How Companies can Put together for Tax Season 2024

Tax season is upon us! Are you able to ace all of the types and monetary paperwork concerned?

In collaboration with DAVO by Avalara, we’ve put collectively a information to getting ready your American or Canadian enterprise for tax time that can assist you out.

On this weblog, we’ll cowl all the pieces you’ll want to organize for tax time:

Whereas this information is an effective jumping-off level, don’t neglect to examine with an accredited accountant to make sure you’ve totally lined all of your tax liabilities as required by regulation, together with deferred payroll taxes, taxes on loans and extra.

Able to get prepped for tax season? Let’s get began!

 

Essential earnings tax season deadlines

American companies

There are some tax season dates that apply to everybody—all American small companies ought to file copies of their worker wages and non-employee compensation types (1097, 1098, 1099, 3921, 3922, W-2 and W-2G) with the IRS by January 31. 

Usually, although, your precise submitting dates for federal earnings taxes will differ from different companies primarily based on how your small business is legally structured and whether or not you observe a calendar or fiscal yr.

If your small business is a partnership or an S company, you should file a 2023 federal earnings tax return by March 15 (if you happen to’re following a calendar yr) or the fifteenth day of the third month following the top of your tax yr.

If your small business is a C company, it’s essential to file your 2023 calendar yr federal earnings tax return by April 15, 2024. That is additionally the deadline for sole proprietors submitting as people.

Contact your accountant to rearrange submitting of the suitable type for your small business and, if you happen to’re following a fiscal yr calendar, in your specific submitting dates. 

State earnings tax deadlines differ from federal earnings tax deadlines and differ from state to state. You will discover your state’s tax authority and examine for relevant dates right here. 

Canadian companies

In terms of getting ready and submitting your taxes for your small business, make sure you preserve these vital dates in thoughts for tax season in 2024:

All companies should file T4 and T4A slips by February 29
Partnerships normally should file their partnership info return by March 31. Nonetheless, as that day is a Sunday in 2024, your return could also be due April 1 if all companions have been people all through the fiscal interval. Seek the advice of your accountant for path
Sole proprietors and people should file their taxes by April 30
Self-employed enterprise homeowners should file by June 17, as the standard date, June 15, is a Saturday this yr

Companies following a fiscal calendar relatively than a calendar yr should file their taxes no later than six months after their fiscal yr ends.

Please be aware, the submitting deadline shouldn’t be at all times the fee deadline, and funds could be due earlier than submitting. Contact your accountant to make sure you’re paying on time.

Put merely, the important thing deadlines for Canadian taxes are:

Late February
Companies can begin submitting taxes with the CRA

February 29, 2024
Companies ought to ship T4s and tax slips by this date

March 31 or April 1, 2024
Partnership taxes are due; seek the advice of your account on which date applies to you

April 30, 2024
Sole proprietor enterprise taxes are due

June 17, 2024
Self-employed taxes are due

Six months after fiscal yr finish
Included companies taxes are due

When a tax due date falls on a Saturday, Sunday, or vacation acknowledged by the CRA, you’ve gotten till the subsequent enterprise day to submit your taxes.

Tax reduction and extensions

American companies

You possibly can file for a six-month extension in your federal tax return with the IRS if wanted. Please be aware, you continue to should pay your taxes on time—the extension is just for submitting, not paying. Contact your accountant if you should file for an extension.

For those who want an extension in your state taxes, contact your accountant. Some states acknowledge federal extensions, however others don’t, so it’s at all times greatest to make sure. 

You might even have the ability to apply for a tax fee plan. You possibly can apply for a fee plan underneath these circumstances:

As a enterprise, for a long run fee plan: you’ve gotten filed all required returns and owe $25,000 or much less
As a sole proprietor, for a brief time period fee plan: you owe lower than $100,000
As a sole proprietor, for a long run fee plan: you’ve gotten filed all required returns and owe $50,000 or much less

Companies and people impacted by pure disasters, akin to hurricanes, floods or wildfires, might qualify for extensions. Click on right here for extra info.

