Common Bookkeeping Mistakes People Make
Bookkeeping is an essential part of filing for taxes and can be quite a tedious task if one has taken it upon themselves to take care of their finances. It expects one to analyze the data and accurately track financial transactions.
Since bookkeeping is a serious business, some professionals have completely devoted themselves to this job and use their expertise to help their clients. It is highly recommended to hire a bookkeeper if you need to save time and energy.
To help you avoid some basic errors that could prove to be costly, Misic Accounting has put together a list of the most common bookkeeping mistakes people make.
1. Failing to account for GST/HST correctly
It’s important to understand when and if you have to charge and remit GST/HST. As a small supplier, you do not have to register for and charge GST/HST, however, the sale that puts you above the threshold ($30,000 in sales) is subject to GST/HST. After this point, you only have a short time to register because you must do so within 29 days of the effective date. Once officially registered, ensure that you record invoices and expenses accurately by separating the net sale and cost from the applicable GST/HST. This will ensure that your income, expenses, and sales taxes are tracked and filed correctly. This will save you money in the long run.
2. Deducting all of their personal automobile expenses from their income
This often happens because the business owner assumes that they “always” work on their business or think that by having a business-related decal on their vehicle, all vehicle expenses are 100% deductible. But it is not the case as only the portion of total vehicle expenses related to the vehicle’s business use is deductible. Business owners need to keep a detailed mileage log of each trip taken that is business related. By comparing the total mileage of these trips to your vehicle during the year, you can calculate the percentage of your vehicle used for business purposes. Understand that it’s your responsibility to keep a mileage log, and should the CRA ever request it, you have to provide it. Failure to provide a record may result in the CRA removing the vehicle expenses claimed on your taxes, or reducing them, which will result in a higher tax bill for you. So keeping this log is not only required but great insurance and backup to your expense claims.
3. Overlooking personal payments made for company costs
Business owners frequently overlook personal payments made for company costs.
If you own a business but pay for expenditures with your own money, you can deduct those costs from your revenue. This is particularly crucial if you are the owner of a corporation because any withdrawals, transfers, or payments made from the business accounts to the owner must be accurately recorded. If you used personal funds for business expenses, the business’s expenses are merely repayments of the amounts owed to them, rather than being reported as salary or profits. It’s imperative to keep track of these items and transactions correctly and accurately, as it could save you a lot come tax time.
To avoid these and other mistakes, reach out to the experts at Misic Accounting.
Our services include income tax services, bookkeeping, business accounting, payroll, financial consulting, and more. We serve clients across Kitchener, Cambridge, Waterloo, Guelph, Brampton, Mississauga, and the surrounding areas.