Tax and Accounting Tips and Traps
Changes to the principal residence exemption reporting requirements
In October 2016, the Canada Revenue Agency (“CRA”) announced a change to their administrative policy relating to the principal residence exemption.
In the past as an administrative concession, the CRA did not require an individual to report the disposition of a property designated as their principal residence....» Read more...
Capital losses for securities
In general, a capital loss arises when the selling price for a capital investments is lower than the purchase price. There are various rules in the Income Tax Act that could suspend the capital loss or deny it. Capital losses may reduce any capital gains and therefore the taxable income for the year.
Reporting capital losses
We mused in the pa...» Read more...
TFSA stands for Tax Free Savings Account. Contributions to TFSA are not tax deductible, however any income or loss on account is not taxable (deductible). Interest on money borrowed to contribute to TFSA is not deductible.
TFSA program started in 2009 and it is a way for individuals to save money tax free throughout their lifetime.
The 2015 Budget proposes t...» Read more...
The eligible dividends regime was designated to eliminate the double taxation for the corporate tax and distributions (dividends) to individual shareholders, from corporate earnings that did not benefit from lower corporate tax rates, such as the Small Business Deduction.
Before the introduction of the eligible dividends rules, it was common tax planning to "bonus down" corporate ea...» Read more...
Mutual funds are a pooling of resources with a common investment objective. Fund managers buy and trade investments in the fund. Any interest, dividends, foreign income and capital gains from these investments, net of management fees and fund expenses, are allocated to unitholders. Annually, you must include in your income, the allocations from a mutual fund to...» Read more...
Accountants - what they do?
Recognized accounting designations
There are several accounting designations across Canada but only three of them are recognized professional accounting designations:
Certified Management Accountant (CMA)
Certified General Accountant (CGA)
Chartered Accountant (CA)
Under the proposed guidelines, the three accounting designations will merge as one...» Read more...
Deductibility of interest expense. Your accountant can help.
If you borrow money to buy an income earning investment, interest expense incurred is deductible. Income for this purpose includes dividends and interest, but not capital gains. Consult your accountant for any tax implications regarding interest deductibility.
Interest on money you borrow to contribute to a registered retireme...» Read more...
Selling your business? Talk to your accountant first!
The decision to sell your business is a financial and emotional one. You are planning your retirement but you find it difficult to step away from your business. At the earlier stages, you should consult your tax accountant and consider other points such as tax opportunities, accounting and financial implications.
What is the value of...» Read more...
2013 Personal Tax Update
For any investor it is very important to understand the types of income generated and the after-tax cash flows. Depending on the type of investment income, the tax rates can be different and should be considered before making an informed investing decision. Your accountant can advise on the tax implications regarding your investments.
Div...» Read more...
Chartered Professional Accountants of Canada (CPA Canada) has been established as a non-for-profit association starting January 1, 2013. This brings us one step closer to a unified accounting profession in Canada. The following is the message sent to Chartered Accountants members on January 4, 2012 by the Presidents of Chartered Accountants and Certified Management Accountants of...» Read more...
Incorporating your small business
As a small business owner, once your business grows, you are likely to face the decision of whether or not to incorporate. An experienced small business accountant will advise you to base your decision to incorporate on a number of factors, tax and economic related.
An incorporated business is a separate legal entity distinc...» Read more...
Year-end to-do tax checklist
December is a very busy month for most people. However, take some time to review the year-end tax checklist - it could save you tax $$$. Before December 31 you should consider the following:
Evaluate your remuneration strategy;
Make capital acquisitions for the business (self-employed, contractors, doctors, dentists etc.) before year-end. Tax deduction is av...» Read more...
Business related travel
Canada Revenue Agency’s longstanding position is that travel between home and the principal place of business is not deductible.
For a Small Business this means that a taxable benefit arises when an employee uses a work vehicle to travel between home and workplace. For a contractor, the travel portion between the house and the principal place of business is not busi...» Read more...
Why internal controls are so important for a Small Business?
A strong control environment will ensure a Small Business is run efficiently and there is a reduced exposure to unknown tax liabilities and fraud. As owner you should consult your Small Business Accountant on a continuous basis and update the internal controls as the business grows.
A Small Business has limited resources and as...» Read more...
