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What to expect when the Canada Revenue Agency calls you

It is possible that the Canada Revenue Agency (CRA) will contact you by phone for legitimate tax reasons.

During such phone calls, the CRA officer must validate your identity and therefore will ask for certain personal information, including your date of birth, your address, and in the case of a business some account specific details.

The CRA will not:

The CRA may:

·         ask for information about your passport, health card, or driver’s licence

·                  validate your identity by asking for certain personal information, including your full name, date of birth, your address and, in the case of a business, details about your account

·         request personal information by email

·         notify you by email when new mail is available for you to view in CRA secure portals such as My Account, My Business Account or Represent a Client

·         email you a link requesting you fill in an online form with personal or financial details

·email you a link to a CRA webpage, form, or publication in response to your telephone enquiry

·         send you a link to your refund by email or text message

·send you a notice of assessment or re-assessment by mail or notify you by email when it is available to view in My Account, My Business Account, or Represent a Client

·         setup an in-person meeting in a public place to take a payment

·ask for financial information such as the name of your bank and its location

·         demand immediate payment by prepaid credit card

·request payment for a tax debt through any of the CRA’s payment options

·         threaten with immediate arrest or prison sentence

·take legal action to recover the money you owe if you refuse to pay your debt

 

Before giving money or personal information:

  • verify the caller’s authenticity
    • You can note the caller’s name, phone number, and office location and tell them that you want to first validate their identity.
    • You can then verify that the employee works for the CRA or that the CRA did contact you by calling the CRA at 1-800-959-8281 for individuals or 1-800-959-5525 for business.
  • verify your tax status and make sure your address and email are up to date
    • You can confirm this information with the CRA either online through the CRA secure portals, or by calling the CRA at 1-800-959-8281 for individuals or 1-800-959-5525 for business.

When in doubt, ask yourself

  1. Did I file my tax return on time? Have I received a notice of assessment or re-assessment indicating a tax balance due?
  2. Have I received previous written communication from the CRA by email notification or mail about the subject of the call? Does the CRA have my most recent contact information, like my email and address?
  3. Is the requester asking for information I would not provide in my tax return or that is not related to my debt with the CRA?
  4. Did I recently submit a request to make changes to my business number information?
  5. Why is the caller pressuring me to act immediately? Am I confident the caller is a CRA employee?

CRA phone interactions generally come after written communications, such as an email notification to check your online mail or a letter, and are made under special circumstances. For example:

  • If you have a tax debt, a collections officer may call you to discuss your case and request a payment. In this case, you may need to provide some information about your household financial situation.
  • If you have not filed your income tax and benefit return, a CRA officer may contact you by telephone to ask you for the missing returns.
  • If the CRA has questions about your tax and benefit records, or documents you have submitted, a CRA officer may contact you by phone for further discussion.

To report scams

To report deceptive telemarketing, contact the Canadian Anti-Fraud Centre online at www.antifraudcentre.ca or toll free at 1-888-495-8501. If you believe that you may be the victim of fraud or have given personal or financial information unwittingly, contact your local police service, financial institution, and credit reporting agencies.

 

 

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.

Employee benefits: Taxable or not?

Employee benefits: Taxable or not?

By Sheryl Smolkin

Does your T4 say you made more than you thought you did? Perhaps you didn’t consider your taxable benefits. Find out what is and isn’t taxable.

When you get your T4 slip in January or February, you may wonder why the employment income reported in Box 14 is higher than the salary or wages you earned for the year. That’s because your employer must report premiums it pays for certain group benefits and the value of some perks as a taxable benefit, and you must pay taxes on those amounts.

In addition, both you and your employer have to make Canada or Quebec Pension Plan contributions on the value of all taxable benefits plus Employment Insurance contributions on taxable benefits you receive in cash.

However, there are valuable company perks, such as a cell phone, tuition reimbursement and service awards, that aren’t taxable in certain circumstances. Here is how the Canada Revenue Agency (CRA) treats eight common employee benefits for tax purposes:

  1. Group life/health premiums

Employer-paid premiums for group life insurance, dependant life insurance, accident insurance and critical illness insurance are taxable benefits and the amounts paid on your behalf will be added to your taxable income. In Quebec, premiums for health and dental insurance are also considered a taxable benefit. You may also be able to claim health insurance premiums you paid as a tax credit.

