Posts Tagged ‘Calgary’

Dying without a Will

A will is a document that says how you wish property to be divided after your death.

In Alberta, if you die without a will or if you leave property that is not disposed of by will, the Wills and Succession Act determines what will happen to your property.

 If you die leaving children but no spouse, then everything is divided equally among your children. If any of your children died before you, but left children (your grandchildren) who survive you, are entitled to share the portion of your estate which your child would have received if he or she was alive.

If you are married or in an adult interdependent partnership and you have children who are also the children of your surviving spouse or adult interdependent partner, your spouse or adult interdependent partner is entitled to receive your entire estate.

 If you are married or in an adult interdependent partnership and you have children who are not also the children or your surviving spouse or adult interdependent partner, your surviving spouse or adult interdependent partner will be entitled to receive either 50% of your estate or an amount set out in the Act at the same time of your death, whichever amount is greater. Your children are entitled to share the balance of your estate equally. If any of your children died before you, but left children (your grandchildren) who survive you, those grandchildren are entitled to share the portion of your estate which your child would have received if he or she was alive.

If you leave no spouse or children or descendants, your estate goes to your nearest kin, in the following order: to your parents in equal shares, or to your surviving parent; if both of your parents are dead, then to your brothers and sisters in equal shares. The children of deceased brother and sisters inherit their parent’s share. If you have no surviving nieces or nephews, then your estate would be left to your next of kin according to different degrees of blood relationships. For example, your estate would pass first to your grandparents. If your grandparents have died before you, your estate will be divided equally among your surviving aunts and uncles. If you do not have surviving aunts and uncles, your estate will be divided among your cousins. If you do not leave any traceable next of kin, your estate goes to the provincial government and is used for universities to provide funding for scholarships or fields of research.

The Wills and Succession Act does not consider the needs of each particular family and some unfair situations may result.

A surviving parent may go through needless inconvenience when the other parent dies without a will. For example, where part of the deceased’s estate is to go to the children and the children are under 18 years of age; their share may be held in trust for them by the Public Trustee of Alberta.

As a result, a parent or guardian with small children may only be allowed to use that money if he or she applies to the Public Trustee each time she needs money to buy something for the children. The Public Trustee invests the money held in trust, and charges an administrative fee for acting as trustee for the children.

When the surviving spouse is elderly and the children of the deceased are adults who are able to earn a living, it may be the case that the surviving spouse needs the inheritance more than the adult children do. However, without a will, the estate will not necessarily pass entirely to the surviving spouse. This problem could be avoided by making a will which would leave the entire estate to the surviving spouse.

If you do not have any traceable relatives, you probably still wish to decide what happens to your estate when you die. You may prefer to leave your estate to a charitable organization or a friend rather than to the provincial government. You can state your preference in a will. If you leave any portion of your estate to a charitable organization, your estate will receive a tax benefit as a result of the donation.

Alberta has additional legislation that affects what happens to your estate if you die without a will. For example, The Dower Act, which prevents a married person from selling, mortgaging, or willing away the homestead without the spouse’s consent, entitles the surviving spouse to the use of the homestead for the remainder of his or her life, subject to the interests of any mortgagee or other registered creditor. Under the Dower Act, a homestead is the land upon which there is a dwelling house occupied by the owner (that is the deceased spouse, prior to his or her death), as longs as there are no joint owners on title to the land. The surviving spouse is allowed to occupy the dwelling house during his or her lifetime, or can rent the land and receive the income. This is the case regardless of the terms of the will or the provisions of the Wills and Succession Act.

If you die without a will and the share going to your dependent family members under the Wills and Succession Act is not enough for their proper maintenance and support, your dependent family members may apply to the court for more money. The judge, in such cases may make changes as he or she sees fit. According to the Family Maintenance and Support provisions of the Wills and Succession Act, dependent family members include your spouse or adult interdependent partner, children under the age of 18, and children over the age of 18 who are unable to earn a living due to a mental or physical disability. These provisions also apply where a will is made but does not make adequate provision for dependent family members. If you leave a will, you can specifically address the individual needs of your spouse and minor or disabled children. You can also state your reasons for not leaving a larger portion of your estate to certain of your family members. For example, if you and your spouse have signed a pre-nuptial agreement in which you agree to keep your finances separate, you may wish to make reference to that agreement in your will.

