11 Best Practices to Prepare Cross-Border Entrepreneurs for Tax Season
Tax time is never the first thing that comes in mind, but likely it is always sitting there as a constant worry. Our experience coaching entrepreneurs to success shows that applying basic principles and best practices throughout the year eliminates the worry. This allows you to feel confident knowing you have everything in place. A well thought out system, and discipline applied to it, will minimize the work load.
Here are some tips on what you can do now to prepare for a smooth tax season.
Kaman Kwok Inc.’s checklist for a positive tax experience:
For self-employment taxpayers, keep track of all your expenses, so that the total invoices equal to the amount showing on your tax return under each expense category (i.e. advertising, meals & entertainment, travel, insurance, professional service fees, etc.).
Categorize all your receipts according to the kind of expenditure they are.
Use a business credit card only for business expenses to separate from any personal expenses.
If you have a home office, summarize all your home office expenses including property taxes, utilities, mortgage interest (or rent), insurance, repairs and maintenance, and communication expenses (phone/internet). You should also provide the total square footage of your house and square footage you use as home office.
If you use a vehicle for business, keep track of your total KM driven for business, expenses incurred for business (i.e. gas, repair and maintenance, insurance, parking, etc.).
Pay tax and installments on time.
Keep copies of all your donation and medical receipts during the calendar year.
Consider making RRSP (Registered Retirement Savings Plan) contribution early instead of last minute rush. The contribution deadline for 2016 tax year is March 1, 2017.
Summarize all your capital gain/loss transactions (proceeds, cost basis, acquisition & sales date) during the calendar year.
Keep your Canadian tax slips (T4, T3, T5, T5013) and US tax slips (W2, 1099-INT/DIV, 1099-B, 1099-MISC) in an envelope as soon as they are received.
If you are a US citizen/resident, keep track of your highest monthly balance in all your non-US bank accounts for FBAR filing purpose.