Common Mistakes People Make With Their Business Expenses
When managing your business finances, focusing on your expenses is essential to save money. If you plan your spending the right way, you can reap the benefits of reduced taxes and avoid penalties. However, limited experience with taxes and business expenses can make running your business more challenging than it should be.
Often, many people make the mistake of not writing off expenses and purchases correctly or delay filing taxes because they don’t understand the consequences. Mishaps like these can cause your business to suffer financially due to penalties and interest and in some cases can even force you to shut down.
If you are facing difficulties with managing your business expenses and taxes, it’s vital to understand what you could be doing wrong in the first place. To help you gain some insight, Crosby Business and Tax Services Ltd. has listed three of the most common mistakes people make with their business expenses. With the help of this list, you will learn the basics required to manage your business expenses.
1. Believing anything can be written-off.
Clients often feel that anything can be written off, but this is not the case. There is a criterion that must be met for an expense to be eligible for this benefit. So, spend wisely or consult with your accountant before making any significant expenses or capital purchases.
2. Not maintaining receipts and statements.
Another mistake is that people think they don’t need to keep their receipts because they have bank or credit card statements. However, it is essential to have physical proof because the absence of receipts in a trust review may cause you to lose the expense and the GST credit. So, always keep receipts on file to reap tax benefits.
You may argue against paper copies because you have shifted to online receipt and invoice storage, however, you still need to keep all of your paper receipts. Let’s look at an example to understand the importance of keeping physical receipts. Say clients who have faced financial challenges look to cut expenses and wish to cancel their online cloud services. They now find themselves trapped because they didn’t keep their receipts after they scanned them to the cloud. Now, they must maintain the online service going and endure the annual or monthly cost associated with it.
Similarly, companies that have closed must now keep the online subscription going for at least the next seven years in the event their company comes up for review. If they kept their paper copies, they could cancel those services and save the monthly fees.
3. Not filing taxes on time.
One of the most common mistakes we come across is people not filing their taxes on time. It can lead to penalties that could be avoided. Moreover, you may be branded as a repeat late filer, and when you owe taxes this carries a heavy penalty up and beyond the norm, it may also complicate your chances of borrowing with banks and lenders.
As business and tax consultants in Calgary, AB, Crosby Business and Tax Services Ltd. can help you avoid these and other mistakes people make with their expenses and taxes. We specialize in wealth management, tax consulting, tax preparation, and planning services, which we execute promptly and in coordination with you, so you understand our services better. Also, while working with our clients, we make sure to take a tax approach that helps you accumulate your pre-tax wealth, grow and preserve your after-tax wealth, and enable you to transition into retirement and beyond.