In summary, if you die with a will in Alberta, there are laws that determine what happens to your estate. You should make a will if you want to decide what will happen to your estate when you die, rather than have the provincial legislation do it for you.

http://clg.ab.ca/programs-services/dial-a-law/dying-without-a-will/

 

CRA Collections and the Small Business Owner

Have you ever wondered how your personal assets would be affected should the CRA send you an advisory or audit for collections? Here are eleven tips that will help safeguard small business owner’s personal asset’s from CRA collections.

Never use your home address as your business address. If you have a business location outside of your house use that location. If CRA collections issues a direction to the sheriff to prepare a report of assets, the sheriff will go to the business address.

If the corporation has debts to the CRA, attempt to make a payment arrangement. A payment period of 6 – 24 months has a better chance of acceptance by CRA collections. You provide post-dated cheques for the payment period.

If a payment arrangement has been made, and the cheques issued to CRA, provide this proof to the sheriff who will include this information in their report of the assets.

Ensure there are sufficient funds in the bank account to cover the amount of the cheques. A bounced cheque forces the CRA collections officer to look for other sources to obtain the money.

Keep all CRA filings and payments up to date during the period of the payment arrangement. This includes GST/HST, payroll taxes, and income taxes, etc.

Apply for interest relief while the corporation is paying off the debt to CRA. If accepted by CRA, the outstanding balance will be decreased.

If you can make an additional large payment while paying the arrangement, this will reduce the interest on the outstanding balance.

Be honest with the CRA collections officer, whether you have nothing (or something) to hide. Do not say anything to cause the collections officer to be concerned.

Similarly, if the CRA collections officer requests information, be sure to provide it. Try to build trust with the collections officer, so that the person may show some discretion.

Be polite to the CRA collections officer. They are just doing their job.

If there is a personality conflict between the CRA collections officer and you, request a meeting with them, their supervisor and you. Attempt to improve the relationship to resolve your tax issues.

 

August 1, 2017/in News /by Chris Hammond

http://www.countbeans.com/how-to-safeguard-the-small-business-owners-personal-assets-from-cra-collections-officers/

ESSENTIAL TAX NUMBERS: UPDATED FOR 2018

http://www.advisor.ca/

WORKING CLIENTS

Maximum RRSP contribution: The maximum contribution for 2017 is $26,010; for 2018, $26,230.

TFSA limit: The annual limit for 2017 is $5,500, for a total of $52,000 in room available in 2017 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009. In 2018, the annual limit is $5,500, for a total of $57,500 for someone who has been eligible since 2009. The annual TFSA limit will be indexed to inflation in future years.

Maximum pensionable earnings: For 2017, the maximum pensionable earnings is $55,300 ($55,900 in 2018), and the basic exemption amount is $3,500 for 2017 and 2018.

Maximum EI insurable earnings: The maximum annual insurance earnings (federal) for 2017 is $51,300; for 2018, $51,700.

Lifetime capital gains exemption: The lifetime capital gains exemption is $835,716 for 2017 and $848,252 in 2018.

Low-interest loans: The current family loan rate is 1%.

Home buyers’ amount: Did your buy a home? You may be able to claim up to $5,000 of the purchase cost, and get a non-refundable tax credit of up to $750.

Medical expenses threshold: For the 2017 tax year, the maximum is 3% of net income or $2,268, whichever is less. For 2018, the max is 3% or $2,302, whichever is less.

Donation tax credits: After March 20, 2013, the first-time donor super credit is 25% for up to $1,000 in donations, for one tax year between 2013 and 2017.

Basic personal amount: For 2017, it’s $11,635, line 300. For 2018, it’s $11,809.

OLDER CLIENTS

Age amount: You can claim this amount if they were 65 years of age or older on December 31 of the taxation year and have income less than $84,597 in 2017 (the 2018 threshold is not yet available). The maximum amount they can claim in 2017 is $7,225, and in 2018 is $7,333.

