The 12 days of Christmas, a time for giving

To continue on with my theme of giving during these holidays, this post is about donations and their tax treatment.

With the 12 days of Christmas here, it is time to be giving presents.  Those presents could be a donation to a charitable organization. 

For personal tax purposes a charitable donation gives rise to a tax credit.  The credit obtained,
is 15% federally and 10% provincially (Alberta) on the first $200 of donations.
The credit then increases to 29% federally and 21% provincially on any amounts above $200.

Another benefit of donations is that you can claim both your own and you spouse's donations on one return, therefore benefiting from the higher credit on the amount above $200.

As a household if you contributed a total of $500.  The tax dollars you would receive back would be:
($200x 25%) = $50  plus ($300 x 50%) = $150.  Total = $200.     So on a donation of $500 you would be giving to a great cause; then at tax time reducing your tax bill by $200.  You only have to pay a net $300 and the charity gets $500.  Everyone wins,  awesome.

If you own and operate a corporation.  Charitable donations are a fully dedcutible expense for tax purposes.

So if you are thinking of giving these season,  from a tax perspective it is a smart thing to do.  Any donations made before December 31, 2011 would be credits on your 2011 tax return.

Have a great giving season

Christmas is around the corner

Here at Henderson Campeau we are getting excited for Christmas and all the fun  that it brings.

It's great to see the city glowing with Christmas lights, the atmosphere in the neighborhood joyous, and the snow starting to fall.

Skiing season is here and we are excited about that. I'm sure many Calgarians are excited as well.

With it being the holiday season it is a great time to come down to Kensington and support the local businesses. 

Henderson Campeau is a big promoter of supporting local businesses and events.  We are proud to be apart of the Kensington Business Revitalisation zone. 

We encourage everyone to support the local small businesses in your community and getting involved these holidays to help grow Calgary neighborhoods.

Here is a recent article on Kensington in the herald.  http://www.calgaryherald.com/business/Kensington+ramp+excitement+factor/5781654/story.html

Have a great week and enjoy the snow.



International Day of Persons with Disabilities

The holiday season is here, and that means opening your heart to giving. Not only to those close to you, but to those that really appreciate a helping hand.  We should make a habit of giving throughout the entire year and not just at Christmas.

This Dec 3, 2011 is the International Day of Persons with Disabilities. This is an international observance promoted by the United Nations since 1992. We encourage you to participate in this day, at a local level, and think about giving back to those in need.

Check out this link for how to celebrate in Calgary. http://www.calgaryidpd.ca/

From an accounting perspective, I will discuss a few tax breaks that are available to persons with disabilities. People who qualify can take advantage of the credits available.

Disability tax credit

A disability tax credit can be claimed if you have a severe and prolonged mental or physical impairment which restricts your ability to perform the basic activities of daily living, such as: speaking, hearing, walking, feeding, dressing, and performing the mental functions necessary for everyday life.

If the disability qualifies, it must be certified by a doctor, who will then complete this form: T2201

For 2011 the federal disability credit is $7,341.  This amount can also be transferred from the dependent to the caregiver.

Amount for infirm dependent

An individual may claim an amount for dependants age 18 or older, provided they are dependent on the individual because of a mental or physical disability.

Dependant

A dependant is defined as a person who at any time in the year is dependent on an individual for support. This includes the individual's or the individual's spouse's or common-law partner's

• child or grandchild; or

• parent, grandparent, brother, sister, uncle, aunt, niece, or nephew (if this person is resident in Canada at any time in the year).

For 2011, the federal credit is $4,282

Registered disability savings plans (RDSPs).

Family members, and other authorized contributors are entitled to establish registered disability savings plans (RDSPs) if they are related to individuals with a prolonged and severe physical or mental impairment.

RDSPs are designed to help parents and others save and provide for the long-term financial security of a disabled beneficiary.

The tax treatment of RDSPs is very similar to that of Registered Education Savings Plans. The contributions to the plan are not tax deductible, investment income accrues on a tax-deferred basis, and withdrawals from the plan are taxable to the beneficiary to a certain extent.

