JAIKS BLOG

JAIKS BLOG

We are pleased to provide a variety of resources on accounting, taxation and other related subjects that we hope will be helpful to both individuals and businesses.


Browse through our Quick Tools resource menu then, if you have a question that isn’t answered, we can help. Simply contact us by email or give us a call at 289-926-9371. We would be happy to meet with you for a free, no-obligation consultation.

The Principle Residence, the Home Office, and the Taxpayer

Hello everyone, as has been discussed previously there are new rules in place governing what constitutes a principle residence and the reporting of such for tax purposes. In addition to tightening the definition of what constitutes a principal residence, stating that to claim such someone must reside there at least 50% of the time. The CRA has also changed their language regarding home offices. The CRA 2016 tax planning guide rigidly defines the home office as a section of a principle residence “used on a regular and continuous basis for meeting customers, clients, or patients.”


If you are self-employed and utilize a home office, you can deduct a portion of the operating cost of your home. For example, if your home office takes up 15% of the total square footage of your home you can claim as a deduction from your business income 15% of property taxes, hydro, heat, home insurance, maintenance costs, and even 15% of your mortgage interest (but not principle). These expenses cannot exceed $5000 in a fiscal year but can be carried forward and claimed against income in the next year.

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The Tuition Tax Credit: Not Just for University

Hello everyone, September is not far off and many are entering post-secondary education in the hopes of starting a career or bolstering their credentials. What many are not aware of however, is that program costs outside of university or college tuition are often eligible for tax deduction. For example, examinations that are for  trade, occupation, or professional credentials and paid to an institution with the intention of acquiring professional status recognized by the provincial and federal government, as well as those that allow applicants who pass to be licensed and certified as a trade person allowed to practice in Canada may be eligible for a tuition tax credit. Be sure to save receipts from any such examination to ensure you or your loved ones receive every break you are entitled to.   

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RRSP vs CPP: Utilizing the Best Tools Available

Hello everyone, we’ve previously discussed the usefulness of RRSP contributions both to prepare for one’s retirement and for tax relief. Recently, a Statistics Canada study was completed that found RRSP contributions actually decrease when mandatory work-place Registered Pension Plans are increased. The Canadian Pension Plan is slated to require increased contribution by 2019. Statistically speaking, citizens are more likely to decrease their RRSP contributions after that, and while the logic seems sound; why would someone increase their RRSP contributions if they’re effectively being forced to save for their retirement? Well CPP contributions do not have the same benefits as RRSP contributions, RRSP contributions can be used to lower your income bracket and potentially save you thousands of dollars in taxes. Don’t let mandatory increases to CPP contributions steer you away from the best tools available, and talk to your tax professional.

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Budgeting and Your Financial Future

Budgeting is not an enjoyable task but it is frequently key to your long-term success and happiness. The number one stressor within relationships in Canada is, you guessed it, finances; A survey among 3000 couples found that for 82% the number one issue is money, a very good reason to have an agreed upon financial strategy with your partner. As a first step, it is vital to record your income and expenses for a broader picture of your finances, this can be daunting as you realize just how expensive simple indulgences can be, if you purchase a fifteen-dollar lunch everyday at work, five times per week, that is $300 per month or $3600 per year! 

With this in mind, it can be enormously beneficial to seek the consultation of professionals certified in Real Wealth Management, able to analyze your finances both objectively and thoroughly to better assist you with your short and long term financial goals which brings us to our next step, creating a wish list. 

What are your long term financial goals? Do you want to send your children to college? Be debt free? Pay off your mortgage five years early? Whatever your goals are it is important to reconcile them with your budget. What expenses can be trimmed and the money saved contributed to your goals? It is fundamental to ask yourself what you want for your future, and determine which funds  you can allocate to these goals per month. 

Here are some tips to keep in mind for reducing expenses, do not use credit cards wherever possible, use cash. When you shop for essential items bring no more than $10 or $20 more than you think you’ll need so that you’re not tempted to spend more than you’ve budgeted.  Use coupons regularly, even small discounts on regular purchases can add up to thousands of dollars saved over the course of a year, and be sure to keep these in accessible place where you will not forget them. If you still have cable or a landline phone, they have effectively become obsolete, there are plenty of streaming services via the internet that can get your favorite shows and events at a fraction of the price of a cable package, while landlines have been made largely irrelevant by cell phones. These are just a few basic tips that can help you manage your own finances, if however in the past you have tried and failed to stay on course to achieve your own goals, it may be time to seek certified professional assistance, especially when it comes to budgeting and negotiating CRA debt. For more information on budgeting strategies check out “The Only Budgeting Book You’ll Ever Need” by Tere Stouffer or Gail’s Guide to Building a Budget online here: http://www.gailvazoxlade.com/resources/guide_to_building_budget.html 

