment advisor can help owners make sure they have a clear understanding of their current financial situation. These professionals can also help develop or adjust existing plans based on new needs or changing circumstances.
2) Defer Income: Depending on a number of factors (e.g. future tax rates, projected profit or loss for 2010, cash flow), small business owners may be able to reduce the current taxes they will be paying by deferring some of the income they expect to receive in December, instead into January 2011.
3) Gather Business Receipts and Increase Expenses: Maximize income tax deductions by ensuring all allowable receipts for business-related expenses (e.g. gas, stamps, customer lunches, coffee for the office) are kept and accounted for. Over the course of a year, those receipts for the little things can add up. Business owners should consult the guidelines available from the Canada Revenue Agency, or speak to their professional tax advisor about eligible business expenses.
If it makes sense for their current business situation, businesses can also increase some expenditures now on things they plan to need early in 2011, in order to maximize 2010 deductions. For example, small business owners can consider accelerating the purchase of new equipment or other depreciable assets before the end of the year to potentially benefit from a claim for tax depreciation in the current year.
4) Consider Inventory Write-offs: A drop in the value of inventory may also provide an opportunity for an additional income tax deduction for the current year. It is important to speak to a banking advisor and your accountant about the tax rules that apply to your particular situation.
5) Set-up a New RRSP or make that Maximum Annual RRSP Contribution: For unincorporated small business owners, income earned by the business becomes personal income when filing taxes using the T1 form. However, many small business owners fail to take full advantage of the best income tax deduction available to Canadians – the Registered Retirement Savings Plan (RRSP).
RRSP contributions are deducted from annual income, thereby lowering income tax payable at the individual's marginal tax rate. Now is a great time to set-up a new RRSP or make a contribution to an existing plan for 2010 to benefit from the tax-deferred growth right away. The process is simple, quick and can be done at any bank branch.
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For news media enquiries:
Paul Cunliffe,
Laurie Grant, Vancouver, laurie.grant@bmo.com, 604-665-7596
Ron Monet,