quadrantadmin, Author at Quadrant

Trudeau’s making it tougher on students

In the coming year, post-secondary students across Canada are at risk of increasing taxes due to proposed tax changes. The current education and textbook tax credits, which were put in place by the previous government, are being eliminated by the Trudeau government. These deductions allowed student incomes, earned while attending school or over the summer months, a way to be taxed at a lower rate. The loss of these deductions means that students need to find more money to support the cost of ever increasing post-secondary education. Ironically, the prime minister’s website says he’s working to make post-secondary education more affordable and these change usually hit the middle class the most. Given that these students are the future of Canada, these change appear to be misguided.

Small Business Owners Not Letting The Feds Off The Hook Just Yet

After an unprecedented three-month backlash from the small business community, the government announced some small changes to the proposed tax measures. They have dropped the capital gains limits in business succession, increased the exempted annual passive income threshold to $50,000, and promised to reduce small business corporate tax rate to nine percent. They even stopped their rhetoric that portrayed small-business owners as tax-cheats. However, these revisions are not enough and do little for business owners to grow their business, innovate and create jobs. Given the challenges that business owners face, there are still a lot of questions that need to be answered.

How the federal tax-reform proposals miss their target

In principle, a government proposing tax changes to bring fairness and neutrality to our tax system is welcome. The present federal tax-reform proposals aim to target three key areas: (1) limit the spreading of income as capital-gains, (2) investment in passive assets using corporate after-tax earnings, and (3) corporate earnings paid out as capital gains instead of taxable dividends. However, the current reform proposals appear to have missed their intended target of wealthy, big businesses that try to avoid their taxes. In addition, these changes overlook the principles in the current system for small-business tax treatment, that were a result of balance and compromise over decades, and recognize the considerable financial risk they take when starting, operating or expanding their businesses.

Key Takeaways:

Even though these reforms are aimed towards big businesses and high-income individuals, smaller businesses are the unfortunate casualty.
While having a relatively little impact on revenue for the federal government, the new rules on income splitting will have the consequence of complicating tax compliance for family enterprises.
Small-business owners seeking to retire with a modest amount of savings could see themselves hit with a giant tax bill.

“Expediency should not come at the cost of complexity, inequity, double taxation and retroactivity.”

Small business still concerned in spite of tweaks to tax changes, Morneau hears

Small business is still very concerned in spite of tweaks to the tax changes. Many business lobby groups initially said that they welcomed Morneau’s changes to the proposals, but after they heard from people like business owners and tax experts, who said that the plan would end up hurting the economy, they changed their mind. What needs to be done, according to some, is that these should be abandoned and we should take a closer look at the tax system in Canada.

Return of Gifted Property: Charitable Organizations Beware!

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.

Donor – Where the property is returned to the donor, the taxpayer is deemed not to have disposed of the property nor to have made the gift. As such, the portion of the original charitable donation tax credit or deduction related to the property may be disallowed.

Donee – Before returning a gifted property, the charity should review other provincial and federal legislation as it might affect their ability to legally return donated property. CRA also noted that returning property could be regarded as making a gift to a non-qualified donee or providing an undue benefit which could result in revocation of charitable status.

A qualified donee that issued an official donation receipt and later returns donated property must file an information return with CRA if the fair market value of the property is greater than $50 when it is returned, and the property is returned after March 21, 2011.

Personal Investor: Riding the rally? Beware of the tax man – Article – BNN

IF you are a stock investor and have enjoyed gains this year, it might be worth your time to research how to protect those gains from the government tax man. There are differences in the way the government calculates investment gains and incomes, among other sources. It would be in your interest to look into hiring a tax expert to direct you in the proper direction to lower you effective tax rate and not pay too much. Look into the the three basic tax saving tools: rrsp,tfsa and non registered accounts to save money.

Operating a Business in the U.S.? The IRS is Targeting Smaller Foreign Entities

The IRS has recently noted that they are rolling out campaigns to focus on entities below the “big fish” that have historically been targeted. Such campaigns include:

Related party transaction campaign – a redefined focus on mid-market entities to determine compliance with U.S. transfer pricing requirements.
Inbound distributor campaign – reviewing whether S. affiliates distributing imports from other countries are realizing adequate returns based on their assets, risks assumed, and functions performed.
Form 1120-F non-filer campaign – targeting corporations (the IRS believes there are many) with a U.S. permanent establishment or branch which have not filed U.S. income tax returns. The IRS indicates external data sources will be used to identify these companies, commencing with a “soft letter outreach”. There is no indication of any amnesty, meaning penalties and interest are likely for Canadian corporations which have not complied with any U.S. filing obligations

Think you have until next year for new stress tests? Think again.

Canadians looking to buy a home before the new mortgage rules apply may need to act now before the January 1st, 2018 deadline. Stress test used to only apply to home buyers with less than a 20 percent down payment, but the rules governing mortgages have been tightened and now all borrowers will need to meet these guidelines. Essentially, the new rules could cut a home buyer’s purchasing power by up to 21 percent. While it is expected to take effect in the new year, banks may move up the policy date and some estimate that it could come as soon as December.

Surprise! 4 things you didn’t know were taxable | National Post

With tax season beginning in just a few months, there is little time to prevent an unexpected tax surprise. Often people forget or they may not be aware of four kinds of income that are taxable: forgiven debt, unemployment benefits, proceeds from fundraising and disability insurance benefits. Preparing to report these items now, and doing things like spreading out estimated tax payments can help you avoid a surprise when you file your 2017 tax return.

Meaningful Questions That Must Be Answered Before Tax Reform For Private Corporations Is Implemented

On July 18, 2017, the Department of Finance released tax proposals and draft legislation that obliterates the current system that has been used in Canada for decades. Rather than targeting the flaws, the government’s proposals amount to tax reform. By saying they are “closing loopholes” and ensuring payment of “fair share of tax,” it is the opinion of this tax lawyer that this language being used to describe these changes is purposely meant to persuade the public into believing that these changes are in their best interest and to keep critical thought about their implications to a minimum. Small- and medium-sized business are vital to our economy, and thus changes require at the very least adequate consideration and discussion before implementation.

Key Takeaways:

Questions that should be answered during tax reform efforts include but are not limited to: who will benefit, how should Canada’s small and medium-sized businesses be taxed, and how should private corporations be taxed?
In Canada, our tax systems aim to achieve integration. This means the tax rate of income, which travels through a business first, should be no more or no less than the rate that would apply if the individual had earned it directly.
Tax law and policy are too vital to the health of the country, to be tampered with in a hurried manner for unknown reasons and with unconsidered consequences.

“So far, the only answers our government has provided us with are those of the sort that mute public discourse and create unnecessary tension between members of the “middle class”. So far, the government has provided so little time for consultation that the “consultation” can only be inferred to be superficial. The public at large and our entrepreneurs deserve better.”