Get Unstressed – Organization tips to get you ready to file your taxes

I hear it all the time – people STRESS about their taxes and getting their taxes done.  Here are some tips to get you ready for your 2017 tax returns and reduce your tax preparer fees, as well as reduce your stress levels, knowing you’re prepared:

1 – Gather all your tax slips in one folder (T4’s, T5’s, T3’s, other T-slips, RRSP contributions, donation receipts, medical receipts.  Your T-slips should all be available to you by February 28th, except for T3’s and T5013’s which can take a few weeks longer (but by March 31st).

2 – Group like slips together

3 – If you have a lot of investments, keep a list of your accounts and account numbers, and check your T5 and T3 slips against your accounts to see what’s missing

4 – Group medical receipts by patient

5 – Group donations to the same organization together

6 – Gather details of any investment dispositions, including real estate, into a spreadsheet.  Include details of the historical cost and other transactions affecting your cost base.

7 – If you are a sole-proprietor or have rental income, use accounting software to capture income and expenses details for each of your business and rental properties (separate books and records for each business or property).  Hire a qualified bookkeeper to do your bookkeeping for you (freeing your time to spend on higher-level business matters). At the very least, use a spreadsheet to track your financial transactions.

8 – Don’t delay – start the process early.  The sooner you get your information to your tax preparer, the less stressful it will be for both of you.  Tax preparers would much rather get your returns done in March than scramble to meet the deadlines in the last final week.   If you’re getting a refund, wouldn’t you much rather receive that sooner than later?  And if you owe, wouldn’t you like to have peace of mind knowing how much you owe and that you still have time to make that tax payment (due April 30th), rather than waiting until the last minute.

9 – A caveat to #8 – it’s more efficient (and less costly) to get your complete tax information package to your tax preparer at the same time.  Sending bits and pieces in dribs and drabs will only add processing and review time to the process, which could result in additional billings by your tax preparer.  Having said that, don’t hold up if you’re just waiting for a couple of slips or receipts.  Just note what you are missing with as much detail as you can (for example, if you’re missing an RRSP contribution slip, note the amount you contributed and date of contribution).

You must have adequate and reliable records to support your tax filings.  Here are some helpful links on keeping records.

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/keeping-records.html

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic78-10r5/books-records-retention-destruction.html

Need help?  Send me an email (Linda@visionspire.ca), and I’d be happy to answer your questions.

 

[author] [author_image timthumb=’on’]http://54.82.103.175/wp-content/uploads/2017/12/IMG_0012-resize-square.jpg[/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist and Money Mindfulness Coach. With over 20years of assisting business owners with the business and tax strategies, her mission is to eliminate stress and anxiety people experience around money and taxes, by empowering them with the tools, knowledge, strategies and mindsets that will put them in the driver’s seat of their business success and financial wellness, so they can have more harmony, joy and abundance in their life. [/author_info] [/author]

What’s new in tax for your 2017 personal tax returns

It’s that time of year again – personal tax season!   Now, there are a few things you should be aware of that may affect your 2017 tax returns…here’s a quick summary (this update is for general information purposes.  Please speak to your tax advisors for specifics regarding your personal situation):

RRSP Contributions – The deadline to make RRSP contributions that can be deducted on your 2017 tax return is March 1 this year.  Many people ask whether they should contribute to their RRSP or Tax-Free Savings Account (TFSA), and I always respond by recommending they consult with their financial advisors.  Generally, however, it is advantageous to contribute to your RRSP if you are in a high income tax bracket and expect your retirement income (when you withdraw from your RRSP) to be in a lower tax bracket.  For 2017, you can contribute 18% of your 2016 earned income to your RRSP, up to a maximum of $26,010 for 2017 (plus any unused contribution room from previous years).  The TFSA contribution room is $5500 for 2017 (plus any unused contribution room you may have from previous years – up to a cumulative total of $52,000 at the end of 2017).  TFSA contributions are not deductible, and the income earned in the TFSA is not taxable.

Child Fitness and Arts Amounts – 2016 was the last year to claim the child fitness and arts credits.  No need to keep your children’s fitness and arts program receipts for income tax purposes.