Canadian companies

In Canada, you aren’t in a position to request reduction within the type of an extension for tax funds, however you possibly can file a Request for Taxpayer Reduction to cancel or waive penalties and curiosity charges. You’ll have to fill out Kind RC4288, and relying in your causes for requesting the waiver, Kind RC376. 

You possibly can request reduction from penalties and curiosity charges if your small business is affected by monetary hardships, sure actions of the CRA and extraordinary circumstances. Study extra about submitting an RC4288 Kind right here.

Organizing your receipts

If your small business accounting is ever audited, you’ll must have your receipts readily available. You possibly can arrange your receipts and observe your small business bills your self with file folders or you need to use organizational software program to retailer your receipts digitally.

Evernote

Evernote is a note-taking program that lets you retailer info in digital notebooks. You should utilize it to retailer digital copies of your receipts, both by including receipts by yourself or via an app built-in with Evernote. 

Evernote has a free plan, however its Skilled plan begins at $14.99 USD/month ($17.99 in Canada).

Shoeboxed

Shoeboxed was designed to do one factor, and it does that one factor effectively. With Shoeboxed, you possibly can observe your receipts digitally. Each the American IRS and Canadian CRA settle for legibly scanned digital copies of receipts when auditing companies so this program helps you keep prepared and arranged if the necessity ever arises.

Shoeboxed plans begin at USD$29/month if you happen to pay month-to-month.

Expensify

If you’d like a program that does extra than simply observe and arrange your receipts, is an expense administration system for enterprise accounting. You possibly can automate expense reporting, arrange receipts and observe mileage for any enterprise journey you or an worker has undertaken.

Fundamental Expensify plans are free, however you possibly can improve to premium plans beginning at USD$5.00/month per consumer.

Updating your bookkeeping

Messy bookkeeping solely hurts you come tax time. To be ready for the 2021 tax season and past, you’ll wish to audit your small business accounting so your books are so as. 

Take the time to look over your monetary information and arrange all your small business bills—akin to payroll, merchandise, advertising and marketing prices—by class. Guarantee your classes are constant and report any enterprise bills made with private credit score accounts. 

You probably have no organized information of your bills and earnings in any respect, it’s best to strongly take into account hiring an accountant to get your recordsdata so as.

 

Gross sales tax necessities

American companies

American companies haven’t any gross sales tax necessities at a federal degree as gross sales tax legal guidelines are overseen by particular person states. Most states permit for native gross sales tax charges along with state-mandated gross sales taxes, so your state’s tax charge is probably not the gross sales tax charge you’re meant to be charging clients—at all times seek the advice of along with your native tax rules to make sure. 

For those who function a retail enterprise within the US, it’s essential to report your gross sales taxes throughout the mandated reporting interval(s) for states through which you’ve gotten a gross sales tax nexus. 

A gross sales tax nexus is outlined as a longtime presence in a state, the parameters for which differ from state to state. For some, it requires having a bodily location (akin to a retailer or a warehouse). For others, merely doing sufficient enterprise in a state, akin to via ecommerce, can set up a nexus. For those who’re working an ecommerce enterprise that sells over state traces, make sure you make clear along with your accountant the place your gross sales tax obligations start and finish.

It’s essential to notice that even when your small business was closed for a part of the yr, you continue to must file $0 gross sales tax returns for intervals the place you had no gross sales.

To assist with reporting and paying gross sales tax, it’s advisable that you simply keep a separate checking account for the taxes you’ve collected. Doing so will provide help to preserve observe of the sum of money you owe to the federal government. It additionally put a management in place that can guarantee gross sales tax cash isn’t by accident used to pay one other enterprise expense. It additionally helps forestall theft, significantly if you happen to restrict entry to the account.

The distinction between gross sales taxes and tax lessons

Relying on what you promote, chances are you’ll want info on each the totally different gross sales taxes you collected and the totally different tax lessons you collected, or chances are you’ll solely want one.

Gross sales taxes can differ per location. You probably have one retailer in Boston and one retailer in Dallas, you’ll want to collect totally different tax charges. For those who’re a single-store enterprise, you’ll normally solely be working with one gross sales tax.

Tax lessons, alternatively, can differ in the identical location. In some areas, rules require retailers to cost totally different tax charges for objects. Liquor and tobacco, for instance, could also be taxed in another way than attire and grocery objects. Be sure you seek the advice of your native and federal rules for any particular tax lessons for the products you promote. 

