Annual June 15 Proprietorship Deadline | Edmonton Accountant
These are actually part of your personal tax returns. They’re a separate schedule on the personal tax return. It’s called a t two one two five mm.
Yeah, I can see why cause it’s mad.
Hi, thanks for joining us for another episode of ask a spiral CPA. Today we’re talking about the annual June 15th proprietorship filing deadline. I have Trevor here with me again from Inspired Method. I there, Trevor Houser, Easter. It was really nice. Yeah, I had a some time with the family and a couple of days to relax and get focused again. Excellent. Excellent. So the quote that we have here today, we were talking about the annual June 15th proprietor filing deadline. It’s Gary Vaynerchuk, quote says, even if your ambitions are huge, start slow, start small, build gradually and build smart. So I think that’s important when we’re talking about proprietorships. You know, an industry Canada tells us that 50% of the volcano, small businesses fail and they fail within five years and 29% of those entrepreneurs who fail, they’re going to report running at a cash is one of the reasons for failure. Yeah. So the story that we have, you know, business owners that they’re a little bit uncertain about their idea, uh, you know, they start a side business, they run as a proprietorship, however they’re uncertain of how and when that information it needs to actually be reported.
So Trevor, what are the questions that these business owners that are starting their, their side hustle, what do they need to ask? Well, I think one of the first questions to ask is what is the difference between a proprietorship and a corporation? So a proprietorship is basically an unincorporated business. We’re as a corporation is a separate legal entity. Okay. Edmonton Accountant, so it’s almost a separate person for tax purposes, uh, than the business owner itself. But the upper proprietorship, it’s a, you know, it’s basically tied to you and your personal tax obligations. Okay. So should business owners strongly consider the benefits of limited liability? Yeah, 100%. They should, you know, before you go down the proprietorship wrote, you really have to consider the benefits of limited liability. So, in other words, can you get sued personally for this side business, this side hustle, which can be a big thing, you know, do you want to put your house on the line, your car on the line, your savings on the light.
Um, when you’re doing this Biz, this side business, we’ll even knowing all that people don’t want to incorporate because of costs. Uh, sometimes they have to look at, you know, what is the potential downside from not incorporating? Yeah, huge. So our proprietors normally tax efficient with more than 50,000 in income. Normally even if we, you know, strip out all of the secondary benefits of incorporation and you know, we, we look at, you know, person doesn’t care about living in the liability that they think it’s not very risky what they’re doing an awful lot of assets to protect anyways. Edmonton Accountant, or you know, they’re not worried about protecting a trade name and the other secondary benefits that go along with incorporation. And we just look at it from a tax perspective. We just look at it in this person has $50,000 worth of income. Normally that person is paying more additional tax, then they would pay in additional fees to incorporate.
So. So really it’s, it’s generally not tax efficient. Now this can vary from situation to situation. Edmonton Accountant, but you know, for the most part that’s a good general rule of thumb that $50,000 in net income generally you’re actually spending more money to not be incorporated. Wow. Most people probably don’t know if that, yes. So a question are the tax filings for proprietorships done with your personal tax return? They are. So your tax filings for an unincorporated business and or proprietorship, you know, it means that the same thing, these are actually part of your personal tax returns. They’re a separate schedule on the personal tax return. It’s called the t two one to five. Um, and it, it’s basically an additional schedule that goes with your personal tax return that goes through the business activity, the revenue and the different expenses that go along with the business.
Okay, so do unincorporated business owners have the same tax deadline as everyone else? They have a different tax filing deadlines. So most everyone in Canada has an April 30th filing deadline to file their personal taxes. If you have unincorporated business income proprietorship, Business Inca, you actually have a June 15th a filing deadline. So you effectively get another month and a half. You know, the government recognizes that your tax return is a little bit more a onerous and a little bit more work involved. And so they give you basically an extra 45 days. So instead of having to file on April 30th each year, you and your spouse, even if the spouse is involved in the business, um, is Edmonton Accountant, you know, required to file by June 15th instead of April, April 30th. But it should be noted that even though you’re not required to file by June 15th, if you owe money, they’re still going charge, charging interest, you know, the interest is that are reasonable rate.
Uh, it’s not a penalty. You don’t get a penalty as long as you file by June 15th and the penalties are what can only be significant. Um, but yeah, filing deadline June 15th. Okay. So, uh, next question is, do you need accounting software to operate as a sole proprietor? No. Often you don’t, you know, a lot of Solo preneurs start, you know, they, they get sucked into this trap and they think they need this. I am running a business and so I better spend, you know, 30 hours a week on my accounting. Normally that’s, that’s not what’s involved here. Um, you know, it, it can be as simple as tracking different categories. So you want to know what you had as total revenue and then you want to know what, you know, your different categories of expense are. Maybe advertising, maybe travel, maybe meals, entertainment, maybe there’s a supplies.
Um, but yeah, you don’t necessarily need a double entry accounting system to operate, especially as a small proprietorship. Uh, it’s a little bit overkill, uh, in most situations. Okay. So should you visit an accountant to find out what categories to track? Yeah, yeah. It can be as simple as, you know, just identifying what those categories that you need to track, what are the totals were going to need to provide at the end of the year. In the accountant can normally find out about what’s going on in your business and you know, what are the operations, what are your sources of revenue in this business? What are the main expenses of the business? And, and, you know, high level, what are those projections look like for the business? And then the accountant can, you know, literally when we have clients that come into our office and that situation, we’ll go through the t two, one to five with them and figure out which categories are relevant to them, which categories are not relevant to them.
