As a CPA, you know that bookkeeping and tax preparation are two essential components of maintaining a successful business. However, these tasks can be time-consuming, complex, and often fraught with common issues that can cause problems down the road. In this article, we will discuss some of the most common issues with bookkeeping and tax preparation, as well as tips to avoid them.

1. Poor Record Keeping

One of the most common issues with bookkeeping is poor record keeping. This can lead to inaccurate financial statements, missed tax deductions, and compliance issues. Many business owners find it challenging to keep track of their financial records, especially if they do not have a dedicated bookkeeper.

To avoid this issue, it is essential to establish a record-keeping system early on. This system should include a chart of accounts, which is a list of all the accounts that the business uses to record financial transactions. It is also important to keep all receipts, invoices, and other financial documents organized and accessible.

2. Misclassifying Expenses

Another common issue with bookkeeping is misclassifying expenses. This can happen when business owners do not understand the difference between different expense categories, such as capital expenditures and operating expenses. Misclassifying expenses can lead to inaccurate financial statements and may result in missed tax deductions.

To avoid this issue, it is important to have a clear understanding of different expense categories and to review financial statements regularly. It is also a good idea to consult with a CPA to ensure that expenses are properly classified.

3. Failing to Reconcile Accounts

Failing to reconcile accounts is another common issue with bookkeeping. Reconciliation involves comparing financial records with bank statements to ensure that all transactions are accurate and accounted for. Failure to reconcile accounts can lead to inaccurate financial statements and may make it difficult to identify fraudulent activity.

To avoid this issue, it is important to reconcile accounts regularly, ideally on a monthly basis. This will help ensure that all transactions are accurately recorded and that any discrepancies are identified and resolved promptly.

4. Missing Deadlines

Missing tax deadlines is a common issue for many businesses. This can result in penalties and interest charges, which can be costly. Many businesses struggle to keep track of tax deadlines, especially if they have multiple tax obligations.

To avoid missing tax deadlines, it is important to create a tax calendar that includes all relevant tax deadlines. It is also a good idea to work with a CPA who can help ensure that all tax obligations are met on time.

5. Failing to Plan for Taxes

Failing to plan for taxes is another common issue that businesses face. This can lead to unexpected tax liabilities and cash flow issues. Many businesses do not plan for taxes because they do not understand their tax obligations or do not have a clear understanding of their financial situation.

To avoid this issue, it is important to work with a CPA who can help you understand your tax obligations and develop a tax planning strategy. This may involve estimating taxes, setting aside funds for taxes, and taking advantage of tax deductions and credits.

In conclusion, bookkeeping and tax preparation are essential components of maintaining a successful business. However, they can be challenging and complex, and many businesses face common issues that can cause problems down the road. By establishing a record-keeping system, properly classifying expenses, reconciling accounts, staying on top of deadlines, and planning for taxes, businesses can avoid these common issues and maintain accurate financial records. If you need help with bookkeeping or tax preparation, contact a CPA today.

If you’re a business owner or an individual in Vancouver, you know that accounting can be a complex and time-consuming process. However, it’s necessary to keep your finances in check and ensure that you’re compliant with tax regulations. That’s where Judi Wang Chartered Professional Accountant comes in.

Judi Wang Chartered Professional Accountant is a trusted accounting firm located in Vancouver, with offices in both Vancouver Mainland and Vancouver Downtown. With years of experience in the industry, Judi Wang and her team of professionals have helped countless clients with their accounting needs, providing personalized and comprehensive services to ensure their financial success.

Services Offered

Judi Wang Chartered Professional Accountant offers a wide range of accounting services, including:

1. Bookkeeping: The firm provides full-cycle bookkeeping services to ensure that your financial records are up-to-date and accurate.

2. Tax Planning and Preparation: Judi Wang and her team help clients minimize their tax liability by providing personalized tax planning strategies and expert tax preparation services.

3. Financial Statements: The firm prepares financial statements, including balance sheets, income statements, and cash flow statements, to provide clients with an accurate picture of their financial health.

4. Consulting: Judi Wang Chartered Professional Accountant offers consulting services to help clients make informed financial decisions and achieve their financial goals.

Why Choose Judi Wang Chartered Professional Accountant?

Choosing an accounting firm can be a daunting task, but Judi Wang Chartered Professional Accountant stands out from the crowd. Here are just a few reasons why:

1. Experience: With years of experience in the industry, Judi Wang and her team have the knowledge and expertise to handle even the most complex accounting issues.

2. Personalized Service: The firm takes a personalized approach to account, working closely with clients to understand their unique needs and goals.

3. Accessibility: With offices in both Vancouver Mainland and Vancouver Downtown, Judi Wang Chartered Professional Accountant is easily accessible to clients throughout the area.

4. Professionalism: The firm is committed to professionalism, providing timely and accurate accounting services to ensure client satisfaction.

Conclusion

If you’re in need of accounting services in Vancouver, look no further than Judi Wang Chartered Professional Accountant. With personalized service, expertise, and professionalism, Judi Wang and her team of professionals are committed to helping clients achieve their financial goals. Contact them today to schedule a consultation and take the first step toward financial success.

2022 Small Business Corporate Income Tax Changes

 

2022 corporate income tax rates for active business income limit $500,000:

• Federal: 9%
• BC: 2%

2022 corporate income tax rates for investment income:

• Federal: 38.7%
• BC: 12%

The federal business limit of $500,000 begins to be reduced when a CCPC’s taxable capital reaches $10 million, and is eliminated when taxable capital reaches $15 million.  This phase-out of the small business deduction is also in effect in some provinces. In January 2019, new rules came into effect regarding the corporate tax rate on investment income. If your passive investment income passes the current threshold of $50 000 in a year, the tax rate on your corporation’s ordinary business income increases.

2023 Canada Pension Plan (CPP) Maximum Pensionable Earnings

The CPP maximum pensionable earnings for 2023 is $66,600, up from $64,900 in 2022. The maximum employer/employee contribution is $3,754.45 and $7,508.90 for self-employed with the rates at 5.95% & 11.90% respectively.

2023 Personal Tax Changes

 

Basic Personal Amount

Effective January 1, 2023, the Basic Personal Amount has been increased to $15,000 from $14,398 in 2022.

Tax-Free First Home Savings Account (FHSA)

In Budget 2022, the government proposed the introduction of the Tax-Free First Home Savings Account (FHSA). This new registered plan gives prospective first-time home buyers the ability to save $40,000 on a tax-free basis. Like a Registered Retirement Savings Plan (RRSP), contributions would be tax-deductible, and withdrawals to purchase a first home—including from investment income—would be non-taxable, like a Tax-Free Savings Account (TFSA).

Budget 2022 announced key design features of the FHSA, including an $8,000 annual contribution limit in addition to a $40,000 lifetime contribution limit. Today, the Department of Finance is releasing for public comment draft legislative proposals that provide additional details on the design of the FHSA. This backgrounder offers a summary of these details.

The government expects that Canadians will be able to open and contribute to an FHSA at some point in 2023. No matter when this happens in 2023, Canadians would be allowed to contribute the full $8,000 annual limit in that year. 

Lifetime Capital Gains Exemption (LCGE)

The lifetime capital gains exemption (LCGE) amount on the sale of qualifying small business shares is rising to $971,190 in 2023, up from $913,630 in 2022.

2023 RRSP Contribution Limits

For the 2023 taxation year, the RRSP contribution limit would be a maximum of $30,780 and $31,560 for the 2024 taxation year. You can carry forward the RRSP contribution room that you are unable to use in any particular year.

2023 TFSA Contribution Limit

The TFSA contribution limit for 2023 is $6,500.