Tax, Assurance Services & Accounting
 

TaxTips

Tax and Accounting Tips and Traps

Capital losses

Capital losses for securities General info 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...
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2015 Federal Budget Changes - TFSA

Overview 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. Contribution limit The 2015 Budget proposes t...
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Eligible dividends

Overview 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...
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Investment funds and tax consequences

Investment funds Mutual funds 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...
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What accountants do?

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...
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Deductibility of interest expense

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...
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Sale of a business

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...
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Types of investment income (dividends, interest, capital gains and capital losses)

2013 Personal Tax Update Investment income 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...
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CPA Canada established

CPA Canada 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...
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When is the right time to incorporate?

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. Economic factors An incorporated business is a separate legal entity distinc...
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Year-end tax list

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...
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Are you keeping a logbook?

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...
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Financial controls for Small Business

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...
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Small Business Accountant

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...
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Non-residents employees in Canada

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...
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Penalties for Failure to File an Information Return

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 / $...
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Private Health Services Plans

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...
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Allowable Business Investment Loss

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...
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Tax claims for students

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. Moving expenses If you move for work purposes, including summer employment, then you can claim a tax deduction for moving expenses. Moving expenses will be deduct...
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Quick Method of Accounting for GST

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...
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Shareholder and employee loan

Shareholder benefit 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-...
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Employment allowance for technology devices

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...
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Remuneration tax strategy

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...
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Making your mortgage tax-deductible

Interest deductibility 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...
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Computation of income for tax purposes

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...
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Tax deductions for employees

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...
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Employee vs. self-employed

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...
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