Disability support deductions

Eligible disability supports expenses may be claimed as a deduction if the following conditions are met:

• the expenses were incurred to enable the individual to:

– be employed,

– carry on a business (either alone or as an active partner),

– carry on research or similar work (for which the individual received a grant), or

– attend a designated educational institution or secondary school where the individual is enrolled in an educational program

Example of such payments include: note-taking services, voice-recognition software, tutoring services, talking textbooks, job coaching services, reading services, full- or part-time attendant care services provided in Canada

The disability support deduction is available only to individuals with disabilities; it is not available to people who support them.

Other tax credits include amount for eligible dependents, child care expense deductions, amount for children, medical expense credits, and caregiver amounts. 

Check out this not for profit organization that works with people with disabilities for social activities and lots of fun.  http://www.betweenfriends.ab.ca/

The following is a link to the Government of Canada’s resource for people with disabilities. http://www.pwd-online.ca/pwdhome.jsp?lang=en

If you or somebody you know qualifies for these tax deductions and credits please ensure you are using them.

Have a great day.

2011 Personal tax rates

It is getting cold outside, winter is on our doorstep. Long gone are those dog days of summer and nice fall evenings.  Now we can look forward to warm hot chocolate by the fire, weekends at the ski hills, toboggan runs, Christmas carols and skating.

2011 is winding down, time to ensure all is in order for both your corporate and personal financial matters.

This is the link to the 2011 personal tax rates here in Canada and by province.
http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

We look forward to assisting you in any way we can.

Enjoy the start to the winter.

Remember

Remembrance day is this week. A time to reflect and appreciate all the sacrifices that those who serve our country made and continue to make; to allow us to live free in this great nation. Take some time on Friday and remember. Here is a link to some of the ceremonies in Calgary on Friday November 11, 2011.

http://mryyc.com/2011/11/calgary-2011-remembrance-day-events/

On the cover of the...Spotlight

It has been an eventful week at Henderson Campeau. 
The partners of the firm have the honor of gracing the cover of the most recent issue of Spotlight magazine.  The magazine highlights Alberta CAs.
It was fun to take part in the interview and photo shoot.  It was also great to highlight our approach to life and business.

Take a look.  For a pdf version visit our website under the NEWS tab.  www.hendersoncampeau.com

Project Calgary

The fall in Calgary has been very lovely.  Yet another great thing about living in Calgary.

The following is a link to the Calgary Herald's ongoing story about Calgary.  "Project Calgary".  We encourage you to check it out and get involved.  It is all about taking a good look at the city and discussing way to keep making the city a better place to live. 

Check it out.
http://www.calgaryherald.com/news/neighbours/index.html

Enjoy your city.

All the leaves are brown. (Thinking of a Salary or a Dividend?)

The leaves are brown but the sky is definitely not gray.  What a gorgeous September.  The month of July, August and September have been eventful for the firm.  Both partners enjoyed some relaxing vacation  time in Calgary and abroad.

With the last three months of the year upon us the office is busy.  We have all hands on deck and look forward to tackling another busy season. Of course, we’ll also be taking some time to enjoy Calgary’s beautiful fall weather.  

This week, we would like to discuss a significant accounting and tax issue we often encounter with both start up and established businesses: how to compensate the business owner.

Once a business is incorporated, it is established as a legal entity know as a corporation.  The corporation is now a separate entity from the business owner.  As a result, business owners cannot simply withdraw cash from the company without tax consequences.  Corporations will need a formalized structures in place to pay the business owner. This structure is important because it will have cash management and tax implications. The two most common methods of remuneration are salary or dividend.

The following considerations should be examined when putting formalized payment structures into place.  We strongly advise discussing  the following with a qualified accountant to determine what option best suits your business model.

v  Salaries are considered to be active income.  Dividends are investment income.  RRSP contribution room is calculated on active income.  With active income (salary) the taxpayer’s RRSP room increases.  If your only source of income is dividends, the taxpayer cannot build RRSP room nor benefit from certain tax deductions, such as child care expenses.

v  Salaries are considered operating expenses for the corporation.  They are fully deductible in the corporation.  The salaries are then taxed normally through the personal tax payer.  Dividends are not an expense for the corporation.  The dividends are taxed as investment income through the personal tax payer.   There is a tax credit available on the dividends.

v   Salaries require additional administration.  Each month deductions have to be calculated and remitted to the CRA.

v  With a salary, taxes are deducted from each pay cheque. As dividends are usually lump sum withdraws, the taxpayer must pay the applicable taxes when they file their personal tax return.

v  CPP is not payable on dividends.

v  Depending on the corporate structure, dividends can be strategically claimed to defer personal taxes and declare income to different shareholders.

v  Salaries must be paid to employees of the company and dividends paid to shareholders.  If you are not an employee or not a shareholder, the choice has already been made.

