The Following 3 pdf documents are provided to assist you in knowing what resources are available as a result of the Covid 19 Pandemic

Extended Tax Filings and Payments

Financial Resources Available for Businesses and Individuals

Financial Resources Available For Businesses And Individuals In British Columbia

Please complete this T1 Organizer before your appointment.

There is a lot of confusion over filing deadlines and penalties. There is a difference between filing deadlines and remittances deadlines, interest on late filed remittances and interest on installments you may have been required to have made.

Filing Date Deadlines Personal (T1)

  • filing and remittance deadlines, except for individuals and their spouses with self employed earnings, is April 30.
  • for individuals and/or with spouses with self employed earnings, the filing deadline is June 15; however, the remittance deadline remains as April 30. If you owe money by April 30 you pay be subject to:
  1. Remittance Interest
  • If monies are owed to CRA as of Apil 30, then CRA will start charging interest at the prescribed interest rate; currently at 3%.
  1. Installment Interest
  • CRA will charge installment interest if all of the following conditions apply:
  1. if you were required to make installment payments in 2016;and
  2. you did not make installment payments, or you made payments that were late or less than the required amount.

CRA calculates the interest on each installment that you should have paid using the payment option that calculates the least amount of interest up to the balance due date. Then CRA calculates the interest on each installment you did pay for the year, starting from the later of the date the payment was made or January 1 up to the balance due date. CRA charges the difference between these two amounts if the difference is more than $25.

Installment interest is calculated at the prescribed interest rate. This rate can change every three months. The current rate is 3%.

Late-filing penalty

If you owe tax for 2016 and do not file your return for 2016 on time, CRA will charge you a late-filing penalty. The penalty is 5% of your balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months.

If CRA charges a late-filing penalty on your return for 2013, 2014, or 2015 your late-filing penalty for 2016 may be 10% of your 2016 balance owing, plus 2% of your 2016 balance owing for each full month that your return is late, to a maximum of 20 months

Installment Penalty

You may have to pay a penalty if your installment payments are late or less than the required amount. CRA applies this penalty only if your installment interest charges for 2016 are more than $1,000.

To calculate the penalty, CRA determines which of the following amounts is higher:

  1. $1,000; or
  2. one-quarter of the installment interest that you would have had to pay if you had not made installment payments for 2016. Then, CRA subtract the higher amount from your actual installment interest charges for 2015. Finally, CRA divides the difference by two and the result is your penalty.

If you need assistance with your personal or corporate taxes contact the JKC group.

A professional corporation allows professionals — such as doctors, dentists, lawyers and accountants — to provide their services to clients through a corporate entity, rather than personally. The corporate entity must be created under the auspices of provincial or territorial corporate statutes and comply with rules determined by provincial regulatory bodies. The rules typically control the structure and operation of such entities to ensure that they do not violate, or circumvent, professional codes of conduct and practice. For most professionals, the most compelling reason for incorporating is to benefit from corporate tax advantages. The principal advantage from a professional corporation is tax deferral. The difference between the tax payable by incorporated and unincorporated professional practices is significant. Individuals pay tax on their business income at progressive marginal tax rates.

For example, in 2016, the top combined federal/provincial marginal tax rate on ordinary income is about 47.7 per cent in B.C. for income that exceeds $220,000. In contrast, the combined federal and provincial corporate rate of tax is approximately 15 percent on the first $500,000 of professional business income and 26.5 per cent on income above $500,000.

The spread between personal and corporate tax rates allows professionals to defer tax if they leave their income in the corporation. Since business partners must share the $500,000 limit between themselves, the full benefits of incorporation accrue primarily to sole practitioners and small partnerships.

Tax deferral is a real and substantial tax saving, which can accumulate into very significant amounts, but only if the individual does not immediately require all of his or her earnings for personal use. The deferral stems from the ability of the shareholder to leave some of the after tax corporate earnings in the corporation. The magnitude of my deferral depends upon the reinvestment rate and the length of time that the corporate entity accumulates its after-tax income. Thus, professionals can use tax deferral as a surrogate pension plan.

