There needs to be more than just timely filing of taxes. Undertaking an annual tax health checkup can be equally crucial. If you ignore this part, many unwanted consequences can arise, adversely affecting your business. Any innocuous-looking transaction can lead to inadvertent effects, and in the world of taxes, you should plan and do things in advance, as it is said:
Therefore, it is recommended that you undertake a diligent annual health checkup and monitor your tax filing patterns.
In Canada, an annual tax help checkup is a review of your records and documentation to ensure that you comply with the rules and regulations and to make optimal planning regarding your tax situation.
Following is a detailed discussion on the various aspects of the tax health checkup:
The Canadian tax system is based on self-assessment. Therefore, you must make sure that you are compliant with governmental policies. It is also noteworthy that the world of taxation is ever-changing and evolving. Any new government legislation or directive can bring many new complexities that you will have to look at to ensure that you are in line with the filing requirements.
Modern industry has become increasingly complex. Understandably, your company may be dealing with many sectors, which can increase the complexity of tax filing requirements. During the annual tax health checkup, you must conduct an in-depth survey of management activities and industry specifics in all the areas your company is dealing with.
You must plan beforehand. To illustrate: there can be some areas that might have missed your attention during the year. Consequently, you may be exposed to any new tax or a potential risk of a penalty. Your company’s overseas assets and everyday transactions of your subsidiary bodies can also be a reason for this enhanced exposure. Hence, you must ensure that you plug all loopholes while undertaking a tax health checkup.
There may need to be something more than a generalized overview of your tax activity. You must look at the different issues arising from your specialized area of dealing with everyday business. Specific activities lead to the application of specific laws and regulations. Therefore, you must conduct an in-depth survey of any special laws that apply to any specific area of dealing, to ensure no potential tax effect arises in future.
You can ask the tax authority to give you a ruling or interpretation on any specific law that you think is related to you, but you need help understanding it. It will make it certain that in future, you have that verdict with you when you face any challenge from the tax authorities. Moreover, it will ensure that you comply with the regulations as precisely as the authority demands.
It is also a part of your annual tax health checkup. It is not simply about reviewing the books and registers. Instead, it has to do with minimizing the liabilities you already face. You should take tax authorities on board and negotiate with them to get maximum concessions about your taxes. It will help you save money on your tax and let you know how far you can stretch your tax limits. Moreover, it will ensure better filing in the future.
Tax health checkups involve effective and efficient tax filing so that you can channel those funds into your financial activity and avoid any future hazards. Therefore, you must claim all refunds you are entitled to receive. In this way, your tax filing will become more effective.
You should observe the books and registers properly during your annual tax health checkup. Usually, you are required to keep your tax record for the last six years. Proper record keeping guarantees that you have sufficient arsenal to deal with the queries and challenges posed by the Canadian Revenue Agency.
Tax audit is a formal analysis by the Canadian Revenue Agency to see if you are complying with the tax laws and regulations properly and if there is any credit that you are eligible for but have not received.
It is important to do a per-audit of all your documents and returns to find any loopholes that the CRAs find. The dual tax health checkup is also an opportunity to prepare your position and relevant papers on any controversial issues that the tax authority can discuss with you. It will ensure that the administrative process related to your tax passes without any undue hazard.
Know that you deserve to pay less!
It is expedient to save every penny that you can and use it for your business instead of giving it to the government. If you are entitled to any exemptions but do not claim them, you will not get them. Normally, you will not think about them while filing your Taxes. However, the annual tax health checkup is the time to think about these avenues.
Planning beforehand is always helpful. Such planning will help you steer business and management decisions in a particular direction, enabling you to make structural changes or policy decisions for better tax management in the coming year.
Consider tax planning strategies such as income splitting with family members, utilizing tax-deferred accounts, or implementing other tax-efficient investment strategies.
A Registered Retirement Savings Plan (RRSP) is a plan that the Canadian government has for you in which you can deposit money for later use. It will stay there tax-free. So, in an annual tax-health checkup, review your Registered Retirement Savings Plan (RRSP) contributions for the year. Determine if you’ve maximized your contribution or if you can make additional contributions to reduce your taxable income.
Stay informed about any changes in tax laws that may affect your tax situation. You need to know about any changes to tax rates, deductions, or credits.