As you can see, there are tax consequences and other factors to consider when determining remuneration from your company.  The decision all depends on specific circumstances for each business and owner.

Summer Summer time

Hope everyone is having a fabulous summer.

We enjoyed a busy Stampede, Will did some vacationing in BC and Paul got married in Bermuda. We have been having fun in Calgary as well. 

Below is a link to an article about small business in Canada and the entrepreneurial spirit. 
Small business owners feeling very happy

Have a great week and weekend

Yeehaw! Enjoy the Stampede Everyone

Canada Day, and incorporating your business

Beautiful Elbow Falls, I spent an afternoon out there a couple of weekends ago, some great Canadian landscape.

So it's Canada Day, very exciting.  The summer warmth is finally here. It is a great weekend to celebrate this great country of ours.

I spent a few years living in the Netherlands; their Canada Day equivalent is called Queen's Day.  They celebrate by wearing bright orange from head to toe, taking to the streets in a country wide free market, and of course cruising up and down the canals, singing laughing and celebrating everything Dutch. It is an amazing display of patriotism and joie de vivre.  My point here is that, on this holiday Friday, go out and celebrates everything Canadian; be proud about it.  Whatever it is that you love about this country go out and enjoy it; and maybe wear some bright red.  O'Canada.

Onto some accounting matters.  Since the end of the personal tax deadline we have spoke with many clients contemplating the decision to incorporate their business or not.

The decision to incorporate is a difficult one. Every business is in a different situation and has different goals.  Therefore whether to incorporate or not all depends on your situation. 

I highly recommend sitting down with your accountant before making the decision and gathering all the information you need before proceeding. 

Generally speaking, below are disadvantages and advantages of incorporating your small business. 

Disadvantages 

- The costs and administrative obligations.  Once you form a corporation, you now have a separate legal entity.  This company is now completely separate from the individual. Legal and accounting fees are required to get the incorporation process completed.  (I highly recommend paying to get the company set up properly).

The newly formed corporation must file corporate tax returns, produce financial statements, track balances through bookkeeping, have separate bank accounts and register each year, to mention a few requirements.

-There are many myths out there.  One such myth is that a corporation has many more tax credits and deductions available.  This is false.  A proprietorship (non incorporated business) actually has more tax credits available, as it is included on a personal tax return.  Personal tax credits can be used to reduce taxes. Business losses can be applied against other sources of income. The same business expenses/deductions against business income apply to a business, incorporated or not.

Advantages 

-Limited Liability. Since a corporation is an entirely separate legal entity.  A shareholder’s personal liability is limited to what is invested in the company.

-Flexibility on timing of taxes, and distribution of income.  If a corporation does not distribute all of the profits to shareholders, there is a potential to defer personal taxes until the individual receives income from the corporation.  Deferring shareholder distributions for a subsequent year (through payroll or dividends) results in the company paying corporate taxes (at a low rate) on the profits, and the personal taxes are deferred. I’d like to emphasize that if the shareholders take all the profits from the company each year; there is no advantage to incorporating.

-Planning.  If planned appropriately the corporation can have several shareholders.  How these shareholder's are paid, when and who is paid, offers tax planning options to the corporation and shareholder.

These are just a couple of factors to consider when operating a small business.  Before making the decision, sit down with your accountant and determine what suits you the best.

Now go out and enjoy Canada.

Time to budget

So it's June.  What a spring.  Let's hope the April and May showers have passed and the summer sun is on the way. At the office, we are excited for the summer months, as I'm sure you are too.

We have been busy in May and into June.  The idea that everything slows down after April 30th is not so accurate.  It's exciting here at Henderson Campeau, we continue to grow and develop new and existing relationships.

We are trying to get some golf in as the weather improves. We are also looking forward to all the summer events and fun to be had here in Calgary

So this week the government re-introduced the 2011 budget with very little surprises.  In regards to how it may affect you click on the following link and explore the highlights.

