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  • john 7:41 pm on June 28, 2010 Permalink | Reply  

    CRA reduces automobile log requirements 

    Good news  for those of us that are (or are supposed to be) keeping a log of the business use of our personal car.  CRA has announced today that they are lowering the logging requirements:

    Ottawa, Ontario, June 28, 2010… The Honourable Keith Ashfield, Minister of National Revenue, Minister of the Atlantic Canada opportunities Agency and Minister for the Atlantic Gateway, is pleased to announce the introduction of a new simplified logbook for motor vehicle expense provisions as part of the government’s overall strategy to assist small and medium sized businesses and Canada Revenue Agency’s (CRA’s) aim to ease the tax compliance burden of small business owners.

    Previously, you were required to keep a log of absolutely every trip taken to establish the business purpose.  Needless to say this is a lot of work, so a lot a people just didn’t do it.  CRA has recognized this and wants to reduce the cost (time) the taxpayer must spend on their record keeping.

    The new rule redcues the requirement to log trips by 75%:

    • A log book must first be kept for one year to establish the “baseline” business use %
    • After the baseline is established, the taxpayer is only required to keep a log for 3 months of a year.  The business use % is then extrapolated from that.  Three months a year are still requirement in order to make sure that the baseline is still accurate.
    • The extrapolated figure must be within 10% of the “baseline” year.  The 3 month sample period must also be representative of the usual use of the vehicle

    This is great news for taxpayers.  It’s good to see CRA making changes in order to improve the system.  I wouldn’t normally say this…but, thanks CRA!

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  • john 3:24 am on April 10, 2010 Permalink | Reply
    Tags: saskatchewan, students, , , tuition   

    Saskatchewan Graduate Retention tution rebate 

    Saskatchewan flag

    it's easy to draw

    The Saskatchewan Graduate Retention tuition rebate is a great program for new grads who choose to remain in Saskatchewan. The program also now includes students who went to school outside of Saskatchewan, but have moved to the province since graduating. Combined with the fact that Saskatchewan has one of the lowest unemployment rates in Canada, this is a great reason to move to Saskatchewan, or for Sask ex-pats to return home.

    The $$$:

    The program is advertised as “up to $20,000 of your tuition back!”, however the key here is the “up to” part.  Only students graduating in 2010 and later are eligible for the full $20,000.  The program has been phased in since being introduced in 2008, so students who graduated 2006 – 2009 are eligible for a lesser amount per year. And if you graduated in 2005 or before,  your out of luck. (I’m personally in the situation… back in 2005 when the NDP ruled Saskatchewan all we got was a one-time $675 credit…..)


    Schedule for the Phase in of Tuition Rebate Maximums

    Maximum Rebate for 2006 and 2007 Grads Maximum Rebate for 2008 Grads Maximum Rebate for 2009 Grads Maximum Rebate for 2010 Grads and Beyond
    1 year certificate, diploma or journeypersons $3,000 $3,000 $3,000 $3,000
    2 or 3 year certificate/diploma $3,200 $6,400 $6,400 $6,400
    3 year undergraduate degree $5,000 $10,000 $15,000 $15,000
    4 year undergraduate degree $5,000 $10,000 $15,000 $20,000

    The maximum you are eligible to claim is also limited to the actual amounts spent on tuition.  To calculate this amount, go back to your previous year returns and add up the tuition paid from your T2202 slips.  If you can’t find these, your old slips may also still be available on your school’s website.

    Your maximum eligible rebate amount will be paid to you over a period of 7 years, as long as you file a Saskatchewan tax return.  The rate of pay back is also weighted in order to encourage graduates to stick around longer.  For the year of graduation and the next 3 years, you will receive 10% of your rebate amount.  After 4 years the rate increases to 20% for years 5, 6, and 7.

    How to apply

    If you graduated from U of R, U of S, SIAST, or one of several other school in the province, you don’t need to do anything.  You should have received a big green sheet of paper in the mail to let you know your eligible.  If you graduated after 2006 and haven’t received this, you should contact your school to see about getting another copy sent to you.  I have spoken with a few recent graduates who had not received theirs in the mail, but where still able to get a copy.

    If you graduated from a school outside of Saskatchewan (or even outside of Canada) and are now living in the province, you will need to apply on your own behalf. The application form can be found here.

