Deducting Accounting and Tax Preparation Fees

Let's be perfectly clear - no matter what your political affiliations might be we can all agree that we hate paying taxes.

Whether it is your personal income or your businesses income, writing out that tax check can be extremely painful. That's why we look for ways to reduce them, especially deductions. Anything to lessen the tax burden is a good thing but what about getting those tax returns ready in the first place?

With tax codes being what they are, it's not easy to make sense of all the rules and regulations.

That's why we need a little accounting help every now and then. Can you deduct those tax preparation fees? The short answer is "Yes." But as with anything to do with the government, there is always a "catch."

Tax Preparation Deduction for the Business Owner

As the owner of a business you are eligible to deduct your accounting fees and tax preparation fees as a typical cost of doing business. Look for T2125 Statement of Business Activities and Line 8860.

This would be the fascinating "Legal, Accounting and other Professional Fees" category on your tax return. From the CRA tax code itself comes this official eligibility requirement:

"1. Except where there is a specific provision in the Act dealing with legal or accounting fees…, legal and accounting fees are deductible only to the extent that they:

(a) are incurred for the purpose of gaining or producing income from a business or property, and

(b) are not outlays of a capital nature."

Make sense?

Here's the translation: If you paid those fees in order to make more money for your business then they are deductable. How can there be any other reason for accounting but to make money? That would be with personal income situations. As far as the government is concerned, the T2125 form is just one piece of the total tax return puzzle. The rest of your personal income tax return has nothing to do with making money for your business therefore any money spent preparing those returns aren't deductable.

The Work Around

Yes, you would have to separate the accounting fees even if you're using the same accountant but your accountant should know this. One way around this deduction is for your accountant to assess 100% of their fees for your business returns. Then they would do your personal returns for "free." Who can blame them for spending all the time and effort on the business returns?

DIY Tax Returns

If you prepare your own taxes then you might be able to deduct the cost of software as part of the office expenses on the T2125 form. Again, this is only for business owners. As a regular employee who does their own taxes, you won't be able to make the deduction.


Another great reason for starting a business: More tax breaks!

Should Your Accounting Go Into the Cloud?

Are you up in the cloud yet? We're not talking about daydreaming your afternoon away, but instead about cloud data storage. The simple way of thinking about cloud data storage would be like having an extra attic added onto your home that you can go up to from time to time to add and takeaway stuff. Best of all this "attic" doesn't clutter up the rest of your home.

Cloud storage allows you to park huge amounts of data and software programs, which can free up valuable storage space on your computer. This is vital for a company that is dealing with massive amounts of accounting data. There is still a kind of hesitancy with some companies who feel like they are "letting go" of their data. Should your accounting go into the cloud? Consider these potential benefits of having your accounting software delivered by way of the cloud:

Real Time Updates

If you have an accounting program on your computer, you'll be notified when an update is available and then you'll have to allow your computer to install that update. Often this requires you to reboot your computer. Do you have time for all of that? Up in the cloud, any programming updates are installed automatically. You'll only notice when you see the new features added to your software.

Ability to Expand

Cloud storage is 100% scalable. This means you can add large amounts of extra data at very little extra cost. The alternative would be expanding your memory in your computer. You can also take away data with the same ease and pay for just what you use.

Instant Access

A cloud-based accounting program grants you instant access from applicable devices anywhere there is an internet connection. This means you can work on a plane, at the beach or your favorite java joint.

Ease of Use

Stepping into the cloud is easy to use. You'll also be getting the added bonus of your software provider managing storage space, security and all your backups without you having to stress out over that. In other words, peace of mind knowing that your accounting needs are being met.

Affordable Options

The cloud accounting software you'll be utilizing will be running as a service. Translation: you'll pay a small subscription fee as opposed to a huge purchase price. You also won't have to worry about paying for upgrades when they are available. All for one low price. 

It's The Wave of The Future 

Cloud technology is improving by leaps and bounds every day. As a user you'll be benefiting from all of those upgrades as they happen. It would be like having the latest iPhone delivered to you every time there is a change as opposed to standing in line for hours at the Apple Store.   

