As an accountant or bookkeeper, you know how common it is for a small business owner to miss out on valuable tax deductions simply because they fail to keep track of all their receipts. Here’s a rundown of the top five Canadian tax deductions that small businesses often overlook and how you as their bookkeeper can help them preplan to ensure every receipt is captured and every deduction is claimed.
1. Home Office Expenses
Your small business clients, who operate from home, can claim a portion of their household expenses as a business deduction, including their mortgage interest or rent, utilities, and maintenance. However, if they don’t maintain thorough records of these expenses, then these deductions can easily be missed.
How You Can Help:
Educate your clients on the types of home expenses that they should be tracking and help them create a plan on how they will keep track of this information. Recommend digital tools like LedgerDocs to help them easily upload receipts and invoices on a monthly basis, so that come tax season, all the information you need to claim these expenses is already collected and ready for you to use.
2. Vehicle Expenses
Clients who use their personal vehicles for both personal and business purposes might be eligible to deduct a portion of their vehicle expenses. But without a detailed record of the personal vs work mileage, and receipts to back up expenses, accurately calculating and supporting these deductions can be challenging.
How You Can Help:
Show your clients how to create and maintain a detailed logbook for their business mileage and tell them to keep every vehicle-related receipt, from fuel to maintenance. Suggest using a receipt management app that allows them to capture and store receipts digitally, making your job easier when it’s time to file.
3. Advertising and Promotion
Many business owners don’t know that advertising expenses, including digital marketing, print ads, and promotional materials, are fully deductible. It is easy for these deductions to be missed simply because these expenses are not being consistently tracked.
How You Can Help:
Let your clients know that these expenses are tax deductible, and ask them to keep digital records of all advertising and promotional expenditures. Set up a simple and streamlined process for collecting and organizing these receipts.
4. Capital Cost Allowance (CCA)
Capital assets, such as equipment or furniture, must be depreciated over time through the Capital Cost Allowance. However, without proper documentation, clients might not fully benefit from these deductions.
How You Can Help:
Help your clients to maintain accurate records of all of their capital asset purchases. Encourage them to store receipts and invoices in a centralized digital location. This will not only help with CCA claims but also make it easier for you to manage their asset lists and depreciation schedules.
5. Bad Debts
When your clients are unable to collect payment on an invoiced amount, they can write this lost income off as a bad debt. However, this deduction is often underutilized because small businesses may lack the knowledge or the documentation to support it.
How You Can Help:
Inform your clients that this deduction is available to them and show them how to properly record efforts to collect payment and of any communications with customers regarding unpaid invoices. Storing these documents digitally ensures that you have the necessary evidence to support bad debt claims during tax season.
Using LedgerDocs to collect and manage your clients documents, can give you the edge to be truly be their financial partner. By having complete and accurate records, you can open the doors to many deductions and savings that could have otherwise been missed. Schedule a 1:1 Demo and see our platform in action.
