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.