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If You Sold Or Used Bitcoin Last Year, You Owe Money To CRA

Bitcoin buyers beware. While owning cryptocurrencies like Bitcoin is not a taxable act, using the digital currency to purchase goods and services may be. While not considered legal tender per se, Bitcoin once exchanged for another item, via a sales transaction, is viewed as a commodity. If you were fortunate enough to acquire the digital coin while it was trading at a low price and then sold it at a high price or purchased an item, then you will have to report your capital gains to CRA and pay tax on your gains.

When two people are on the title to a condo, who pays capital gains?

When Kurt purchased a condo, his father co-signed for the mortgage. Now that he wants to sell the condo and his dad is on the title, he wants to know who will be subject to the capital gains tax? The answer is that regardless of who is the named owner of a piece of property, the person subject to a capital gain tax will be the beneficial owner of the property. The beneficial owner is considered to be the person who maintains possession of the property along with it’s use and risk, often evidenced by things such as maintaining insurance on the property or any entitlement to income.

Key Takeaways:

For tax purposes, capital gains are reported on the tax return of the beneficial owner of the property.
In Interpretation Bulletin 170R, the CRA describes beneficial ownership as having possession, use and risk as its primary attributes.
In this case, the beneficial owner is Kurt and not the co-signer.

“Figuring out who “owns” a property is key.”

Tempted to cheat on your taxes and play the ‘audit lottery’? These two cases should dissuade you

It may be tempting to cheat on your taxes, but it’s not a good idea. While the Canadian and U.S. tax systems are largely based on self-reporting, risking an audit by burying questionable expenses or under-reporting income can land you in hot water. For example, a businessman from Calgary paid his wife $12,000 for administrative services, but attributed the expense to office equipment. He was audited by CRA for his “mistake,” and the judge denied the employment expense deductions. Cheating on your taxes can be a time-consuming misjudgment that can cost you thousands to rectify. With CRA paying closer attention to tax compliance, hiring more auditors and comparing incomes, cheating on your taxes in a losing proposition. Speak with your Accountant if you want to know how to avoid these costly mistakes.

New business taxes creating ‘a whole new group of losers’

One pain point for business are the changes to passive income rules. Some businesses are hit hard by the changes, because they have a huge income, or they were saving up to cope with certain business conditions. Now, they are paying more taxes, because their income is over the new threshold. For instance, some business’s franchise agreements require them to set aside some money for renovations every few years. Also many doctors use passive income to pay for clinic improvements. These businesses will now need to lay off staff and/or cut hours.

“Most of them have made no changes to their business practices, and I firmly believe that many of them will get a rude awakening once their tax file is passed by the CRA”

The five biggest RRSP myths that Canadians can’t stop repeating

Don’t fall for these RRSP myths.

“There’s no point investing in an RRSP — you pay all the savings back in taxes when you retire anyway.” Remember you receive a tax deduction when you contribute, and if your tax rate is lower in the year you withdraw, then you pay less tax on it. Plus, regardless of the tax rate, you will enjoy tax-free long-term compounding on your investments in an RRSP.

“It’s better to invest in a TFSA than in an RRSP.” This isn’t true if you expect to have a lower tax rate in retirement.

“It’s better to pay off debt.” This is true for high-interest debt, but the numbers don’t support it for other debts such as a low-interest mortgage.

“I don’t have enough money to save in an RRSP.” Modest, regular contributions can really add up.

“If I save too much in an RRSP or RRIF, there will be a large tax bill when I die.” There are strategies to minimize income taxes on your RRSP/RRIF, and also exceptions.

What You Need For a Business Loan in Alberta

Before you can get a cheque cut from a bank or other financial institution for your business, the lending institution is going to want some information. Often businesses assume that all they need is to fill-out a simple loan application and can find themselves caught off guard by what is required.

While every financial institution will have their own requirements, many documents are mandatory across all lenders. Before applying, here are the basics to keep in mind.

First, decide what the money will be used for. The reasons for the loan are important for determining the type of credit you need to apply for. For instance, if you’re looking for financing to purchase equipment or real estate, then the bank will have a clear idea of terms and security for the loan. On the other hand, if the loan is for financing losses or acquiring non-essential business assets, then the bank may be more reluctant and request stricter terms.