  1. Group short- or long-term disability

Employer-paid short-term disability (STD) or long-term disability (LTD) premiums are not taxable benefits. However, when your employer pays any amount towards your STD or LTD coverage, any benefits you may collect in future will be taxable.

  1. Non-group insurance plans

A non-group insurance plan is a plan for an individual employee. Employer contributions to a non-group insurance plan are a taxable benefit even if the plan is a sickness, accident insurance or disability insurance plan For example, an executive may negotiate individual paid participation in a comprehensive health/wellness plan with a private facility as part of her total compensation. The annual fee would be taxable.

  1. Pension plan/Group Registered Retirement Savings Plan

Your employer’s contributions to a registered pension plan on your behalf are not taxable. However, when your employer contributes to or matches your group RRSP contributions, this amount is viewed as taxable earnings that increase your income. If you notify your employer that you have sufficient RRSP contribution room, your employer may deposit the full amount into your RRSP account without any withholding tax being deducted. And as long as you have RRSP contribution room, you can deduct the total amount contributed to your RRSP in the year of contribution or a future year. Be aware, however, that your employer’s contribution to your pension reduces your RRSP contribution room the following year, via the “pension adjustment” that is reported on your T4 and that the CRA notifies you about every year.

  1. Cellphone

Companies frequently provide employees with smartphones plus a voice and data plan. Even if you use your phone for both work and pleasure, the CRA will generally not consider the payments as a taxable benefit, as long as the cost of the cellphone plan is reasonable and you do not incur costs for personal use (e.g., additional long-distance charges) beyond the basic fee for the plan.

  1. Equipment for working from home

Full- or part-time arrangements for working at home are now common in many industries. Computer equipment or other supplies provided by your employer to enable you to do your job are not taxable benefits. Where you must provide your own office space or equipment, you may be able to deduct all or part of these expenses for tax purposes if your employer completes and signs a Form T2200 that you file with your tax return.

  1. Tuition reimbursement

Tuition paid by your employer is not a taxable benefit if you require the training to progress in your job. For example, if you are employed by a bank and are working towards a Certified Financial Planner designation, any tuition reimbursed by the bank for this program would not be taxable. Also, if the company gives your son or daughter a bursary or scholarship, neither you nor your child is required to pay taxes on the amount.

  1. Gifts and awards

If your employer gives non-cash gifts or awards worth under $500 for outstanding service or for milestones such as a wedding or the birth of a child, the value of the award is not a taxable benefit. Similarly, non-cash awards for long service worth less than $500 are not considered taxable benefits if you have worked for the organization for at least five years and you are not eligible for such an award more often than every five years. Incentive awards and performance bonuses are included in your taxable income, however.

When starting a new job and enrolling in a benefits plan, it’s useful to know how your benefits are taxed so you can structure your choices accordingly. Your employer or benefits provider can give you more information.

Sheryl Smolkin

Sheryl Smolkin is a lawyer who writes about workplace pensions and benefits. Follow her @SherylSmolkin

https://www.sunlife.ca/ca/Learn+and+Plan/Money/Insuring+your+health/Employee+benefits+Taxable+or+not?vgnLocale=en_CA

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.

 

 

Do you use sub-contractors within your business?

Do you use sub-contractors within your business? If so, you are required to file T4A slips for each sub-contractor that you hire.  If you are in the Construction field, then the slip required for each sub-contractor is a T5018, rather than the T4A.

Canada Revenue Agency (CRA) requires that a T4A or T5018 slip must be filed if you have made any of the following payments listed below on behalf of an individual or business:

  • The total of all payments in the year was more than $500; or
  • You deducted tax from any payment

Also if you are a payer, such as an employer, trustee, an estate executor (or liquidator) an administrator or corporate director, and you paid any of the following types of income:

  • Pension or superannuation;
  • Lump sum payments;
  • Self-employed commissions;
  • Annuities;
  • Patronage allocations;
  • Fees or other amounts for services; or
  • Other income such as research grants, certain payments under a wage-loss replacement plan, death benefits, and certain  benefits paid to partnerships or shareholders.

