Small Business Expenses Write-Offs Canada

 Small Business Expenses Write-Offs Canada

[Advice from Raj Katlaria, CPA, Surrey BC]

When it comes to the Small Business Expenses Write-offs Canada, Chartered Professional Accountant  in Surrey, BC – Raj Katlaria has simple advice. Whether self-employed, an entrepreneur or a small, work-from-home business owner, his advice- is that no one’s venture is too small to claim business expenses. So don’t be shy, little things add up, and what you leave out will end up costing you.If you are wondering about Small Business Expenses Write-offs Canada, here is a resource just for you, to be informed.

Small business expenses write offs in Canada includes:

Home Office and Office Expenses

Home offices can be claimed for business use, as long as it’s either your main place of business or it’s a space that you use only for earning income and to meet clients on a regular basis. If you have an office at your shop or store but you bring work home to balance your business and life, the CRA probably won’t allow you to claim your home office space. Here is a list of  Home business tax deductions you can claim

  • Mortgage interest on your residence
  • Utilities
  • Property taxes
  • Repairs & maintenance
  • Home insurance

A number of home-office expenses that you can write off are determined by the percentage that your home office space is of the total size of your home.

Small business tax writeoffs in Canada

 Business Operating Expenses

Every business has its own needs that influence how you spend money to make money.  Business operating expenses  forms a major part of small business expenses write offs in Canada that you can claim:

1. Vehicle Expenses

If you’re heading out for a work related spin, getting gas, meeting a potential customer, marketing, those are all valid. Make sure to keep a record of the Date, Destination, and Distance of your work related spin. As a small business owner in Canada, you can deduct the following vehicle expenses.

  • Capital Cost Allowance (if you own)
  • Fuel & oil
  • Insurance
  • Lease payments (if you lease)
  • Parking fees
  • Repairs & maintenance
  • Toll charges
  • Vehicle registration fees

You are required, by the CRA, to maintain an accurate logbook in order to verify the amount your car is being used for personal and business purposes.

If you own your vehicle, then you can claim depreciation for 30% of the cost of the vehicle each year under the declining balance method. This is referred to as Capital Cost Allowance.

2. Accounting and Legal Fees

Another way of reducing your taxes is by deducting fees paid to your accountant for preparing your income tax return. Similarly, the amount that you spend on legal fees in the ordinary course of operating your business is tax deductible.

3. Office Rent

Rent paid to your landlord for the use of office space is tax deductible. Keep a copy of the lease agreement and rent receipts as you will be required to provide these documents should you be audited by the CRA.

4. Advertising

Depending on the advertising method used by your small business, advertising expenses can either be fully or partially written off.

  • Online Advertising- including your website’s domain name registration and web hosting
  • Television and Radio Advertising
  • Magazine and Newspaper Advertising

5. Meals and Entertainment

50% of the amount that you spend on meals and entertainment is tax deductible. For example, let’s say you decide to take your client out for dinner or to watch a baseball game. 50% of the cost can be deducted from your business income, assuming that you are able to provide a receipt. Nevertheless, there are certain circumstances where you are able to deduct 100% of the cost of meals or entertainment. This includes:

  • Staff events or parties (maximum of 6 per year)
  • Meals and entertainment that is provided for a registered charity fundraiser

6. Insurance

There are several different types of insurances that qualify for small business expenses write-offs in Canada.

Types of Insurance

  • General Business Liability Insurance.
  • Business Property Insurance
  • Business Interruption Insurance
  • Life Insurance

Capital Property

Major business purchases like vehicles, furniture, equipment or buildings will benefit your business for years. You cannot claim the full amount of a purchase in the tax year it occurs, rather, you can claim a percentage of the purchase cost each year over the expected life of the item. This is called a capital cost allowance. The CRA has a list of CCA classes, each with an annual depreciation amount and a definition for purchases that fit the class. Class 10 includes computer hardware and some motor vehicles, while Class 38 covers excavation equipment and Class 43 lists manufacturing and processing equipment.

Make capital purchases right before year-end so you can take advantage of depreciation deductions on purchased assets. In the first year, only half of the CCA can be claimed.

