Working as a realtor sometimes means having a lot of balls in the air. You have multiple clients, multiple listings, and on top of that you’re running your business out of your home, car, and brokerage office. The good news is that by incorporating a few good tools and habits into your business, you can bank on having a stress-free 2018.
Know your reports
Surprise your bookkeeper this year by being proactive and giving them a couple easy reports that summarize your whole year of business beautifully. There are a couple reports that, when matched with the bank and credit card statements, give us almost everything we need to get started on your year end. Every brokerage calls these reports by a slightly different name, but they are all some variety of the two listed here:
- Agent Revenue Summary (RE/MAX) or Agent Earnings History Report (Royal LePage): this report summarizes all your deals, with dates, earnings and GST collected.
- Annual Billing Summary (RE/MAX) or General Expense Statement (Royal LePage): this report lists the details of every deal during the year including all expenses and administration fees they ding you for on each deal.
Use a Mileage App
Vehicle expenses are a large deduction for any realtor. Each km you drive is worth money for tax deductions, so don’t miss recording any of them. MileIQ is an iPhone app that automatically records your car trips using GPS. The app is always working in the background of your phone and recognizes when you start and stop driving. It logs the starting and ending destinations, the distance travelled and asks you to ‘swipe right’ if it’s a business trip or ‘swipe left’ if it was personal. Some call it the Tinder for trips! At the end of the year you can run a report giving an accurate and supportable list of all your kms for that maximum deduction.
Be prepared when the CRA comes asking for details about the km’s you have been writing-off each year. The information they require when they audit your vehicle expense includes:
- A list of each trip, with the sum of the list equaling the total kms claimed. This list must include:
- date of each trip
- starting & ending destination
- purpose of the trip (who/why)
- total round trip km’s, supported by google maps (not odometer)
- Total km’s driven on each vehicle during the year and the total km’s driven for business purposes each year. This gives us your Business-Use Ratio.
Manually tracking mileage in a log book is a big task for anyone to do accurately and on a regular basis. There is a free version of MileIQ for up to 40 trips a month or $5.99/month for additional drives. A couple other good apps are Mileage Expense Log and TripLog.
Capture your receipts on your phone
Coffee meetings, lunch meetings, concerts, hockey games, gifts for clients, cleaners, photographers, printers, Open House refreshments – you guys have a lot of expenses and accumulate a mountain of receipts, including some personal and some business. Receipts in your car, your wallet or purse, your coat pockets, your bedside table, your desk drawers, your kitchen table and some even filed away properly. It can be a frustrating mess.
Not only that, but there may come a day when you actually need these receipts - maybe to return something to the vendor, or (god-forbid) in the case of a CRA audit. The CRA can request those receipts for up to 7 years, so it’s important to keep them safe.
Go digital
If all your receipts were in the cloud, you could throw out all the paper receipts. Well, there’s an app for that - several actually. De-clutter your office and quit dreading the day you have to sift through all those boxes and instead, capture all those transactions in an app.
There are two main types of apps that can help with this:
1) Capturing App: simply put a digital copy of your documents in the cloud. Take a picture with your phone and save the documents as a picture or pdf. Here are two examples:
- Evernote: this is a note tracking app to help organize, declutter and archive notes you take in any of life’s situations. Those who use it can attest that it’s a life changer. With your phone camera, capture receipts and meeting notes from a whiteboard or a notepad, and convert them all to a useable document like a PDF. There are neat ways to convert the information for editing, saving, or printing later.
- Office Lens: Microsoft’s version of Evernote, which syncs with MS Office and OneNote. This package works in very much the same way as Evernote, and is free.
2) Integrating App: Capturing apps accumulate the information, but integrating apps then link those saved receipts right to your bank account transactions and your General Ledger, which is amazing for audit protection. Some of these apps can read the info on the receipt and pass the info onto the bookkeeping software, which can eliminate manual data entry (and the human error that goes with it). Here are a few:
- Receipt Bank: the smartest product of the bunch. This app can read the date, vendor and GST paid from the receipt picture, and push it through to your Xero, Freshbooks or QBO account and even match it to the very same credit card transaction for that purchase. You then have the original receipt as back-up for that transaction forever in the cloud. It starts at about $30.00/month.
- Hubdoc: calls themselves a digital filing cabinet where you can store receipts, bills, statements and emails in one secure, paperless account. Key information from those documents can be extracted from the receipt picture, email, or pdf of a bill, and you can give your accountant access to find all the documents they need. Hubdoc can even collect key documents for you: it can download bank statements every month for you, collect receipts from your amazon account automatically and save a pdf of your insurance and phone bills, simply by forwarding the email. Cost is $25/month.
- Xero Mobile App: Xero is the bookkeeping and accounting software we use at True North. With the app, you can take a picture of the receipt and right there code the transaction to an account directly, where it can later be matched to the bank transaction. This is similar to Receipt Bank, except you are cutting out the middle man; however, there is no auto-read of the info on the receipts. The app is free if you pay for the Xero Business edition, which includes a ton of other vital features like invoicing, general ledger, bank feeds and payables/receivables. Cost is $39/month.
Schedule each Income Tax and GST instalment payment at the start of the year
The CRA is pretty clear about when and how much money to pay them. When we finish your year-end, we can determine how much you need to be paying in tax throughout the year, and when. Never get another interest charge from them by simply scheduling the automatic payments at the start of the year.
At the year end when your accountant tells you how much corporate income tax and how much GST to pay, if either of these amounts is over $3,000, then you need to make quarterly instalments for the current year. Skip the interest and even-out the payments over the whole year by using your online banking to schedule the instalments for the next year as soon as you know the amounts.
Automate Payroll Remittances
Figuring out how (and how much) to pay yourself is especially interesting for realtors. You can do dividends or wages (read more about this here). The tricky part for realtors is that your income is very difficult to predict in both timing and amount. For most realtors we work with, wages make the most sense over the long term, but that means you need to make monthly payroll remittances. This involves determining how much your corp paid you each month, and then calculating the CPP and taxes owing for that pay period (read more about calculating payroll remittances in our FAQ). The payment then needs to be made by the 15th of the following month. This is a manual task that few realtors have time for.
We have a solution. At the start of the year, work with your household to determine how much you guys need to live on for the upcoming year. Take this net figure to your accountant and they will use it calculate your gross wages for the year, and the CPP and taxes owing by year end. Split these annual figures into equal monthly payments: one amount to go to your household and one payment to the government.
Schedule each of these payments to automatically be withdrawn each month on the 10th day so you never miss that 15th of the month deadline. One payment will go into your personal accounts for living expenses and the other gets paid into your company’s Payroll Account with the CRA. Do this at the start of the year, and then revisit and adjust the wage right before the end of the year.
Note: To be able to schedule any tax payments from your business online banking, you first need to register for Tax Payments. Every bank is different, but if you can’t seem to figure out these payments, it could be that you haven’t registered. Ask us if you have more questions.
Read more about Corporate Tax topics that may be helpful to you and your small business.
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