    For the people who prepare their own tax returns, the form you need to file is SK 479.

    For example:

    You graduated from the U of R in 2009, and in 4 years you spent $18,000 in tuition. Since the maximum for a 2009 graduate of a 4 year undergraduate degree is $15,000, your total rebate amount is $15,000.  On your 2009 to 2012 tax returns, you will receive an extra $1,500 back ($15,000 x 10%).  In 2013 to 2015, you will get a $3,000 ($15,000 x 20%) back on your tax return.  Not bad!  Thanks Brad Wall!

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  • john 6:52 pm on February 22, 2010 Permalink | Reply
    Tags: , fraud, payroll, T4   

    A guide to T4 fraud 

    With the deadline for employers to prepare and file T4s with CRA approaching (the deadline is the last day in February), I thought I would write someone on how the system works, how it can be manipulated by evil-doers, and how you can protect yourself from this scam as an employer or an employee.

    By reading this post, you must agree to use your accounting powers for good, and not evil.  This is not a guide on how to steal, but rather a guide on how to prevent others from stealing from yourself.

    First a little background

    Throughout the year , as an employer pays their employees, they are deducting CPP, EI and tax from the paycheques.  The employer is also required to kick in some EI and CPP, and the total amount is remitted to the CRA usually monthly.  When these monthly source deduction remittances are sent in to the CRA, no detail is provided as to which employees are paying how much.  It would probably be just too much work for CRA to track the deductions of every employee for every pay period.  So instead, a T4 reconciliation is prepared at the end of the year (actually the February of the following year).  This reconciliation compares the total amount of deductions listed on each T4 issued to the amount of source deductions remitted to CRA during the year.  If there is a difference, the employer pays it (or receives a refund if the difference is in their favor).  A copy of each T4 issued is also sent in to CRA.

    The scam

    Let’s say that I am an employee, perhaps the bookkeeper for a business, who is given the task of preparing the T4’s.  If I am crooked, I could mess with the T4 summary in order to put some extra cash in my pocket.  How it works is that I would simply reduce the amount of deductions reported on one (or perhaps many) employees, and increase the deductions on my own T4 by a corresponding amount.  Since the amounts added and subtracted are the same, this will cause no overall difference on the T4 reconcillation. For example, box 22 on an employee’s T4 could be reduced by $500, and that $500 added back on to my own T4 box 22.  Then when I file my own taxes, I would receive a larger refund than I would otherwise be entitled to.

    This opportunity for fraud is possible because CRA does not track a running total of how each employees deductions withheld during the year.  It is also a  sneaky scam in that cash is not outright missing.. instead the theft is hidden through the CRA and personal income tax returns.

    How to protect yourself

    If you are an employee receiving a T4, you can protect yourself against this fraud by comparing your final pay stub of the calendar year to the T4 you received.  The amounts for CPP, EI and tax withheld should match the amounts reported on your T4.  If they don’t… talk to your employer about it immediately.

    As a business owner/employer,  the best way to avoid this from happening is to have your T4s prepared by someone who is not also receiving a T4. If you use a payroll service, they will usually prepare the T4s and summary for you, which is ideal.  Another good choice would to have your accountant prepare the T4s for you.

    If neither of these is an option, it is important to compare the T4s issued to a summary of employee deductions withheld during the year to ensure each employee gets the money that was deducted from them.

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    • John Kozan 6:55 pm on February 22, 2010 Permalink

      In case your wondering about the picture… it's from the movie Terminator 4.. T4.. get it?

    • kathy sansom 4:05 am on March 8, 2010 Permalink

      What happens when a T4 is issued for a division of assets (between business partners) in a divorce and a business is considered part of the assets along with house , car and such. the book keep recorded it as “bonus” when it wasn't causing the ex husband/partner a large bill with revenue canada. The bare legally required tax was removed. It has been reported to Revenue Canada along with supporting documentation. The ex-wife and ex-business partner, bookkeeper and accountants were aware of this wrongful T4.
      What happens to them

    • John Kozan 1:43 am on April 10, 2010 Permalink

      This sounds like a complex situation, I can't really comment on the specifics. You should seek out the services of a lawyer, if you haven't already.

      The CRA can impose penalties on preparers of tax information if they knowingly file false information. See http://www.cra-arc.gc.ca/E/pub/tp/ic01-1/README... for more info.

