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Principle Residence Exemption

Did you sell your house in 2017?

Commencing with sales in the 2016 tax year, you must report basic information, such as the date of acquisition, the proceeds of disposition (the sale), and the address, on your income tax and benefit return when you sell your home to claim the full principal residence exemption.

You do not have to pay any tax on the capital gain when you sell your home provided it was your principal residence for all the years that you owned it and you did not use any part of it to earn income.

A property may qualify as your principal residence for any year that you or certain family members lived in the house, if none of you designated another property as a principal residence for that year.

File a tax return and claim the principal residence exemption for the capital gains.

Nurse practitioners can now certify applications for the disability tax credit

Nurse practitioners can now certify applications for the disability tax credit

Nurse practitioners can now fill out and sign Form T2201, Disability Tax Credit Certificate making the application process  for the disability tax credit (DTC) easier and more accessible.

Through Budget 2017, the Government has made a change to recognize nurse practitioners as one of the medical practitioners who can certify Form T2201. With over 4,500 nurse practitioners across Canada who can certify patients for the DTC, this change is going to have a positive impact for Canadians living with a disability.

Individuals who want to apply for the DTC, but live in an area where nurse practitioners are the first point of contact, as for example, in Canada’s North, will benefit from this change.

What is the disability tax credit?

The disability tax credit is a non-refundable tax credit that helps persons with disabilities or their supporting family members reduce the amount of income tax they may have to pay.
Applying for the credit is a three step process:

  1. Fill out Part A of Form T2201, Disability Tax Credit Certificate
  2. Have your nurse practitioner fill out Part B
  3. Send form T2201 to the CRA

Being eligible for the DTC can open the door to other federal, provincial, or territorial programs designed to support those with disabilities or their families. These include the registered disability savings plan, the working income tax benefit disability supplement, and the child disability benefit.

CRA Project – Third-Party Information Request to disclose Canadian Square sellers

CRA requested Square (service that allows you to accept  payments, using a reader that plugs into your iPod touch, iPhone, or iPad) to disclose information about Canadian Square sellers who processed greater than CAD$20,000 on Square during any of the calendar years 2012, 2013, 2014 or 2015; or during the period of January 1, 2016 to April 30, 2016.

Square will share with the CRA the following information associated with the Square account:

 The name(s) and address(es) associated with the seller’s Square account
The associated financial institution(s) name, transit number and account number
The number of Square Readers and Stands linked to the account
The total monthly aggregate of transactional information between the seller and their customers
The number of employee permissions granted through employee / location management functionality
Square encourages affected sellers to verify their tax statements with the amounts indicated on their Square Dashboard to ensure they have accurately reported their commerce activities.

Renting out a room to students? CRA wants to know

As students fan out across the country for another school year, homeowners are finding opportunity in renting out accommodations.

There’s nothing wrong with making a few bucks renting out a room, but the Canada Revenue Agency wants a piece of the action – and how you claim deductions could be costly in the long run.

The name of the game is to preserve your home’s principal residence status. If the CRA considers your home a principal residence, you don’t pay any tax on the amount it appreciates when it is sold. As an example; if you bought your house for $400,000 and sold it for $800,000, you don’t pay any tax on that $400,000 gain.

If your home does not meet the CRA’s principal residence requirement, you must pay tax on half of that $400,000.      

If you are drawing rental income from your home, there are three ways to ensure it remains your principal residence for tax purposes:

  1. The partial use of the residence for income-producing purposes is ancillary to the main use as a residence. In other words, there’s a fine line between renting out a room and renting out a house the owner happens to live in.
  2. There is no structural change to the property. You can put a coat of paint on the walls and make some modifications but you can’t build an addition, for example.
  3. You cannot claim capital cost allowance (CCA), or depreciation on the property.

Of course, the rental income must be claimed (form T776) and filed with your tax return, but there are several deductions available to lower your tax bill. They can include: a portion of mortgage interest, property taxes, insurance, repairs and maintenance, landscaping, utilities, advertising costs, office expenses, professional fees, management fees, salaries or wages, travel costs, and car expenses.

If you’re not sure if you are crossing the line between principal residence and income property, consult your tax professional.

By Dale Jackson 

Dale is Finance Journalist: writer and producer Business News Network, Globe and Mail, Yahoo! Finance.