2011 budget highlights

A few that stick out are:

• Children's arts credit.  A $500 tax credit for children enrolled in artistic activities.  Similar to the existing fitness credit but for the arts
• Family caregiver credit. An additional tax credit of $2000 for caregivers of mentally or physically infirm dependents.
• For small businesses.  A onetime $1000 EI premium credit on the company's increase in premiums if they hire new employees in the year.  (the total EI premiums for the business must be under $10,000)

Just a few highlights. Keep yourself informed and aware of how tax changes (or even current rules) affect you, your family and your business.

Have a great weekend.

Keeping it local

Let it rain, let it rain.

Instead of going on about accounting and taxes, I'm going to switch it up a bit.  This post is a link to an interesting article in the ffwd paper. It is a good article to stir up debate on an issue Calgary is currently facing.

Check it out
http://www.ffwdweekly.com/article/life-style/urban-living/density-what-good-is-it-7471/

Here at Henderson Campeau we love the idea of living, working and shopping all within a small radius.  Both partners of the firm live within a few of blocks from the office.  We also engage suppliers in the neighborhood and dislike driving in traffic.

Have a great week.

May Day

So the tax season is officially over.  Yahooooooo.  Bring on the summer.

We enjoyed the busy time of year and are very pleased with the last several months.  It is a great time of year to see and get to know our clients a little better.  Thanks to every one of our clients for stopping by and meeting with us.  A big thank-you to all those who stuck with us from previous years and to all those new clients who came and met with us this year.  It is a pleasure to get to know all of you, it is fun to be involved in the community and interesting to keep a pulse on the Calgary economy.

We look forward to meeting more people as the our firm grows and helping you out in any way both personally and corporate.

We finished up the season with a gathering at the Kensington Pub with family and friends to celebrate the end of the tax season.  It was a good time had by all.  As you can see a cake was in order.

So thanks for being a part of Henderson Campeau we were glad to help out with your financial matters and look forward to seeing all our personal clients again next year. As well as meeting more people in this great city as time goes on.

2010 tax filing and decision time

Today is a big day for Canadians.  It is the last day to get your personal income taxes filed and paid.  Hooray.

It is also a big day to have a say and the chance to influence your future taxes. It's a great opportunity to choose the future of this marvellous country. Get out and make this great country even greater. VOTE.

Deadlines, Deadlines Deadlines and Easter

Happy Easter!

I hope you all get out this weekend and enjoy what looks like to be a nice spring weekend in Calgary and area.  Take time enjoy yourselves, have fun with family and friends, and be grateful for life.

We will be very grateful when the tax deadlines have come and gone.  I'm sure you will be too, having your taxes caught up and filed on time is something to be proud of.

With that being said I just wanted to point out how the CRA charges interest and penalties on taxes owing. 

If your taxes are not filed and paid by the income tax deadline you may have to pay the following penalties and interest.

-Interest. CRA charges a compound daily interest on any overdue amounts starting May 3, 2011. The current interest rate is 5%. 

-Late-filing penalty. Additionally if you do not file your tax return on time, the CRA will charge a flat penalty of 5% on the balance owing, plus 1% additionally for every month that the return is late.

-There are additional penalties if you continually file late, if you have other years still outstanding, and if you fail to report amounts on your return.

-Instalments.  If you are required to make instalments throughout the year there are also penalties and interest for not making the appropriate instalment payments or fail to make them on time.

On a much more positive note. If you simply file your taxes on time and accurately. If you are organized and responsible, it will save you a lot of money and give you piece of mind to fully enjoy weekends like this one.

Have fun

Enjoying the Calgary weather

In my last post I was excited for the warm weather and spring like conditions here in Calgary. 

Well yesterday I couldn't resist to snap a few photos of my walk into work in the morning of this beautiful spring we are having.  The winter spring of 2011 continues.  Here is a look at the beautiful spring conditions in Calgary.

ENJOY THE WEATHER

The final countdown

Well dare I say it, spring is here.  Or is it?

With only 3 weeks remaining in the personal tax season, we strongly recommend getting in touch with us to get your tax return completed before it is too late.

The streets in Kensington are getting busier, people are getting out and the smiles are plentiful.  What would feel even better is having your taxes out of the way for another year.

With the upcoming Canadian election, you’ve heard many promises or lack thereof.   Most of them involve taxes and tax credits.  There might even be a few you never even knew existed.  It’s a good time to ensure you are getting the most of all credits and deductions available.  Awareness is key. A good accountant can help you capture everything available on your annual tax return.

