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July 3, 2013
Published by Michael Blank at July 3, 2013
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HST is to be charged by province. If a business is resident in Ontario, and sells to another province, the level of HST that is charged depends on the transaction. If a business in Ontario sells to a business in Alberta, and the Ontario business pays for shipping, the Alberta business is deemed to receive the goods in Alberta. Alberta HST (at 5%) applies. If, however, the Alberta company has a shipping contract and takes responsibility for picking up the goods in Ontario and shipping them, Ontario HST must be charged. In conclusion, HST charged largely depends upon where the […]
June 21, 2013
Published by Michael Blank at June 21, 2013
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The Income Tax Act(ITA), as mentioned in previous posts, requires adding back amortization to calculate Net Income for tax purposes. After that, the capital assets are put into a special pool, and a unique form of amortization deductions called Capital Cost Allowance (CCA) is used to calculate amortization for tax purposes. Then it gets complicated. If one has a land and building, and one sells the two, it may lead to little capital gains on one and a great deal of (taxable!) capital gains on the other. Section 44(6) and 13(4) of the ITA help to spread proceeds from one […]
June 12, 2013
Published by Michael Blank at June 12, 2013
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A number of stories are coming out of people who sell an asset (condos for example), then sell and think they pay capital gains. Instead, the CRA challenges that, and states that the sale is business income. The stakes are high. Let’s say there is a profit of $50,000. If the person did not intend to buy and sell the condo for profit (i.e. bought the condo then got married and moved to a house), they should pay capital gains. The $50,000 profit is included in income at a 50% rate, or $25,000, and taxed at the highest marginal rate […]
March 10, 2013
Published by Michael Blank at March 10, 2013
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Tuition increases faster than inflation, and the rates are soaring to the heights of the Ivory Tower. Meanwhile, provincial debt is increasing to the point that Ontario puts more money to interest payments on government debt than it does to postsecondary education. Universities are grappling with underfunded pension plans. Tuition is likely to remain high. There are tax credits that come with inflation, but they are around a max of 17%. Students who earn enough to use the credit gain a 17% tax credit. The rest may be carried forward to future years. The student may transfer $5,000 to a parent […]
February 28, 2013
Published by Michael Blank at February 28, 2013
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The Three “R”s of Taxes 1.Records. One must keep good records. Some like to keep receipts by month, some like to keep receipts by project ,others by supplier or client. It is up to you, but should be kept neatly. They are evidence that supports your financial statement assertions. Receipts could also be electronic, but one must back them up periodically. By back up, that means burn the file on a CD (separate from a computer that could crash), or on a RAID system (series of hard drives with redundant copies), or in the Cloud. Contracts should have a paper […]
February 27, 2013
Published by Michael Blank at February 27, 2013
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In the normal course of business, bartering occurs. It is important to carefully approach this as the tax laws are strict. Basically, one should include the regular normal income as revenue and the cost of the barter as an expense. For example, let’s say John rents a basement apartment for $600 a month to Stuart. John and Stuart agree to cut the rent by $100 a month for snow removal, and lawn maintenance. It is a net of $500 income for John. The CRA wants to see the $600 and $100 figures in the income and expense areas, respectively. For […]
February 15, 2013
Published by Michael Blank at February 15, 2013
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Taxation can be a big problem for small businesspeople. It helps to break it down into smaller more manageable challenges. How does one manage to plan for HST, corporate, and personal income tax? HST is straightforward. HST tax collected minus HST (input tax credits-ITCs) paid out, for a given time period. Good records are important. Find out how often your business must report and file, and that is taken care of. There are no predictions, just pay on time to avoid penalties. HST is very important, but not complex. Corporate/business taxes are more complicated. There are three ways to predict […]
February 9, 2013
Published by Michael Blank at February 9, 2013
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Generally, corporate income is taxed at a lower rate than personal income. For many small proprietorships it may not matter. Corporate taxes may be more complicated sometimes, but generally that is out of an effort to be equitable and cut back on loopholes. Is incorporation for you? From a tax accounting perspective there are rules to follow: First if you walk like an employee, and act like an employee, you cannot claim your income as corporate. The rules are more complex than that, but generally the more one has creative control to get the job done and responsibility to bring […]
January 29, 2013
Published by Michael Blank at January 29, 2013
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A corporation can pay out a salary, or a dividend to an owner. To retain the most cash, a combination of salary and dividend should be considered. It depends on a few factors such as corporate tax rate, personal tax rate, tax credits, and so on.
January 19, 2013
Published by Michael Blank at January 19, 2013
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Corporations who are what I call ‘good corporate citizens’ can apply to pay taxes in installments, rather than monthly. This reduces the monthly hassles and allows the cash set aside for taxes to be kept in the bank for longer. To be eligible, the corporation must: -have a perfect compliance (reporting) history (recent 12 months). This means all forms of federal taxes: Income Tax, HST, payroll (CPP and EI) -earned under $500,000 per year (corporation and associated corporations) -has less than $10 million in taxable capital (i.e. assets) -claimed the small business deduction (for corporations under $500,000 in revenue) for this […]