Posts Tagged ‘compliance’

ESSENTIAL TAX NUMBERS: UPDATED FOR 2018

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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

 

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.

What to do if the Canada Revenue Agency reviews your tax return

If the Canada Revenue Agency (CRA) tells you it’s reviewing one or more of your tax returns, don’t panic! In most cases, it’s simply a routine check.

The first thing you should know is a review is not an audit.  If the CRA tells you that your tax return is being reviewed, it is simply to ensure that the amounts you have claimed are reported accurately. It might also be because some documents are required to support your claim. It’s important to respond promptly to the information request or to call the number shown on the letter as soon as possible since there is a time limit involved.

Why is the CRA reviewing your tax return?

The Canadian tax system is based on self-assessment. You don’t usually need to include your documents when you file your tax return. However, from time to time, the CRA will contact individuals under one of its review programs. This is part of the CRA’s efforts to ensure the integrity of the tax system. Make sure you give the CRA the requested documents as soon as possible so it can do its review quickly and easily.

How long do you have to keep your records?

Keep all your tax documents for at least six years from the date you file your tax return. If you claimed expenses, deductions, or tax credits, make sure you keep all your receipts and related documents in case the CRA asks to see them.

What will happen after your review?

The CRA will let you know the result of your review in writing, either in a letter or on a notice of assessment or reassessment.

 

 

Newcomer to Canada? What you need to know to do your taxes

If you are a newcomer to Canada for all or part of a tax year (January 1 to December 31), you need to do your taxes (file an income tax and benefit return) if you receive or want to receive certain benefits and credits, want to claim a refund, or have to pay tax.

Important facts

You become a resident of Canada for income tax purposes when you establish significant residential and social ties in Canada. Examples include having a home, or a spouse or common-law partner in Canada. You usually establish these ties the date you arrive in Canada.

You should still do your taxes even if you have little or no income to report. By filing an income tax and benefit return, you might be able to get benefits and credits such as the goods and services tax credit and the Canada child benefit. Your spouse or common-law partner also has to do their taxes each year for you to receive benefit and credit payments that you may be eligible to receive.

Remember you need to file on time to make sure there are no interruptions to your Canada child benefit, GST/HST credit, and child disability benefit payment!

 

Here’s why the CRA wants to know what’s going on in your bedroom

The state of your marriage or your common-law status is the government’s business as well because of the tax advantages you might get from being married or, conversely, the deductions you might be able to keep by saying you’re still single.

Expanding income splitting for families, something seniors have been able to do with pensions since 2007, could bring the government into your bedroom like never before.

It’s not like the Canada Revenue Agency and the courts haven’t been there previously. Case law on the subject goes back as far as 1980, with one particular court decision often cited because it outlines key criteria for defining what constitutes a common-law or marital relationship.

As judges today wade through the murky waters of whether a couple are truly in a common-law relationship, they are guided by a 1980 court decision.

In a District Court hearing in Thunder Bay, Judge Stanley R. Kurisko set out seven factors that may indicate a couple is in a common-law relationship. His guidance was eventually endorsed by the Supreme Court of Canada.

SHELTER

Did the parties live under the same roof?

What were the sleeping arrangements?

Did anyone else occupy or share the available accommodation?

SEXUAL AND PERSONAL BEHAVIOUR

Did the parties have sexual relations? If not, why not?

Did they maintain an attitude of fidelity to each other?

What were their feelings toward each other?

Did they communicate on a personal level?

Did they eat their meals together?

What, if anything, did they do to assist each other with problems or during illness?

Did they buy gifts for each other on special occasions?

SERVICES

What was the conduct and habit of the parties in relation to:

Preparation of meals,

Washing and mending clothes,

Shopping,

Household maintenance,

Any other domestic services?

SOCIAL

Did they participate together or separately in neighbourhood and community activities?

What was the relationship and conduct of each of them towards members of their respective families and how did such families behave towards the parties?

SOCIETAL

What was the attitude and conduct of the community towards each of them and as a couple?

SUPPORT (ECONOMIC)

What were the financial arrangements between the parties regarding the provision of or contribution towards the necessities of life (food, clothing, shelter, recreation, etc.)?

What were the arrangements concerning the acquisition and ownership of property?

Was there any special financial arrangement between them which both agreed would be determinant of their overall relationship?

CHILDREN

What was the attitude and conduct of the parties concerning children?

http://business.financialpost.com/personal-finance/taxes/heres-why-the-cra-wants-to-know-whats-going-on-in-your-bedroom

http://business.financialpost.com/author/garrymarr

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TAX ALERT – GOVERNMENT SIMPLIFIES MEASURES TO REIN IN INCOME SPRINKLING

On December 13, the federal government released legislation to simplify restrictions on income sprinkling, proposed to go into effect January 1, 2018. These revisions indicate they have listened to feedback during the consultation period, by providing more certainty to taxpayers through the introduction of “bright-line” tests to automatically exclude some family members, and allow income sprinkling for those members who make sufficient contributions to the business.

A summary of what the revised legislation contains can be found at https://www.bdo.ca/en-ca/insights/tax/tax-alerts/

 

Home Buyers’ Amount

As a first-time home buyer, you may be able to claim $5,000 for the purchase of a qualifying home in 2017.

To qualify for the home buyers’ amount, you cannot have lived in another home owned by you or your spouse or common-law partner that year or in any of the preceding four years.

The qualifying home must be located in Canada and registered in your name and/or your spouse’s or common-law partner’s name per the applicable land registration system. It includes existing homes, such as single-family houses, semi-detached houses, townhomes, mobile homes, condominium units, apartments in duplexes, triplexes, fourplexes, or apartment buildings. It also includes homes under construction.

You do not have to be a first-time home buyer if:

→ You are eligible for the disability tax credit; or

→ You purchased the home for the benefit of a related person who is eligible for the disability tax   credit.

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.

 

 

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