What expenses are deductible? Things to consider when calculating the deductible percentage..
Demonstrate how different portions of the home were used for business, and to what extent to make the expenses eligible for deduction
Factors should be considered for businesses struggling to collect outstanding amounts
Make sure to keep all receipts for renovations that may qualify. Some renovations may also be eligible for a medical tax credit.
Here are some factors to determine if a taxpayer can operate a business while collecting EI benefits...
By providing goods or services to an NPO in exchange for advertising and/or promotional services, a barter transaction may have occurred. As such, the typical rules for barter transactions would apply.
Gains are fully taxable where the taxpayer buys a property with the intention to sell for a profit. In other cases, half the gain is taxable.
Tips received by servers and other individuals in the service industry are taxable. Since tips do not show up on T4 slips, some taxpayers are under the false understanding that they are either not taxable, or only partially taxable.
Home buyers’ plan maximum withdrawal increased from $25,000 to $35,000 for withdrawals made after March 19, 2019
Income from the rental of seasonal and extended seasonal campsites and the storage of RVs (Specified investment businesses) are not eligible for the small business tax rate. Instead, they are taxed at over 50% in all provinces and territories, although 20.67% may be refunded when dividends are paid.
One of the exceptions from TOSI occurs when the income recipient is actively engaged in the business and works an average of 20 hours per week. Where the 20-hour test is not met, the ongoing nature and labour requirements of the business must be considered.
CRA commented on whether a CPP/EI ruling triggers follow-up assessing and review. A referral to the Trust Accounts Examination Division (often leading to a payroll audit) is not automatically sent. However, it is sent in situations such as..
CRA released the promised guidance for employment expenses incurred by shareholder-employees to be deductible:
A deduction can be claimed for salary paid to an assistant. Any deduction must be for salary, requiring it be paid to an employee.
Produce a T2200 which indicate that motor vehicle expenditures were requirements of employment with records that support total kilometres traveled such as repair receipts, employment/business travel logs
On September 6, 2019, the IRS announced Relief Procedures for Certain Former Citizens, a new process to facilitate eligible individuals in becoming compliant with their U.S. tax obligations, in conjunction with renouncing their U.S. citizenship (IR-2019-151)
Legally adopting the child of a common-law partner may be eligible to claim the costs under the adoption expense tax credit ($16,255 @ 15% for 2019)
The Department of Finance announced the climate action incentive payment amounts for 2020. The following amounts may be claimed on the 2019 personal tax returns:
Recent changes include rise in tax free Basic personal income to $13,229, 100% immediate write-off for zero-emission vehicle used in a business etc.
Commuting to work, no matter how far, is considered personal. However, there are some exceptions to this rule, such as where the individual travels to a temporary special work site, or a remote work location
CRA released various suggestions to safeguard tax information, including the following:
At the end of 2018 approximately 2 million unclaimed balances, valued at $816 million, were held by the bank, with $11 million being paid out in the year. Of interest, the oldest balance dates back to 1900..
A Henson trust may benefit a disabled relative..
If the motive for the sales were not personal but, rather, in pursuit of profit (sold on account of income) it is not eligible for capital gains treatment. As the gains were not capital in nature, the principal residence exemption could not apply.
The Court upheld the previous Tax Court decision which classified an employer-provided parking pass as a taxable benefit..
Changes to the Canada Business Corporations Act, which came into force on June 13, 2019, incorporated discussions in respect of increased disclosure and tracking requirements of beneficial owners (those who may be considered owners even if not on title) of various types of property
Special rules apply to loans advanced from a corporation to a shareholder or any related person which require an income inclusion in the hands of the borrower..
Taxpayers may be entitled Employment insurance benefits when working outside Canada. A new Government of Canada report shows shocking statistics on tax actually paid and collected in 2014
CRA intend to continue and increase the use of information gathering methods to get information about other taxpayers
If receiving full salary even after being injured, consider whether some of it could be classified as Worker Compensation and therefore tax-free.
A taxpayer may be eligible for the Disability tax credit (DTC) if the impairment(s) represents a marked restriction in the ability to perform a basic activity of daily living
Transport Canada released details on the purchase incentive of up to $5,000 for zero-emission vehicles as originally proposed in the 2019 Budget...
Clothing reimbursements - consider including distinctive visual markings such that it would be considered a uniform and therefore not subject to tax for the employee.
SPECIAL WORK SITE ALLOWANCE planning to sell your residence because most of your time is spent at a special work site, note that your allowance may become taxable.