To conclude tax write-offs will ultimately help save you money by reducing your business’ taxable income and taxes payable. Contact Raj Katlaria, CPA, Surrey BC. to find out which tax-write offs you could be taking advantage of .You should be well on your way to capture every credit to which your small business is entitled!


Managing flaws in your bookkeeping practices-Avoid being in the red

 Managing flaws in your bookkeeping practices – Avoid being in the red

Think about when you first decided to start your own business. It must have appeared a daunting endeavor. So now that the initial stage is over, if you are still having frictions and challenges in running your business, you might be missing something, perhaps it might be your poor bookkeeping practices. How about you look at the best practices in bookkeeping and overcome flaws or things you are not already doing for your business to run smoothly.

Bookkeeping best practices

bookkeeping practices

  • Setting and Managing Due Dates & Deadlines
  • Properly Maintaining Payroll Taxation
  • Implementing Periodic Accounting
  • Hiring a Professional Accountant to Manage Complex Bookkeeping
  • Keeping Track of Revenue Reports
  • An organized Filing Cabinet
  • Staying Updated with Technology
  • Setting Aside Payroll Taxes Regularly

Follow a plan, stay organized

  • Record your receipts and invoices in numeric order.
  • Record due dates for payments and payables.
  • Maintain consistent records.
  • Keep daily records.
  • Keep proofs of transactions
  • Keep track of bank account statements
  • Maintain a petty cash box
  • Secure your paperwork


Having a professional bookkeeper can not only advise you about booking best practices, but can also help you grow your business.

bookkeeping practices

Raj Katlaria,  a professional and dedicated accountant in Surrey, BC, can  help your  business grow, by following bookkeeping best practices and   analyzing and finding the best possible solutions . Call, Raj Katlaria at 778-926-9226, to book a personal consultation or contact us by email with questions and concerns.



Red Flags for your Canadian Business Audit by CRA and what to expect

Red Flags for your Canadian Business Audit by CRA and what to expect

If you recently filed your business  income tax 2016,  by hiring services of a Chartered Professional Accountant, you might be at ease, but otherwise you might wonder or somewhat be concerned about the likeliness of your business being audited by the Canada Revenue Agency(CRA), based on your filing. Here is what every business owner should know about the audit

Catching CRA’s eye

Canadian Business Audit by CRA

A variety of tax-return related items are likely to raise red flags with the CRA and may lead to an audit, although many business audits occur randomly. The following are some instances:

  1. The occurrences of significant inconsistencies between previous year’s filing and your most current filing.
  2. Gross profit margin or expenses markedly different from those of other business in your industry.
  3. Miscalculated or unusually high deductions.
  4. The occurrences of a marked difference in owner-employer salary being inexcusably higher or lower than those in similar companies in his or her location can be a red flag for the CRA, especially if the business is structured as a corporation.
  5. Deducting large business expenses: While being able to deduct business expenses from your income tax is one of the big tax advantages of operating a business, you need to be cautious about it. Advertising and promotion, meals and entertainment, travel, miscellaneous and interest expenses are most likely to catch CRA’s eye.
  6. Running a cash-intensive business: The CRA realizes that businesses that have lots of opportunity to take in cash also have lots of temptation not to report all of their taxable income. So if you operate a business such as a restaurant, hair salon, bar, or other retail business, operate or are a renovation or home improvement contractor, expect extra scrutiny from the CRA
  7. Having family on the payroll: There’s nothing wrong with having your spouse or child work as an employee in your business; this kind of income splitting is perfectly legitimate – as long as you follow the rules. The problem is that many small businesses don’t, making small businesses that put their spouse or child on the payroll an easy target.
  8. Making large charitable deductions. The Canada Revenue Agency knows exactly how much taxpayers at your income level usually give to charity, so a it is likely to trigger a red flag when your charitable donations exceed that number. Donations involving capital property are especially likely to be reviewed.

Response Measures:


A CRA auditor will write to you or call you, or both, to begin the audit process and inform you where the audit will take place.


You can expect an audit to take place either “onsite” i.e. at your place of business, or, in rare situation, the audit may be conducted at a CRA office (office audit)

What does an auditor examine during a business audit?

