Taxation – The Tax Refund Myth

by admin in Advisory, Taxation

TAXATION The Tax Refund Myth A “tax refund” is really just the CRA giving you back your own money. “The government gave me money back” is a common phrase often heard after the April 30 or June 15 filing deadline. The truth is that the government is not being charitable; it is only refunding the tax that you or your employer had overpaid throughout the year. Because the rate of tax withheld at source throughout the year may be different than the tax rate applicable to your actual taxable income (after taking into consideration all other income and deductions), you might have remitted more money to Ottawa than was necessary. Your “tax refund” is the difference between your remittances and your actual tax liability. One of the biggest misconceptions is that, upon filing of their personal income tax returns, people with a lower income will likely receive a tax refund while people with a higher income will usually end up owing tax. This is not necessarily true because the tax refund/liability is not based on your income level but rather on the difference between the remittances paid compared to the actual tax liability. How It Works For example, assume Mrs. […]

Taxation – Tax Benefits for the Self-Employed

by admin in Advisory, Personal Tax

TAXATION Tax Benefits for the Self-Employed There are many tax advantages for self-employed Canadians who work from home and hire family members in their business. If you are self-employed, you may want to consider incorporating home and family into your business to create tax benefits for both the business and the family. Consider the following opportunities to reduce your taxable income and thus increase the amount of money left over to support your family. Individuals in a 40% tax bracket save $40 on every $100 spent. Hiring Family Members If your business needs employees, why not hire your children or your spouse? Of course, the job must correspond to their abilities and the pay be reasonable in terms of the going market rate for such skills. It is usually more beneficial for a sole proprietor to pay family members rather than a third party for the same work. Suppose, for example, you pay one of your children or your spouse $5,000 per year for performing a task and they have no other income. Because the $5,000 is less than their personal exemption ($11,327 for 2015) they will not have to pay any income tax on the earned amount. Further, the […]

Taxation – Salary or Dividends?

by admin in Advisory, Taxation

TAXATION Salary or Dividends? The way a bonus is paid has a significant effect on corporate and personal after-tax income. You are an owner-manager and you’ve just had a really good year. Profits are up significantly and you want to reward your employee shareholders with a bonus. But how? Salary or dividends? The answer to this age-old question is not as simple as it seems. It is even possible to receive remuneration that is a combination of salary and dividends. However, because every company and its shareholders have different needs, a “one size fits all” approach to remuneration is not prudent. Salary and dividends differ with respect to taxation. A dividend is a per-share payout of retained earnings and is therefore not an expense and thus does not reduce pre-tax income. A salary bonus differs from a dividend in that it is an expense and thus reduces pre-tax income. Corporations, trusts, charities and a wide variety of other entities can also receive dividends. Different Tax Effects Distributing a salary bonus effectively reduces pre-tax income by the amount paid. Thus, if a company pays out 100% of pre-tax earnings in the form of a salary bonus, the corporation may not be […]

Incorporation – Lets Incorporate

by admin in Advisory

INCORPORATION Let’s Incorporate The incorporation process is relatively simple whether you incorporate provincially or federally. As a sole proprietor, you may be looking back at last year’s results and ahead to the time you have to pay your taxes, and wondering whether you might not be better off incorporating to control the income tax expense on earned income. In Canada, a company may be incorporated provincially or federally. Federal incorporation has some advantages: You can carry on business in any provincial jurisdiction using the federally approved name. The head office can be in any province. Books and records can be maintained in any province. Annual meetings can be held in any province or territory. If you are incorporated provincially and wish, for example, to move your business from Alberta to Manitoba, it would be necessary to dissolve the Alberta corporation and reregister in Manitoba or apply for a discontinuance in Alberta and apply for a continuance in Manitoba. If your business is incorporated federally, you need only file Articles of Amendment indicating the head office is moving and register an extra-provincial corporation in its new home province. Whether you are thinking of incorporating provincially or federally, the following are a […]

Technology – Password Management

by admin in Advisory

TECHNOLOGY Password Management Password manager software is an inexpensive way to secure all your passwords. Our need for passwords to access everything in our life has become pervasive. Every agency, every computer, every credit card, every smartphone requires an exponential explosion of letters, numbers, and symbols to secure all information from hackers, whether it is personal data or corporate information. To complicate matters, it is no longer permissible (or advisable) on many sites to use a simple password that is easy to remember, such as a word or name. Instead you must create a password with numbers, special characters, upper and lower case letters, and a minimum length. One study suggests the average individual has at least 25 Internet-accessible accounts with passwords, while other sources suggest that number could be substantially higher. Is it any wonder that most individuals will, whenever possible, assign the same password to as many accounts as they can? Hackers know this and once they compromise one account, it often doesn’t take long to gain access to your other accounts. Use Different Passwords The best means of protecting your personal information is to use a different, unguessable password for every account. Most password management software includes […]