 

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Frequently Unused Tax Credits and Deductions

With the April 30th filing deadline fast approaching and many people in a hurry to meet it, it can be easy to overlook tax credits and deductions that Canadian tax payers may be entitled to. The following is a brief list of a few deductions and credits that are frequently overlooked, the first are moving expenses. Provided the move is at least 40 kilometers closer to one’s job or business moving expenses are eligible for deduction, less commonly known is the fact that moving expenses for one’s children (provided they are full-time students) also can be claimed with the similar restrictions of the move being at least 40 kilometers closer to their school. In the event receipts from the travel are not saved, you may claim meal expenses at $51 per day and vehicle expenses at 43.5-59.0 cents per kilometer of travel depending on the province. Another commonly missed deduction comes from the fact that healthcare premiums unbeknownst to many, can be claimed as healthcare expenses if the total medical expenses for that year exceed $2237 or three percent of one’s income or that of their spouse, whichever is lower. Finally, if you or a loved one have claimed a disability tax credit for the 2016 year but have suffered the disability for years it is possible to seek adjustments on returns from up to 10 years ago.  

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Important Changes to the Ontario Student Assistance Program

With the government's educational reforms taking effect this year there are some major changes to the Ontario Student Assistance Program that anyone interested in a post-secondary education should be aware of. For the first time in Canadian history OSAP now offers citizens without $50,000 of family income or an existing post-secondary degree, assistance up to and beyond, total tuition coverage for an eligible institution. provided that they don’t already possess a post-secondary degree.

 

The use of “citizen” (although there are also allowances for permanent residents and protected persons) instead of “student” is important, as this offer applies to "mature students" as well, there are no requirements that an applicant currently be a student.  “Eligibility for the new program will not depend on the numbers of years out of high-school or program level” assures Sean Greson issues manager for the Ministry of Advanced Education and Skills development. In addition to this, assistance to applicants with children are more accommodating; Childcare costs factored into assistance.

 

If you are interested in learning more, follow the link to the general information website and OSAP calculator here: https://www.ontario.ca/page/osap-ontario-student-assistance-program?_ga=1.209252434.1951252719.1489095943

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Sale of Principle Residence

Hello Everyone, today I would like to inform you of an update regarding the sale of one’s principle residence. As you may already be aware, the sale of one’s principle residence in Canada is exempt from capital gain tax, because of this there generally hasn't been a reason to report the sale, but the rules have changed for the 2016 return and onward.

While the sale of one’s principle residence does remain free of capital gain tax for the years it was designated as the owner’s principle residence, the transaction is now required be to reported under the Capital Gains section of the T1 Income Tax and Benefit Return. Late designations of a property as a principle residence can be adjusted with a penalty of $100 per month (to a maximum of $8000). A principal residence does not have to be the house where the owner resides all the time, indeed according the CRA the property may qualify as a principle residence if the owner, the owner’s children, or the owner’s spouse reside there at some point during the year, although this can change if the property is rented out. It is also important to remember that an owner and spouse may only have one principle residence between them, this principle residence may even be outside of Canada. The above change also apply in the disposition of property even though the property has not actually been sold in such a case. 

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Tax Changes for Your 2016 Return

Hello Everyone, April is approaching fast and there are several tax changes that will take effect this year and potentially alter your return. We here at JAIKS believe that just about everyone should be informed of shifts within the taxation landscape, and so have taken the time to talk about a few of the more broadly reaching changes. 

Among the more controversial changes is the elimination of the Family Tax Cut which allowed individuals to transfer up to $50,000 of income to a spouse lower income if they have a child under the age of 18, to a maximum benefit of $2000. While a bit of a blow to middle class families who had come to expect the benefit in the past, there are still a number of ways depending on circumstances, to split income.

Another set of important changes comes in the form of new rules for several child benefit tax breaks, fitness and arts credits for children under sixteen are being cut in half, $1000 to $500 and $500 to $250 respectively. Still, these changes may be more than made up for (depending on income status) with the Enhanced Universal Childcare Benefit with which parents of children under 18 can get up to $6400 per year for each child under the age of six, or a maximum of $5400 per year for each child aged six to seventeen.  

Finally, there have been adjustments to the federal tax brackets. If you make between $45,282 and $90,563 per year your tax rate will drop from 22% to 20.5% from the previous year.  Meanwhile another bracket has been created for those who earn more than $200,000 per year the rate has been adjusted to pay 33% on every dollar earned above that figure, an increase from 29% last year. 