And we’ll basically say you need to track totals for this category, that category, uh, in this category. And these categories you don’t necessarily need to worry about. And sometimes the business owners need to, you know, a, have it explained to them about what the categories actually mean. You know, dues and subscriptions, you know, might, I might mean to them their software license that they have. So, um, yeah, it’s a good idea to go through, go through it with an accountant. Edmonton Accountant, you know, it’s an exercise as we’ve done in an hour or two. And you’ll, you’ll have a good idea of what categories you need track and, and which ones you don’t. Okay. So, um, what is the difference between single entry in double entry accounting? So when you get double entry accounting, that’s the conventional, you know, buy quickbooks accounting software. And what double entry accounting means is for every debit there is a credit.
And so let’s take this for example, of if you earn revenue. So if you earn revenue, you have a debit in that money goes into the bank account, uh, and then you have a credit, which is just revenue. Okay. Um, so for every debit there’s a credit. So for every action there’s an equal and opposite reaction, if you will. Uh, if you’re a physicist, I, yes, this is the same thing with an expense that we have an expense. Somewhere along the line we should see money coming out of a bank account or being charged to a credit card. So let’s double entry accounting. For every transaction there’s actually two entries made me accounting records. Single entry accounting is generally the threshold for proprietorships, and it’s simply just a total. So we’re just totally expenses. We’re not verifying those expenses against a credit card transaction or a bank transaction.
So it’s a little bit different. Obviously [inaudible] entry accounting is a little bit less work. We’re only verifying a simple toll. Edmonton Accountant, but single entry accounting is, uh, you know, inherently a little bit more risky, uh, because I, I total can be an error can be made and making those totals, whereas double entry accounting, it was difficult to make those errors because if you make the air, if you report the expensing correctly, your bank badge won’t match at the end. So double entry accounting is, you know, usually the standard for corporate accounting. Um, but for proprietorships, again, they can be overkill. A single single entry accounting and my writing simple totals can be all that we need. Okay. So is it still a good idea to have a separate business bank account? Yes, it’s still a good idea to have a separate business bank account. Uh, whether you’re incorporated or not, it provides an added level of assurance and, and it makes it easy to go through the income and expenses.
At the end of the year. So sometimes it’s just the ease of reporting and reviewing what happened. If you know every, all the income, Dr Deposits in one account and all the expenses were paid from, you know, one account and one credit card, it’s very easy to go through at the end. They, especially if we get behind on, on doing any totals, it also provides a, Edmonton Accountant, a layer of audit protection. Uh, certainly not an audit guarantee. Uh, but it does, you know, reduce your audit risk because it speaks to the intent of the transaction. So if you have, if all of your expenses are coming out of your personal account, both, you know, when you go out to eat with your family and when you go to a dinner with a business associate, you know, it can be difficult for, you know, to establish the intent of that transaction.
And auditor can look at this and say, well, why should I believe that this, this expense had a business purpose. But if you have to clear accounts, it speaks through, you know, you had it clear intent and if you are maintaining those two accounts, so there’s uh, you know, less argument for the auditor to have that the, the expenses didn’t have a business intent. Um, so it, it is a good idea to, you know, maintain a separate account. Um, you know, it’s a minimal cost and in terms of, you know, how much it’s going to cost you an extra five or 10 bucks a month in service fees, you still have to maintain the uh, the receipts and the invoices either way to justify it, to support the expenses. Um, but having that separate business bank account, separate business credit card, um, it’s the best practice for sure.
Okay. So why is it still a good idea to have an accountant to help you file for your prep or proprietorship? So it’s still a good idea to have an accountant look at it. Even though we’re talking about single entry accounting cause your accountant is going to have some input on first of all, you know, are the expenses that you’re reporting, are they even reasonable? Do they fit the parameters of what’s allowed, what’s not allowed? You know, what cra is going to consider. Um, and they might even find some things. Where are you sure this is zero. Edmonton Accountant, you know, are there’d be areas where given the nature of your business that it would be expected that there would be an expense in this category where a lot of business owners come in and they don’t have one. So it’s not just being too aggressive.
It’s actually, you know, missing expenses and legitimate deductions as well. Right. Did the accountant can pick out, Edmonton Accountant, you know, it can also just be a classification thing. You know, sometimes business owners will trigger an audit not because they report any legitimate expense book because they classify it, they classify the expense and an account that would appear that it would appear that it was legitimate. Um, you know, if you had, you know, if you through all of your, your auto expenses into the travel category, um, or all the supplies for the business, they’re sitting in office supplies. Um, things like that can trigger an unnecessary audit and an unnecessary amount of work. And then it brings into scrutiny all of the items that might’ve been gray area items to begin with. Edmonton Accountant, so it’s still a good idea to hire an accountant. I know, obviously there’s, there’s no guarantee or do you hire an account or not if there’s going to be an audit, but you’re doing everything you can and minimize your risk. Okay. So I think that’s what we have here today on it. You know, the annual June 15 proprietorship filing deadlines. As always, if you could hit the like and subscribe buttons so we can continue deliver you tips on how to beat the odds at business and please leave us some comments in the, in the Aquarius below so we can address it and potentially use them for a topics in future videos. Thanks very much.