The auditor will examine books and records, documents, and information (collectively referred to as records) such as:

  • Information available to the CRA (such as tax returns previously filed, credit bureau searches, or property database information);
  • Your business records (such as ledgers, journals, invoices, receipts, contracts, and bank statements);
  • your personal records (such as bank statements, mortgage documents, and credit card statements);
  • the personal or business records of other individuals or entities not being audited (for example, a spouse, family members, corporations, partnerships, or a trust [settlor, beneficiary, and trustee]); and
  • adjustments made by your bookkeeper or accountant to arrive at income for tax purposes.

During an audit, the auditor will identify issues and discuss them with you. At any time, you can also raise your concerns with the auditor.

Once the auditor completes the examination of the records provided, the outcome will determine the next steps.

  • Correct assessment: If the auditor finds that your previous assessment is correct, nothing more has to be done. You will receive a completion letter and the audit will be closed.
  • More taxes owed or a refund: If the auditor finds that your return has to be reassessed (which means you will have to pay more taxes or you are entitled to a refund), you will receive a proposal letter explaining the reason for the reassessment. You will have 30 days to agree or disagree with the proposed reassessment. The auditor can further explain the reassessment if necessary.

If you disagree with the proposal, you are encouraged to contact the auditor to try and resolve factual disagreements. The auditor will carefully consider your explanations and respond to your questions about the proposal. If issues remain unresolved, you can contact the auditor’s team leader to discuss them further.

What to expect at the end of the audit?

At the end of the audit, a final letter will be sent to you and one of three things will occur:

  • no adjustments will be made to your previous assessment;
  • an adjustment resulting in more tax will be made (reassessment) and you will have to pay the balance owing; or
  • an adjustment resulting in less tax will be made (reassessment) and you will be entitled to a refund.

If the adjustment results in more taxes being owed, the auditor can provide you with an estimate of the amount before the CRA issues a notice of assessment or notice of reassessment. This will give you the opportunity to prevent more interest charges from accruing by paying all or part of what you owe right away.


Rights –

  • Right to appeal- If you disagree with the reassessment, you have the right to appeal


Responsibilities –

  • You should keep adequate books and records to determine you tax obligations and you entitlements for a minimum of six years
  • It is your responsibilities to not only keep your books and records on paper but also in an electronically readable format.

You can seek advice and assistance of Raj Katlaria, Chartered  Professional Accountant in Surrey, BC, who will not only ensure that your business does not get flagged by CRA, by using his expertise, but also advise you on how to avoid future business audits.

Our friendly, professional, dedicated and superior client service also provides accounting, taxation and auditing services, as well as bookkeeping, payroll, GST/HST and other related functions. We are committed to providing personal attention to our clients. We take pride and accountability in providing professional and quality services to both individuals and corporate clients in a wide range of industries. To consult Raj Katlaria, CPA for all your accounting needs, you can call at 778-926-9226 or email at, or visit us at our Surrey, BC office for a personal consultation.

We have been serving clients from all across Surrey, Delta, Langley, Vancouver for all of their accounting needs with professional and quality service and finding the best possible solution. Looking forward to meeting you at our office in Surrey, BC.

Query Letters for Discontinued Rentals

Query Letters for Discontinued Rentals

A number of clients have received query letters from the CRA when they have stopped reporting rental income without showing a corresponding disposition of the property for capital gains purposes. The assumption is that if they are no longer renting a property, they must either have sold it or converted it to personal-use (which will result in a deemed disposition at FMV). However, this may not always be the case. For example:

■ In the case of a client who is renting out part of his principal residence, a deemed disposition will only occur if the change in use is substantial. The CRA will not apply the deemed disposition rule if:

— The income-producing use is ancillary to the main use of the property as a residence;
— There is no structural change to the property; and
— No CCA is claimed on the property.

So a client who has been renting out a basement, but decides he would rather use it as a recreation area after the tenant moves out, is not required to report a deemed disposition. In our response to the CRA’s query letter, we should cite paragraph 2.59 of Income Tax Folio S1-F3-C2 Principal Residence.