How to select your Small Business Accountant
So many times we have heard stories about small business accountants. However, there is not much information about how to select your small business accountant. According to many experts, word of mouth referrals are one of the best ways to find a small business accountant. Also interview your prospects and assess your accounting and tax needs; ju...» Read more...
Non residents tax in Canada
Non residents of Canada working as employees in Canada will be subject to the same tax deductions as Canadian residents. These deductions include federal and provincial income tax, Employment Insurance premiums, and Canada Pension Plan contributions.
Non resident employees should complete form TD1 to determine which "claim code" the employer should use when calcu...» Read more...
Penalties for Failure to File an Information Return
If you fail to file an information return by the due date, Canada Revenue Agency may assess a late filing penalty. The penalty is the greater of $100 or:
No. information returns (slips) / Penalty (per day) / Maximum penalty
1 - 50 / $10 / $1,000
51 - 500 / $...» Read more...
Private Health Service Plans / Health Care Spending Account
Qualifying private health service plans, such as the Health Care Spending Account (HCSA), are very common nowadays. Not only is the Health Care Spending Account a compensation tool for employees but there are also tax benefits available for both employer and employee. Premiums paid by the employer are tax deductible. Premiums paid by t...» Read more...
Allowable Business Investment Loss (ABIL)
A business investment loss may arise when an individual realizes a capital loss on the actual or deemed disposition of a debt owed by OR on a share of a Small Business Corporation. An Allowable Business Investment Loss (ABIL) is the tax allowable portion (50%) of the capital loss.
An individual may crystallize a business investment loss by making an...» Read more...
Benefits and tax deductions
GST/HST tax credit
A quarterly payment that helps individuals with low income to offset all or part of the GST/HST they pay. You must apply every year in order to be eligible for this tax benefit.
If you move for work purposes, including summer employment, then you can claim a tax deduction for moving expenses. Moving expenses will be deduct...» Read more...
Quick Method of Accounting for GST
The Quick Method of Accounting for GST (“Quick Method”) is a simplified method to account for GST available to small business. The basic principle is that the Quick method should make it easier for small businesses to calculate their net GST.
How does it work?
GST registrants are required to charge the regular GST / PST / HST rate on their sales. H...» Read more...
The purpose of the shareholder benefit tax provisions is to prevent shareholders from using corporate property (including money) for their personal use. The value of any benefit conferred by the corporation to the shareholder is included in the shareholder's income. There are some exemptions to the shareholder income inclusion such as payment of dividends, reduction of paid-...» Read more...
In the past, some employees were required to buy their own electronic devices for use in the course of employment. However, in order to diversify the remuneration package, it becomes common for employers to provide employees with allowances to purchase electronic devices (computers, smart phones etc.) for use in their employment.
TIPS & TRAPS
CRA's view is that such allowance will usually gi...» Read more...
What is the best remuneration tax strategy?
There are no clear answers when it comes to remuneration. The ultimate goal is to allow you to take out funds from the corporation with minimal tax costs. However, the remuneration strategy is not straight forward and depends on individual circumstances. Finding the right remuneration strategy is best left in the hands of your trusted Chartered Accoun...» Read more...
The interest deductibility on a house mortgage was subject to two landmark cases heard by the Supreme Court of Canada:
Singleton in 2001 and
Lipson in 2009.
The first case was found in the favor of the taxpayer whether the second was lost by the taxpayer. Lipson was lost on the grounds of abusive tax planning around spousal attribution rules but the Supreme Cou...» Read more...
The computation of income subject to tax is a two-step process. First, the net income as per the corporation’s Financial Statements is restated in taxation terms. Then the net income for tax purposes is reduced for items such as charitable donations, taxable dividends received, losses carried forward, etc. The result is the corporation’s taxable income on which the income tax is calcul...» Read more...
Individuals are very limited as to what they can deduct against employment income. Usually the deductions are available if they were not previously reimbursed by the employer (or reimbursed but included in your income). Some of the allowable deductions are:
dues and other memberships, when the membership is required in order to maintain the professional status;
salaries paid to assistants em...» Read more...
It may be more advantageous to be an independent contractor rather than an employee, in order to maximize the deductions allowable for self-employment. While you may think you are self-employed, CRA may consider you as an employee. Factors to consider in making this determination:
level of control the payer has over the contractor (i.e. a self-employed individual usually works independently w...» Read more...