Incorporation also enhances remuneration flexibility and allows the owner-manager to choose between receiving compensation as salary or dividends, which have very different tax consequences. For example, professionals may want sufficient salary income to allow them to contribute to a Registered Retirement Savings Plan (RRSP) and Canada Pension Plan (CPP). In other circumstances, an individual may prefer dividends if he has a cumulative net investment loss (CNIL) and wants to claim the capital gains exemption. The costs of administration may, however, outweigh the tax advantages if the professional needs to extract all of the professional corporation’s business income in each year.

Depending upon the applicable provincial legislation, professionals may be able to use a holding company to own the shares of a professional corporation and siphon off professional earnings to the holding company through tax free dividends. This will reduce shareholder risk in the professional corporation and allow the saved cash to accumulate in the Holdco. To be sure, there is no real risk in leaving surplus funds to be reinvested in the professional corporation itself if the professional shareholder is fully and adequately insured against negligence. A Holdco, however, adds greater certainty to the structure.

There are opportunities in some provinces to split income between family members, but such structures should take into account the attribution rules and the special “kiddie tax” on certain income that minors can earn from such structures. The kiddie tax can neutralize any benefits from splitting business income in corporations in which the parents participate actively. The shares of a professional corporation that qualifies as “small business corporation” may be eligible for the lifetime capital gains exemption when the shareholder disposes of his or her shares. In general terms, a small business corporation is a Canadian- controlled private corporation that uses all, or substantially all, of the fair market value of its assets in an active business in Canada. The exemption is worth $824,176 in 2016, and is indexed thereafter.

There are also some disadvantages of incorporating and operating through a professional corporation. For example: Expenses of incorporation;
• Annual maintenance of corporate entity;
• CRA payroll deductions and monthly remittances;
• HST registration and remittances; and
• Corporate accounting and tax returns

Professionals will need to evaluate their personal circumstances and income levels to determine if a professional corporation suits their business needs. Generally, the advantages should outweigh the incremental administrative, organizational and incidental costs associated with professional corporations. The key factor, however, is the amount of money the professional is able to leave in the corporation to accumulate without incurring the additional dividend tax upon extraction of the corporate funds