 

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RRSP Contributions

Hello Everyone, T4’s are right around the corner and with them information on your yearly gross income. It’s never too early to think of the future, especially if it’s been a particularly good year and you find yourself in a higher tax bracket. It may be time to sit down and discuss an RRSP. The contribution deadline is March 1st. It’s certainly worth considering, as strategic RRSP contributions could save you thousands of dollars.

Even if your income hasn’t changed from the previous year there can be a number benefits to making an RRSP contributions. Making an RRSP contribution could lower your income tax bracket. If for example you make 52,000 dollars per year, a 3000 dollar RRSP contribution that year will bring you from the 26% tax bracket to the 20.5% bracket. Furthermore, deferring a portion of taxable income until the money is withdrawn at retirement means that you may be in an even in a lower earning tax bracket at that time, in addition to collecting the interest that the RRSP will accumulate.

The maximum amount of RRSP contributions for the year 2017 is the lowest of 18% of your earned income from the previous year or $26,010. Income for the purposes of this measurement includes salary or wages, rental income, alimony, and other income sources that are not investment income. It’s important to remember that if you’re the member of a Company Pension Plan or Deferred Profit Sharing Plan, the amount that will be deducted from your RRSP limit is easy to see on your T4 as your Pension Adjustment.

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European Pension

Were you or your parents born in Europe? Did you or your parents work in a European Country for several years? If you answered yes to either one of those questions, you or your parents may be entitled to a pension regardless of how long you’ve lived in Canada. At JAIKS Inc. We’re committed to using our knowledge and expertise to lend a helping hand to our clients. http://europa.eu/…/retir…/state-pensions-abroad/index_en.htm

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6 Deductible Expenses That Commission Employees Should Claim

Are you a commission employee? If so, you may be surprised with some of the expenses that you can claim when it comes time to file your taxes. Commission employees have more freedom to claim expenses than other employees, who may find their options rather limited when it comes to what they can claim as a business expense. If you intend to claim a business expense as a commission employee, you may want ensure you meet the CRA’s criteria to what constitutes a commission employee. Commission employees, as defined by the CRA will need to (as specified in their employment contract) pay for their own expenses, be required to work away from their employers place of business, and receive their pay in whole or in part by the commission earned by the business they conduct. If you feel that you meet the following criteria, you will want to consider having your employer prepare and provide you with a T2200 form, also known Declaration of Conditions of Employment form. Doing so will ensure that your employer recognises and vouches that any applicable business expenses you incur are legitimate and may be claimed. It is imperative that you retain a copy of this form, as well as other documentation recording expenses incurred while conducting business. Should CRA deem audit to be necessary, they will require your copy of the form, as well as proof of the expenses you claimed in order ensure that your claims are both legitimate and accurate.

With this being said, if you consider yourself a commission employee and meet the criteria set out by CRA, you should consider claiming the following expenses if you not already doing so.

6: Office Rent and Home Office Expenses

Expenses relating to either a rented office space or even home office are considered by CRA to be business expenses that you may claim. It is very important to understand that CRA treats these as two very different expenses, with two very separate rules on how they may be claimed. If you make use of a rented office space, make sure to consider a claim. If you pay for the rental fees yourself, you should have no problem in claiming them as an expense. However, if your employer pays for your expense, you will want check with your employer, and find out if they consider it a business expense on their part, or simply include it as part of your payment for the services you provide. If your employer includes these rental fees as part of your income, you should consider making a claim for a business expense.

If you have a home office, you should make yourself aware of the conditions that must be met before it can be claimed as a business expense. Firstly, any space in your home you wish to use as an office space should be designated for business purposes. Additionally, it is expected that you will spend a minimum of 50% of your business time within this space. If your home office meets this criteria, you will want to consider claiming a portion of your housing costs, such as heating, electricity, insurance, and even property taxes as a business expense. If you live in a rental property, a portion of any rental costs and maintenance fees may be considered a business expense. The recommended way to calculate the portion of costs you intend to claim is to divide the area you have designated to be your workspace by total area of finished rooms in your residence. Maintenance costs may also be claimed, but it would be best to limit any maintenance claims to work that is done within the work space.

When you are ready to file your taxes, it’s important to note that these expenses can only be used to deduct taxes that were contributed from business activities conducted within these workspaces. If you are finding that your claim exceeds the amount of taxes that you can deduct, don’t worry: you may be able to carry the expenses forward and use them next year.

