15 Year End Business Tax Saving Strategies
By Mrs. Wendy Willis, President, Integrated Business Management Group Inc.
Source:  Integrated Business Group Inc.

The end of the corporate calendar year is approaching and business owners should be thinking about ways to lower taxes for 2010. Here are 15 tax-saving strategies to consider and discuss with your accountant:

1. Determine if you can claim the small business deduction.
   For 2010, the first $500,000 of active business income of a Canadian controlled private corporation (CCPC) receives preferential tax treatment by qualifying for the small business deduction on the federal level and in most provinces. (Manitoba, Nova Scotia, and Yukon set the limit at $400,000.) The deduction is referred to as the small business limit and it is phased out on a straight-line basis when corporate taxable capital in Canada rises between $10 million and $15 million.
   
   Your accountant can help you determine if there are ways to trim taxable capital once it starts to rise above the $10 million mark.
   
   
2. Maximize your RRSP contribution
   If you run a sole proprietorship or partnership, your business income is all or part of your personal income. Your RRSP contribution is deducted directly from your income, so it has the potential to lower your tax rate. For 2010, the maximum allowable RRSP contribution is $22,000.
   
   You may be able to contribute even more. If you didn't use the entire deduction limit in previous years, you can carry forward the unused amount. There is a slight catch: The maximum you can contribute is actually tied to earnings. You can contribute only 18 per cent of earned income, so if that amount is not high enough, you may not reach the maximum contribution.
   
   
3. Delay sending out invoices.
    If your business is cash-based, you pay taxes only on income received. If you want to defer income to 2011, delay mailing invoices until the end of December. Alternatively, set up installment payment plans so that most revenue arrives in January or later.
   
   
4. Defer capital gains.
   If you realize a capital gain on the sale of an eligible small business investment and invest some or all of the proceeds in another eligible small business investment, you can defer taxation on some or all of the gain. To qualify, the proceeds must be reinvested during the year of disposition or within 120 days after the year ends. Eligible investments are newly issued common shares in a corporation whose assets don't exceed $50 million after the investment.
   
   
5. Donate investments.
   Private corporations that donate listed securities to a registered charity are eligible to add the entire amount of a capital gain to their capital dividend account. That money can then be distributed tax-free to shareholders.
   
   
6. Purchase assets.
   If your business is on a calendar year, consider accelerating the purchase of new business equipment or office furniture that you may have been planning to purchase in 2011. The tax rules let you deduct, under the "half-year rule," one half of a full year's tax depreciation, or capital cost allowance, this year, even if you bought it -- and used it -- on December 31. Then in 2010 you can claim a full year's depreciation.
   
   
7. Buy computer equipment.
   Eligible computer systems and related peripherals are eligible for a 100 per cent tax depreciation rate that is not subject to the half-year rule, which means your enterprise can write off the entire cost of the equipment in the year of acquisition. The equipment must be purchased after Jan. 27, 2009 and before February 2011.
   
   
8. Postpone asset sales.
   If you plan to sell some assets, and you follow a calendar year, waiting until 2011 will provide your business with a larger CCA deduction for this year. Selling the assets before the end of the year would trim your company's CCA claim for 2010. If you have already claimed CCA on the assets, it may be recaptured. Postponing the disposition would defer the tax on the recaptured CCA.
   
   
9. Write off bad debts.
   If your business is accrual-based, you can deduct bad debts in the year they become worthless. But you must demonstrate that the accounts are noncollectable. So act now to accelerate collection efforts and keep detailed records of collection calls, letters, and contacts.
   
   
10. Buy ahead.
    This is also applicable if your company used accrual accounting. Purchase extra routine supplies in December. Your business can deduct the items on your 2010 tax return, even if it does not pay for them until 2011. If your organization uses cash basis accounting, it gets the deduction when it pays for the goods.
    
    
11. Deduct interest.
    In general, interest is deductible on money borrowed to earn business or property income other than capital gains. There are rules aimed at denying deductions for losses that stem from interest and other expenses where a business cannot demonstrate a reasonable expectation of profit.
    
    
12. Make repairs.
    The cost of repairs -- but not improvements -- is fully deductible. Cash basis businesses get the write-off when paid; accrual based businesses get it when incurred.
    
    
13. Give gifts.
    Your enterprise can deduct as a business expense the cost of two non-cash gifts and two non-cash awards each year, as long as the total cost of the two gifts or the two awards doesn't exceed $500, including taxes.
    
    
14. Contribute to a political party.
    You get a federal tax credit for political contributions. It's calculated as 75 per cent of the first $400, 50 per cent on the next $350, and 33 1/3 per cent of any contribution higher than $750 up to a maximum credit of $650. Some provinces provide similar credits. Federal and provincial credits cannot be carried forward.
    
    
15. Build space for employees' kids
    There is a non-refundable investment tax credit if your business sets up a licensed childcare centre for staff. The credit is 25 per cent of such eligible expenses as fixed assets and start-up costs, to a maximum of $10,000 for each care centre created. Credits may be carried back three years and forward 20 years.

There may be additional tax breaks available from your province or territory and your accountant may be able to find even more ways to minimize the 2010 taxes your business will pay

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