      If you suspect someone to be cheating with their taxes, you can always report them to the CRA at http://www.cra-arc.gc.ca/gncy/nvstgtns/lds-eng…..

  • john 5:56 pm on February 9, 2010 Permalink | Reply
    Tags: 2009, automobile, , deductions, home office, ,   

    CRA to crackdown on home office and auto claims in 2009 

    I just heard a rumor that the Canadian Revenue Agency is getting ready to focus it’s attention on taxpayer claims of office in the home and automobile claims for the 2009 tax year. A letter will be going out to tax preparers about this very soon.

    If you are planning to claim either deduction on your 2009 tax return, be sure to have the proper documentation to support these claims. For an office in the home, keep all of your utility receipts, as well as receipts for rent, mortgage interest, etc. Also remember that the percentage of these expenses that is deductible is based on the ratio of your office square footage to the total square footage of your home. The office must also be used solely for business purposes.

    Claims for automobile expenses must be supported by receipts for fuel, maintenance, etc, as well as a log which shows the trips made for business purposes vs. personal use. Remember that driving to and from work is not considered a business trip.

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  • john 11:15 pm on February 5, 2010 Permalink | Reply
    Tags: canada, credits, fitness, hbtc, hrtc, pension splitting, public transit, , tradespersons   

    2009 Canadian Tax Cuts Summary 

    Under the Harper Conservatives’ “Canada Economic Action Plan”, there are several tax cuts that you will be able to take advantage of on your 2009 personal income tax return. A summary of these are:

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    • John Kozan 5:57 pm on February 8, 2010 Permalink

      I should probably mention that this summary is straight from a CRA pamphlet. They gave me a few hundren pamphlets to hand out, so if you want one, let me know.

  • john 6:36 pm on February 4, 2010 Permalink | Reply
    Tags: advice, landlord, lease, leasehold improvements, negotiate, rent   

    Negotiate your lease 

    I was just talking with a client who recently opened her own hair salon. She told me that she re-negotiated a lower lease with her landlord based on the fact that she has done renovations to the property.

    This is a fantastic piece of advice for any business owner who is renting or leasing their business space. Often times landlords will be willing to give you a break on the rent, or even pay for a portion of the renovations.

    This is a great idea that I thought was worth sharing. Please comment if you have had any experience negotiating with your landlord.

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    • Doggy 10:47 pm on February 6, 2010 Permalink

      Greatings, Thanks for article. Everytime like to read you.
      Thank you
      Doggy

  • john 11:35 am on December 20, 2009 Permalink | Reply
    Tags: clothes, deductible, question,   

    Are work clothes a deductible expense? 

    suitI am often asked if the cost of your work clothes, for example: suites, ties, shirts, etc. can be deducted on your tax return.  After all, your employer requires you dress nice every day.

    I like this questions because the answer is easy:  no.  The reasoning behind this is that everyone has to wear clothes to work.  Also dress clothes are not work-specific, you could wear them out anywhere and not be out of place,  unlike, for example, an actual work uniform.

    So while some people might consider a suit and tie to be the “uniform” of an office job, it doesn’t enjoy the same tax treatment as a “real” uniform (like the police, firemen, etc)

    For more information, see the CRA guide on employment expenses

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  • john 6:30 am on December 16, 2009 Permalink | Reply
    Tags: excel, google, spreadsheet   

    My Google Spreadsheet feature wishlist 

    google_docs_logo

    Over the last few months I’ve been moving from using Microsoft Word and Excel to Google Docs.  I think the Google Spreadsheet has come a long way in the 2 or 3 years it’s been around, but I think there are a few important features that are still missing.

    Since it’s nearing Christmas I’ve put together my Google Spreadsheet feature wish list.  If Google Spreadsheet had these features, I would be able to ditch Excel completely.