■ In situations where an entire property is converted from a rental to a principal residence, the client can elect under subsection 45(3) to defer the deemed disposition until the year in which the property is actually disposed of. This election does not have to be submitted until the year in which the property is disposed of or an earlier year if a formal demand for the election is issued by the CRA. So again a deemed disposition will not be reported in the year the conversion took place. For clients in this situation, we would cite paragraph 2.54 of Income Tax Folio S1-F3-C2 Principal Residence.

It should be emphasized that the rules for elections under 45(3) are different from the rules for elections under 45(2) (where a property that was previously used for personal use is converted into an income producing property). Elections under 45(2) must be filed in the year the conversion takes place.

In cases where a property is owned jointly, it should be stressed that the percentage used to report the clients’ respective share of the capital gain must be the same as was used to report the rental income.

For more information contact Raj Katlaria, CPA at 778-926-9226 or email at, or visit us at our Surrey, BC office for a personal consultation.

We have been serving clients from all across Surrey, Delta, Langley, Vancouver for all of their accounting needs.Give us an opportunity to serve you with our expertise and best advice and know more about us by visiting our  Accounting firm in Surrey, BC.

Filing Returns for Clients Who Died Intestate

Filing Returns for Clients Who Died Intestate

When a person dies without a will, someone must usually apply to a court to be appointed the administrator of the deceased’s estate. Typically, this is the only person the CRA will recognize as the legal representative of the estate and with whom they will communicate with respect to the preparation of the deceased’s tax returns.

However, the court process can be cumbersome and expensive if the client needs to retain a lawyer. It may also be unnecessary if the deceased was insolvent or owned all of his or her assets jointly with a surviving spouse or common-law partner. In limited situations, the CRA may therefore recognize a surviving family member as a legal representative for tax purposes. The procedures for doing this are discussed on pages 15 of the Deceased Taxpayers and Testamentary Trusts seminar.

The CRA have recently announced that the process will be formalized somewhat with the introduction of affidavits which will need to be completed before they grant a request. Because estate administration falls within provincial jurisdiction, there will be different versions of the affidavit for each of the provinces.

These affidavits were supposed to have been available on April 1, 2017 but had not been released at the time of writing.

Why Should I File Before the Deadline?

File tax return

Why Should I File Before the Deadline?

Over the past several years, there has been a growing trend for taxpayers to wait until after the tax-filing deadline before filing their tax returns. Last year, more than 3.5 million taxpayers filed in May. Why is this a bad idea?

There is a misconception that the late-filing penalty is actually a late- payment penalty, assessed on people who do not pay their taxes by the due date. This leads some people to believe that there is no point filing the return if they do not have the money to pay the amount owing.

Make sure clients realize that although the calculation of penalty is based on the amount owing (5% of your balance due, plus 1% for every month that your return is late for a maximum of 12 months), it is only assessed if you file late. Yes, you will be charged interest if you cannot pay right away, but at least you will avoid the penalty if you at least file by the deadline.

Principal Residence Designations on Relationship Breakdown


Principal Residence Designations on Relationship Breakdown

The breakdown of a marriage or common-law relationship will usually result in one of the spouses or common-law partners leaving the matrimonial home. What are the tax consequences of this? Will it result in a disposition and principal residence designation which needs to be reported on the Schedule 3?

The act of leaving the matrimonial home will not in itself result in a disposition of that spouse’s share of the property. This will only happen when a formal transfer of ownership occurs or the property is sold. If the property is sold, each spouse will make the designation on the Schedule 3 with respect to his or her share. In the case of a transfer of title, the deemed proceeds of the transferor’s share will be the same as his or her ACB unless both spouses elect for it to transfer at FMV. Unless the election is made, the spouse who is transferring title would therefore have no capital gain. However, we would still recommend that the designation details be reported on the Schedule 3.

In addition, both spouses or common-law partners should be aware of the rules concerning how the property may be designated as a principal residence after one of them has moved out. These are summarized below. For the sake of simplicity, we will assume that it is the husband who moves out and the wife who remains in the home. Of course, the same rules would apply if it is the wife who moves out and the husband that remains in the home.