A common situation we see on personal tax returns and tax planning is the treatment of a rental property.  There are many deductions available against rental property income.  Examples of expenses that can be deducted towards rental income include:

·         Advestising

·         Property taxes

·         Interest

·         Management and administrative fees

·         Utilities

·         Travel

·         Insurance

·         Even certain motor vehicle expenses

These must be all related to generating income and within reason.

Even more importantly is to plan for the eventual sale of the property.  Since the rental property is no longer your principal residence it is subject to gain/loss when you sell the property.  To ensure you minimize the tax implications it is important to ensure the property is dealt with in the most tax advantageous method.

Get out and enjoy the spring weather while it lasts.

Birds and the Bees

Ok, so this time I think spring is on the way for real.  The sun over the last couple of days has been nice and getting everyone giddy after a long, long, long Calgary winter.  Here at Henderson Campeau we are putting in the time to ensure you are getting your tax refunds back in your pocket and ensuring you are not overpaying for fun things like elections.

We are still managing to enjoy life amongst all the busy office hours. Paul got out with his brother's family to do some cross country skiing at the Canmore Nordic Centre.  I have much more respect for those cross country skiing athletes.

Will has been enjoying the spring thaw right here in Calgary and Kensington getting out and enjoying the city.

Seeing it's spring it's a good time to talk about children and dependents.

The CRA has several tax credits in place for children and dependents. Here is a brief description of them:

Eligible dependent amount:  If at any time in the year you were single and cared for a dependent in your home you would be eligible for this tax credit.  This credit can be up to $10,382 federally.

Child amount tax credit : For each child under the age of 18, one person can claim a child amount for $2,101.

Caregiver and amount for infirm dependents : If you maintain a dwelling for a infirm dependent or a parent over the age of 65, you may qualify for the caregiver tax credit.  If you care for a dependent over the age of 18 and is infirm there is also an amount for infirm dependents.

Disability amounts and medical expenses : If you care for a dependent and they qualify for the disability tax credit you can transfer that amount to you. Also if you incur certain medical expenses to care for a dependent some of those medical expenses may be deductible on your return.

Childcare Expenses and fitness amount: I discussed these in a previous posting, check out the archives for more specifics. If at any time you paid for child care or fitness for your children these expenses may be deductible on your return.

Universal Child Care Benefit and Canadian Child Tax Benefit :  Once you have your child please fill out the Child Benefits Application to ensure you are not missing out on any child benefit payments. The UCCB is for any child under 6 years of age and the CCTB is a benefit for lower income families.  Here is a link to the application to ensure you are not missing out: Child Tax Benefits.

Having an accountant to advise and ensure you are taking advantage of all your available tax credits in regards to children or dependents can save you a lot of hard earned money.

Enjoy the start to April.

Family fun

So we are now in mid March, the snow is melting and the sun is shining.  We are getting very busy at the office and looking forward to having you come in and get another year of taxes completed.
It was a week to celebrate the Irish, March Madness and spring time.

Also we have now started a facebook account check it out the name is of course, Henderson Campeau Chartered Accoutnants.

This week to build on the tax credit posting last week. I'll inform you that if you have a spouse,common law partner or dependants; and they don't use all of their tax credits, certain amounts can be transfered to you.

These credits include:

• Tuition credits (up to $5,000 federal and provincial)
• Disability credit
• Personal credit of $10,382
• Child amount (can be used by either parent)
• Age amount if you are over 64
• Pension amount (If you are receiving a pension the income can be split between spouses)
• Donations (the amount of donations between spouses can all be used by one individual)
• Medical expenses (family medical expenses can be optimized on one return)

These are a few examples of tax credits that can be strategically used to reduce a family's overall tax.
Therefore it is in your best interest to file the entire family's returns at the same time to ensure all the credits are optimized.

Additionally if you are single and have children, infirm dependants, elderly parents and maintain a dwelling for these dependants you may qualify for additional credits, such as eligible dependant amount or the caregiver tax credit.

Another confirmation that discussing your entire family situation with your accountant and for accountants getting to know their clients personal situation is very important.

Tax credits

So things at the office have been good.  Lots of activity lately in the office, we have seen many new as well as familiar faces dropping by, very nice.  Good ole taxes are getting done.  It is time to come on by to see us and join in the fun.

This week's posting is a quick discussion on non refundable tax credits available to taxpayers.