May 2011

May 2011


Vol. 9, No. 5

This Month

» Voluntary Disclosure Program

» Withholding Information from
   Canada Revenue Agency

» CPP Changes Jan. 2011

» Salaries Paid to Family Members

Voluntary Disclosure Program

If you owe money to any of the tax authorities because you failed to file a return for one or more years, you can make a voluntary disclosure. You will pay only the tax due plus interest. No penalties will be assessed. You have to make a complete disclosure. The information can be less than or more than a year old. Plus you must contact the Canada Revenue Agency prior to the start of an investigation or an audit.

Typical voluntary disclosures include; domestic business income never reported, failure to collect or remit GST/HST and/or source deductions, information returns not previously submitted, foreign wages and benefits not reported, and domestic and foreign dividends and interest never reported.

Relief is determined on a case by case basis.

Salaries Paid to Family Members

When deciding as to whether a salary should be paid to a family member, or more specifically to one’s spouse, numerous questions arise. On one side, there is the question of the risk involved that the salary may be unreasonable and having the expense being disallowed. On the other side, there is the benefit of lower tax brackets, RRSP contribution room and unused credits. In a situation where the spouse contributes nothing to the business but is paid a salary which, if paid to an unrelated employee, would have been much lower based on the work performed, the risk mentioned above increases. However, there are numerous functions that can be performed by family members away from the business premises which are easily overlooked. These functions are summarised below:

  • Computer work,
  • Banking,
  • Answering the telephone and taking messages,
  • Purchasing supplies, Delivery and pick-ups, and Promotional work.

In rendering government decisions to accept salaries paid to family members easier, numerous aspects should be considered such as:

  • Having a written contract of employment between the corporation and a family member,
  • Salaries commensurate with duties performed, The educational background of family members,
  • Not being overly aggressive in paying salaries to family members,
  • Keep copies of cancelled cheques, and If payment is made in cash to family members, have them sign receipts.

The family members’ salaries would be reported on T4’s (Relevés 1 for Quebec) as they normally would if paid to an unrelated employee.

Withholding Information from
Canada Revenue Agency

If you run your own business or you are self-employed, you may be tempted to report only part of your income to the tax authorities. Or you might consider suppressing information about your activities.

If you are audited by the Canada Revenue Agency (CRA) you should consider this. The CRA auditor has access to the Internet. What will show up if the auditor enters your name or your business name in Google or one of the other search engines? Will the auditor discover information about activities that you have failed to report?

A CRA auditor now routinely uses publicly available search engines, Google for example, to discover information about companies and individuals that are being audited. In one recent case, the CRA disallowed a Voluntary Disclosure application because the taxpayer submitted an incomplete disclosure. He failed to provide information about his involvement in certain business activities that showed up during a Web search.

So remember. Everyone is watching you on the Web including Big Brother!

Canada Pension Plan
(CPP) Changes January 2011

These changes will affect you if you are:

  • an employee who contributes to the Canada Pension Plan (CPP), whether you are just starting your career or you are planning to retire soon;
  • a self-employed person who contributes to the CPP;
  • between the ages of 60 and 70 and you work while receiving your CPP retirement pension (or if you work outside of Quebec while receiving a Quebec Pension Plan (QPP) retirement pension); or
  • an employer who contributes to the CPP on behalf of your employees.
  • You will not be affected by these changes if you started receiving a CPP retirement pension before December 31, 2010, and you remain out of the work force.
  • The CPP operates throughout Canada, except in Quebec, where the Quebec Pension Plan (QPP) provides benefits. These changes do not apply to QPP.

What are the changes?

The following changes will be phased in gradually between 2011 and 2016. The first major change occurred in January 2011 for people retiring after age 65:

  • Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65 (gradually from 2011 to 2013).
  • Your monthly CPP retirement pension amount will decrease by a larger percentage if you take it before age 65 (gradually from 2012 to 2016).
  • The number of years of low or zero earnings that are automatically dropped from the CPP retirement pension calculation will increase (2012 and 2014).
  • You will be able to start receiving your CPP retirement pension without any work stoppage (starting in 2012).
  • If you are under age 65 and you work while receiving your CPP retirement pension, you and your employer will have to make CPP contributions (or if you work outside of Quebec while receiving a QPP retirement) (starting in 2012). These contributions will increase your CPP retirement benefits (starting in 2013).
  • If you are age 65 to 70 and you work while receiving your CPP retirement pension, you can choose to make CPP contributions (or if you work outside of Quebec while receiving a QPP retirement pension) (starting in 2013).

These changes were designed to improve retirement flexibility for working individuals in Canada, enhance pension coverage, and improve equity in the CPP.

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Phone: (403) 220-1570

Email: Padgett Calgary

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