In May and June of 2019, the provincial courts of appeal in Ontario and Saskatchewan ruled that the Greenhouse Gas Pollution Pricing Act (the Carbon Tax) was constitutional.
Watch out for details of this new incentive to be released in the fall...
Consider whether an RRSP contribution should be made now in order to benefit from the tax deduction, while making equity available for a later home purchase. Funds withdrawn under the plan must be in the RRSP at least 90 days prior to the withdrawal...
CRA was asked whether the costs of installing a steam shower (sauna) and hydrotherapy pool could be eligible for the medical expense tax credit (METC)?
Interest rates on Canada Student Loans and Canada Apprentice Loans will be lowered starting in 2019-2020...
Consider revisiting your estate plan, will, and any other communications you would like to leave for your family.
To qualify for the rebate, the purchaser, or a person related to the purchaser, must, at the time they become liable for the purchase, intend to use the property as their primary place of residence...
Determine whether it is best to defer receiving OAS prior to applying...
Each parent is entitled to half of the credits/benefits which would be available if the child resided primarily with them
If incurring child care costs with a recreational or educational component, consideration may be given to claiming these amounts as a child care expense, up to the maximum allowed amount. That is, an annual amount of $8,000/child under 7, $5,000/child aged 7 to 16 and $11,000 for a disabled child.
The annual TFSA contribution limit for 2019 will be increased to $6,000 (from $5,500) due to indexation...
Review whether capital purchases should be accelerated, and whether the accelerated deduction should be claimed given your particular situation
Be prepared by reviewing protocol and obligations in respect of client information hacks and losses. Quick response can assist in rectifying the integrity of the data and the relationship with the client.
Although it may be possible deduct travel amounts against employment income, such amounts are often challenged by CRA.
Employers should budget for higher CPP costs on continual increases over the coming seven years.
The direct proceeds from the federal carbon tax will be returned to the territory or province of origin.
U.S. Supreme Court decision found that a business with no physical presence in a state may still be required to collect and remit state sales taxes.
A private corporation’s income from a specified investment business (SIB) is not eligible for the active business tax rates (varying from 10% to 31%, depending on a number of factors
Be cautious when acting as a director or taking responsibility for loans when not directly involved in a corporation’s activities. Failing to take certain actions may result in personal liability for certain corporate tax debts.
A person who earns income while receiving EI benefits can keep $0.50 of their EI benefits for every dollar earned, up to 90% of their previous weekly earnings.
The facts of each situation must be considered to determine whether an exception from TOSI is available, and whether remuneration in the form of dividend, salary or both is most appropriate.
Whenever a settlement is being negotiated, ensure there is mutual understanding on the tax treatment to prevent potential nullification.
There are special laws which hold a director personally liable for certain amounts that their corporation fails to deduct, withhold, remit, or pay. Most commonly, these amounts include federal sales tax (GST/HST) and payroll withholdings (income tax, EI and CPP). It does not generally include normal corporate income tax liabilities.
CRA noted that “if insurance agents, realtors, mutual fund salespersons, or other professionals are legally… precluded from assigning their commissions to a corporation, then the commission income must be reported by the individuals, and cannot be reported through a corporation, regardless of the documentation provided”.
Tax time is fast approaching—it’s important to do your homework and know exactly what tax deductions you can claim.
Individuals that receive certain types of income derived from a “related business” will be subject to Tax on Split Income (TOSI) unless an exclusion applies. TOSI is subject to the highest personal tax rate with no benefit of personal credits.
Do I have to check up on a supplier when paying them GST/HST? Yes.
Implement a system for checking GST/HST numbers, especially for major purchases, in CRA’s GST/HST registry...
If the loan was made to earn income and other conditions are met, you may be able to write-off half against your regular income as an allowable business investment loss (ABIL). A recent tax court case shed some light on defining whether the loan was made to earn income...
The legislation to legalize marijuana for non-medical purposes works its way through parliament (Bill C-45 entered the Senate phase on November 27, 2017). Producers, vendors, regulators, enforcement, and potential customers are seriously considering the implications.
On taxable benefits arising from employer-sponsored, if the cost exceeds $150/person, the entire amount, including the additional cost, is a taxable benefit to the employee.
CRA stated that they do not consider meals subsidized by the employer to be a taxable benefit provided the employee pays a reasonable charge.
If you are a director and legal representative of a corporation, ensure that you are properly protected if distributing assets.
If stating interest rates in legal contracts, ensure to also state them in per annum terms
If employees are using a business aircraft for personal use, attention should be paid to whether employment benefits are being properly calculated and reported.
CRA may request taxpayer information from third-parties...
