quadrantadmin, Author at Quadrant

Beware the rules that apply to incorporated employees – The Globe and Mail

Incorporated employees are those who may “reasonably be regarded as an officer or employee of the hirer, but for the existence of the corporation,” and they (or a related person) owns 10 per cent or more of the company providing the services. They used to be able to get away with not paying personal taxes because the company paid them. However, the rules were changed in 1981 when PSB rules were enacted. If the PSB rules apply to you, you can avoid any penalties by taking certain steps like paying yourself a salary as an income as well as hiring over five people to work in your corporation. You can also avoid PSB penalties by keeping any receipts that prove you are an independent contractor, including use of personal equipment and avoiding accepting employee benefits.

“If your corporation employs more than five people, you’ll avoid PSB status, and the nasty tax implications.”

Potential for massive IRS tax penalties still hangs over U.S. citizens living in Canada

Most people are unaware that the U.S. is the only country that imposes citizenship-based taxation on it’s citizens no matter where they live or where they earned the money. That means that U.S. citizens living in Canada pay taxes to both Canada and the U.S. They are required to disclose all financial accounts in foreign countries where that are more than $10,000. Failure to report these accounts comes with a penalty of $10,000 per account if not disclosing them was not a deliberate act and $100,000 for 50 percent of the value of all accounts not disclosed.

“While most U.S. citizens who are resident in Canada find that no U.S. income tax is actually owing due to offsetting foreign tax credits, the investment restrictions, compliance burden and costs of filing U.S. tax and information returns can be severe.”

Out from behind the eight ball: Top tips on how to save your small business its much-needed money

Small businesses can keep more of their money by taking advantage of a number of ways to save. For instance, try co-sponsoring an event with a complementary business in order to share the expenses as well as the networking benefits. Join a professional organization that offers discounts and other beneficial perks that will help you to grow your business. If you can’t pay off your credit card debt each month, at least make sure your card has a low interest rate and a solid rewards program. Trying any number of these can lead to surprising savings.

Key Takeaways:

Partnering with a complimentary business can provide you with opportunities to co-organize events and engage in cross-promotional marketing.
Open-source office productivity software can get you out of some expensive recurring licensing deals.
Once or twice a year, do a vendor audit to examine what you spend money on and if there are ways to save.

“There is strength and safety in numbers. Find and partner with companies to take advantage of bulk-buying discounts by purchasing and sharing larger orders of the same product.”

These are the tax changes you need to know about for 2020

With a new year comes new changes to the tax laws. There will still be five federal income tax brackets and each will adjust for a 1.9 percent inflation rate. The Basic Personal Amount, money the government allows to not be taxed to allow for basic needs, will be increased more than expected. This allotment is also being removed for wealthy individuals. Pension plan contributions are expected to increase while employment insurance premiums for employees are expected to decrease.

“For one, there’s an increase to the basic personal amount Canadians can earn before facing federal income tax.”

Tackling debt Canadians’ top resolution for 2020: CIBC poll – BNNBloomberg.ca

For the 10th consecutive year, Canadians have voted getting out of debt as their top financial priority. A CIBC survey showed paying bills (18 percent) and growing wealth (13 percent) to be the next highest goals, with retirement savings being low on the list. More than a quarter of Canadians borrowed money in 2019, and over three in four said that paying off debts is more important than increasing savings. The poll also shows that a slight majority of Canadians is concerned about a recession in the new year.

“According to a poll, 21 per cent of Canadians put debt repayment as their top financial priority — the 10th straight year that has led the rankings.”

Personal Investor: Sometimes a TFSA is better than an RRSP

With the March first deadline, many are ready to contribute to their RRSP accounts, but you might want to put your money elsewhere. While RRSP investments grow and can be bought and sold with no tax consequences, they are taxed at withdrawal. TFSA has the benefit of growing tax-free and funds not being taxed at time of withdrawal. Those in the workforce might benefit from one account over the other depending on their personal financial situation, or they may choose to have both.

Key Takeaways:

The amount you contribute to your RRSP can be deducted from your taxable income. However, they are fully taxed at the individual’s current rate when funds are withdrawn from the RRSP.
An RRSP generally has a larger contribution (18 per cent of your previous year’s income to $26,500 for 2019), while the TFSA only allows up to $6,000 for 2019.
TFSA contributions cannot be deducted from your income, but withdrawals are never taxed including gains on any investments, and they can be withdrawn at any time.

“Before making a contribution, you might want to consider the relatively new kid on the block: the tax-free savings account (TFSA).”

CRA found more than $1B auditing smaller businesses last year

Audits of small and medium sized businesses for the 2018-2019 fiscal year has yielded over a billion dollars owed to the CRA, with an average of 137,000 per small business owed and 338,000 per medium business. The amount owed included back taxes, penalties and interest. The CRA is more diligent in identifying businesses requiring an audit due to it’s use of identifying cases of indirect verification of income. The CRA is continuing to scrutinize how businesses report income and audits will likely increase in the upcoming years.

“The most recent common audit issues or areas of concern were unreported income, capital transactions, corporate reorganizations and restructurings, ineligible expense claims, and related-party transactions.”

Paying RRSP, TFSA investment fees from outside the accounts not an advantage, Finance says

There has been some confusion over the tax implications of paying RRSP and TFSA account management fees from outside those accounts. The confusion began when the CRA told attendees at the November 2016 Canadian Tax Foundation Conference that starting Jan. 1, 2018, paying registered plan fees from non-registered, or open, accounts would incur a tax penalty equivalent to the fee. However, a recent letter from The Department of Finance will recommend that the minister amend the Income Tax Act’s definition of “advantage” to exclude the practice of paying for investment management fees from funds outside of registered plans (including TFSAs). While the Income Act has not yet been amended, the letter is encouraging and will hopefully end the tax uncertainty.

“In the letter, the Department of Finance acknowledged that investors are generally not tax-motivated when paying registered plans from outside the accounts, noting that doing so can even result in a net loss. Finance also specified that the fees paid cannot exceed a reasonable amount.“

What are the tax implications of donating land?

If you are a Canadian landowner with a commitment to the land, you may be considering making a private land gift to preserve Canada’s ecological diversity. Before you call a charity, check out these how-to tips on different ways to make land donations or to arrange for conservation agreements on land you may want to preserve for future beneficiaries. There are ways to decrease your tax obligations, including capital gains taxes. If you are unfamiliar with the federal Ecogift program, this article gives you a primer on how it works, and presents useful links to find out more about tax incentives to landowners who want to preserve and earn certification for property which is ecologically sensitive.

“Donating eligible land to a charity can help you avoid capital gains tax, as well as qualify for a charitable donation tax credit.”

If you’re thinking of putting assets into joint ownership with your children, read this first

There are some things you should be aware of before you set up joint accounts with your adult children to protect your assets from being subject to probate fees upon your death. Firstly, understand that probate fees or taxes are different in every province and territory. In Alberta, there is a flat probate fee, which caps out at a maximum of $525. In addition, there are risks, such as triggering the deemed disposition of your share of the asset when adding a joint beneficial owner. Furthermore, family squabbles may still occur and result in your assets not being distributed as you wish. Plus, the money could be taken if your children have any outstanding credit as a recent court case demonstrated. Use of multiple wills and trusts, among other strategies, will likely be a better way to handle your assets and still save money.

“While there may be a variety of reasons Canadians seek to put an asset into joint names with right of survivorship, for most, the primary motivation is the potential savings of probate fees (or tax) upon death.”