5: Electronic Office Equipment

Often overlooked, many people don’t realize that they can claim a portion expenses incurred from electronic office equipment. If used for business, you can claim lease costs as an expense. If you made the decision to purchase your own equipment, you can make a Capital Cost Allowance claim for the loss of value as your equipment depreciates. The rules when it comes to assessing the depreciation of your equipment are more complicated than other claims you may make, so it may be best to consult your accounting professional on how to properly asses these sorts of claims. Equipment that falls into this category include computers, cell phones, printers, fax machines, and photocopiers. Cell phones in particular have some additional rules you should be aware of. While costs pertaining to licencing or connecting a cell phone to a network cannot be claimed, you may make a claim for costs incurred from calls that are business related. As with claiming an expense for the use of office spaces, you will want to ensure that any expenses claimed from electronic equipment are only used to deduct taxes paid towards income earned from the equipment you are claiming.

4: Food, Beverages, and Entertainment

Many business professionals put a lot of effort into ensuring that their clients feel valued, and because of this many consider entertaining clients to be an essential part of earning their income. CRA therefore considers many costs incurred from entertaining clients to be business expenses. Common expenses that are claimed pertaining to client entertainment include ticket or entrance fees to events, food and beverages, and room rentals. You may also claim costs regarding food or drink that you have purchased, given that the purchase was made whilst conducting business. As with most business expenses, certain circumstances apply for these purchases to be applicable. For example, if you are spending over 12 consecutive hours conducting your business, and are in another municipality/metropolitan area, you can claim food and drink as a travel expense. This rule also applies to food and drink purchased on airplanes, trains, or busses, given that the cost of the meals were not included in the ticket price.

CRA allows you to claim 50% of the costs that you incurred whilst entertaining clients, or purchasing meals.

3: Vehicle Expenses

While this may be an obvious expense for most, you may not be aware of all of the vehicle costs that may be counted as a business expense. If the use of a vehicle is essential for you to earn your income, you will want to consider claiming a portion of your vehicle expenses. In addition to fuel costs, maintenance costs, licencing fees, registration fees, and even insurance costs may all apply as business expenses, and may be claimed. Other expenses that may apply, and that you may want to consider claiming include both leasing fees, and interest paid on car loans. It is important to note that costs pertaining to vehicle use can only be claimed if they relate to reasonable business use. If you intend to claim costs regarding the use of your vehicle, you will want keep organized notes describing when the vehicle was used, how it was used, where you traveled, and the distance driven. This is particularly important if you use the vehicle for personal use as well. CRA expects that you make a reasonable assessment of what portion of your vehicle costs were incurred in both business and personal use, and separate the two when making a claim.

It is important to note that commuting to and from your place of employment is not considered a business expense, and that costs incurred whilst doing so should not be claimed.

2: Client Gifts, Business Cards, and Advertisements

Promoting yourself as a commission employee and business professional can be a vital part of how you conduct business, so it should come as no surprise that these are considered a business expense by CRA. Ensure that you retain any receipts for business cards you have printed, as well as any invoices or receipts that you received regarding advertisements that you purchased to help promote yourself as a business professional.

Gifts to clients are an expense you may have overlooked. They can be an important part of promoting yourself as a professional, and may be an expense that easily adds up. Clients like knowing that you care about them, and are more likely to conduct future business and offer referrals if they know that they are respected and valued. If you purchase items for a client, whether it’s cards, Christmas gifts, or an out of the blue showing of gratitude for their continued business, make sure that you retain all receipts to make a claim when it comes time to file your taxes.

1: Training Costs

Many professionals are constantly looking to improve their skills and qualifications in order to improve the level of service they can offer their clients and further their career. Additional training is an essential activity for many commission employees, and is a good way to retain a competitive edge and grow a client base. Considering this, it makes sense that fees from training courses are considered a business expense. If you are considering claiming the cost of a training course or seminar, you will want to make sure that it is specific to improving or maintaining skills or qualifications that you already possess, and that these skills or qualifications are specific to improving how you conduct business.

Unfortunately, CRA does not allow you to claim every training course as an expense. Courses that earn you credits towards a diploma, degree, or certificate cannot be counted as a business expense. Costs from such courses may be seen by CRA as tuition costs, which are still tax deductible. CRA may also be hesitant to allow you to claim a training session or course as an expense if they feel that the cost was too high, and did not warrant the level of service provided.

When filing taxes, we would like to stress the importance of keeping thorough and organized records of all expenses that you intend claim, and that you separate personal and business expenses. You will also want to ensure that you retain a copy of the T2200 form you received from your employer. Should CRA decide to select you for an audit, your records will be an invaluable asset in protecting you and your reputation as a business professional. Most business expenses can be claimed on a T777 Statement of Employment Expenses form. If you are unsure whether or not an expense is appropriate to claim as a business expense, talk to your accounting professional. We are here to help and assist you with these matters, and can help you maximise your return and grow

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TAX BREAKS

There are some OLD tax saving ideas which are really great to use and should be taken advantage of to drop taxable income. Some of these ideas we are quite familiar with but do not always take full advantage of.