Effective March 31, 2019, charities and qualified donees must include the new website address of CRA, www.canada.ca/charities-giving on all donation receipts.
One may need to track any return of capital which is not reinvested to determine interest deductibility.
CRA provides a number of mobile phone apps that taxpayers (individuals, corporations, etc.) can use to assist with their tax obligations...
T5018 should be filed for any subcontractor payment or credit made relating to goods or services received in the course of construction activities...
A travel allowance paid to an employee for the use of their personal vehicle for business purposes will be non-taxable if it is reasonable...
U.S. State Department was able to deny or revoke passports to U.S. citizens having a “seriously delinquent tax debt”...
Two significant changes are proposed. First, a limit to the small business deduction for CCPCs generating significant income from passive assets, and second, a new regime to stream the recovery of refundable tax to the payment of specific types of dividends
Gains or losses from selling or buying DCs must be reported on one’s tax return... DC received in exchange for goods or services must be included in the seller’s income for tax purposes. GST/HST would also apply on the fair market value (FMV) of goods or services
CRA states that T4s are required for all employees, including family members, and subject to payroll deductions, as appropriate.
CRA require PayPal to disclose sales records of Business Account Holders...
The CRA Charity Directorate provides a number of fairly comprehensive and easy to read checklists relating to various responsibilities associated with operating a registered charity.
Where an individual is married or in a common-law relationship, GIS entitlements are based on the combined income of a couple.
In a recent release (Excise and GST/HST News No. 102), CRA reminded taxpayers that they may place a non-compliance hold on a taxpayer’s account if they are a non-compliant GST/HST registrant.
If operating as a mid-market business in the U.S., be prepared for the possibility of more scrutiny from the IRS.
Two Technical Interpretations (May 26 and March 3, 2017) considered whether support provided to a refugee would be required to be reported on a Form T5007, Statement of Benefits.
CRA assisted in collecting a six figure U.S. tax penalty for unfiled disclosures from a U.S. citizen resident in Canada.
An April 28, 2017 Tax Court of Canada case considered whether a practicing lawyer had a source of business income in respect of her law practice for the 2011-2014 years.
where a family member of a deceased individual would like to be recognized by CRA as the person or persons who will manage the tax affairs of the person who died without a last will and testament, they can now do so by completing a CRA Form (Affidavit for intestate situation, Forms RC549 to RC561, with no form for Quebec, and no RC554).
In recent years, CRA has particularly focused on tracking underground economy activities. One way they are doing this is by obtaining information from key 3rd parties.
A death benefit is a payment received subsequent to the death of an employee, in recognition of the deceased employees services.
CRA has provided commentary on its website to discuss recent changes to allow the electronic distribution of T4 slips. In the past, an employer could provide a T4 electronically only with the employees consent. For 2017 and subsequent tax years, employers may also satisfy their obligations by providing electronic versions without specific consent, provided other criteria are met.
Historically, CRA has stated that an employee enjoying a discount on the purchase of merchandise from their employer is only taxable if a limited number of specified situations exist, such as where the employer makes a special arrangement
In the past, taxpayers in certain designated professions (i.e., accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors) may have elected to exclude the value of work in progress (WIP) in computing their income for tax purposes. This essentially enabled these professionals to defer tax by permitting the costs associated with WIP to be expensed without including the matching revenues.
When using this tool, individuals should have their CPP Statement of Contributions, financial information about their employers pension, most recent RRSP statement, and any other information related to savings that will provide for ongoing monthly retirement income.
In a March 31, 2017 Technical Interpretation, CRA commented on the tax consequences of a charity returning a donated property to the donor. This could occur, for example, when a donation was made specifically for a project that had been halted.
On July 18, 2017, Minister of Finance, Bill Morneau announced the release of a Consultation Paper which focused on three tax practices that the Government considers to provide an unfair tax advantage to private corporations and their owners. These include:
Some quick points to consider
The Voluntary Disclosure Program (VDP) provides taxpayers (individuals, corporations, partnerships, trusts, etc.) the opportunity to fix incorrect or incomplete previously filed tax returns (or returns that should have been filed) with a reduction to penalties and possibly interest. CRA recently released fairly substantial proposed changes to the current program, effective January 1, 2018. The proposals are expected to be finalized in the fall of 2017.
The proposals will create two tracks for income tax disclosures.
In a March 9, 2017 Technical Interpretation, CRA commented on the tax filing and withholding requirements related to a non-resident individual providing services to a Canadian company.
The role of a tax accountant has been continuously changing over the course of the last 50 years, and it is currently undergoing yet another transition period with the growing popularity of cloud accounting.