Second, determine how much money is required. Underestimating the amount can lead to problems with working capital sooner than necessary. Overestimating can cause the bank to question your credibility. The best approach is to put together a well thought-out plan.

Most lenders will want to see a business plan, supported by complete financial statements and projections. Typically, it should include financial statements with a three-year history of earning like a profit loss statement, cash flow statement and balance sheet, and a current interim financial report. They’ll also want to review financial projections for the business over the next year or two. Regardless of how they were prepared; it is likely that the lender will insist that any financial statements be reviewed or audited by a Chartered Professional Accountant (CPA) firm.

Depending on the type of loan you’re applying for, other documents that may be required to include legal documents, collateral, business credit reports, insurance documents and the personal financial details of all the owners who have a significant share. Banks and other financial institutions these documents as part of their due diligence process.

Once you’ve prepared and collected all the documents, you’re ready to find a lender and prepare a loan application package for them based on their specific requirements.

How companies use giving to create social and business benefits

Recent surveys reveal companies hoping to keep their younger employees engaged with the business should look to charitable concerns for that motivation. Over three quarters of millennial workers look at the company’s charity activity in social and environmental areas before selecting a workplace, and two thirds of them will decline employment with companies that lack committed social responsibility activities. One suggestion some experts have for companies looking to boost charity operations at a low cost is to bring the very millennial employees they’re hoping to entice into the loop; tapping those employees’ skills to help non-profit charities.

Should Pete sell mutual fund to pay down the mortgage?

Pete has a low fixed-rate mortgage, and although he pays the required bi-weekly payments, he is able to pay an annual lump sum with no fees attached. He can get the money by selling his mutual fund, but he is questioning if this is a good idea. After evaluating the positives and negatives, the answer is no, because the interest rate in the mutual fund is higher than the mortgage interest rate. Another reason not to do this is that there could also be hidden fees and tax consequences (if held within an RRSP) of selling a mutual fund.

Key Takeaways:

Withdrawing from investments to pay off your mortgage could have hidden fees associated with it, and is generally not a good idea.
Increasing your payments on the mortgage if you have surplus cash could be helpful for the future.
If you increase payments on your mortgage, make sure to choose an amount that will not cause you financial hardships in the future.

“People want to know where their money will be most effective. [But] selling high returns for low-rate debt doesn’t add up.”

5 Changes You Need To Know Before Filing Your Income Tax

The laws that govern how taxes are calculated have changed again, and taxpayers should be aware of the new details before filing their 2017 returns. Among the changes are the elimination of the National Transit Tax Credit, a reduced small business tax to 10 percent, and the Military Tax Credit to exempt military salaries from federal income taxes. Family tax benefits have also been overhauled, which will affect Canadians filing returns that include child dependants. This includes the elimination of the Children’s Fitness and Arts Tax Credit and disability tax credit for eligible children, but an increase in the Canada Child Benefit and Child Disability Benefit. Students will also no longer be able to claim the federal education textbook and tax credits.

Should I contribute to an RRSP even though I’m retired?

Bruce has $15,000 in unused RRSP contribution room and wonders if it makes sense to top up his RRSP. Making an RRSP contribution is a useful way for Canadians to defer taxes and reduce their income to get into a lower bracket. It is also an excellent way of saving for retirement. Up to 18% of gross income can be contributed into an RRSP. However, it is only worthwhile to contribute if it will lower your tax bracket. So, if you are retired and your contribution and withdrawal years will be in the same tax bracket, then contributing to a RRSP is not necessary.

Key Takeaways:

Continuing to contribute to your RRSP works in your favour if you are taxed in a higher-income bracket than when you are withdrawing the taxable RRSP/RRIF for income.
If you do not use up the 18% annually, the remainder accumulates as unused RRSP contribution room and can be used in future years when you can contribute.
It’s most effective if there is a difference in the tax bracket between contribution year and withdrawal year.

“I’m 70 years old, retired on a fixed income, and my tax bracket is not forecasted to change going forward. My question is, I have $15,000 in unused RRSP room. Should I contribute prior to converting to a RRIF?”