Maintaining Information and Reporting Gross sales Tax

Most states would require that your small business has some type of record-keeping in place, whether or not bodily or digital. These information ought to preserve observe of each gross sales transaction, and be aware important info like the quantity of the sale, in addition to the quantity of gross sales tax you collected. Relying on the document conserving necessities of your state or locality, you might also be required to maintain authentic copies of receipts, money register tape, or different authentic gross sales paperwork.

Whereas these necessities might sound stringent, they may provide help to with one other frequent obligation: reporting on taxes. Many states require that you simply periodically report on the gross sales tax you’ve collected, along with really paying that tax to the state and/or locality. Fortunately, detailed information can streamline this course of and stop the probability of an error or discrepancy.

Automate your in-store gross sales taxes

As a result of gross sales tax charges and reporting necessities can differ so broadly in the US, many retailers battle with staying on high of their gross sales taxes. 

You’re chargeable for amassing the gross sales tax for each sale you make—and which means you’ll have cash within the financial institution you possibly can’t spend. For those who’re not cautious, you might need much less readily available than you realized when gross sales tax comes due, which might land your small business in arrears.

You possibly can keep away from hassle by establishing instruments that can assist you handle your gross sales tax necessities. DAVO is a completely automated gross sales tax administration system for brick and mortar retailers in each the retail and hospitality industries. DAVO connects to Lightspeed to mechanically put aside gross sales tax funds each day, then recordsdata and pays these funds to the state when due. As soon as a service provider units up DAVO, they by no means must manually handle gross sales tax for in-store gross sales once more.

Remitting gross sales taxes for supply apps in the US

For those who’ve been utilizing third-party supply apps to serve your clients via takeout and supply, you want to concentrate on who’s chargeable for remitting gross sales tax to your state—you or your supply companion. 

Every state is totally different and the legal guidelines have been altering. A ruling by the Supreme Courtroom has led to many states declaring that it’s the third-party app’s duty, not yours because the service provider, to gather and remit states gross sales tax. Even when that is the case, not all third-party apps pay native gross sales taxes. For those who haven’t arrange your POS appropriately, chances are you’ll overpay or underpay your gross sales taxes by not taking this under consideration. Assessment your contract along with your third-party supply companion for clarification on who’s chargeable for paying which taxes.

Based on DAVO, as soon as you realize who’s chargeable for remitting gross sales tax, you possibly can arrange your POS to correctly document gross sales tax in considered one of two methods.

For those who’re chargeable for remitting all gross sales tax:

Create a brand new order sort named for every third-party supply companion you’re working with. For those who provide dine-in and takeout providers, and UberEats manages your deliveries, you’d have dine-in, takeout and UberEats order providers.
Assign your new order sort the gross sales tax charge in your jurisdiction.
Create a young sort (alongside your money and credit score/debit tender varieties) named in your third-party supply companion.

In case your third-party supply companion is chargeable for remitting all gross sales tax:

Create a brand new order sort named for every third-party supply companion you’re working with. For those who provide dine-in and takeout providers, and UberEats manages your deliveries, you’d have dine-in, takeout and UberEats order providers.
Assign your new order sort a 0% tax charge in your jurisdiction.
Create a young sort (alongside your money and credit score/debit tender varieties) named in your third-party supply companion.

Canadian companies

In Canada, there are three varieties of gross sales tax: PST, GST and HST. In Quebec solely, the PST is called the QST. Which kind of gross sales tax to cost is determined by the province your small business is positioned in. 

When amassing gross sales tax, keep in mind that there are objects which can be taxable, like clothes and workplace provides, whereas others, like groceries, are usually not. In Canada, it’s necessary to be a gross sales tax registrant to cost gross sales tax. If your small business makes over $30,000 a yr, it’s essential to register with the CRA.