Accounting fees and legal fees
Certain accounting or legal fees such as the cost of representation on tax disputes are deductible in the year paid. If you have these costs be sure to pay them before the end of the year.
Charitable or political donations
If you are planning to give money to a charity or political party, make sure the gift is made before December 31, 2016 to ensure you can claim the tax credit on your 2016 return.
Equipment purchases
If you have equipment you are planning to purchase for your business early next year, consider purchasing it before December 31, 2016 or before your corporate year end as applicable. The tax depreciation only starts when the equipment is available for use in your business.
Family trust
Ensure that any desired distributions to or from a family trust are made by December 31, 2016. If distributions are planned, ensure appropriate dividends are paid through the Trust by year end. Payments by cheques deposited and distributed before the end of the year are required, unless detailed steps are completed.
Home Office
If you are a self-employed individual using a home office as your principal place of business (more than 50%), or exclusively for earning business income and on a regular and continuous basis for meeting clients or customers, then you may be able to deduct home expenses related to the office space. Such expenses include the business portion of rent, mortgage interest, property taxes, utilities, insurance, repairs, and telecommunications.
Investments
If you have realized capital gains in the current year, consider selling investments with unrealized capital losses before year end. This strategy will reduce your tax bill as capital losses can be offset against capital gains. The key is to trigger these losses in 2016 so the last settlement day for 2016 must be considered. Where a loss has been triggered, you or an affiliated party cannot reacquire the same or an identical investment within 30 days of the sale or the loss will be disallowed. Further, we recommend that you consult your Crowe MacKay tax advisor and your investment advisor prior to undertaking this strategy.
Old Age Security (OAS) claw back
If your net income in 2016 is over $73,756, you are required to repay some or all of your OAS benefits. This “claw back” is the lesser of your OAS benefits received in the year and 15% of your net income that is over $73,756. The OAS claw back is calculated solely on your net income and is not affected by your spouse’s income. Note that if your net income is $119,615 or greater in 2016 (and you are not receiving an increased OAS entitlement – see below), you will be required to repay all of your OAS benefits. If you are eligible to receive OAS but are subject to a full claw back, you may consider deferring receiving OAS until a year in which the claw back is reduced or eliminated. Deferring the receipt of OAS will increase your OAS entitlement when you begin to collect it and it will increase your maximum annual net income to receive OAS. Contact us your tax advisor if you have any questions about OAS.
Pension income-splitting
If you are earning eligible pension income (excluding Canada Pension Plan, Old Age Security and certain foreign pension income), you may be able to split up to 50% of this income with your spouse or common-law partner. This pension income-splitting may be done by filing a joint election with your income tax return and can result in significant tax savings if your spouse or common-law partner is in a lower tax bracket. Your spouse or common-law partner may also be able to claim the pension income amount tax credit on the income that he/she is deemed to have received (see below).
Pension tax credit
A $2,000 pension tax credit is available if you earn eligible pension income, which typically includes income from a registered pension plan, income from a registered retirement income fund (RRIF) and annuity payments from a registered retirement savings plan (RRSP). If you are 65 years or older and are not receiving any pension income, you may consider converting a portion of your RRSP to a RRIF in order to receive eligible pension income on which the pension tax credit can be claimed.
Registered Disability Savings Plan (RDSP)
The RDSP is a registered long-term savings plan specific to people with disabilities who are eligible for the disability tax credit. Contributions may be made by the beneficiary, a family member, or by any other authorized contributor. There is no annual limit on contributions; however, there is a lifetime contribution limit of $200,000. Although contributions to the plan are not tax-deductible, income earned inside the plan is not taxed until it is withdrawn by the beneficiary. Contributions can be made until the end of the year in which the beneficiary turns 59 and payments from the RDSP must begin by the end of the year in which the beneficiary turns 60. There are currently two income-based programs in place to enhance the funds that are contributed to the RDSP. The Canada Disability Savings Grant Program (CDSG), and the Canada Disability Savings Bond Program (CDSB).
Registered Education Savings Plans (RESP)
Make any contributions to an RESP before December 31st to qualify for any 2016 grants you may be eligible for. As in years past, the government will pay a Canada Education Savings Grant of 20% of annual contributions you make to all eligible RESPs for a qualifying beneficiary to a maximum of $500 in respect of each beneficiary. Additional grants are possible where there is unused grant room from a previous year and for families with lower net income. Canada Education Savings Grants have a lifetime maximum of $7,200.
Registered Retirement Savings Plan (RRSP)
Regular and spousal contributions for the 2016 taxation year may be made up to March 1, 2017. Similarly, if you must repay a portion of your Home Buyers Plan or your Lifelong Learning Plan, payments must be made by that same date. Overall tax savings are most significant for individuals who are currently in a high tax bracket but will be in a lower bracket when the RRSP money is withdrawn. The RRSP contribution limit for 2016 is $25,370.
Shareholder loans
If you have a shareholder loan from your company that has been outstanding since the December 31, 2015 year end (i.e. it is at risk of showing up as a debit balance on 2 consecutive balance sheets), ensure it is repaid by December 31, 2016 or earlier. Consult us, your tax advisor, to determine if the amount must be repaid and to discuss repayment methods such as dividends or net wage compensation.
Spousal loans
If you have spousal loans, ensure the interest is paid by January 30, 2017 by a “documented” method such as a deposited cheque. These loans (with interest as low as 1%) are typically used for income-splitting where families have large investment pools (generally over $1M).
Tax Free Saving Account (TFSA)
Canadian residents age 18 and over are eligible to open a TFSA. Income earned in a TFSA is not taxable as it is earned nor is it taxable when withdrawn from the account. Contributions to a TFSA are not tax deductible. For 2016, the maximum contribution is $5,500 plus any outstanding contribution room carried forward. The cumulative contribution room granted to Canadians since the start of the TFSA program is $46,500 to December 31, 2016. Please refer to your 2015 Notice of Assessment and/or your investment advisor for the maximum contribution you may make for 2016. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

All strata corporations must file a corporate income tax return each year, even if there is no tax payable. Generally, strata corporations are considered non-profit organizations that are exempt from tax under paragraph 149 (1)(l) of the Income Tax Act (ITA). A strata corporation’s taxation status is based on the particulars of the strata corporation each fiscal year.

