SMALL BIZ - SEPTEMBER 2021
- Income Splitting Using Prescribed Rate Loans
- Business Investment Losses
- Should You Incorporate Your Business?
SMALL BIZ - JUNE 2021
- Immediate expensing of capital purchases
- CERS & rent paid for a chair in hair salons
Small Biz - Feb 2021
In this month's issue:
- 2021 Automobile Deduction Limits & Expense Benefits Rates for Business,
- 2021 Indexation Adjustment for Personal Income Tax and Benefit Amounts,
- RRSP Contribution Deadline & TFSA Limit,
- Rates and Maximums Chart
Small Biz - Jan 2021
- Home Office Expenses for 2020 - CRA's simplified rules due to COVID-19
In this issue:
- Canada Recovery Benefit
- Canada Recovery Sickness Benefit
- Canada Recovery Caregiver Benefit
Please click the 'green" link above to find out more!!
New T4 reporting requirements
For the 2020 tax year, the Canada Revenue Agency (CRA) will be introducing additional reporting for the T4 slip, Statement of Remuneration Paid.
Additional reporting requirements will apply to all employers, and will help the CRA validate payments under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Response Benefit (CERB), and the Canada Emergency Student Benefit (CESB).
Please note that employers who have already filed their T4 slips and summary for 2020 will not need to refile.
How to report employment income during COVID-19 pay periods
For the tax year 2020, in addition to reporting employment income in Box 14 or Code 71, use new other information codes when reporting employment income and retroactive payments in the following periods:
- Code 57: Employment income – March 15 to May 9
- Code 58: Employment income – May 10 to July 4
- Code 59: Employment income – July 5 to August 29
- Code 60: Employment income – August 30 to September 26
Eligibility criteria for the CERB, CEWS, and CESB is based on employment income for a defined period. The new requirement means employers should report income and any retroactive payments made during these periods.
If you are reporting employment income for the period of April 25 to May 8, payable on May 14, use code 58.
Small Biz Builder - September
In this issue:
- Income Splitting Using Prescribed Rate Loans
- Business Investment Losses
- Should You Incorporate Your Business?
Please click the "green" link above to find out more!!
Small Biz Builder - July
Canada Emergency Wage Subsidy - The New Program
Please double click the "green" link above to learn more!
Canada Emergency Response Benefit (CERB) The Canada Emergency Response Benefit (CERB) is part of the Federal COVID-19 Emergency Response Act that was passed March 24 and 25. At the time of writing, information and supporting regulations are still being released.
The subsidy is designed to support Canadians who have been directly affected by COVID-19. This financial support is available to both employed and self-employed Canadians. It provides a $2000 taxable benefit for a 4-week period for up to 16 weeks or 4 periods.
The Canada Emergency Response Benefit will cover:
Wage-earners who must stop working due to COVID-19 Those who are sick, quarantined or taking care of someone who has COVID-19 Working parents who must stay home with children due to sickness or daycare/school closures Self-employed individuals
If you require further information, please contact your Furlonger Associates representative. Canada Emergency Response Benefit
Furlonger Associates is committed to ensuring our employees, families, clients and community remain healthy and safe. While Ontario public health authorities still consider our COVID-19 risk to be low, we are taking various steps to manage and respond to the evolving circumstances around this pandemic. We will continue to monitor any updates provided by health authorities and will adjust our actions as appropriate.
While our offices remain open and fully operational, we are taking extra precautions including sanitizing high traffic areas and high touch surfaces, encouraging our team to be diligent with hand washing and greeting our clients in a friendly, but hands-off manner. We ask that anyone who is feeling unwell or has recently travelled outside of Canada refrain from attending our office.
As a precaution, we are encouraging the use of the following means for communication and submission of your records:
Secure Portal: Our client portal is designed to provide a safe and easy way to transfer information. Please contact your Furlonger Associates representative to activate your secure transfers.
Online meetings: We are happy to arrange an online meeting through Zoom with you, or a telephone call at your convenience.
After hours drop box: We have a mail slot on the purple door on the east side of our building that is accessible 24 hours per day.
In-office drop box (office hours only): We have a drop box located in our main reception area that is accessible during office hours.
Please use the following links to stay current:
Employment and Social Development
Ontario Ministry of Health
If you have any questions or concerns, please do not hesitate to contact our team at (519) 432-0624 or through email at email@example.com.
If you pay the following expenses by December 31, 2018, they will be eligible for the deductions of credits:
- childcare expenses
- deductible support payments
- charitable donations
- union and professional dues
- moving expenses
- political donations
- accounting fees
- medical expenses
- investment counsel fees
- interest paid on loads used to purchase investments
- tuition fees
The most popular tax tool available to taxpayers is investing in a registered retirement saving plan (RRSP).