Province
GST
PST
HST
Complete Tax Charge

Alberta
5%
 
 
5%

British Columbia*
5%
7%
 
12%

Manitoba**
5%
7%
 
12%

New Brunswick*
 
 
15%
15%

Newfoundland and Labrador
 
 
15%
15%

Northwest Territories
5%
 
 
5%

Nova Scotia
 
 
15%
15%

Nunavut
5%
 
 
5%

Ontario*
 
 
13%
13%

Prince Edward Island*
 
 
15%
15%

Quebec*
5%
9.975% (QST)
 
14.975%

Saskatchewan*
5%
6%
 
11%

Yukon*
5%
 
 
5%

*These provinces have a distinct gross sales tax charge for alcohol, so make sure you’ve been charging the proper gross sales tax on alcohol gross sales in these provinces. Learn extra right here. 

**As of December 1, 2021, private providers (akin to hair providers, non-medical skincare and spa providers) are exempted from PST in Manitoba.

How do I do know my gross sales tax reporting interval?

Your reporting interval will differ relying on the nation and area(s) you promote in. 

American companies

Your reporting interval(s) will differ primarily based on the state(s) you’re doing sufficient enterprise in to have established a gross sales tax nexus. 

Seek the advice of the legal guidelines for the states through which you’ve gotten a gross sales tax nexus in your reporting interval(s). In case you are not sure of whether or not or not you’ve gotten a nexus in a state, seek the advice of an accountant.

Canadian companies

Your reporting interval for federal gross sales taxes will probably be assigned to you once you open a GST/HST account. Most small and medium companies will probably be assigned an annual reporting interval, however it’s doable to be assigned quarterly or month-to-month reporting intervals as a substitute. 

Reporting intervals for the provinces with their very own PST differ relying on how a lot gross sales tax you’ve gotten collected per yr. The quantity collected per yr additionally adjustments relying on which province you’re conducting your small business in. You wouldn’t have PST reporting obligations in provinces which have harmonized the GST and PST into one charge because the HST, and also you wouldn’t have PST reporting obligations in Alberta.

British Columbia

PST Collectable Per 12 months
Reporting Interval

Greater than $12,000
Month-to-month solely

$12,000 – $6001
Month-to-month or Quarterly

$6,000 – $3,001
Quarterly or Semi-annual

$3,000 or much less
Quarterly, Semi-annual or Annual

Manitoba

PST Collectable Per 12 months
Reporting Interval

Greater than $5,000
Month-to-month

$4,999 – $500
Quarterly

$499 or much less
Annual

  Saskatchewan

PST Collectable Per 12 months
Reporting Interval

Greater than $12,000
Month-to-month

$12,000 – $4,800
Quarterly

$4,799 or much less
Annual

Quebec

In Quebec, QST is handled very similar to the federal GST/HST. Small enterprise homeowners that personal retail shops in Quebec will probably be assigned a reporting interval once they register for QST.

Auditing your knowledge with experiences from Lightspeed Retail

Your Lightspeed Retail POS system has been gathering knowledge in your gross sales, earnings, margins, taxes and extra all year long.

Get your total numbers with the Gross sales Abstract report

The Totals report is strictly what it appears like: a complete of all of your gross sales in a given interval, introduced to you by sale line. It additionally contains your price of products offered, gross revenue, margin and gross sales taxes. 

The Gross sales Abstract report doesn’t break down your gross sales by tax class, however is helpful for a fast overview of the quantity of earnings and tax collected on all of your gross sales. For those who want a sum complete of your numbers, begin right here.

Easy methods to run the Gross sales Abstract report for tax season

Open Lightspeed Retail. Navigate to Studies.
Underneath Gross sales Studies, choose the Gross sales Abstract report sort.
Regulate the date vary to embody your reporting interval.
Make a remark of your complete taxes and earnings.

Tip: carry on high of your reporting all year long with Superior Reporting

Utilizing Lightspeed Superior Reporting, you possibly can customise tax experiences for your small business after which schedule them to mechanically run each month. Superior Reporting will then electronic mail the experiences to key stakeholders, like your account, so it can save you time gathering numbers throughout tax season.

See if you happen to qualify for tax deductions

A deduction lowers your tax legal responsibility. If you apply a tax deduction to your earnings, the proportion of your earnings that’s taxable is decreased. Tax deductions apply to numerous bills that companies incur all year long. 

