As the calendar year draws to a close, sole proprietors have a golden opportunity to tie up loose ends and prepare for a smoother tax season by creating a year-end checklist and completing it. Failing to take action now can lead to stress, costly errors, or missed deductions when it comes time to file your return. Here’s what to prioritize on your list:
1. Catch Up on Bookkeeping
Don’t let receipts pile up into the new year. Ensure all income and expenses are entered, categorized, and reconciled with your bank statements. Not only will this save you time during tax season, but it’ll also help identify any missing invoices, duplicate entries, or unclaimed expenses while they’re still fresh.
2. Review Outstanding Invoices
Follow up on unpaid invoices and consider writing off unrecoverable accounts as bad debts. This may allow for a deduction this tax year. If you’re using accrual accounting, your income must reflect what you earned—not just what you’ve been paid—so it’s crucial to get your receivables up to date.
3. Make Necessary Purchases
If you’re considering buying office equipment, tools, or software, doing so before December 31 could increase your eligible expense claims or capital cost allowance (CCA). These tax-saving purchases can reduce your net income and, in turn, your tax bill.
4. Confirm Payroll Reporting
If you pay employees (or even yourself as a contractor), ensure all payroll records, source deductions, and remittances are current. Delays can result in penalties and late fees. Also, plan now for T4 preparation, due by the end of February.
5. Get Ready for CRA Filings
Check your GST/HST filing frequency and reporting deadlines. If you’re approaching the $30,000 small supplier threshold or expecting a change in sales next year, now is the time to review your registration status.
Complete Your Year-End Checklist
Waiting until tax season to address these tasks can result in missed deductions, rushed filings, and higher accounting fees. Set yourself up for a stronger start to the new year by organizing now. If you need help at tax time, reach out to us.