Contributions to RRSP’s are tax deductible and the income earned within the plan grows tax deferred until retirement. You can claim a contribution of up to 18% of 2017 earned income to a maximum of $26,230. Earned income is defined as income from employment, from business, net rental income from real estate, CPP disability pension, certain types of royalty, and spousal or child support payments that are included in your income.
The contribution limit may be subject to the year 2017 pension adjustment reversals. Pension adjustments reflect, in most cases, your employer’s contributions to a pension plan or actuarial commitments to such plans in the year 2017. The age limit for contributing to an RRSP is 71. The age limit for converting an RRSP to an annuity or RRIF is also 71.
Don’t over-contribute; a severe penalty will be the result.
The Ontario government passed sweeping labour reform legislation Wednesday, effectively rolling back many changes brought in by the previous Liberal regime.
Some of the highlights to note:
- The Ontario government passed sweeping labour reform legislation Wednesday, effectively rolling back many changes brought in by the previous Liberal regime.
- A number of scheduling provisions will be eliminated including a minimum of three hours pay in the event a shift is cancelled 48 hours or less before it was scheduled to begin.
- The law will also bring the total of personal leave days down to eight from 10 — three for personal illness, two for bereavement leave and three for family responsibilities.
- The Tories have exempted those earning under $30,000 from provincial income tax and given a tax cut to those earning up to $38,000.
- Minimum wage will remain at $14 until October 2020, with future increases tied to the rate of inflation.
- There are no more paid personal emergency leave days.
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 necessitates, and the family conflicts that might arise.
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.
- 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.
- Make the funeral arrangements if necessary. Obtain the death certificate.
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.
There is a recent CRA audit project targeting corporations who made motor vehicle purchases. The CRA is requesting documentation such as purchase invoices, and the percentages of business and personal use of the vehicles. There are many different angles the CRA can be using this information. First, they are verifying that the vehicle has been properly categorized for tax depreciation purposes in class 10. If a vehicle costs over $30, 000, with a few exceptions, they should generally be categorized in another tax class that has stricter depreciation limits. Secondly, the classification is also important for determining how much GST/HST input tax credits can be claimed. Thirdly, personal use of the vehicle also has an impact on the GST/HST input tax credits as well as creating personal taxable benefits that need to be reported. Contact your Padgett office if you've received this type of information request, or to review how the tax rules for motor vehicles can apply to you.
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.
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 the 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.
Since personal and corporate tax as well as family law issues can make this issue complex, please contact our office to discuss your situation.
Employment Insurance Benefits for Self-Employed People
Canada Pension Plan Basics
The Canada Pension Plan (CPP) is a contributory, earnings-related social insurance program. It ensures a measure of protection to a contributor and his or her family caused by the loss of income due to retirement, disability and death. There are three types of CPP benefits:
- Disability benefits (which include benefits for disabled contributors and for their dependent children);
- Retirement pension;
- Survivor benefits (which include the death benefit, the survivor’s pension and the children’s benefit).
The CPP operates across Canada, although the province of Quebec has its own similar program, the Quebec Pension Plan (QPP). The CPP and the QPP work together to ensure that all contributors are protected. With very few exceptions, every person in Canada over the age of 18 who earns a salary or a wage must pay into the CPP. You and your employer each pay 50% of the contributions. However, if you are self-employed you pay both portions.
You do not make contributions if you are receiving a CPP disability pension. At age 70, you stop contributing even if you are still working. You can apply for and receive a full CPP retirement pension at age 65, or receive it as early as 60 with a reduction, or as late as 70 with an increase. If you continue to work while receiving your CPP retirement pension and are under age 70, you can continue to participate in the CPP. Your CPP contributions will go toward post- retirement benefits, which will increase your retirement income.
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 $836.19 in 2017). She or he will not be required to pay the employer’s portion of the EI premiums.
Self-employed residents of Quebec continue to receive maternity, paternity, and parental payments under the Quebec Parental Insurance Program. Self-employed Quebec residents can also choose to apply for the federal program mentioned above.
In 2017, the maximum benefits are $543 per week. The weekly benefit amount is 55% of your average weekly earnings (AWE) from the calendar year before you submit an application for EI special benefits. Your AWE are your total self-employment income minus any losses, as calculated according to the Income Tax Act, divided by 52.
On Monday, May 7, 2018 the Government made a new regulation that reinstates the previous formula for calculating public holiday pay that applied prior to January 1, 2018. This change takes effect July 1, 2018 and generally applies to all employees covered by the Employment Standards Act.
What does this mean for you?