RRSP's can be purchased until March 2, 2015 and can save you quite a bit of money especially if you are in the higher tax brackets. Then when you retire and are in the lower tax bracket it is a good way to pay yourself with lower tax. IF you find yourself still in the higher tax bracket when you retire, come to talk to us as we offer great ideas of what to do with your RRSP contributions after age 65 but before 70 in order to withdraw RRSP income and not lose your old age pension due to clawback.

TSFA's are also great ideas of saving money, they do not reduce your taxable income the same way RRSP's do. But they are a good way to save and the interest from these are tax free. If you need more information on TSFA's come talk to us, we are here to help you.

A NEW great tax credit introduced for this year that you should look into is called FAMILY TAX CUT, The October 30, 2014 announcement included a proposal to introduce the Family Tax Cut, a new non-refundable tax credit of up to $2,000 for eligible couples with minor children. Basically you can now income split up to $50,000 with your spouse, provided you have minor children. This is very advantageous for the family where the income levels between spouses are great. This is definitely something to check out if you fall into this criteria.

We are here to help, just either give us a call and/or fill out our form online.

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DISABILITY TAX CREDITS - Do you qualify?

DISABILITY TAX CREDITS - Do you qualify?

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The Importance of reporting ALL income from information slips

This penalty consists of a 10% Federal, and 10% Provincial amounts. Whereas some penalties are applied against the uncalculated tax, this penalty is applied to the unreported income. If you voluntarily tell CRA about an amount you forgot to report, they may waive this penalty.

For Example, John filed his 2008 tax return early and hadn't received all of his T slips yet. After he filed, he received a T5 slip reporting $3.50 in interest income and didn't bother to request an adjustment because he thought the amount was trivial. The CRA then reassessed his return later to include the unreported income with no further issues. When John filed his tax return in 2010 however, he had forgotten about and then failed to report $2000 of RRSP monies he had withdrawn for his RRSP when he was tight for cash earlier in the year. When the CRA reassessed his 2010 return to include the unreported income, John was charged a $400.00 penalty, $200.00 Federal and $200.00 Provincial for repeated failure to report income plus interest.This effectively taxed his current income at over 60% due to his negligence in reporting $3.50 two years earlier! Another scarier way to look at it, is tax at over 10,000% on the original $3.50!

The moral of the story is that no matter how trivial, always report income included on income tax information slips.

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Foreign Asset Reporting and the Extreme Costs of Non-Compliance

Unfortunately the penalties for not completing this form are extreme as one large Canadian Corporation group found recently when a judge ruled against the Asper group of companies. Penalties for non filing were enforced even though the company reported all the income from these investments properly.

So what is this form and why is it required? As has been reported in the press both here in Canada and south of the border, governments are concerned with offshore money escaping taxes in the home country. As a resident of Canada and most other western countries, you are taxed on world wide income. This form is simply to track those assets offshore which have the potential to earn income and otherwise escape tax if not reported.

Canada Revenue Agency requires Canadian resident taxpayers to report specified foreign property with an aggregate cost in excess of $100,000 at any time during the year.

Specified properties include the following:

  • Foreign bank accounts
  • Interest in foreign trusts (mutual funds)
  • Foreign bonds, treasury bills and other debt instruments
  • Shares in foreign corporations
  • Real estate
  • Other income earning property

Excluded properties include:

  • Property used to carry on an active business
  • Assets held in Canadian registered plans such as RRSP’s
  • Property held primarily for personal use such as vacation property, art, and antiques

If you have a large diversified investment portfolio, you should speak with your investment advisor to determine whether or not you might fall into the reportable categories.

You also need to determine whether or not you, your spouse or both own a property as individuals report separately and the for jointly-owned property, it is the contributed amount that is the determining factor.

Even if you are not required to file a personal tax return, you will be required to file a T1135 if your properties cross the threshold.

Foreign property does not include a U.S. IRA

If you rent out your foreign condo, that you also use for personal use, you may be required to report.

You are not required to report US securities if they are owned within a Canadian mutual fund.

If you inherited a property, your cost base is the fair market value at the time of inheritance.

Penalties are harsh. Penalties begin at $25 per day to a maximum of $2,500. If you knowingly fail to file or fail to file through gross negligence, penalties are $500 per month for the first 24 months to a maximum of $12,000. More severe penalties exist for false statements and omissions.

For further information, please visit CRA’s page for completing the T1135 including frequently asked questions.

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