Tax season can present challenges for businesses not operating with the benefit of an accountant or bookkeeper. Putting together all the information required and understanding all the credits and deductions available calls for expertise many business owners lack. As a result, it’s not uncommon for businesses to work with a bookkeeper to help keep records in order and prepare tax returns. But is a bookkeeper really the best professional for the job? And can a bookkeeper prepare tax returns?
If you want assistance preparing your tax returns but aren’t sure whether a bookkeeper is the solution, here we look at the bookkeeper’s role, how they can help streamline the tax return process, and whether they have the professional knowledge required to help reduce your tax burden.
Bookkeepers record your business’s financial transactions related to your operations. Because they keep track of your books, they can be beneficial when filing your taxes. In addition, they can assist with the following financial responsibilities:
- Balancing your books: Your bookkeeper keeps your finances organized by recording all transactions and balancing your debits and total credits.
- Preparing your financial reports: Preparing your weekly, monthly, and quarterly financial reports helps keep track of incoming and outgoing transactions, providing better visibility of your financial health.
- Reconciling bank accounts: Your bookkeeper uses reports to reconcile transactions with your bank accounts, to verify your financial records are correct and spot discrepancies. If they find differences between what’s recorded in your books and your bank accounts, they can track the discrepancy to understand what happened. This helps spot potentially fraudulent activity and common mistakes such as over- or under-payments to suppliers.
- Preparing cash flow statements: Cash flow statements are overviews of cash transactions allowing you to understand your cash flow, see where your money comes and goes, and helps you plan and forecast to make your business more sustainable.
- Managing your accounts receivable and payable: Bookkeepers pay the bills and collect incoming money due on your invoices so you can report accurately on your revenue.
- Payroll: Managing payroll can include preparing paychecks, tax withholding, managing employee benefits, etc… all important details when filing taxes.
- Paying GST: Your bookkeeper can also take care of your GST payments to update your records when tax time arrives.
Accountants can conduct the same duties as a bookkeeper but also provide a more strategic role in business and tax planning, including:
- Financial reports and audits: Financial reporting and analysis provides an overview of your financial health with essential insights to help you make wiser decisions. Audits ensure everything the bookkeeper prepares is correct and that your financial situation is reflected correctly in your books.
- Business consultant and advice: Accountants can share advice to help you become more strategic, maximize your profits, and create a more sustainable business with achievable goals.
- Obtain financing: Accountants can identify opportunities to expand your capital with financing strategies to pursue your business goals.
- Compliance: Depending on your industry, you might require specialized accounting, which calls for an accountant.
- Tax planning: An accountant can assist with tax planning strategies to reduce your tax burden.
While an accountant can provide the same services as a bookkeeper, a bookkeeper can’t take on the full responsibilities of an accountant. Bookkeepers in Canada do not require a bachelor’s degree or certificate, while an accountant must take a standardized exam to become a certified public accountant, also known as a CPA. As a result, when it comes to taxes, an accountant can provide the following beneficial tax and planning services:
- Helping you choose the best legal structure to reduce your tax obligations and raise capital.
- Succession planning, which is vital for family-owned businesses to help minimize taxes and have a plan for ongoing success when you retire.
- Restructuring to take advantage of tax-saving opportunities.
- Setting up trusts to help you reduce your tax liability.
- Careful tax considerations based on essential aspects of your personal and corporate finances to help minimize your tax obligation.
Can A Bookkeeper Prepare Tax Returns And Is This Allowed By The CRA?
Bookkeepers can be authorized representatives to liaise between your business and the CRA. A bookkeeper ensures all of your financial records are in order, including payroll, GST, and tax payments, making it easier to file your taxes and avoid audits.
Although many business owners or members of business teams manage without a formal bookkeeper or accountant, you are flying blind without a formalized financial management strategy. The CRA expects you to pay your taxes and report your earnings honestly and accurately. As a business owner, you want to lower your tax bill, but tax regulations are complex and confusing. This can lead to unintentional errors when claiming deductions, increasing your risk of an audit.
Bookkeepers keep your finances organized, making it easy to monitor your financial health. As a result, you can meet your financial obligations for things such as payroll, debt payment, paying your taxes and GST, etc. Bookkeeping and tax returns help you prepare throughout the year, so you are organized, and everything is in order for each tax season. Tax return bookkeeping helps track your tax obligations, making clear what expenses can be claimed as deductions successfully.
Bookkeeping manages the fundamentals required to keep your financial information organized and accurate. At the same time, your accountant uses the data to prepare detailed reports and provide analyses to help you make sound financial decisions. An accountant is a big-picture financial expert who thinks long-term and helps with strategies that improve profitability, including tax planning. Therefore, the ideal scenario is to work with a company providing the assistance of a bookkeeper throughout the year, with the input of an accountant to guide strategy and provide tax planning to reduce your tax burden.
For help navigating your tax obligations as a business owner, call Intrepidium at 778-762-3445, or click here for a complimentary consultation with the Intrepidium Team to learn how preparing for tax season doesn’t have to be stressful!