BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

December 16, 2011 09:00 ET

Franchisees Can Take Advantage of Five Year-End Tax Tips-BMO

- Over 78,000 franchises across Canada employ more than 1 million people

- Franchising accounts for over 10 per cent of Canada's GDP

- Franchised businesses account for over 40 per cent of all retail sales

TORONTO, ONTARIO--(Marketwire - Dec. 16, 2011) - BMO Bank of Montreal released five year-end tax tips and strategies for entrepreneurs running franchise outlets in Canada that can pay dividends come tax time.

"While 2011 had some challenges, many franchise owners we talk to are cautiously optimistic and confident about finishing 2011 on solid ground," said Steve Iskierski, Senior Manager, National Franchising Services, BMO Bank of Montreal. "As the year draws to a close, now is a great time to do a quick financial check-up with a small business specialist and your accountant to consider some straightforward tips and strategies to help minimize the amount of 2011 income tax payable."

For franchisees in Canada (most commonly a sole proprietorship or partnership), there are a number of year-end strategies that can be applied to reduce the amount of income tax payable, including:

1) Do a 'Financial Check-Up': A business banking advisor, accountant, and investment advisor can help owners make sure they have a clear understanding of their current financial situation. These professionals can also help develop or adjust existing plans based on new needs or changing circumstances.
2) Defer Income: Depending on a number of factors (e.g. future tax rates, projected profit or loss for 2011, cash flow), franchisees may be able to reduce the current taxes they will be paying by deferring some of the income they expect to receive in December, into January 2012 instead.
3) Gather Business Receipts and Maximize Expenses: Maximize income tax deductions by ensuring all allowable receipts for business-related expenses (e.g. gas, stamps, customer lunches, coffee for the office) are itemized. Over the course of a year, those receipts for the little things can add up. Franchisees should consult the guidelines available from the Canada Revenue Agency, or speak to their professional tax advisor about eligible business expenses.
Franchisees can also increase some expenditures before year-end, in order to maximize 2011 deductions. For example, consider accelerating the purchase of new equipment or other depreciable assets before the end of the year so you can potentially benefit from a claim for tax depreciation in the current year.
4) Consider Inventory Write-offs: A drop in the value of inventory may also provide an opportunity for an additional income tax deduction for the current year. It is important to speak to a banking advisor and your accountant about the tax rules that apply to your particular situation.
5) Set up a New RRSP or make that Maximum Annual RRSP Contribution: For unincorporated franchisees, income earned by the business becomes personal income when filing taxes using the T1 form. However, many franchisees fail to take full advantage of the best income tax deduction available to Canadians - the Registered Retirement Savings Plan (RRSP).
RRSP contributions are deducted from annual income, thereby lowering income tax payable at the individual's marginal tax rate. Now is a great time to set up a new RRSP or make a contribution to an existing plan for 2011 to benefit from the tax-deferred growth right away. The process is simple, quick and can be done at any bank branch.

The BMO Bank of Montreal National Franchising Team

The National Franchising Services Team focuses exclusively on franchising, providing a full range of customized programs and financial solutions to assist established and emerging franchise systems in Canada. With over 40 years of experience in the franchising marketplace, BMO Bank of Montreal understands the need for customized financial solutions. To find out more about franchising services at BMO please visit: BMO Bank of Montreal Franchising Services.

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