How To Use a Virtual Assistant in Your Business

We still might be a few years away from robot butlers, but that doesn't mean we can't put technology to work to help our businesses. We're talking about virtual assistants. These are outsourced contractors who, through the magic of the internet, can perform tasks from research, making appointments and even customer service without having to be local.

They mostly work from their own home, which can help you cut down on office overhead. They are freelancers with a specific skill set that is needed by your company. Whether it is a virtual content writer or virtual administrative assistant, many business owners are discovering the benefits of working across the internet.

Here are the advantages to think of when hiring a virtual assistant.

Accounting:

A virtual assistant makes a perfect bookkeeper. If you have set up an online bookkeeping system for your business, then there is no reason why you can't share that with a remote accountant. Not only can a virtual assistant maintain your financial records but they can also follow up on unpaid invoices or outstanding bills. You obviously need to work with a reputable person if you're going to turn over your financial information - this is not someone you should find on Craigslist. Instead, look for a professional company who handles this type of work.

Competitive and Customer Research:

You know how easy it is to get lost in online research. One minute you're looking up relevant information about your competitor and the next you're watching YouTube videos of baby pandas. Why not let a virtual assistant handle your online research chores? You can task them with an assignment and set them loose across the Internet. This type of research can cover everything from finding your next blog topic to seeing what new products are coming onto the market that relate to your business. They could also research other businesses or investors to help prep you for a meeting.

Database Management:

Hopefully your business will grow by leaps and bounds very quickly. If so, then your customer relationship database will also be expanding. Not only will you need an easy to access contact list of vendors and business associates but you'll also have a customer email database to manage. With access to your servers, a virtual assistant trained in this type of work can make sure your lists are up to date and error free.

Travel:

If traveling is part of your business then you'll certainly want to keep an eye on your travel expenses. There are plenty of amazing deals on hotels, flights and rental cars to be had out there in cyberland. Do you have the time to sort through it all? A virtual assistant can make all the arrangements and find you the best deals.

Once you've used a virtual assistant for even the simplest of tasks, you'll find that you have more time to focus on building your business instead of running it.  

How to Choose an Accountant for Your Small Business

As you begin the journey of operating a small business you’ll find yourself entering into many new partnerships. Not only will you be building a qualified staff to help accomplish your company’s goals but you’ll also require the help of attorneys, landlords, real estate agents, insurance agents and accountants. It’s the accountant that might just become the most valuable asset to your company. That’s why picking the right account is crucial to the success of your business.

Just as with a company lawyer, it will be very hard to hide something from your accountant. That’s why you need to find a person and/or firm that you can trust. In order to pick the right small business accountant you have to understand the nature of their job. In this way you’ll be able assess possible candidates.

Beyond Bookkeeping: The Role of the Accountant

A small business that is just starting up could get by with a qualified bookkeeper to handle the accounts. This could be an employee specifically hired for the task. A bookkeeper needs to keep track of all the financial records pertaining to revenue and expenditures. Thanks to some very decent software programs, simple bookkeeping tasks aren’t complicated to maintain. However, when you bring an accountant into the equation then you are basically “super-sizing” your bookkeeping abilities.

A small business accountant will not only handle the bookkeeping duties but they will also be able to process all that financial information into advice for appropriate courses of action for the business.  One of the biggest issues that an accountant deals with is tax planning. This is not something that just happens every April 15. Business taxes need to be worked on throughout the year. Deductions, payroll, expenditures and investments all have impacts on a company’s tax return and an accountant will be in the best position to analyze the various options.

An experienced accountant is also someone who can provide consultations with regard to expanding your business. There is where they really can earn their paycheck! Although the final decision would be yours as the head of the company, an accountant should offer many options regarding an expansion plan whether that includes opening additional stores/offices and increasing the staff size. Your accountant should be as invested in your success as you are.