Be sure you observe your bills year-round to make submitting for tax deductions straightforward and quick. Contact your accountant if you happen to really feel you’re eligible for any of the deductions under.

Dwelling workplace bills

With no less than occasional work-from-home a actuality for a lot of enterprise homeowners, chances are you’ll wish to look into dwelling workplace deductions. The principles differ in Canada and the US.

American companies

You qualify for a dwelling workplace deduction if your own home workplace is:

Your principal place of work; or
Sees unique and common use

Unique use makes it onerous to qualify for this deduction. For those who permit your workplace for use for sure private or instructional functions, it disqualifies you, irrespective of how a lot you’re employed in your house workplace. rule of thumb to go by is that your own home workplace have to be utilized in an analogous method to a daily workplace. Because of this sure private actions, like answering your private cellphone for instance, are permitted, however having your kids use your workplace house shouldn’t be. 

You have to be utilizing the house repeatedly to assert common use, as solely sometimes working from dwelling disqualifies you. Principal place of work typically means it’s essential to use your own home workplace in your administrative and administration work. For those who make substantial use of another fastened location to do this work, akin to a again workplace in your small business, you’re disqualified. 

There are two methods to assert this deduction: the simplified technique, the place your deduction relies on the sq. footage of your own home workplace, or the common technique, the place you measure your own home workplace bills in opposition to your residence bills. 

For those who really feel you qualify for this deduction, you possibly can use Kind 8829 to assert it.

Canadian companies

As of the 2023 tax yr, the short-term flat charge technique for dwelling workplace bills is not accessible.

You probably have dwelling workplace bills, you possibly can nonetheless use the detailed technique. This technique has the identical necessities because the flat charge technique, with the addition of calculating the dimensions of your workspace and offering supporting paperwork. 

The detailed technique additionally required two types to be stuffed out: Kind T2200S and Kind T2200. Kind T2200S is stuffed out by the worker, whereas Kind T2200 is stuffed out by the employer. You will have to fill it out for any staff who labored from dwelling and want to declare the deduction underneath the detailed technique.

Training

In the US, chances are you’ll qualify for a deduction if you happen to’ve had any bills associated to training required by an employer or regulation past the minimal instructional necessities in your current commerce. Any bills associated to training that advances your skilled expertise however shouldn’t be required to maintain your skilled {qualifications} might also qualify, as might sure commerce reveals and conferences. 

Canadian companies might also write-off training bills which can be required to replace or keep your skilled license or designation for your small business or to maintain updated within the business associated to your retail enterprise.

Telephone and web prices

For those who conduct any enterprise transactions or conversations via the cellphone or web, chances are you’ll qualify for tax deductions in each the United States and Canada. For those who use the identical cellphone for enterprise and private use, you possibly can solely write-off the proportion of your cellphone invoice that you simply use for enterprise functions. 

Webhosting and on-line retailer themes 

American companies might deduct bills like area registration charges from their earnings taxes. Webhosting and different prices could also be deducted.

Whether or not you employ your web site for advertising and marketing or as an ecommerce hub, Canadian companies might also put any funds in the direction of a web-hosting firm or on-line retailer themes on their checklist of tax deductions in your retailer.

Contractor work and salaries

American companies might deduct salaries, contract labor, bonuses, commissions and bills like trip pay paid to staff from their earnings taxes. For those who employed navy veterans or different long-term unemployed folks, chances are you’ll be eligible to benefit from the Work Alternative Tax Credit score. Verify this text for extra info.

In Canada, you could possibly write off any staff in your payroll, together with contractors. You can not declare any funds that have been paid to you because the proprietor of the enterprise. 

Transport prices

The IRS accepts transport prices in tax deductions if the bills are each atypical and obligatory, akin to a retail retailer paying for the transport prices related to their buy orders.

Based on the CRA, transport prices related to your small business are additionally thought-about tax-deductible bills for Canadian companies.

In case your transport prices are associated to items you’re manufacturing your self, it’s best to deduct them underneath price of products and providers, not as separate bills, in each the US and Canada. Seek the advice of your accountant for steering.

Automobile use

Within the US, enterprise homeowners and self-employed employees might deduct bills associated to automobile use for enterprise operations, both via recording precise bills (depreciation, gasoline, insurance coverage, and many others) or via the IRS’ commonplace mileage charge. 

