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Canadians now spend more on taxes than on food, clothing and shelter combined, study finds

Canadians now pay almost half of their hard-earned income in taxes, which contrasts with a third for the average family in 1961. Recently, the Fraser Institute calculated that in 2015 an average Canadian family paid $34,154 (or 42.4 percent) of their total $80,593 cash income in taxes. For housing, food and clothing, the average family spent 37.6 percent of their total cash income. The objective of this study is to plot the average family’s experience each year in order to understand the changes Canadians are experiencing throughout the years.

Personal Investor: Wise millennials choose TFSAs over RRSPs

According to Statistics Canada, 42 percent of millennial investors prefer TFSAs (tax-free savings accounts) over RRSPs (registered retirement savings plans). This means this group, aged 25-34, are willing to give up the instant gratification of a tax refund that comes with the RRSP in favour of gains that are never taxed in a TFSA. A TFSA is particularly beneficial for lower income earners. By not contributing to their RRSP now when they are in a lower tax bracket, young wage earners can carry forward their allowable contribution space to a year when they are in a higher tax bracket. This ensures their tax savings are higher.

How to tell the taxman you’re selling your home

When selling a home, your taxes are impacted too. The Canada Revenue Agency (CRA) considers a profit on the sale of property to be a capital gain. But, CRA allows for a primary residence, or family home, to be sold at a profit without having to pay capital gains tax. There are caveats of course. There can be only one family home sold per year and the owner must be legal age and documented. Also, there is a list of acceptable domiciles that are considered home. Check with your accountant or CRA to make sure you qualify.

Key Takeaways:

When you sell your property, any increase in value is known as a capital gain and subject to tax. The amount is based on your marginal tax rate and is charged on only half of the profit earned from selling the property.
There is a exemption on a family’s primary residence, which means you don’t have to pay any tax (even if you end up earning a profit) on the sale of your family home.
Whenever you sell your primary residence, CRA requires that you report this sale on your income tax return even though the sale isn’t taxable.

“Canada Revenue Agency (CRA) provides Canadian homeowners with an exemption from taxes owed on the profit made from the sale of your principal residence.”

Now is the time to consider tax-loss selling to offset capital gains, tax experts say

Now is the time to consider tax loss selling to offset your capital gains. By selling those stocks that haven’t worked out, you can apply the loss to your capital gains. Losses can be applied to gains made in the year you incurred the loss in addition to carrying all or the remainder of your loss forward to future years, or backward for up to three years. This means losses this year can still be used to offset a gain as far back as 2014.

How to make the most of your charitable giving come tax time

Here are some ways to make the most out of your charitable giving come tax time. Charitable donations receive tax credits at both the federal and provincial levels. On the federal side, the first $200 of annual charitable donations receives a 15 percent credit and then 29 percent for cumulative donations above $200. Donors who have income subject to the 33 percent top federal rate (for income over $202,800) and who donate more than $200 annually benefit from a 33 per cent tax credit on such donations. You may also want to consider “tax-gain donating,” which is to use capital gains you’ve realized this year (and up to 3 previous years) and donating the winning stocks or mutual funds “in-kind” to charity. That way, you get the donation tax receipt, pay no tax on the capital gain to date and increase your adjusted cost base of the security repurchased back up to fair market value, reducing your ultimate tax bill on a future sale. Remember that this month is also the last chance for “first-time donors” to take advantage of the temporary First-Time Donor’s Super Credit, which provides an additional 25 per cent non-refundable tax credit on up to $1,000 of donations.

CRA Targeting Underground Economy: Contractors, Online Sales, Farmers Markets…

In recent years, Canada Revenue Agency (CRA) has particularly focused on tracking underground economy activities. One way they are doing this is by obtaining information from key 3rd parties.

For example, recently CRA obtained details from contractor credit applications submitted to Rona. Consider the type of information that Rona would have: name, address, and other specifics that would help determine whether credit should be given. Presumably CRA could compare information reported on a credit application to the contractors’ tax returns.

CRA has also recently obtained information from Square Canada. Many smaller vendors accept payment by swiping the customer’s credit card through a little square plastic device connected to the audio jack of a phone or IPad. Square Canada provides this payment processing device, a Square Reader. Through a Federal Court Order issued to Square Canada, CRA obtained identifying vendor information and sale details associated with individuals or entities using these devices. The information request primarily focused on those with annual revenues of $20,000 or greater, for the 2012-2015 and part of the 2016 year.

It would not be unreasonable to expect that CRA could obtain similar information from other websites, web-based apps and organizations.

