What Tax Changes Brought 2019 for Small Businesses?

It seems every year brings about new tax changes, and 2019 was no exception. The 2019 taxes for small business came with some changes. Some were good, such as the reduction on the federal small business tax rate, others not so much for instance the CPP changes which meant a higher contribution per employee.

Here is a short review of the small business tax changes that came into effect this year.

Small business tax changes, one year later:

Some Good Changes

Not all tax news and changes have to be bad news. For 2019, there were actually some good changes for small businesses. First, the federal small business tax rate was reduced. Previously this was set at 10%, but for 2019 this dropped slightly to 9%. For British Columbia this created a combined rate of 11% once the 2% provincial tax is added in.

In other good news, the amount that both employers and employees pay for EI premiums was reduced. The number of people drawing upon this service dropped in recent years, due to a low unemployment rate. This meant savings for both the small business and its employees.

The Bad Changes

Unfortunately, 2019 also brought some bad tax changes, potentially offsetting the good news.

First, CPP went up. Some CPP changes came into effect to change the potential earnings from one quarter to one third of your income once you begin to collect. For small businesses this meant a higher employer contribution for each employee.

If you have a small business and a significant stream of passive income (eg dividends), you may have been affected by new rules for 2019. Any passive income over $50,000 per year will take a bigger bit into your small business tax rate.  For every dollar of passive income over $50K, you lose $5 off the small business limit of 500K. For example, if you have $100,000 in passive income, you started paying the higher corporate tax rate over $250K. For some small businesses this was a major change that costed them a lot of money.

With so many tax changes in 2019, carried into the future, you want to be prepared and learn how to beat structure your small business to reduce your tax burden. Talk to an expert at Naicker today, to help you understand the changes and find out what will be best for your business.

Tax considerations for e-commerce business owners

E-commerce businesses are becoming more and more popular with every year and many Canadians have deciding to forego the brick-and-mortar business plan for one that allows them to stay at home and online. But there may be tax considerations to think about when running an e-commerce business. Here are a few things to think about:

Is incorporation a benefit?

Because e-commerce businesses tend to be smaller than other offline companies, the owners may think that they are too small to incorporate, or that incorporation may not benefit them. But if the company is selling across Canada, or internationally, there may be tax benefits from incorporating. Contacting an experienced accountant, such as Naicker & Associates, can help answer those questions.

What taxes do you charge?

If you’re selling to an out-of-province customer or client, you must know when and what sales taxes to charge. If you’re running up-to-date commerce software, all of this information should be programmed into it. But with every year changing, you need to ensure that it’s accurately set up for 2018 and beyond.

What employment taxes do you need to pay?

One aspect of many e-commerce businesses is that any employees they have may have never actually set foot into any sort of building. One common mistake that the company owners make is by assuming these employees are all contractors. Depending on the work and how they are being paid, they may, in fact, be regular employees and the owner is required to pay payroll taxes and make pension contributions. If your employee is in another province, you will have to worry about the tax laws there.

Finding a tax specialist who can help answer these questions, whether you’re in Burnaby, Port Moody, or anywhere in the Lower Mainland, can take the stress and worry out of this. Contact Naicker & Associates and we’ll provide all the answers.