  1. The husband may continue to designate a property as his principal residence even though he is no longer living in it himself as long as it is occupied by his spouse, common-law partner, former spouse or common-law partner, or child. A former spouse, for this purpose, would include an ex-wife from whom he is now divorced. So the fact that he is no longer living in the house does not mean that he cannot designate the property as his principal residence for years after the break-down.
  2. Spouses or common-law partners cannot designate different properties as their principal residence until they have been living separate and apart throughout the year pursuant to a judicial separation or written separation agreement. This could be a problem if husband purchases and moves into a new home and years go by before there is a court order or written separation agreement in place. Assuming his spouse wants to designate the old home as her principal residence, he must do so as well, which will leave his new home exposed. For this reason, it is recommended that the agreement specifies how the principal residence exemption will be designated.
  3. In order to designate a property as your principal residence, you must own the property either in your name or jointly with another person. Any complications resulting from spouses or common- law partners occupying different properties will therefore cease once there is an official transfer of title or the property is sold.

An election to transfer title at FMV (which is made under paragraph 74.5(3)(b)) could be beneficial where the couple have more than one property which can be designated as a principal residence (since it would reduce the capital gain realized by the transferee spouse in the year the property is sold). Remember, however, that the election must be made jointly. It is filed with the tax return of the transferor spouse in any year ending after the separation has occurred.

Advantages of Incorporating vs. Sole Proprietorship

Almost all the small and medium scale businesses out there in the world consider whether they should incorporate or not. The business owners can come to this decision at any point of time when the business develops. However, you need to have a clear understanding about the advantages that are associated with incorporating vs. sole proprietorship in order to make the perfect decision.

Advantages of Incorporating

Limited liability can be considered as the key advantage that is associated with incorporating. In other words, the owner of the business would not assume the entire liability of the company. Having the sole proprietorship of a business could be a major risk. That’s because your personal assets, including the car and house could be seized in order to pay off the debts. Therefore, business owners who don’t prefer to take such a risk can think about incorporating.

Continuance is another prominent benefit that is associated with corporations. That’s because a corporation is associated with an unlimited life span. Even if the stakeholders leave the business or die, the business would exist. From the recent studies, it has been identified that raising money in much easier with corporations. This can create an ideal platform for the business to develop and grow. Corporations have some unique methods in order to make money. Equity financing, which is associated with selling the shares of the corporation to venture capitalists and angel investors can be considered as a perfect example to prove the above mentioned fact. There is a potential tax difference with incorporating. That’s because you will be able to defer paying some of the taxes for a future date. This will assist you to save a considerable amount of money.

Disadvantages of Incorporating:

  • A Corporation is closely regulated

  • More expensive to set up a corporation than other business forms

  • Extensive corporate records required, including documentation filed annually with the government

  • Possible conflict between shareholders and directors

  • You may be required to prove residency or citizenship of directors

Advantages of Sole Proprietorship

The ability to gain authority of the business can be considered as the key advantage that is associated with sole proprietorship. The owners would not have to think about attending formal meetings and structure the business accordingly with others. The owner would be provided with the freedom to transfer or sell the company to another person as well. On the other hand, sole proprietorship of businesses is associated with the simplicity of formation. Very little paper work is needed in order to file the name of the business. On the other hand, it is extremely easy to open bank accounts for the business as well.

When it comes to a sole proprietorship, the changes in the business can be accommodated easily. When the business grows, you would need to make some changes in it. The company owner would be able to change the business structure in such a situation to accommodate a more complex model. On the other hand, sole owners of the company do not split profiles with others. This provides the business owners with excellent investment opportunities as well.

Disadvantages of Sole Proprietorship:

  • Unlimited liability (if you have business debts, claims can be made against your personal assets to pay them off)

  • Income is taxable at your personal rate and, if your business is profitable, this could put you in a higher tax bracket

  • Lack of continuity for your business if you are unavailable

  • Can be difficult to raise capital on your own

As it is evident, sole proprietorship and incorporating is associated with their own benefits. Therefore it becomes imperative to seek professional advice in choosing the best option available for you.

Raj Katlaria, is a professional and dedicated accountant in Surrey, BC, whose mission is to find the best solutions regarding a person’s business needs and is your go-to person when it comes to choosing the best business structure for your business needs. His professional advise will help you prevent future problems, especially when involved in analyzing and finding the best possible options. Call, Raj Katlaria at 778-926-9226, to book a personal consultation.