It’s that time to break out the year-end tax-planning playbook | Financial Post

We’re closing in on year-end, and for taxpayers, this is the time to take a look at last minute deductions and adjustments to save you money and maximize your returns when you file next spring. There are a few opportunities that require planning now. One item is tax-loss selling, which needs to be completed before the last week of December. Also, don’t miss your chance to use the federal First-Time Donor’s Super Credit (FDSC). This is the last year you can claim it, so ensure you don’t miss your chance to take an additional 25 percent in tax credits on donations up to $1,000. And for small-business owners, now is the time to look into dividend sprinkling before the proposed anti-dividend-sprinkling rules come into effect.

More than half of all sales in Canada still done in cash, Bank of Canada survey says

Surprisingly, fifty-one percent of people in Canada use cash for the majority of all their transactions. Despite the exponential rise in credit and debit card usage, Canadians still prefer cash. Given that they’re quicker and easier to use, many expected people to be using cash less often. Where cash is no longer king is for big-ticket items, and instead it is used for small-value transactions. In terms of the overall dollar value, credit cards appear to be the payment option of choice. Credit cards offer various incentives and “free perks,” which cost Canadians over $10 billion in 2014 in hidden costs for processing fees. The average credit card transaction costs a merchant $2.08 to process it versus 30 cents for debit cards and 29 cents for cash.

How to Tell If Your Small Business Needs to Engage an Accountant

Up until a certain point, small businesses can often operate and file their taxes on their own before there is a need to bring in an expert. Today, with the abundance of accounting software available you may even be able to manage it for longer on your own, even if you don’t have a lot of financial knowledge.

However, as your business and your revenue grow, you may not have the time, or you may find that you require better systems to help you continue to increase your business and manage your money successfully.

Knowing when to hire someone externally is often a difficult decision. Here are some of the ways an accountant can help.

1. Unfamiliar with Accounting Practices

If you’re not familiar with accounting practices, then you may want help from the beginning. Accountants can help advise you on the best structure for your company, such as whether a sole proprietorship, partnership or incorporating would be the most beneficial to you. Each has different tax implications and the decision to choose one over another will depend on the nature, size, income and maturity of your business.

2. Running Your Business & Making Informed Decisions

Depending on what type of business you start, you may need a financial or managerial accountant. Most small-business owners will need a managerial accountant to help with salaries, profits and the cost of goods produced. The goal is to help owners and managers make sound financial decisions based on your cash flows and business activities. In addition, they can help your business avoid potential pitfalls and help you account for things like inflation, interest rate fluctuations or changes to tax laws.

3. You Require Professional Financial Reports

Financial accounting deals with providing information to the public, such as stockholders, customers, creditors and regulatory bodies. Even if you’re not legally required to submit them, professional financial reports may be required by your current investors or required to apply for a loan to present to potential investors as part of a business plan.

4. Rapid Growth

Even if you have a working knowledge of accounting, you may find that you simply do not have the time or that accounting is taking you away from more important tasks that could allow you to directly grow your business. Expanding often means more customers, hiring more employees, additional vendors, and more, which require more paperwork, record-keeping and number crunching.

5. Expanding Your Business

Growing your business through an acquisition or expanding into another province or another country requires carefully planning and thorough analysis. An accountant can walk you through the process and help you structure the growth to help set you up for success.

6. Taxes

The most obvious role of an accountant is tax management and planning. This means not just making sure you pay the right amount of tax, but also avoiding any potential penalties from the Canada Revenue Agency (CRA). A good accountant often pays for themselves very quickly, by ensuring you’re not missing out on any tax breaks or expense claims that you’re entitled to. In taxes, it’s often what you don’t know that can help or hinder your business the most.

7. Selling Your Business

When you’re ready to sell your business (or parts of your business), an accountant can help you value your business through investigation, analysis, projections and professional judgement. When done properly, it can ensure a seamless transition and the continued success of your business. They can also help you structure your deal to minimize any tax implications.

The trouble with capital gains taxes, and why we’re likely still stuck with

An economic research organization in Canada is advocating for the removal of the Canadian capital gains tax, which was introduced in 1972. They point out that Canada has a need for increased business investment, and the tax suppresses how much capital is available to support such ventures. Investment in Canada has fallen 18 percent since 2014, so reducing or abolishing the tax, like other countries have, might help spur economic growth. They argue that capital gain is more sensitive than other types of investments to the tax rate, and as a result a high tax rate can hurt economic growth by discouraging a natural reallocation of capital to its most productive uses. Some investors avoid paying this tax by delaying the realization of their capital gains, but not everyone (often low-and middle-income taxpayers) has the financial flexibility to delay a sale. However, not all economists agree that removing capital gains will increase investment in Canada.