Pension income amount: You may be able to claim up to $2,000 if they reported eligible pension, superannuation or annuity payments.

OAS recovery threshold: If your net world income exceeds $74,788 for 2017 and $75,910 for 2018, you may have to repay part of or the entire OAS pension.

CLIENTS WITH CHILDREN

Family caregiver amount: If you have a dependant who’s physically or mentally impaired, you may be able to claim up to an additional $2,121 in calculating certain non-refundable tax credits.

Disability amount: The amount for 2017 is $8,113 (non-refundable credit; $8,235 in 2018), with a supplement up to $4,733 for those under 18 (the amount is reduced if child care expenses are claimed; $4,804 in 2018). Canadians claiming the disability tax credit (DTC) can file their T1 return online regardless of whether or not their Form T2201, Disability Tax Credit Certificate has been submitted to CRA for that tax year.

Child disability benefit: The child disability benefit is a tax-free benefit of up to $2,730 (for the period of July 2016 to June 2018) for families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions.

Canada Child Benefit: This non-taxable benefit is effective as of July 1, 2016. The maximum CCB benefit is $6,400 per child under age six and up to $5,400 per child aged six through 17. In the 2017 Fall Economic Update, the government pledged to index the benefit beginning in 2018.

Universal child care benefit (UCCB): This benefit was replaced with the Canada Child Benefit as of July 1, 2016. However, Canadian residents can still apply for previous years if they meet certain conditions, including living with the child and being primarily responsible for the child’s care and upbringing.

Child care expense deduction limits: As of 2017, the maximum amounts that can be claimed are $8,000 for children under age seven, $5,000 for children aged seven through 16, and $11,000 for children who are eligible for the disability tax credit.

Children’s fitness tax credit: This credit has been phased out, and is gone as of 2017.

Children’s arts tax credit: This credit has been phased out, and is gone as of 2017.

Originally published on Advisor.ca

1/26/2018 Essential tax numbers: updated for 2018 | Advisor.ca

 

Perspective on cash flow

A 26-year financial services veteran’s perspective on cash flow

Posted on: October 19, 2017 | Author: Myron Feser, vice president of sales, ATB Financial

Cash is king. For no one is this more true than for the entrepreneur who’s working to get their new business off the ground. Learning how to manage cash flow is a crucial milestone on the road to success.

Cash flow is the health of your company. Access to working capital will allow you to provide stability during tough times, while having cash available helps your business grow and thrive during prosperous ones. The ability to handle the ups and downs of any economic cycle also shows the bank that your company is well managed!

Of course, like many things involved in entrepreneurship, it isn’t as easy as it sounds. In fact, effectively managing cash flow can be downright overwhelming, especially if you’re just starting out. It’s always a good idea to engage financial experts, like a business accountant, to help you. As your business grows, you may even want to think about bringing in someone to orchestrate your cashflow full-time.

Whether you’re managing your finances on your own or if you’ve brought in an expert, the next step is to understand your business cycle. That means knowing how quickly the goods or services you provide can be turned into cash. For example, if you have a manufacturing business your cycle might look like: Take raw materials -> manufacture product -> sell the product -> turn the receivable into cash.

The shorter the cycle, the better it is for your business as you’ll have more cash on hand. Even shortening your business cycle by one day can have a significant impact on your company’s working capital position.

Again, having working capital is crucial to building a successful business. Most businesses don’t fail because they aren’t profitable. They fail because they run out of cash. Keep an eye on your cash and your business cycle, and your business should thrive!

Myron’s top cash flow tips:

Entrepreneurs often underestimate how much working capital is required to grow their business. Talk to your banker and figure out how much you need.

Finance any capital purchases like capital assets so that you don’t tie up too much of your working capital.

Make sure you understand your finances and cash flow—even if you do bring in outside help. Monitoring your cash flow on a daily or weekly basis is critical.

Develop strategies to make your business cycle as short as possible.

Definitions

Working capital: the money you use for day-to-day operations. Current assets minus current liabilities.

Capital purchases: significant purchases that a company makes as an investment to acquire or improve long-term capital assets.