All strata corporations must file a
1. Corporation Income Tax Return (T2); and
2. If eligible file a T1044 Return

In order to file a T2, a strata corporation will need to apply for a business number through CRA. A business number is simply a common identifier used by CRA. It does not change your tax status. T2 returns are due 6 months after the fiscal year end. Penalties and interest are assessed on taxes payable on late returns.

T1044 is a Non-Profit Organization Information Return. A strata corporation is eligible and must file a T1044 if:
1. It received or is entitled to receive taxable dividends, interest, rentals or royalties totaling more than $10,000 in one fiscal year;
2. It owns assets valued at more than $200,000 at the end of the immediately preceding fiscal period (i.e. cash and cash equivalents, accounts receivable, prepaid expenses, investments, tangible capital assets);
3. It had to file a non-profit organization return for a previous fiscal year.

Even though form T1044 is informational only, subsection 162(7) provides a penalty of $25 per day, up to a maximum of $2,500, for each missed filing (that is, each year). Fortunately, there is relief. The CRA’s administrative policy is not to apply the penalty when form T1044 is late-filed for the first time (CRA document no. 2007-0243291C6). It is unclear whether this policy applies to multiple missed filings filed at one time.

If a strata corporation voluntarily comes forward to correct inaccurate or incomplete information or to disclose information that they have not reported (like filing a T1044 for the first time) there may be relief from penalties that may be assessed by the Canada Revenue Agency (CRA). Speak to one of the professionals at JKC Group who can attend to tax relief through the Voluntary Disclosure Program or other possible available avenues.

Background facts:
All accountants charge by time spent on a task or project. The longer it takes the higher the cost will be. Notwithstanding these facts, it is possible to provide a fixed fee quote; however, this quote is really an estimation of the time required multiplied by the anticipated charge out rate.

Economic theory about accounting fees – Most people have an effective rate for their work. Whether they are paid hourly or salary, it can be converted to an hourly figure. What many people don’t know is their free time also has a value which can be quoted in dollars per hour. Studies have shown that a person’s free time has a value which approximates their average hourly wages. Accordingly, accounting fees will mirror those charges.

Economic theory of accounting fees – Example A: Low income earner

Assume that each person could prepare their own tax return, though their preparation time will be significantly slower than a trained accountant (say 5x slower).

Person X earns $10/hour and has one T4 slip. They could prepare their own tax return in 30 minutes. Therefore, the tax return would be worth $5 to them (plus $39 for the purchase of the software).
Total cost to do it yourself $44. On the other hand, a trained accountant could prepare the same return in 6 minutes at a cost of $300/hour plus fixed fees of $50 for a total of $80. Therefore, the person who earns $10/hour should prepare the tax return themselves or look for someone who will charge $44 or less.

Economic theory of accounting fees – Example B: high income earner

Same assumptions as example A except, Person Y earns $200/hour and has dual residency (Canada & US), FBAR foreign bank account reporting, T1135 reporting, two Canadian rental properties and one US rental property, significant investment income and interests in private corporations and LLCs. Therefore, Person Y could do their own tax return in 30 hours or a value of (30 hours x $200/hour) plus accounting software ($39) = $6,039. On the other hand a trained accountant could prepare the same return in 6 hours at $300/hour plus a fixed fee of $50 for a total of $1,850. Therefore, the high income earner is much better off having a trained accountant prepare their return and creates $4,189 of value by having a trained accountant assist them.

