Proactive Accounting Solutions for Residential Construction and Industry
Small business owners in the residential construction and general contractor industries face unique challenges when it comes to accounting and taxes. Operating as a cash business in the construction industry carries a high risk of being audited by the Canada Revenue Agency (CRA), so it is crucial to have a strong understanding of tax planning and compliance.
Why Proactive Accounting Solutions: The Risks of Operating as a Cash Business in the Construction Industry
The CRA categorizes the residential construction and general contractor industries as part of the Underground Economy Group, which means that the agency has high expectations for unreported income and conducts more audits than other industries. Recently, the CRA has initiated audit projects to address the boom in the construction industry, focusing on past years and any discrepancies found.
The outcome of an audit can result in significant tax reassessed, interest, and gross negligence penalties of up to 50% of the tax, and even litigation costs that can reach up to $50,000. CRA audit assistance can also be expensive, ranging from $10,000 to $25,000, and does not guarantee a positive outcome.
The Benefits of Proactive Accounting Solutions for Small Businesses in the Construction Industry
To mitigate the risk of being audited, small business owners in the construction industry should adopt proactive accounting and advisory services. Proactive accounting is a comprehensive tax planning and compliance approach involving ongoing support, risk detection, and advisory.
Traditional accounting for compliance purposes may not provide the necessary support and guidance to avoid an audit. Having an ongoing relationship with a tax professional who can provide audit risk assessment planning, ongoing support, risk detection, and tax savings advisory is crucial.
Proactive accounting can help small business owners in the construction industry minimize their risk of being audited and maximize their tax savings opportunities. In addition, proactive accounting can help small business owners to stay compliant with tax regulations, avoid penalties, and make informed business decisions.
The Value of Proactive Accounting Solutions for Small Businesses in the Construction Industry
Proactive accounting brings great value to small business owners in the construction industry. 90% of tax planning opportunities are lost at the end of the tax year, highlighting the importance of proactive accounting. By working with a tax professional specializing in proactive accounting and advisory services, small business owners in the construction industry can ensure that they are taking advantage of all tax savings opportunities and reducing their audit risk.
Proactive accounting can also help small business owners in the construction industry to streamline their accounting processes, improve cash flow, and increase their bottom line. By having a comprehensive understanding of their financial situation, small business owners can make informed business decisions that will help them to grow and succeed.
Conclusion
Small business owners in the residential construction and general contractor industries face unique challenges when it comes to accounting and taxes. Operating as a cash business in the construction industry carries a high risk of being audited by the CRA. Small business owners should adopt proactive accounting and advisory services to mitigate the risk of being audited and maximize tax savings opportunities.
Proactive accounting is a comprehensive tax planning and compliance approach involving ongoing support, risk detection, and advisory. By working with a tax professional specializing in proactive accounting and advisory services, small business owners in the construction industry can ensure that they are taking advantage of all tax savings opportunities, reducing their audit risk, and making informed business decisions that will help them to grow and succeed.