Capital assets: assets owned by the company, like buildings or equipment.

Business cycle: how fast you turn your inventory, product or service into cash.

FEDS CLARIFY INCOME SPRINKLING PROPOSAL

Advisor.ca http://www.advisor.ca/tax/tax-news/feds-clarify-income-sprinkling-proposal

The federal government provided revised income sprinkling measures, offering clarity about how its controversial changes to the Income Tax Act will be implemented.

Specifically, the feds provided bright-line tests for determining whether family members are significantly involved in a family business, and thus are excluded from potentially being taxed at the highest marginal tax rate (known as the tax on split income, or TOSI).

A key requirement is “regular, continuous and substantial” contribution to the business, says Walsh. Family members who fall into these categories won’t be subject to TOSI:

Family members who fall into these categories won’t be subject to TOSI:

  • The business owner’s spouse, provided the owner meaningfully contributed to the business and is aged 65 or over. This aligns with current pension income splitting rules.
  • Adults aged 18 or over who have made a regular, substantial labour contribution – generally an average of at least 20 hours per week – to the business during the year, or during any five previous years. The measure recognizes that post-secondary students may step back from the business during the school year. Hours will be prorated for seasonal businesses.
  • Adults aged 25 or over who own 10% or more of a corporation that earns less than 90% of its income from services, and isn’t a professional corporation. This is consistent with current tax rules concerning capital, and recognizes that some service-based or professional-based businesses often don’t require significant capital to do business. (Service- or professional-based businesses must pass the labour test, above). Business owners have until Dec. 31, 2018, to adjust to this exclusion.
  • People who receive capital gains from qualified small business corporation shares and qualified farm or fishing property,if they wouldn’t be subject to the highest marginal tax rate on the gains under existing rules. This is consistent with the feds’ withdrawal in October of the lifetime capital gains exemption measures.

Family members aged 25 or older who don’t meet any of these exclusions would be subject to a reasonableness test to determine how much income, if any, would be subject to the highest marginal tax rate.

In certain cases, adults aged 18 to 24 who have contributed to a family business with their own capital will be able to use the reasonableness test on the related income.

In a conference call, a spokesperson for Finance Minister Bill Morneau said CRA audits will require proof when it comes to claiming an exemption for a family member.

Wills and the Executor

A will specifies your instructions as to how your assets will be distributed on your death. In the will, you name an executor to act as your personal representative and to deal with all the tax, investment, administrative, and other duties involved in distributing and overseeing your assets as per your instructions.

Some people feel honored to be named as the executor, in that it suggests respect and trust in their abilities. However, most people fail to realize how much responsibility is required, the amount of time and effort that the appointment often.

Here are some of the responsibilities of an executor:

Locate the will of the deceased. Determine that the will is the last will of the deceased.

  • Locate the will of the deceased. Determine that the will is the last will of the deceased.
  • Make the funeral arrangements if necessary. Obtain the death certificate.exe
  • Take control of the assets. Arrange security and insurance if required. Have the assets valued for the date of death.
  • Manage the assets for the estate as the trustee.
  • Dispose of perishable assets.
  • Contact financial institutions to change the name on the accounts to “the estate of”,
  • Open a bank account for the estate.
  • Arrange the probate of the will if applicable.
  • Assess the income tax situation and file any required returns.
  • Pay the bills of the deceased and the estate.
  • Make provision for the immediate needs of the spouse and any dependents.
  • Set aside reserve funds for the payment of estimated debts, taxes, probate fees, and compensation for the executor.
  • Prepare an interim distribution to the beneficiaries if available.

Conflicts often arise between the executors and the heirs. The beneficiaries may be suspicious of the executor because he or she does not have enough knowledge or skills, is insensitive, is too hasty, shows favoritism, etc. Anyone who is appointed as an executor should be aware that these are common situations during emotional times.

