News Archives - Page 23 of 28

Canada Budget Has Changes To Small-Business Tax Rules, More Money To Crack Down On Tax Cheats

The Liberal government chose to fine-tune their original tax changes for small businesses as a result of the uproar and corporate tax cuts in the U.S. The 2018 Federal Budget continues to keep Canadian corporate taxes the same, but to help businesses in other ways, such as spending to help women-led businesses grow, innovation and diversification of trade. The budget focuses on changes to prevent wealthy Canadians from gaining an unfair advantage, and changes to the small business deduction limit. In addition, the government will spend $90.6 million to deal with tax cheats both domestically and internationally. When the new rules take effect, it is expected to bring in an additional $925 million a year by the fiscal year 2022-23.

Federal budget’s simpler plan to tax passive income likely to calm small business outcry

For most of the last year, there has been an outcry from small businesses regarding the proposed tax changes. As a result, Budget 2018 has taken a scaled-back approach for taxing passive investment income. The new approach is meant to relive complex accounting for small businesses, but also result in reduced money for the federal government. Starting in the tax year after 2018, the new rules will mean that multi-million dollar private corporations will no longer qualify for the federal small business tax rate of 9 percent and instead be taxed at 15 percent.

U.S. tax reform to bring double taxation to some Canadians

New tax law changes in the United States will impact some Canadians who hold dual citizenship, a green card, or who own American property. Of primary concern is how some of the tax changes will affect how foreign income is calculated for American citizens. It affects the “participation exemption system” that allows income earned abroad to not be taxed again when it comes into the U.S. The issue is how tax-free repatriation provisions, known as “transition tax” is being applied and while U.S. corporations are offered relief in the Tax Cuts and Jobs Act, individuals may be subject to double taxation. The problem is further compounded by a statement by the IRS saying it will disregard any foreign tax credits, which reduce the transition tax.

Albertans who own vacation properties in B.C. face new tax

Albertans with a vacation property in some parts of B.C. will face a new tax. The tax hike will impact people that own secondary properties in some parts of British Columbia. It isn’t confirmed, but it will likely be 2 percent of the assessed value in areas like the Lower Mainland, Victoria, Nanaimo and Kelowna. The new levy that is aimed at non-residents in order to improve affordability of homes for British Colombians.

Can I put my mortgage in my RRSP and other burning questions as the deadline looms

With the deadline looming, here are some ways (including a lessor known one) how RRSPs can benefit you and help you decide to contribute. First, the well-known benefit of an RRSP is to provide a completely tax-free rate of return on your net contribution. And unless you’re in the lowest tax bracket, it also means you’ll be taxed at a later date when you withdraw money from your RRSP.

Second, spousal RRSPs provide a way to split more than 50 percent of your pension income with a lower-income spouse. And, if you need to withdraw funds prior to age 65, then that money will be taxed at the lower-income spouse’s rate.

Third, while your RRSP can’t hold real estate, there are two ways it can help with home ownership. If you’re considering this, then it is wise to seek financial advice from your accountant or financial advisor.

Here’s How To Get The Most Out Of Your RRSP

Tax season is kicking into high gear, so now’s the time to consider how you’ll be filing for the year that just ended, but also to make changes to reduce your 2017 taxes. According to a recent study, only 33 percent of Canadians will contribute to an RRSP this year, so now is the perfect time to review the tax advantages of an RRSP.

A Registered Retirement Savings Plan, or RRSP, is an investment strategy that allows savings to be placed into an account without being subject to taxation. Not only does it reduce your income now to potentially put you into a lower tax bracket, but it also allows those contributions to grow tax-free for many years. And usually, when you withdraw the money at retirement, you’ll be taxed in a lower tax bracket since your income is generally lower. If you need to make withdraws earlier, then two programs to consider are the RRSP Homebuyers’ Plan to help you buy a home and the Lifelong Learning Plan to help you pay for school.

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.

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.