Small Business Finance Fundamentals, Part 4

Taxes!

Taxes?!

Tax time is a dreadful season for everybody, let alone small business owners.

Even charities and nonprofits are on the hook for that party.

While charities might have some tax exemptions and small business have deductions, the government is still going to take its cut and the rules are not intuitive.

Miss a deadline?

Here’s your fine!

Misread something?

Here’s your audit!

Think your good deeds for the community disqualify you from taxes?

Congratulations on your huge audit!

Let’s break this down so you don't break down.

Small Business Taxes: I Owe How Much??

Once your small business is up and running and the income starts to make a noticeable pile in your bank account, it feels like a party.

But it’s not all your money.

And, even worse, you have to figure out how much of it isn’t yours, then send it off to government land where they eventually tell you how wrong your guess was.

When formulating your best guess, watch for these key items:

Self-Employment Taxes - If you’re self-employed, congratulations! You owe both the employee and the employer portions of things like CPP and EI.
Sales Tax (GST/HST/PST) - Depending on your revenue, you may need to collect and remit sales tax, maybe even from your very first sale.
Deductions and Write-Offs - These are the real puzzle, but good bookkeeping can save you a fortune. Experienced bookkeepers take the guesswork out of your tax owings and know exactly which numbers go where.
Quartery Tax Payments - If your bill is big enough, you may need to pay it in installments instead of one huge pile of cash at year-end.

Nonprofit Taxes: Tax-Exempt, not Tax-Free

Many charities and nonprofits are tax-exempt, which sounds great at first glance… but it’s not tax-free. You still have obligations.

You Still Need to File - Even if you don’t owe taxes, most nonprofits are required to file an annual return (like a T3010 in Canada or Form 990 in the U.S.). Forgot to file? You might lose that tax-exempt status!
Payroll Taxes Still Apply - If your nonprofit has employees, you still need to deduct and remit payroll taxes, just like any other employer.
Sales Tax Might Apply - Some provinces and states require nonprofits to collect and remit sales tax on certain goods and services. Check your local rules… unless you enjoy surprises. 😬
Unrelated Business Income (UBI) - If your nonprofit runs a side business, like selling merch or renting out space, that income might be taxable. Again, details like this are why a bookkeeping professional is worth their weight tax coffers.

The Most Common Mistakes - a.k.a. Things to Avoid

Not Keeping Receipts - if a purchase happens and no receipt is around to confirm it, did it really happen? Government says: no.
Ignoring Deadlines - These are not just personal achievement goals. The government has no sense of humour about late filings and the penalties are real.
Misclassifying Workers - Hiring contractors? Make sure they’re actually contractors and not employees, or you could be on the hook for unpaid payroll taxes.
Not Setting Money Aside - All the feel-good of your business can’t fix the ick you get from a huge year-end tax bill.

How to Stay on the Government’s Good Side

Use Accounting Software - Take your pick: Quickbooks, Wave, and Xero are a few examples that can help you track tax obligations automatically.
Keep a Tax Calendar - We’re well into the digital age now, and everybody carries a calendar in their pocket. Put it to work for you so you don’t need to strain to remember every deadline.
Talk to a Tax Pro - Taxes are complicated and just one mistake can be costly. A professional can help you avoid expensive errors.
Plan for Next Year - If this year’s tax bill was brutal, use that experience to adjust your strategy for next year. You can’t call it an “unexpected” if it happens two years in a row.