Business Tax Planning
If you own a business, and your children and/or spouse work therein, consider paying them a reasonable salary from the business. If this is their only income, or they only work part-time elsewhere, they may not need to pay personal income tax if they earn below their personal tax exemption.
If you own a business, pay yourself enough income before the year-end. Focus on allowing your desired RRSP contribution room for the next tax year, perhaps even the maximum.
Keep your tax records for seven years because if you are audited, CRA can back-review your personal income tax returns for up to seven years. Copies of returns, RRSP contribution slips, medical receipts, support for self-employed revenue and receipts, all preparatory source documents, and T-slips may be requested to summarily assess your taxable income. Do your taxes right and keep the proof. Avoid paying for past income tax penalties and interest.
Be detailed in your record-keeping regarding your expenses to ensure they are allowed. CRA may investigate whether you have deducted expenses that were for personal use or business use. So long as you can support these deductions with proper documentation, such as detailed receipts, you’ll not create a tax liability.
Another advantage is that you will not need to photocopy and send receipts with your tax return. But caution, the downside is that you are more likely to be contacted for a formal review to verify income and expenses not previously articulated by sending a paper return (you may need verification for up to seven years). Discuss this with your accountant.