Generally speaking, the better presented your records are, the lower your fees will be.

CRA’s tax auditors and tax collectors serve very different functions. Tax auditors from CRA gather information to determine whether your tax returns fully reflect your obligations under the Canadian Income Tax Act. CRA tax collectors take your tax debts as given and use every means they have available to collect money from taxpayers. Tax auditors and tax collectors have different powers at their disposal.

Tax Audits

Every taxpayer is required to file a tax return, and a tax assessment based on that income tax return is issued by CRA. Some tax returns are subjected to additional scrutiny in the form of a tax audit. An income tax audit could involve CRA tax auditors reviewing their existing files to check your return, or it could involve tax auditors showing up at your place of business to view your records. No matter what the scale of the tax audit is, the objective is to determine whether your tax return reflects your full obligations under the Canadian Income Tax Act. If it is determined that you did not meet your full income tax obligations, the CRA tax auditor will issue a tax reassessment requiring you to pay the tax liability that CRA says that you owe. Since the purpose of a tax audit is to gather the information to check whether a taxpayer’s tax return is accurate, the powers granted to CRA auditors under the Canadian Income Tax Act all deal with compelling taxpayers to provide CRA with information and documents. The CRA is entitled to enter into any place where business is carried on in order to do this and does not require a warrant so long as they place they are entering is not a dwelling-house. Tax Act allows CRA auditors to compel taxpayers to produce any information that they have for any purpose related to the administration or enforcement of the Canadian Income Tax Act.

CRA Tax Collections

Once you have been issued a tax assessment or reassessment, you owe money to CRA. Even if you have been assessed taxes incorrectly, the tax debt will exist at law until the CRA or the tax court vacates the tax assessment. The tax collections department of the CRA takes the tax amount for which you were assessed as correct and owing, and uses the powers it is granted under the Income Tax Act to collect the full amount of all outstanding assessed tax amounts, including any interest or penalties The Canadian Income Tax Act gives CRA tax collectors a number of different powers to assist them in their mandate of collecting all outstanding tax debts, all without having to go to court. The Canadian Income Tax Act gives CRA tax collectors the power to garnish debts owed to a taxpayer with an outstanding tax debt. Debts owed to a taxpayer include money held in a bank account, wages owed to an employee, and receivables owed to a business by its customers.

The Canadian Income Tax Act gives CRA tax collectors the power to seize goods owned by the taxpayer for sale at public auction to cover the outstanding tax debt. Prior to exercising this power, the CRA must give the taxpayer 30 days notice via registered mail addressed to the taxpayer’s last known address. If the taxpayer still has not paid after 30 days, the CRA may issue a certificate of failure and direct for the taxpayer’s goods to be seized. If you are receiving letters from CRA indicating that they may decide to seize your goods, you should immediately contact us.

For most tax debts arising under the administration of the Canadian Income Tax Act, the debt is not collectible for 90 days following the issuance of the assessment or reassessment that gave rise to the tax debt. This means that the CRA cannot exercise its tax collection powers until that 90 day period is over. This non-collectible period can be extended if you file a formal Notice of Objection to the tax assessment. If you have a tax issue it is essential to act quickly to avoid collection action being taken by CRA. Tax debts arising from source deductions or GST/HST do not receive the 90 grace day period and are collectible immediately.

Investment Income

1. Tax rates are significantly more favorable for dividend income than interest income.
2. Defer tax on interest to the following year by investing funds for a one-year term ending in the next calendar year.
3. Defer purchases of mutual funds until early in the next calendar year to minimize taxable income allocated in the current year from the mutual fund.
4. Existing holding companies that have built up refundable dividend tax should consider paying dividends to recover this tax. Depending on its year-end, the company may have up to 24 months to enjoy the benefits of the tax refund before the shareholder is required to pay the personal tax on the dividend. The individual circumstances should be reviewed.

It may be a good time for you to consider whether your investment income is tax efficient and consider investment alternatives.
• Interest income;
• Eligible dividends (generally dividends received from public corporations); or
• Non-eligible dividends (generally dividends received from small business corporations).

