Financial

Heather Schaus is the accounting manager at BDO’s Mount Forest office

Five ways to prepare for income tax

Showing up at your accountant with only a shoebox crammed full of receipts is costly in professional time and handcuffs your ability to make better financial decisions throughout the year. Although most farms today have bookkeeping systems well beyond the shoebox, organizing some key information ahead can save time and headaches chasing down information later. Whether you use a ledger, Excel spreadsheets or computerized bookkeeping programs, such as QuickBooks, Sage 50/Simply Accounting or AgExpert, the same information and paperwork is needed. So here are five simple ways to get ready for this coming tax season. 1. Reconcile. The first thing you need to do is make sure your bank account is reconciled in your bookkeeping. Reconciling with your bank is making sure you have recorded all of the deposits, cheques, and debit payments you have done each month and checking they have cleared or show up on the bank statement for that month. It also ensures any activities, loan interest and principal payments, bank charges and loan advances, which are only seen on bank statements, are recorded in your bookkeeping. By reconciling your bank account in your bookkeeping, your accountant knows all income and expenses are recorded. Plus it feels amazingly satisfying to reconcile. 2. Inventory List. Your accountant will need a list of your inventory as of your year-end so write it down. If you are already doing this for your loaning institution, you can simply share a copy of this inventory list with your accountant as well, or vice versa. Sharing this information is important because inventory on income tax returns can be used as an “add back”, if you are in a loss position. In fact, some of the income tax rules require adding back your inventory, if you are in a loss position. Make sure you talk with your accountant as to your personal tax situation and how inventory “add back” will affect your farm tax return. 3. Bought/Sold Asset list. A straightforward list of purchase and sales/disposals of equipment, including office equipment, machinery (tractors, combines, etc.), computer equipment, buildings and building additions during the year will help your accountant tremendously and a good place to start conversations about longer-term planning. If you have had any major purchases during the year, attach a copy of the purchase invoice, including any trade-ins invoices. Sharing what year you purchased the assets sold/disposed of in the current year will help the accountant more easily find the original cost of the asset from that year. Different types of assets have different Capital Cost Allowance rates used as expenses each year, this Bought and Sold asset list details will help your accountant know how to CCA categorize the assets bought and sold in the year. Make sure to ask your accountant about the rates and expenses that can be deducted on your farm income and expenses for future capital planning. 4. Island of Misfits. The items that don’t seem to fit anywhere need some further explanation. These are the items often recorded in your bookkeeping, under “Other miscellaneous income” and “Other/miscellaneous expenses” or some computer programs call this “Ask your accountant”. With any of these accounts write a note, explaining what was purchased or earned during the year. When your accountant is looking at these accounts, they know what was put there and why, and some expenses and income may need to be moved to other accounts or taxed differently.

Steve Cronsberry (Owner) 5483 Fifth Line Minto, Palmerston marquardtfarmdrainage.com

18885340393 5193433233

of providing professionally designed and installed drainage systems.

Sometimes you don’t know where some expenses and income should be put in your bookkeeping and this is a good opportunity to ask your accountant where you should be recording this type of expense in the future. If you are often putting the same type of expenses in these other accounts, it might be time to create another column in manual bookkeeping or create a new income or expense account on your computerized bookkeeping. 5. AgriInvest/AgriStability. Let your accountant know upfront if you are taking part in AgriInvest and/or AgriStability so they can put your farming income and expenses on the proper income tax form in your tax return. This form will have your Agri pin number on it and when your tax return is submitted to Canada Revenue Agency they can forward this information on to the various provincial/federal offices that run these programs. If you are not part of these programs, your farm income and expenses will be on a different form and no information will be going to these programs. By letting your accountant know ahead of time if you have registered for any of these programs in the past and current year, they can complete the proper forms for you. Other forms still need to be completed for AgriStability each year however, they’re not connected to your income tax returns. By organizing and sharing with your accountant this information ahead, your tax returns can be done more efficiently, costing you less in the long run. Furthermore, with BDO you can share this information easily and safely on our new global client portal so you can do it right from your desk. Doing monthly bank reconciliations, and creating an inventory list and a list of bought and sold assets during the year list will help your accountant ensure all of your information is correctly inputted for income tax and with decisionmaking throughout the year. Also, don’t forget to review and add notes to your accounts and let your accountant know if you are part of government programs. ◊ EXCLUSIVE $695,000

Near Owen Sound, 3 acres of country living, large 5 bedroom, 3 bath raised bungalow.

Call Dave or Elly for a buyers package to see more about these properties.

702 MAIN ST. SAUBLE BEACH (519) 422-ATVS (2887)

sales.atvdepot@bellnet.ca

Want to list your business? Call 519-859-0303 or email lynda@aglinks.com

P.O. Box 21054, Wonderland Rd. S., London ON N6K 0C7 www.aglinks.com / Follow Us On Facebook