Management – Top Challenges

by admin in Advisory

MANAGEMENT Top Challenges The more things change, the more they stay the same. No matter what the economic conditions, some business worries never go away. Here are a few tips on how to handle some of these eternal problems. Cash Flow    Customers will continue to extend payments over 90 days. Understand your cash flow. At the end of each week, review accounts receivable, and accounts payable and make sure you know what you must pay in withholding taxes. Do not use your source deductions to pay suppliers unless those deductions are actually in the bank. Send requests for funds to suppliers before the end of the month. Owner-Manager Fatigue Overworked and underpaid will continue to be the mantra. Learn to pace yourself. Work to make money not save money. Work at what you do best and delegate the rest. Consider that if you work 2,000 hours per year and your business has sales of $400,000, you are effectively generating $200 of revenue per hour. Ask yourself why you are trying to learn how to do something a subcontractor can do in a day. Maintaining Customer Base Maintaining clients while working to get new ones is going to be a challenge. […]

Moneysaver – Rising Interest Rates

by admin in Advisory

MONEYSAVER Rising Interest Rates Start planning now for interest rate increases. Historically low rates have encouraged borrowing for equipment, real estate, operating lines of credit and everyday purchases. How much longer interest rates will remain at these levels is an open question but now is a good time to start thinking about the potential impact of higher rates on your business and personal life.   Potential Effects of Higher Interest Rates Here are some of the effects higher rates could have on your business: Higher interest rates will drive up the cost of operations, manufacturing and delivery, which will force small businesses to either increase prices or face a smaller bottom line. If prices go up, consumers cut back their purchases if they need to borrow for vehicles and mortgages, or use lines of credit. Any resulting cash crunch may force customers to stretch payment time on their payables. This makes you your customers’ banker. Payout periods of as much as eight years for equipment and vehicles have led many purchasers to believe that if they can make the monthly payments they can afford the asset. But, as the years pass, the warranty expires, the vehicle value plummets and repair […]

Taxation – Consider the Taxes

by admin in Corporate Tax

TAXATION Consider the Taxes Develop a strategy for distributing earnings and reducing corporate income taxes. For most owner-managers, their goal is to create personal wealth through the operation of a successful business. Unfortunately, corporate and personal tax liabilities (among other things) stand in the way. Owner-managed businesses must struggle with tax on two fronts: making a profit while minimizing the corporate tax liability minimizing personal taxes while taking remuneration out of the company.   Have a Strategy The first step to minimizing personal and corporate taxes is to put a tax strategy in place. Such a strategy depends on each individual owner’s personal cash-flow needs. Because tax rates applicable to corporate income are often lower than to personal income and because this differential is only levied when the owner-manager withdraws the funds, taxes can be deferred to the extent such income is left in the corporation. Often, this is not a realistic option since the owner-managers may need all or most of this business income for personal use. Then the owner-managers must remunerate themselves in the form of: salary dividends a combination thereof. Deducting salary expenses reduces taxable income and lowers corporate income taxes. However, because dividend payments are not […]

Moneysaver – Consider 2017

by admin in Uncategorized

MONEYSAVER Consider 2017 Look beyond revenue for profit growth. Preparing for 2017 In a slow-growth environment, the best way to maintain or improve the bottom line is to reduce expenses. Now is the time to look at year-to-date financial figures and establish budget goals for the next fiscal year. Start with zero-based budgeting. Consider the Following Start with zero-based budgeting rather than simply adding a percentage to last year’s expensed figures. Every item of revenue and expense in the general ledger is reviewed and the revenue and expense items are justified with realistic assumptions. Consider the possibility of having employees work from their homes in order to: reduce the cost of lease space reduce travel allowances or reimbursement costs reduce in-house cost for utilities, telephones, taxes, maintenance, and interest Review the communications system. Determine whether a separate facsimile line is necessary. Consider using an Internet system that connects to each employee’s smart phone rather than using the traditional land line. Consider whether the cloud would reduce computer, printing and communication costs and still enable employees to find data from one source. Purge old documents. Much data older than eight years can be shredded to free up space. Review the age […]

Trademarks – Trademarks for Your Business

by admin in Advisory

TRADEMARKS Trademarks for Your Business Protect your business by registering proprietary names as trademarks. If you want to protect the unique name of your business, website or domain name, logo, product or service name, or company slogan, you may wish to apply for a trademark. What Is a Trademark? According to the Canadian Intellectual Property Office: “A trademark is a combination of letters, words, sounds or designs that distinguishes one company’s goods or services from those of others in the marketplace. A trademark is unique. It is important to a company because over time, a trademark comes to stand not only for the actual goods and services you sell, but also for your company’s reputation and brand.” There are three types of trademark registrations available to protect your business name: A logo trademark: protects the design element that identifies the goods or services of a business or an individual. For example, an apple with a bite out of it immediately brings Apple computers to mind. A logo is protected by its unique artistic and layout elements.           A word trademark: is words used without any artistic design. (The artistic use of words is protected by copyright.) […]

Schedule Your Complimentary 30 Consultation