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.