    • Fixed decimal point -  Real accountants don’t use the . button
    • Double line borders – Take a look at a set of financial statements, and you see that at least one line will be underlined twice.  Google’s lack of the double underline is a show stopper for preparing financial statements in the Google Spreadsheet
    • Sort selected cells – I consider Google’s lack of a proper spreadsheet sorting function to be more of a bug than just a missing feature.  There are many times when I need to sort just a few rows of a spreadsheet and that just cannot be done in a Google spreadsheet. Right now  Google can only sort the entire sheet at once, or just the “un-frozen” rows, and that’s not good enough.
    • Pivot tables – This is an advanced feature in Excel, so it might be too early to expect Google Docs (which just shed it’s “beta” tag back in July) to have it, but this is something I use once and a while and I would need it if I was completely ditching Excel.
    • Multiple cell entry – Something that I find myself doing a lot in Excel is using control-enter on several highlighted cells in order to enter a value into all of them at once.  It upsets me a little every time I hit control-enter on a Google spreadsheet and this doesn’t work.

    What features do you want to see in Google spreadsheets?

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    • Bedobe 3:26 am on January 31, 2010 Permalink

      Until Google Spreadsheet makes it possible to “double underline” an item, it will never take the place of Excel for many of us. I do not understand why they don't have this most basic feature. It's absolutely critical in financial applications.

  • john 9:12 pm on December 14, 2009 Permalink | Reply
    Tags: TFSA   

    TFSA withdrawal and re-contribution 

    TFSA WebI just came across this situation  about our Canadian tax free savings accounts (TFSA) so I thought I would share.

    For 2009 (and 2010, and 2011) the limit to the amount you can put in a TFSA is $5,000.  Unlike an RRSP, you can freely move money in and out of your TFSA without any tax consequences  (The theory behind this is that the money going into your TFSA has already been taxed once).

    However, if you read the fine print, you will find that you cannot contribute, withdraw and then re-contribute back to your TFSA during the same year.  The reason for this is the way your contribution limit is calculated. If you had maxed your TFSA at $5,000 in 2009, then withdrew it, you would not be able to put it back in (during the same year)  because you have already transferred in $5,000 (the limit).  The amount you can transfer into your TFSA during the year is capped at your yearly limit, regardless of any withdrawals made. (This post assumes that you’ve used some to all of your TFSA limit.  If you have lots of unused TFSA room, you wouldn’t run in to this problem.)

    The  TFSA contribution limit (for 2010 and 2011) is calculated as $5,000 + withdrawals of the previous year + unused TFSA limit carried forward.

    For example, if you contributed the maximum amount in 2009, $5,000, and then withdrew $2,000, your TFSA contribution limit for 2010 would be:

    $5,000 (2010 limit) + 2,000 (2009 withdrawals) = $7,000

    Your unused TFSA contribution limit will also carry forward indefinitely, similar to your RRSP limit.  So if you don’t use it, you don’t lose it (how often do you hear that?).  So for example, if in 2009 you put $2,000 into a TFSA, and then withdrew it, your 2010 TFSA limit would be:

    $5,000 (2010 limit) + 2,000 (2009 withdrawals)
+ 3,000 (2009 carried forward: 5,000 - 2,000) = $10,000

    In this second example, you would actually have the TFSA room available to put the $2,000 back during the same year.  The example is just to show how the limit is calculated if you have some unused limit carried forward.

    If your just skimming through, here’s the conclusion:

    You cannot withdraw, then re-contribute the amount back to your TFSA in the same year.  You need to wait until the following year to put the money back into your TFSA. And remember that TFSA transactions do not have any tax effects, so go ahead and withdraw as much, as often as you wish!

    I’m guessing the reason for this is because the TFSA limit is only calculated once per year by CRA; they don’t keep a running total after each TFSA transaction.

    Questions? Comments? Please leave feedback!

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  • john 4:16 pm on December 14, 2009 Permalink | Reply
    Tags: simply accounting, trick   

    A quick Simply Accounting trick 

    I’ve been entering a lot of invoices into Simply Accounting lately, so I thought I would share a little trick I’ve been using to make it easier to enter business expenses that were paid personally by the business owner.

    The trick is to set your “Shareholder’s loan” account to be a “bank” account.  Now invoices that were paid directly by the shareholder can be directly entered through accounts payable.  This works especially well if the business owner has a habit of paying for business expenses on a personal credit card.

    simply-shl-bank-2

    simply-shl-bank

    I would love to hear your feedback, so please leave a comment.    How do you use Simply to account for expenses paid in this manner?

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    • John Kozan 11:29 pm on December 15, 2009 Permalink

      A downside of doing this however is that it will mess up your cash balance and ratios in the Daily Business Manager… if you use it

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