Credit for Education and Books – 2016 was also the last year to claim the education amount tax credit.  If a student has unused education credits from 2016, they can still be used in 2017 and later years.  The tuition credit amount continues to exist, which has been enhanced for certain occupational and apprenticeship programs.  A proper T2202A will be required to claim the tuition credits (students should be able to get a copy through their student account).  Check the CRA website to see which programs qualify for the enhanced credit amount.

Professionals with unbilled Work-in-Progress (WIP) – Certain professionals, such as lawyers and accountants, generally carry WIP (income that has been earned for services provided, but not yet billed at year-end) on their balance sheet.  If you had WIP at the end of the year, you could generally take a reserve to defer the income inclusion to the following year when it is billed.  Effective March 22, 2017, such professionals will need to include their year-end WIP in income.  There are transition provisions available.  Please seek guidance from your tax professionals to ensure the transition year is being reported properly on your return.

Caregiver Tax Credit Amounts – As our population ages, more and more adults are caring for their elderly parents.  If this is you, you may be entitled to claim certain additional tax credit amounts on your tax return.   Effective for 2017, the caregiver tax credit, infirm dependent tax credit and family caregiver tax credit are being replaced by a NEW Canada caregiver tax credit.  This credit is equal to 15% (Federal) of caregiver expenses incurred, up to $6,883 of expenses, and up to $9,033 of caregiver expenses incurred for your dependent spouse or child who is infirm.   This credit is reduced dollar-for-dollar when the family member’s income exceeds $16,163.

Other noteworthy items:

For those who are self-employed – Remember that you pay double the CPP premiums – 9.9% of net business income, to a maximum of $5,128 for 2017.  You will also get a CPP credit amount for half of that (the employee portion).

The combined top marginal tax rate in Ontario is 53.53% (on income over $202,800).  The highest top marginal tax rate in Canada is in Nova Scotia at 54%, while residents of Alberta, BC and Saskatchewan see the lowest top marginal rates (47-48%).

Where are those high-income earners (over $200k)?  Here are some 2015 stats from Statistics Canada:

In 2015, there were 390,000 people in Canada who earned over $200k in income (or 1.45% of all income groups), over 100,000 more people than in 2011.  The median income for all of Canada was about $34k in 2015.

More than half of the over $200k income-earners can be found in Ontario (157,450 people or 1.55% of Ontario income-earners).

Interestingly, almost 900,000 people (8.7%) earned over $100k in Ontario in 2015 (2.2million or 8.27% across Canada).

 

[author] [author_image timthumb=’on’]http://54.82.103.175/wp-content/uploads/2017/12/IMG_0012-resize-square.jpg[/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist and Money Mindfulness Coach. With over 20years of assisting business owners with the business and tax strategies, her mission is to eliminate stress and anxiety people experience around money and taxes, by empowering them with the tools, knowledge, strategies and mindsets that will put them in the driver’s seat of their business success and financial wellness, so they can have more harmony, joy and abundance in their life. [/author_info] [/author]

Are You Ready For a Tax Audit?

Are you at risk? The Canada Revenue Agency (CRA) continues to audit the following key areas, as these areas seem to be the ones of greatest error or non-compliance by small and medium sized businesses:

Denied expenses – CRA denies unsupported and non-deductible expenses. It is important to have proper and adequate documentation to support the expenditures.
Taxable benefits – CRA scrutinizes automobile benefits and other expenses such as travel expenses and phone and internet usage to ensure taxable benefits are attributed properly to employees.
Shareholder benefits – CRA continues to seek out personal expenses paid for and deducted by the business that should be denied or taxed to the shareholder. Taxpayers should carefully document the business purpose of all expenses and have practices in place to closely monitor shareholder accounts and credit cards to avoid these reassessments.
International compliance / cross-border transactions – Many business are unaware of the tax and reporting implications of conducting business outside of their country and engaging in certain financing transactions outside of Canada, including sales taxes, payroll and employee withholdings, and corporate tax reporting implications. For Canada and the US, there is information sharing and new processes at boarder security to more closely scrutinize cross-border business travel.
Sales & commodity taxes (or Indirect taxes) – There have been a lot of changes in the sales tax rules in Canada over the last few years, with significant changes affecting large businesses, cross-border transactions, pensions, and financial institutions. Many businesses are unaware of how these changes affect them. The CRA also continues to find and disallow ITC claims for expenditures with inadequate or improper documentation.
Non-arm’s length transactions – Whether domestic or international, if there is insufficient proof/documentation for the validity of the transaction between non-arm’s length parties (such as management or administration fees), the expense can be denied (but yet, the income still taxed in to the other party – resulting in double taxation).
Aggressive tax planning/schemes – Aggressive tax planning and abusive tax avoidance schemes are a global concern. The CRA has invested millions in its program to reduce aggressive tax planning or abusive tax avoidance schemes that contravene specific anti-avoidance provisions of the law. The CRA now has the tools to detect, correct and deter the non-compliance of taxpayers using aggressive tax plans, and there will likely be more audit activity in this area.
As part of this scrutiny, the CRA has recently sent notice that it will be increasing its audits of individuals who have claimed business or property losses. If you do receive an audit request letter or request for information, don’t sit on it or stick it in a drawer somewhere hoping it will go away or take care of itself (yes, people do this). Take the letter immediately to your accountant or tax advisor to assist you in dealing with it.

Not dealing with the CRA requests in timely manner can cost you hundreds or thousands or even more in additional taxes, interest and penalties, which can cripple a small business. But CRA auditors are people too – just doing their job, serving you, the taxpayer, as their client. You may have done everything correctly, or you may have made honest mistakes (CRA audits can be a great opportunity to learn and boost your tax management controls and practices). But be prepared. Talk to your accountant and ask them what your risks are and how you can reduce them.

[author] [author_image timthumb=’on’][/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist and Money, Marketing & Soul business coach. Her mission is to eliminate stress and anxiety around money and taxes, by empowering heart-centered small business owners with the tools, knowledge, strategies and mindsets to put them in the driver seat of their financial success and wellness.[/author_info] [/author]

What is a Money Story?

Ever run away from your finances?  Put your head in the sand perhaps, and hope it all works itself out?  Or do you dive right in and play with the numbers?  Is it a game?  Do you take your money seriously?  Have you tried every trick in the book, but still come up hitting a wall on how to get ahead of your bills?

Everyone has a money story, ones that keep you safe, ones that have you spending more than you’re making, or watching every dime that comes in or goes out, ones that have thinking there’s never enough (even though you may be doing really well financially).

What’s Your Money Story?
“It’s really not about the money…I just love what I do”
“I can’t afford to…”

“Money makes you evil, greedy, selfish…”
“I don’t want to become THAT person who has money”
“It’s hard to make money”
“I can never seem to get ahead”
“I could never make any more than I do now”

“There is never enough…money leaves as fast as it comes in”
“I wish money didn’t exist”

“Money will take care itself”
I know I should be paying attention to my finances, but I don’t have time”
“I’d rather be ____, then doing my finances”
——————————————
Money stories like these can: 
  • keep you playing small and afraid to step into something bigger
  • prevent you from making necessary investments in your business and yourself
  • leave you feeling over-worked and under-paid
  • leave you exhausted, burning the candle at both ends just to pay the bills
  • lead you to give your power away to others and cause resentment
  • lead you to think you have more money than you actually do
  • have you ignoring your finances in a big way, potentially leading to financial failure

 

A money story is the combination of thoughts, beliefs and behaviours that are dictating the way you do money, and they may or may not be in alignment with your core values and priorities.  The good news is that you can create whatever money story you want – preferably one that gives you freedom of choices and grows your net worth.  The first step to changing your money stories is having awareness of what they are in the first place.

How do you know what your money stories are?  Look at where you are spending your time and money…and ask “Who’s is this?  Where does it come from?  What stories am I running here?”.

Want to change your money story?  Attend a money story workshop (there’s one on September 21 in Milton – Re-Set Your Money Story).  Or book a session with me.

  • Uncover money blocks and discovery how you do money on  a spiritual or energetic level;
  • Transform your beliefs and actions with money right away;
  • Learn practical tools for creating awareness of money patterns so you can change them.

 

Learn More about the September 21 Re-Set Money Story Workshop (click the workshop title, or type this URL in your browser:  http://54.82.103.175/moneystoryworkshop)