Capital Gains and Losses

5. If you own qualified small business corporation (QSBC) shares or qualified farm and fishing property, you may benefit from the lifetime capital gains exemption of $824,176. The exemption is indexed to inflation annually. The government has maintained the exemption of $1,000,000 for qualified farm and fishing property. The exemption is available on dispositions made on or after April 21, 2015.
6. Consider realizing accrued losses on investments to shelter capital gains realized this year and in the previous three years.
Note that a loss realized from the disposition of an investment may be denied if you repurchase the investment within a short period of time.
7. If you have significant trading activity, your sales of securities may be considered a business for income tax purposes.
If your sale of securities is considered a business, your profits will be fully taxable as income (instead of being considered capital gains taxable at 50%), and your losses will be fully deductible against any source of income. If you are concerned about your sales of securities being considered a business, you can consider filing a one-time, non-revocable election with the Canada Revenue Agency. This election will treat all of your gains from dispositions of Canadian securities as capital gains (and all of your losses as capital losses) for the current year and all future years.

 

Cyber attack text on digital display with random hexadecimal numbers.

Online shopping is predicted to increase by 8% in 2016, meaning 56% of holiday shopping will be done online[1]. Odds are good that you or someone you know is going to buy at least one gift through a desktop, laptop, smartphone, or tablet. But how do you ensure sensitive information stays secure? Data breaches tend to make headlines in the news but they’re hardly the only means of identity theft. Countless people have had information stolen by unscrupulous websites, fraud, and hacking. Here are six tips to share with your end users, friends, and family members to help them become smarter online consumers.

1. Pay attention to your browser’s URL
Whenever you’re online there’s a web address in the top bar of your browser. It tells you where you are on the internet, and it can be a good indicator of the legitimacy of the website you’re on. For shopping purposes, and anything else that involves personal information, you need to be sure the website’s address starts with HTTPS. The S indicates a secure connection and any site trying to earn your business should have it.

2. Watch out for email deals
Regular online shoppers have inboxes filled with digital ads from the places they frequent, and those ads are legitimate. What you need to watch out for are ads from places you aren’t familiar with or that seem too good to be true.

3. Don’t shop on public WiFi
Public WiFi is great, but it’s not necessarily safe. You don’t know who’s on the network, what they might be doing, or what they’re capable of—they may just be hanging out waiting to steal credit card info. Shop from home, or from any secure connection. Make sure your home WiFi is secured as well—an openly accessible WiFi network is a serious security risk.

4. Use a password manager
Complex passwords are a must, but even those can be stolen if you type them into a spyware-infected computer. You can beef up security even more by using a password management app. Not only will these apps allow you to sign in to websites with a single click, they can also generate random passwords that are incredibly secure. All you’ll have to do is use a master password to unlock the app and it will do all the hard work for you. And since you aren’t typing your passwords manually there’s much less risk of theft.

5. Keep your computer and antivirus software up to date
No one likes to be reminded of software updates: They interrupt us, take a long time to install and configure, and sometimes come with bugs that make life harder. That doesn’t mean they aren’t essential, though. Operating system updates often patch security holes, and antivirus software is completely useless without updated virus definitions. If you’re the kind of person who avoids updating their machine take some time before you start shopping to run all your updates and doing a full scan of your computer.
SEE: Over one billion installs of apps using OAuth 2.0 can be remotely hijacked, say researchers. If you don’t have any antivirus software on your computer now is the time to install some. Free applications like Avast and AVG are both great options.

6. Use Paypal or stick with a single credit card
Paypal and websites like it act as intermediaries to online vendors. Anyone who has ever forgotten their Paypal password knows how many security hurdles you have to jump through—it’s serious about security. If you don’t want to use Paypal or are buying from a vendor that doesn’t accept it stick to using a single credit card. This isolates your risk to one account and if you pick one with good security features you’ll be alerted as soon as something bad happens.