Non refundable tax credits are personal tax credits available, these credits are calculated by adding up the total of credits that you qualify for and multiplying them by 15% (lowest federal tax rate, provincial rates differ). 

The following is a list of a few of these credits

Personal  ($10,382)

Over age 64 (max $6,446)

Transfers from spouse/dependant

Amount for children born after 1993

CPP/EI

Pension income

Disability/Caregiver

Tuition/education/student loan interest

Canada Employment Credit

Public Transit

Children’s Fitness amount

Home Buyers’ amount

Adoption expenses

Medical

Donations

Dividend tax credit

Overseas employment

So if you think you qualify for any of the above credits let your accountant know when getting your personal taxes prepared.

Have a great weekend and let the spring shine in.  Remember to set your clocks ahead one hour on Sunday.  Day light savings already.

For federal tax purposes you add up all the credits you qualify for and multiply the result by 15% to determine the amount you can deduct from your taxes owing.

Tax season is here.

Well it is official.  It is March 1, 2011.  Get those RRSPs topped up today.  It also means all T slips should be filed and the personal tax season is here.  Will had a great week off to prepare and I enjoyed a weekend of skiing before the craziness begins.

It is truly beautiful in Calgary's backdoor.

So for the next few months I'll try to keep the discussion relating to personal taxes to help you all out.  This week I'll discuss employment expenses.

In 2010 if you were a salaried employee or commissioned employee and you were required to incur certain expenses to conduct your job, you may be eligible to deduct those expenses on your personal return.

The first step is to have your employer file and sign a for T2200.  This form is a statement from your employer that declares your employment conditions.  For example if you were required to work away from your regular place of business and had to incur vehicle expenses, purchase you own supplies as well as work from home, this declaration would allow you to deduct those specific employment expenses on your tax return.

Here is a link to the form T2200

Now if you qualify and your employer has signed the T2200, on your return we can deduct expenses such as:

Professional fees, Travelling expenses, Supplies, Office Rent, Allowable motor vehicle expenses, Parking, Salary expenses, and work space in the home expenses.

As a commissioned employee you can deduct the above expenses and additionally:

Advertising, Food and beverage, Entertainment, Lodging, Licenses, Training costs and few more expenses.

Keep in mind that the qualifying expense must meet certain criteria, such as time away from your regular place of business, home office qualifications, and hours worked to qualify for meal expenses.

So if you regularly have to incur expenses to earn your employment income you may qualify to deduct those expenses on your personal tax return.  As mentioned this requires certain forms to be completed and certain criteria to be met.  Contact your accountant to discuss your options. 

Have a great week, stay warm and bring on the spring already.  

Love is in the air.

Happy Valentines Day.

I hope everyone is enjoying the day and treating their significant other or those around them really good.

Will is doing just that as he is away this week to Hawaii for some time off.  So I am the lone partner this week.

This week we just want to emphasize that there are many personal tax credits available to everyone when we are discussing personal taxes. We urge you to be aware of them and take advantage to reduce your annual taxes.

Here are a few:

Childcare Expenses: You can claim up to $7,000 of childcare expenses for a child born in 2004 or later and up to $4,000 for children born between 1994 and 2003. Childcare expenses include payments made to caregivers, daycare or day homes, day camps and day sport schools where the goal is to care for the child, boarding schools, and educational institutions that charge for child care services.
This is above the Child Tax benefit you may qualify for and the basic amount for children born 1993 and later.

Child Fitness Amount:  You can claim up to $500 for amounts paid for a child under the age of 16 for amounts paid to a prescribed program of physical activity.

Public Transit:  You can claim the total cost of public transit passes for yourself and children under the age of 19.

Home Buyers Amount:  If you had purchased a new house in 2010 and it is your first home purchase you may qualify for a $5,000 credit.

Remember many of these are non refundable tax credits and the actual tax dollars you get credit for are 15% of the credit.

These are just a few examples of personal tax credits available.  There are many more to consider, so make sure you are not missing any and aware of those that apply to you when completing your 2010 personal tax return.
 

Last week of January 2011...Already?

The first month of January 2011 has now come and gone.  That was quick.

