Koroll & Company Blog

As a small business owner, it is important for you to understand your business and be accountable to the Canada Revenue Agency (CRA) who holds you responsible for reporting your business activity through tax returns and remittances.

To do this effectively, you must understand the necessary processes and the information you need to collect and retain. You must also understand the factors that impact the growth and success of your business. 

As with every new year, 2018 and 2019 saw changes that will affect your tax planning strategy as both an individual and as a business owner.

To help you better understand the changes you should be considering when completing your 2018 tax return and planning for 2019, we have compiled them here for your review.

For many Canadians, just thinking of the Canada Revenue Agency (CRA) can give them a headache. But, while the tax man isn’t everyone’s favourite person, they do play an important role in the Canadian tax system.

The CRA administers tax, benefits and related programs - all while ensuring each Canadian is compliant and receives no more or less than that which they are entitled to.

That is why the CRA offers a number of tools and resources to help business owners, like you. Koroll & Company has listed some of those here. 

While many Canadians are focused on filing their 2018 tax return, it is important to also remember to plan and strategize for the year ahead.

To do this, you must first make note of the applicable tax brackets, credit rates and limitations, contributions and premiums that will apply to you and your specific situation in 2019. 

Unlike tax deductions that reduce your taxable income, tax credits reduce your tax owing (your taxable income multiplied by the applicable tax rate). There are two types of tax credits – refundable and non-refundable.

A refundable tax credit means that the government will return the unused portion of your tax credit to you if your tax owing becomes $0 without using the full amount. 

Registered Retirement Savings Plans (RRSPs) and Registered Pension Plans (RPPs) are retirement savings tools that help you plan for your financial future.

Knowing the similarities and differences between the two is critical to understanding their tax treatment.

Pension Income Splitting is a tax planning tool that can be used by taxpayers over the age of 65 (and in some cases 60) to reduce their tax liability and increase their eligibility for government benefits.

This is done by “splitting” their pension income with their spouse or common-law partner.

This can be one of the most effective tax planning tools for seniors but, unlike the Age Credit and Pension Income Credit, is underutilized as many seniors are unaware of this tax saving opportunity. 

Planning for the future is critical but, when developing your savings plan, it is important to consider other factors such as your current financial situation and tax planning, as well as your short-term and long-term goals.

There are a number of saving tools available to Canadians, depending on your goals – Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), Registered Education Plans (RESPs), Registered Disability Savings Plans (RDSP), Pooled Registered Pension Plans, and more.