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Importance of Will and estate planning

Importance of Will and Estate Planning

Importance of Will

The importance of Will and estate planning cannot be stressed enough, as life  we all  know can be long, productive but eventually it all ends; an eventual death. A taxpayer, in this case, should have a plan that ensures all his property, and accumulated wealth is well divided and his wishes adhered. A written will and proper planning of the estate should be properly moved into place, ready to be implemented without cumbersome court processes that would stall the division process. It is, therefore, important that he or she prepares himself by implementing legal team to follow up with his tax returns and file then correctly to ensure that his beneficiaries do not suffer and miss their possession

Type of Will

Conventional will is the most common type of will applicable and more so applicable in all provinces. A will should be:-
– In writing
– Signed by the testator, or another person in the presence of the testator.
– Signed in the presence of two or more witnesses present and all must all sign in the present of the testator.

The witness, in this case, has no claim to the will, and they must be of age to the majority present. The testator is required to be of sound mind and capable at the time of the signing the will. A typed will is not allowed even with the testator’s signature. Fraud cases are very common, and a lawyer’s presence or a copy of the notary certificate accompanying the will or a copy should be proof enough that it is the original or a copy of the original. Individual will do not require a probate, proving hard to contest in court. The notarial will are mostly allowed in the province of Quebec; governed by civil code.

Probate Fee

The court document required by an executor before the estates administered. This is a certification by a court (probate/surrogate court) stating the legitimacy of the will. The fees required for the probate are not deductible on any of the tax returns.
Probate fee in British Columbia (Payable on gross value of all personal and real Property in BC)
Estates under $25,000……………………………………… no fee
$25,001 to $50,000……………………………….  $6 per $1,000
$50,001 and over…………………………………  $14 per $1,000

The Death of an Individual

The taxation year of a deceased individual ends on the date of their death. All his property at this time will automatically become his estate. Any joint partnership does not make part of the estate but it transfers to the next survivor in line. If he had a will before his death, it will specify how the estate should be managed and distributed. It will also specify whom the deceased wanted to assume this responsibility, this individual is called the “executor”.

Currently, there are no inheritance taxes imposed by either the federal government or any of the provincial governments in Canada. This means that the deceased’s money, investments and other properties can pass to the estate and to the beneficiaries without being taxed. However, because the deceased is deemed to have disposed of all capital property at the time of death, the amount inherited by the tax may reduce the beneficiaries payable on any capital gains or recapture of capital cost allowance that must be reported on the deceased’s final return

Dying Without a Will

In-estate is a situation where the taxpayer dies without a will. This allows for his estate to be delayed before administered. The heirs can merge and agree on an administrator failure to which the court can look for a relative, spouse, children grandchildren. If no one is around, the court can appoint a public trustee or at the time referred to as a guardian acting as a legal representative of the estate. Lack of a will also allow the court to share the estate differently. In Alberta, a spouse can receive $40000 and $20000 in Ontario. Lack of a preferential share rule leaves the court to divide the estate in prescribed portions to the children, spouse, and others.

Format of a Will

You can view the format of a will at the link below:

Raj Katlaria  is a professional and dedicated accountant in Surrey, BC, whose mission is to find the best solutions regarding a person’s financial needs. This helps prevent future problems, especially when involved in financial and estate planning. To help you to develop a financial plan that deals with any unfortunate financial emergencies call Raj Katlaria at 778-926-9226 to book a personal consultation.

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Reporting the sale of your principal residence for individuals (other than trusts)

Reporting the sale of your principal residence for individuals (other than trusts)On October 3, 2016, the Government announced an administrative change to Canada Revenue Agency’s reporting requirements for the sale of a principal residence.

When you sell your principal residence or when you are considered to have sold it, usually you do not have to report the sale on your income tax and benefit return and you do not have to pay tax on any gain from the sale. This is the case if you are eligible for the full income tax exemption (principal residence exemption) because the property was your principal residence for every year you owned it.

Starting with the 2016 tax year, generally due by late April 2017, you will be required to report basic information (date of acquisition, proceeds of disposition and description of the property) on your income tax and benefit return when you sell your principal residence to claim the full principal residence exemption

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