An executor requires many skills. One of the most important is the ability to know when outside expertise is required. An executor frequently hires a lawyer, accountant or trust company for assistance. Sometimes, appointing an independent outside party, such as a trust company as the executor may be the best choice, especially when a family conflict can be expected, although it can be costly

Employment Insurance Benefits for Self-Employed People

Self-employed Canadians are able to voluntarily access Employment Insurance (EI) special benefits. There are five types of EI special benefits:

→ Maternity benefits (15 weeks maximum) available to mothers of a new born child. It covers the periods surrounding birth;

→ Parental / adoptive benefits (35 weeks maximum) available to adoptive, biological or otherwise legally recognized parents while they are caring for a newly adopted or newborn child. It may be taken by either parent or shared between them;

→ Sickness benefits (15 weeks maximum) which may be paid to a person who cannot work because of injury, sickness, or quarantine;

→ Compassionate care benefits (26 weeks maximum), that may be paid to persons who have to be away from work temporarily to provide support or care to a family member who is gravely ill with a significant risk of death. The benefits can be shared between different family members who applied and are eligible to receive them; and

→ Benefits for parents of critically ill children (35 week maximum): available to eligible parents who take leave of work to provide care or support to their critically ill or injured child. Either parent is eligible or the benefits can be shared.

You are eligible to access the EI special benefits if you:

→ Are a self-employed person or you work for a corporation but cannot access EI benefits because you control more than 40% of the corporation’s voting shares; and

→ Are a Canadian citizen or a permanent resident of Canada.

Self-employed Canadians are required to voluntary opt into the Program at least one year prior to claiming benefits. Premium payments begin in the tax year in which they enrolled in the EI Program. Register to participate in the EI program through “my service Canada account.”

Self-employed persons can opt out of the EI Program at the end of any tax year, provided they have never claimed any benefits. If a claim for benefits was made they have to continue to contribute to the EI Program on their self- employed earnings for as long as they are self-employed.

Self-employed Canadians that opt into the EI Program will pay the same EI premium as salaried employees (maximum of $858.22 in 2018). She or he will not be required to pay the employer’s portion of the EI premiums.

“Soft” Loans for Your Children

Parents quite often make loans to their adult children to help them purchase a car, a home, or for other reasons. A loan is different from a gift. The parent can charge interest so that the loan will earn some investment income. The loan can be set up for blended payments of principal and interest or to pay interest only. There is no requirement for the parent to charge interest.

For a long term loan used to purchase a house, for example, it is quite possible that the loan will not be repaid during the parent’s lifetime. The parent could provide in her or his will that any remaining balance of the loan will be forgiven or instead become part of the child’s inheritance. Such an arrangement does not cause any adverse tax consequences because the “debt forgiveness” rules in the Income Tax Act do not apply to the settlement of loans by inheritance or bequest.

Giving your child this type of “soft” loan is similar to giving them a part of their inheritance early, during your lifetime.

Per Diem Meal Allowance

In a recent Technical Interpretation, CRA noted that an employer-provided meal allowance will not be taxable where the following conditions are met:

→ It must be a reasonable amount;

→ The allowance is received to cover expenses while travelling away from the metropolitan area or the municipality where the employer’s establishment is located, at which the employee normally worked or to which the employee normally reported;

→ The travelling is done to perform the duties of an office or employment.

As a general rule, CRA allows an employer to use $17 (including the GST/HST, and PST) per meal as a reasonable over-time meal allowance. The rate is stated in the CRA Guide T4130.

CRA usually considers an allowance to be reasonable if it covers the out-of-pocket expenses incurred by an employee who is travelling for employment purposes.

Director & Personal Liability

In a Tax Alert titled “Abuse of Source Deductions and GST/HST Amounts Held in Trust” CRA warned that businesses must hold source deductions and GST/HST amounts in trust for the government. Penalties and interest and possibly personal liability for the directors will be the result if this is not done.

Federal legislation allows CRA to collect unpaid amounts through garnishments, assessments of the directors, seizure and sale of the assets of the debtor corporation, an assessed director or a sole proprietor, and any other means of recovery.

Taxpayers who have not complied with this requirement may make a voluntary disclosure to CRA. The taxpayer will not be penalized or prosecuted if valid disclosures are made before CRA begins any compliance action against the taxpayer.

Taxpayers may only be required to pay the in trust amounts owing plus interest.

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