In Canada, chances are you’ll be allowed to write down off automobile bills when the automobile is getting used for enterprise functions. You possibly can declare parking charges, automobile funds, repairs, registration charges, gasoline, insurance coverage and mileage. 

Be mindful, if you happen to use the identical automobile for private use you’ll have to document mileage individually for private and enterprise use in each the US and Canada. Contact your accountant for steering.  

Gear 

The IRS requires any gear deducted as a enterprise expense for use completely for the enterprise. This implies American companies can normally deduct gear akin to a receipt printer related to their POS system, however probably will be unable to deduct a printer used at dwelling.

If your small business wants a specific piece of apparatus to function, like a POS system or buying carts, the bills qualify as a tax deduction in Canada.

In each Canada and the US, gear is usually deducted over a number of years as a substitute of suddenly.

Skilled providers 

You might declare skilled providers you attain for enterprise causes, together with attorneys, accountants, bookkeepers and extra, in each the US and Canada. 

Donated stock

You could possibly declare donated stock as a deductible. Be sure you accumulate a donation receipt from the charity you’re donating to.

In case your small enterprise donated provides, cash or property to a acknowledged charity, you could possibly deduct them. Verify the present pointers established by the IRS or the CRA earlier than you make a charitable deduction to verify the group you wish to assist qualifies for the deduction.

Earlier than writing off any charitable contribution, seek the advice of your accountant.

Shopper and worker meals

Within the US, you possibly can take small enterprise deductions for meals along with your shoppers, so long as you do certainly talk about enterprise with them, and so long as the meal happens in a enterprise setting and for enterprise functions.

Listed here are some tricks to information when and what you possibly can deduct:

Attain out to an accountant with questions

You probably have any questions whereas submitting your taxes, keep in mind which you can at all times belief the specialists. Be sure you seek the advice of with an accredited enterprise accountant to make sure you’ve correctly filed all the pieces.

Earlier than you meet along with your accountant, it’s a good suggestion to organize a listing of questions you possibly can go over collectively so nothing vital is missed. This checklist ought to embrace:

Are there any accessible native tax credit?

You might qualify for tax credit you don’t find out about. Your accountant ought to have the ability to establish these credit for you. 

Does my enterprise have a nexus or tax legal responsibility in different states or provinces? If that’s the case, have I dealt with gross sales taxes appropriately?

This query is especially vital if you happen to’re promoting on-line to make sure you’re not unintentionally neglecting any gross sales tax obligations.

Are there any benefits to altering/modifying my enterprise construction? 

As we’ve realized, not all companies file their taxes in the identical approach and on the similar time. You might qualify for a extra favorable tax class for your small business—your accountant will have the ability to advise you. 

How can I file taxes on-line?

In each Canada and the US, you possibly can—and ought to—file your taxes on-line.

For those who’re not sure of the way to go about doing that, your accountant can stroll you thru it utilizing the digital submitting choices for companies in the US or e-services for enterprise in Canada. 

 

Submitting your tax types

In terms of submitting taxes, it’s at all times a good suggestion to speak to an accountant—they’re the professionals, in spite of everything. Utilizing accounting software program will make this step go easily.

Collect all of your accounting paperwork and fill out all of the required types
Remit your types to the CRA or IRS
Pay any quantities due
File your information and receipts in a protected place in case of an audit

When you’ve gathered your types and consulted your accountant, it’s a easy matter of sending the paperwork to the best company and paying what’s owed—that’s it. Your earnings taxes have been settled for the yr. Time to start out gathering receipts for subsequent yr’s tax season!

Editor’s be aware: Nothing on this weblog publish needs to be construed as recommendation of any sort. Any authorized, monetary or tax-related content material is supplied for informational functions solely and isn’t an alternative choice to acquiring recommendation from a professional authorized or accounting skilled. The place accessible, we have now indicated the first-hand sources of the data contained on this weblog publish. Whereas we try to offer correct content material, we can’t be held chargeable for any actions or omissions primarily based on such content material. Lightspeed doesn’t undertake to finish additional verifications or preserve this weblog publish up to date over time.