This last week felt more like May than January with the double digit weather.  However in the office we were wishing for more seasonal temperatures and snow; for skiing and the fact that Will is hosting a Winter Wonderland party this weekend. Let it snow, Let it snow

With January now behind us, it becomes an important time for owner managed businesses with a December 31 year end.  This proves to be a challenging year end and requires you to be organized due to the deadlines in February.  Usually a company has 3 months to pay taxes following their fiscal year end, with a December year end it is in the best interest of the company to have things finalized in early February.  Why?, well February 28 brings a few deadlines, T4's and T5's for 2010 are due as well as the personal deadline of RRSP contributions.  So in order to properly plan for taxes, meet the filing deadlines and keep all of your options open it;  a company with a December year end would benefit both corporately and personally if they have their financial records finalized for the year in early February.

By getting your corporate books finalized, tax return submitted and T slips filed in February, the owner manager can appropriately plan for personal and corporate taxes.  It allows for tax planning strategies to be implemented to reduce and defer taxes in the best interest of the small business and it's owners.

Have a fabulous last few days of January

Using a work space at home for business

We are keeping busy getting ready for the upcoming tax season.  We have been addressing many office administrative needs and reaching out to our clients.  It has been fun getting back in the new year and getting things in order for 2011.

Tax issue: Home use for Business puposes.
We see many self employed clients, claiming a home office as a business expense.  This is a legitimate business expense that can be deducted on the business schedule of your tax return when a portion of your home is used as the principal place for business.

It allows you to deduct legitimate office expenses to reduce your taxable income. These office expenses are the portion of your home costs that you already pay to run your house. However your home office must qualify as a eligible work space.

Most people think that if they use the phone to answer a couple of calls in a month and have a desk set up, this is being used for business purposes.  Then they take the large % of the home and want a deduction.

So although the work space in home is a great way to deduct valid office expenses for a self employed individual, it should not be misunderstood.

The income tax act requires the home office to meet the following criteria:

(a) the principal place of the business of the individual, or

(b) used exclusively to earn business income and on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business.

So what this means is, that the home office must be the main place where business is conducted. So if you have a home office and conduct business at another office or in other places, your home office expenses would not be valid

The second criteria is that the home office must be used to regularly and continuously meet customers.  So at least several customers a week must come to your home.

So immediately many home offices are ruled out since these two criteria are not met.  However if they are met you then can use a reasonable method to calculate the home office %.  (Usually square footage). Using this % you can deduct the home office portion of the following

• Utilities
• Mortgage Interest or Rent
• Home Insurance
• Property taxes 

So if your home office qualifies as a business workspace, it can be used as an useful tool to claim a portion of home expenses relating to your business to reduce your taxable income.

Hoping to get some skiing in this weekend.

Happy New Year

So it's 2011.  That means it is time to start working on those resolutions. Getting back to the gym, putting things in order to start the year off right, and of course paying more attention to your finances.
Well we are here to help you out with all of it, ok maybe not the gym part.
Get in touch with us to start planning anything financial or tax related for you or your company.

I Just got back from a trip up north to visit family and I am happy to be home as the drive through the winter blizzard is not advisable.

Will has settled back in after a few ski trips and hockey games.

We are now back in the comfort of our office in Kensington, here to help you out in 2011.

See you soon

December postings

2011 Personal Tax Rates (December 1, 2010)

Here are the 2010 personal federal tax rates :

• 15% on the first $40,970 of taxable income,
• 22% on the next $40,971 of taxable income (on the portion of taxable income between $40,970 and $81,941),
• 26% on the next $45,080 of taxable income (on the portion of taxable income between $81,941 and $127,021),
• 29% of taxable income over $127,021.

Contact us early to start considering your 2010 taxes. We would be glad to help.

Motor Vehicle Allowances.  (November 22, 2010)

Many businesses struggle with the decision whether to expense vehicle costs through the company or pay employees/owners a per-kilometre allowance.  As in all business and tax matters, the individual goals and amounts need to be considered before a final decision is made. 

If a motor vehicle is expensed by the business, all personal usage of that vehicle must be claimed as a taxable benefit (claimed as personal income) by the employee/owner.  The benefit is calculated by determining a Standby Charge and an Operating Expense Benefit.

If the vehicle is not expensed by the company; the company can pay the employee/owner a reasonable per-kilometre allowance tax free, for the business kilometres driven. 

Whichever strategy works best for your business; it is required that a drivers log be kept in order to provide evidence of the kilometres driven for business and personal use.

Before making a final decision we highly recommend consulting with a financial/tax expert to examine all of your alternatives.