The T4A/T5018 slips require the name of the contractor (personal or business), their current address, and the Social insurance number/Business number of the contractor.

These T4A slips must be filed and given to the recipient on or before the last day of February following the calendar year to which the information return applies, whereas the T5018 slips must be filed 6 month after the corporations fiscal year end.  The minimum penalty for late filing the T4A/T5018 return is $100.00 and the maximum penalty is $7500 and $2500 respectively.  CRA has been lenient regarding T4A/T5018 slip submission in the past but are now starting to enforce this requirement.

Padgett Business Services will be providing this additional service.  Please call us at 403-220-1570 for further information.

Daniela Hops, CMA

Can I prevent employee fraud?

How small businesses can prevent employee fraud 

It started with a telephone call from a disappointed manager or owner. Employee John Doe was a good worker, but I got complacent and trusted him with my life.

Once I heard those words, I knew what was about to come. As a former auditor with the city of Miami and a former forensic accountant investigator with Medicaid, I have analyzed significant amounts of data, building large and small fraud cases for prosecution.

Small businesses are more susceptible to fraud than larger businesses. Small businesses typically have fewer or weaker controls in place than their larger counterparts, primarily due to a lack of personnel or financial resources.

Internal audits and tips were cited as the detection method in fewer small-business cases than among all cases, while small-business frauds were more likely to be detected by accident. These findings indicate that small organizations have room for improvement in their proactive fraud-detection efforts.

According to the Association of Certified Fraud Examiners Report to the Nation (2008), small businesses are especially vulnerable to occupational fraud. In 2008, the median loss suffered by organizations with fewer than 100 employees was $200,000. This was higher than the median loss in any other category, including large organizations. Small businesses also suffered huge losses. Check-tampering and fraudulent billing were the most common small business fraud.

In order to stop huge losses, small businesses should first prevent potential fraud by conducting résumé checks. Résumés should be checked thoroughly to determine that the applicant in fact graduated from the stated educational institution. Also, any unaccounted-for time in an applicant’s past must be acceptably explained. To guard against bogus employment references, a prospective employer should never rely on the résumé for the telephone number of an applicant’s previous employer.

The owner or manager of an emerging business must exercise some simple precautions to thwart employee fraud. Employees who handle money should be removed periodically from their jobs so that malfeasance may not be continually concealed; this can be accomplished through required vacations and short-term job rotation. The classic embezzlement is the handiwork of the trusted employee working long hours and never taking a vacation. Most thefts would surface if the employee had to take his or her hands off the job.

An independent audit, at least annually, is an expense small businesses cannot afford not to incur. An emerging business often cannot survive the losses of significant employee theft.

Most owners or managers of emerging businesses would like to be viewed as trusting by their employees. At the same time, they must also be vigilant, and not gullible, of all business activities.

Even the “nicest” employees may be subject to temptations and failure of character. Prudence demands that procedures and practices be established to preclude the possibility of employee fraud. The survival of your business depends on it.

Special to The Miami Herald

Nathaniel N. McKenzie is managing partner of McKenzie & Co. Forensic Accountants.

Should You Incorporate Your Business?

Should You Incorporate Your Business?

 

If you own a business, you may have wondered if you should incorporate. Historically the income tax system in Canada has benefited incorporated Canadian small businesses.

Although the income and deduction calculations are almost identical to an unincorporated business, the major differences are in the corporate taxation structure and tax planning opportunities. When developing a tax plan for your business, you and your advisor should look for opportunities in the following areas:


• Income splitting with family members;

• Tax deferral to the future;

• Estate planning for you and your family;

• Utilization of the capital gains exemption; and

• Planning your retirement, including disposing of your business.


Personal and corporate tax laws as well as family law issues can make this decision a complex one. If you need help with this decision please contact Padgett Calgary, we would be more than happy to discuss this with you.

Salaries Paid to Family Members

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

 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

 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.  For more information please contact us at Padgett Calgary, we would be more than happy to discuss this with you.

Contact Us

Padgett Business Services

1511 10 Street SW Calgary, AB T2R 1E8
Phone: (403) 220-1570

Email: Padgett Calgary

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