You will no longer be required to submit the number of days worked in the previous pay period.
For more information, please visit the links below. Do not hesitate to reach out to our office if you have any questions or require additional information on these changes.
Individuals - Tax information
1. Make your life easier: Change your return online with ReFILE
The ReFILE service now lets you change your return using your preferred certified filing software. Make sure you receive your notice of assessment before sending a change through ReFILE.
One of the best features of the ReFILE service is that it allows you to view your estimated tax results based on your changes made. Each successful change will also receive a confirmation of receipt from the Canada Revenue Agency (CRA), allowing you to rest easy knowing that the change is being processed.
2. Seniors: Ready to do your taxes? Make sure you’re receiving your benefits and credits!
The CRA wants to make sure that you are receiving the benefits and credits you are eligible for. As a senior, here are some of the most common things that you could claim on your income tax and benefit return at tax time.
3. Did you know you may be eligible to claim medical expenses?
You can reduce the amount of federal tax you pay by claiming a non-refundable tax credit on a wide variety of medical expenses.
You may be able to claim medical expenses for yourself, your spouse or common-law partner, your dependent children (under 18 years of age), and certain other dependants.
4. What to do when a loved one dies
Dealing with the death of a loved one is difficult. With this in mind, the CRA wants to help make filing their final tax return easier. This simple checklist will help you with the first few steps you should take.
5. Video: Filing online—fast, easy, and secure
This is a video which explains how to file an income tax and benefit return online, and the electronic services available to help taxpayers with that process.
On November 22, 2017, the Government passed Bill 148, the "Fair Workplaces, Better Jobs Act, 2017". Bill 148 makes various amendments the Employment Standards Act, 2000 ("ESA"), the Labour Relations Act, 1995 ("LRA") and, to a lesser extent, other workplace legislation. The changes made by Bill 148 represent a major overhaul of workplace legislation and will have a drastic impact on employers.
To summarize, the Fair Workplaces, Better Jobs Act, 2017 will:
- Raise Ontario's general minimum wage to $14 per hour on January 1, 2018, and then to $15 on January 1, 2019, followed by annual increases at the rate of inflation
- Mandate equal pay for part-time, temporary, casual and seasonal employees doing the same job as full-time employees; and equal pay for temporary help agency employees doing the same job as employees at the agencies' client companies
- Expand personal emergency leave to 10 days per calendar year for all employees, with at least two paid days per year for employees who have been employed for at least a week
- Ban employers from requiring a doctor's sick note from an employee taking personal emergency leave
- Provide up to 17 weeks off without the fear of losing their job when a worker or their child has experienced or is threatened with domestic or sexual violence, including paid leave for the first five days
- Bring Ontario's vacation time in line with the national average by ensuring at least three weeks' vacation after five years with the same employer
- Make employee scheduling fairer, including requiring employees to be paid for three hours of work if their shift is cancelled within 48 hours of its scheduled start time
For more information, please visit:
Registered Retirement Savings Plan (RRSP): You can reduce your taxable income by contributing to an RRSP. There are, however, limits. The most you can contribute for 2016 is 18 per cent of your income, to a maximum of $25,370, though you may be able to contribute more if you didn’t reach the limit in previous years. Check last year’s notice of assessment for your contribution room.
- Deductible RRSP and PRPP contributions can be used to reduce your tax. Generally, any income you earn in the RRSP or PRPP is exempt from tax as long as the funds remain in the plan, however, you usually have to pay tax when you receive payments from these plans.
Child Care Expenses: You can claim child care expenses if you paid someone else to look after your kid while you went to work. That includes caregivers, daycare centres, day camps and boarding schools. You’re allowed to claim up to $8,000 for any kids aged up to seven years old, or $5,000 per child aged seven to 16 years old.
Spouse or Common-Law Partner Amount: You can claim this if your spouse or common law partner made less than $11,474 in 2016. If you’re eligible, you won’t have to pay as much income tax.
Federal Political Contributions: You can claim any donations you made to federal political parties or candidates for seats in the House of Commons. A tax filer can claim a maximum of 75 per cent of the first $400 they donated, 50 per cent of any donation between $400 and $750, and 33.5 per cent of any contribution over $750, according to TurboTax. The highest credit you can obtain is $650.
Donations and Gifts: You’re allowed to claim any donations or gifts you made to particular institutions, so long as they don’t exceed 75 per cent of your income.
Children’s Fitness Tax Credit: Tax filers can claim a maximum of $500 for kid, which helps parents to offset the cost of registration in a program that promotes physical activity.
Children’s Arts Amount: Parents can also claim up to $250 per kid for any registration fees for artistic, cultural or recreation programs.