A small business achieves many levels of asset protection when it becomes incorporated. As the head of the company, you’ll also benefit from that protection but you might need assistance with regard to your personal finances. Your company accountant is probably in the best position to also advise you on your individual tax returns and suggest possible investment areas.

Accountant Interview Questions

As you meet with different candidates for your accountant you might want to consider asking them these pertinent questions:

·         What are your CPA qualifications?

·         How long have you been a CPA?

·         What other types of business do you represent?

·         How up to date are you with computer bookkeeping programs?

·         How do you keep on top of market trends?

·         How are your fees calculated?

·         What role do you play in the community?

Finally, ask for references and follow up with them. A good accountant should have no problems sharing their past and current success stories!

How an accountant adds value to your small business

Many business owners see an accountant as someone who keeps track of accounts payables and receivables, and makes sure that the business taxes are paid. However, a good accountant can be so much more. They are like a business partner, where they help your business become more financially efficient and take advantage of tax laws.

An experienced accountant is very valuable as they can help you make the right business decisions by providing strategic and financial advice while reducing your risk for your company. An accountant can be someone who wears many hats for your business, such as:

Business analyst: An accountant is trained to identify specific business challenges and provide solutions. By understanding your business and industry they become valuable as they can provide you with advice on the best financial strategy to take. They will help you create accurate financial information which will help you in analyzing your business performance. You can also assess what you have achieved as well as provide accurate forecasting for future growth.

Financial operations: An important part of an accountant’s job is to set up an accounting system including providing you with financial analysis and data. But, most importantly, your accountant can provide you with financial advice that can help you manage your business better - such as budgeting and cash flow forecasting.

Tax advisor: No matter how good you are with your company’s financial operations, there will be times when you will need the help of an expert. By taking advantage of an accountant you can be better prepared to deal with the complexities of small business taxation. They would be able to provide your business with advice and help restructure your business operations so that you can minimize your taxes and increase your profits.

A professional accountant adds tremendous value to your business through finding ways to:

• save money,

• lower your tax rate,

• increase profits

• and provide you with the financial information so that you can grow your business.

They can also help you analyze the numbers and use them to make more strategic decisions. Unfortunately, many small business owners fail to realize that working with an accountant is one of the most important business decisions that they should make - and not only during tax time.

How Can I Find a Good Accountant?

May 2010; the tax season is behind us for another year. If you are like almost half the Canadian population, you prepare your own taxes each year. But, as the Canadian tax code is growing increasingly more complex, a greater number of Canadians are seeking professional assistance from accountants in order to reduce the risk of paying unnecessary taxes.

Locating accountants is relatively easy. Finding the accountant suitable for your specific needs is far more difficult. Canada boasts three professional accounting bodies whose members are certified to serve the accounting needs of the nation. However, each organization has different standards and requirements for membership. Therefore, if you are shopping for an accountant, it's best to decide precisely what your needs are and interview prospective accountants carefully.

By far, Chartered Accountants (CA's) are the best trained accounting professionals. Only CA's can audit and sign financial statements. Roughly 40% of CA's in Canada work with the public, while the remainder is employed in the private sector, government, or education. Although advertisements for CA's will make many claims, it is wise to get several references.

In addition to CA's, Canada also has 37,000 Certified Management Accountants (CMA's). Generally, CMA's do not have private practices but, rather, work in large organizations, monitoring and interpreting operating results to help management develop operating strategies. Nonetheless, a CMA should have adequate training to help a small business or a self-employed individual with basic tax management and preparation.

Finally, Certified General Accountants (CGA's) offer a little something for everybody, working both in private practice as well as corporate or government settings.

Whomever you choose, your best bet is to ask friends and colleagues for recommendations. Also, take the time to interview at least three prospective candidates. Be sure that the chemistry is right between you. But, as much as possible, try to be your own accountant. A wealth of information is available online today. If you can't do it yourself, gather as much information as possible so you know what to request of your accountant. By learning to prepare your own taxes, you'll gain valuable insight into managing your everyday financial affairs.

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