The Ultimate Checklist For New Health Professionals 2023: Ensuring Your Business Finances And Tax Compliance Are On Track
Starting a new health practice is an exciting journey full of opportunities, but it also comes with the responsibility of running a business, which means managing finances and ensuring tax compliance.
Navigating the complexities of taxes and financial management can be daunting if you’re new to the game. But fear not! There is help.
This comprehensive guide will provide you with the ultimate business finance and tax compliance checklist to help you make sure everything’s on track, allowing you to focus on what you do best: helping others achieve their health goals!
In this blog, we’ll take a look at how to:
Maintain separate business and personal accounts
identify and track deductions
Being aware of deadlines and payment schedules, and
Implementing automated software solutions to streamline processes.
Organizing Your New Health Business Finances For Tax Compliance
Having your finances organized is critical for ensuring that you remain in good standing with the CRA. It can save you time and money and avoid potential penalties and interest. By keeping your business's finances in order, you can ensure that you’re prepared for tax season and avoid any unexpected surprises.
Let's dive into the essential steps you should take to organize your new health practice’s finances for tax compliance.
Maintain Separate Business And Personal Accounts
A common mistake that new business owners of health practices make is mixing their personal and business finances. This can quickly end up in misunderstandings, mistakes, and possible compliance problems when filing taxes. The best way to avoid these problems is to maintain separate accounts for business and personal use.
Open a separate business bank account and credit card and use them only for business transactions. A separate folder should be used to store all business receipts and invoices to make sure record-keeping is accurate.
Tax Forms For New Health Businesses
Tax compliance for your company depends on your ability to understand and use the right tax forms. Your business structure and sources of income will determine which forms are needed.
Let's look at some essential tax forms for new health practices and how to use them effectively.
Income Tax Forms
Different types of income tax forms are available in Canada.
The T1 General is for personal income tax and benefit returns for individuals. The T2 Corporation form is for income tax returns for corporations.
The T4 is a statement of remuneration paid that employers issue to employees, detailing their income and deductions.
The T4A is a statement of remuneration paid that businesses issue to independent contractors.
T5 is a statement of investment income that financial institutions and businesses give to investors, reporting interest, dividends, and other investment income.
The T2125 is a statement of business or professional activities used by self-employed individuals to report business income and expenses.
There are numerous other income tax forms to note in Canada. It is important that you submit the correct ones.
Employment Tax Forms
If your practice has employees or independent contractors, employment tax forms are just as important as income tax forms in terms of ensuring tax compliance. These forms need to be correctly filled out and submitted so that you can avoid fines and maintain compliance with tax laws and regulations.
Key Tax Deadlines And Payment Schedules
To prevent fines and interest charges, you need to make sure that you’re keenly aware of the Canada Revenue Agency’s (CRA’s) tax due dates and payment schedules. In this section, we will discuss some of the key tax deadlines and payment schedules that new health businesses need to be aware of, including federal income tax deadlines and estimated tax payments.
These deadlines and payment schedules vary depending on the type of business and the amount of income earned.
Federal Income Tax Deadlines
If you are self-employed, either as a sole proprietorship or a partnership, then your income tax return filing deadline is June 15. However, any balance you may owe the CRA is due by April 30.
The deadline for filing corporate income tax returns is a little different, though. For corporations, the deadline is typically six months after the end of the corporation's financial year. However, any balance that you might owe the CRA is due three months after the end of the corporation's financial year. For example, if the corporation’s financial year-end is December 31, then the payment deadline would be March 31, and the filing deadline would be June 30 of the following year.
The CRA might allow you to request an extension, whereby additional time will be granted to file your return. However, the deadline to pay what you owe will remain unchanged. In other words, you can delay the paperwork but not the payment.
It's, therefore, very important to at least estimate the amount owed and pay it before the original deadline to avoid interest and penalties. If you overpay, you can always claim it back or have it deducted from your next payment.
Estimated Tax Payments
Generally, small businesses and corporations are required to pay their income taxes in installments if their net income tax owing for the current tax year or the preceding tax year exceeds a specific threshold that the CRA determines.
For sole proprietors, these payments need to be made on a quarterly basis and are due on the 15th of March, June, September, and December. For corporations, the due dates are monthly at the end of each month.
To calculate your estimated tax payments, take your total tax liability for the previous year and then divide it into four equal payments.
Consultation With Tax Professionals
We strongly recommend that you consult with tax professionals to help you remain compliant with tax laws and regulations, reduce tax liabilities, and acquire general financial advice.
Let's look at some of the benefits of consulting tax experts, learn how to choose the best advisor, and prepare for consultations.
Finding A Qualified Tax Advisor
To find a good tax advisor, start by researching potential candidates. You could look online or request referrals and verify their credentials to make sure they’re legitimate. When choosing someone, think about their qualifications, costs, and communication style.
A qualified tax advisor can give you advice on which expenses are tax-deductible and how to reduce your tax liability.
Implementing Accounting Software Solutions
Automated accounting systems are a no-brainer. They save time, reduce errors, and increase the accuracy of your business's financial management.
In this section, we’ll look at the benefits of implementing accounting software solutions and review which features to look for when choosing the right solution for your practice.
Features Of Accounting Software
Modern accounting software is great, as it offers a wide array of useful and user-friendly features to streamline your business's financial management. These include things like general ledger management, analysis and reporting, automatic invoicing, and expense tracking.
These features can help you monitor and record all your financial transactions and then generate financial statements and reports with ease.
Transitioning From Manual To Automated Systems
If you use manual accounting methods, you will need to transition. The process of switching from manual to automated accounting systems involves choosing the right software, setting it up, and learning how to use it. When choosing accounting software, consider factors such as the product's features, price, usability, and customer support.
By implementing an automated accounting system, you can simplify your financial management processes and focus more time and energy on growing your health business.
What Have We Learned?
In this blog, we’ve learned that staying on top of your business finances and tax compliance is critical for ensuring the success of your new health practice.
You can have peace of mind knowing that your company's finances and tax compliance are in order by following the steps in this comprehensive checklist. This will free you up to concentrate on offering your customers the best health and wellness services.
Remember, staying organized, consulting with professionals, and leveraging technology are key factors in ensuring the financial wellness and success of your business.
Frequently Asked Questions
What Do I Give My Accountant For Business Taxes Canada?
To ensure a smooth business tax filing process, we recommend that you provide your accountant with all the necessary financial documents, such as income and expense records, asset and loan information, inventory totals, and payroll data.
What Documents Are Needed For Your Company Tax Return?
To file your company's tax return, you will need to provide documentation such as your financial statements and your company's payroll records. You might also need to include copies of any contracts, leases, or documents related to other transactions.
How Long Are Businesses Required To Keep Records Of Financial Transactions For Taxation Purposes?
You need to keep financial records of business transactions for up to six years to meet your tax obligations. This includes keeping income and expense statements, invoices, cancelled checks, and other supporting documents.
Keeping these records for the required period of time is important for your business to make sure that you’re compliant with the law and able to access the information needed when it's demanded of you.
For more help getting your health practice’s finances under control, sign up for the Business Foundations course from Tyagi Group today!
