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Small Business Taxes in Canada – Personal and Corporate Taxes

Small Business Taxes in Canada

As a small business owner, we can often think that the odds are stacked against us when it comes to capital and finances. But it is important for small business owners to be informed that the Canadian tax system is set up to your advantage. You can build wealth within your company and for retirement.  As hard as it might be to believe, there are methods to create wealth right within the tax system that are encouraged by the government.

Firstly, it is important to understand that the Canadian tax system is broken up into two parts: personal and corporate tax. 

 Personal Tax vs. Corporate Tax

Personal tax rates can be quite high. You may pay high personal tax rates and, in a way, this makes sense. The government wants you to pay its money before you go and spend it somewhere else. This is what GST (Goods and Service Tax) and HST (Harmonized Sales Tax) are all about. This tax (consumption tax) is a way of trying to prevent you from overspending.

On the other hand, we have corporate tax, small business tax rates are between 9% and 15% based on which province you live in. Although it might seem arbitrary, the corporate tax rate is much lower than the personal tax rate since the government wants you to contribute towards the economy.

 Income Retention in Corporation

We all love paying the lowest amount possible in taxes which is why some entrepreneurs may potentially keep as much income earned and build a nest egg in your corporation. But, due to recent tax changes by the government, they have discouraged this and are trying to stop this from happening. The government still wants you to save capital for the future but just not this way, instead here are the recommended methods of doing so.

 Method 1 – RRSPS

Instead, the government wants you to payout your salary, and use RRSPs. This method can be used for saving for the future, the government wants you to do so using that salary that you earn. You simply create a RRSP contribution room and retirement fund, and it grows quite quickly as taxes aren’t paid now but down the road in the future. Overall, you have a greater amount of money to start with which further grows and helps a lot as retirement reaches.

 Method 2 – Lifetime Capital Gains Exemption

This method is quite valuable and can change the way you think about your business in a positive manner. This big tax incentive by the government is policy-based, basically what the government wants is for you to create a treasured business that you could potentially sell in the future and obtain tax-free money. The strategy to carry this out is through the lifetime capital gains exemption. This policy is a method and not a loophole, additionally it’s not going away any time soon. It’s very policy-based, simply put the government wants you to create a company that’s not going to croak when you die or retire. In return for this, the government is offering $900,000 of tax-free money for selling the shares of your small business corporation that qualifies.

 This is such a treasured tool for retirement and creating wealth, yet it is often overlooked. The primary reason it is overlooked is that it is a lot of work to achieve this. Many things need to be resolved within the business to ensure that it is sellable. It can be quite complicated but with the help of professionals at H&T Accounting Services, you can achieve this.

 Collectively, there are many ways you can set yourself up for success as a small business owner with the help of the government policies and rules. Understanding how the tax system works is crucial to avail these opportunities and retire with as much capital as you possibly can. It is important to understand that having an accountant or financial advisor that understands your goals can only help you achieve this. Book an appointment with us today to take your small business to the next level whilst setting yourself up for success.

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Home Office Expenses For Employees

personal tax return

Are you someone who is looking to claim personal tax? Have you thought about hiring an accounting service to help you file the claim? If you said yes to both these questions then keep scrolling down because we have got you covered.

Why Should You Claim A Personal Tax Return?

Home office expenses are usually claimed on a personal tax return. The deductions help in reducing the amount of your income that you pay on the tax. This means that your overall liability on income tax also gets reduced.

What Is The Temporary Flat Rate Method? How Is It Calculated Through Accounting Services?

A temporary flat rate method helps in simplifying your claim for a home office expense. This includes the home expenses, the office supply, and the phone expenses all at the same time. So, if you are someone who is still working half the time from home, you can easily claim $2 for every day you worked from home. The period of working from home should at least be four consecutive weeks after the pandemic hit the world. As an individual, you can claim $400 at maximum for working from home under the home office expenses for employees working through COVID-19. Just keep in mind that this method of calculating the claim would only work after 2020.

Here Is How You Can Easily Do Auditing Yourself And Calculate What You Should Add To This Claim:

  • Do not calculate the area of your working space.
  • Do not keep any supporting documents with you.

Here is how your employer can calculate the claim by not doing the following:

  • They do not have to complete the form or sign up at T2200S or T2200 like employees.

Here are a few easy steps to help you find out if you are capable of filing for the claim or not:

  1. Find Out If You Are Eligible

You can easily find out whether or not you are eligible to file for the claim.

  1. Fill Out The Form

When you start filling out the form, you need to calculate the total number of days you worked from home in the year 2020 when the pandemic hit the world and then multiply the total number of days by $2. Remember that you can only go up to $400 for the claim you are seeking in return. So, the maximum number of days you worked from home can only be 200 days.

  1. Determine An Appropriate Number Of Days You Worked From Home

The best way to calculate your total number of days is by using the temporary flat rate method. Just follow the process and then attach the form to your income tax return.

  1. Claim The Deduction On Your Tax Return

In the form, you will see Line 9939, you should add the claim amount over there with your other home office expenses.

Did you find this article useful? Let us know in the comments below.

 

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How Much Can You get in Canada Child Benefits?

How much can you get in Canada Child Benefits?

The Canada Child Benefit (CCB) is administered by the Canada Revenue Agency (CRA). It is a tax-free payment that’s provided on a monthly basis to eligible families who have children that are under 18. In addition, the Canada Child Benefits might also provide a child disability benefit, including other related territorial and provincial programs.

The Canada Child Benefit is paid to eligible families from July until June of the next year. This benefit is based on several factors. In order to qualify to receive this benefit, a family needs to meet these four important conditions:

  1. You have a child who is still under 18.
  2. You are the sole caretaker of this child and responsible for their upbringing.
  3. You live in Canada and are a resident who is required to file tax returns.
  4. You and/or your partner is a citizen of Canada, a protected person, a permanent resident, a temporary person (been in the country for the last eighteen months and has a valid permit for the nineteenth month), or is an indigenous person living under the Indian Act.

You will be considered as the primarily caretaker of the child if you are responsible for supervising the daily activities and other needs of the child, making sure that all of their medical needs are met, including arranging childcare when needed.

How much will a family receive?

The amount of money a family receives is based on a couple of things like:

  • The number and ages of qualified children present in the family.
  • The family’s net income for the last tax year.

Furthermore, you can also use a reliable online calculator in order to get an estimation of the amount of money you might receive. This is also going to calculate whether you qualify for the Child Disability Benefit or not. A lot of the community agencies can help you when it comes to finding information about family and child tax benefits, hence make sure to get in touch with them.

How can you apply for the Canada Child Benefit?

You can apply for the CCB by choosing one of the three different methods. The first method is by using you birth registration. This takes place when you are registering the birth of your child at the hospital. Also, there are certain provinces that allow online registration. You need to give your consent before sharing your Social Insurance Number (SIN) and give permission to the Vital Statistics Agency to share your birth registration number with the Canada Revenue Agency.

The second method involves logging into your CRA account. After you have logged in, go to the ‘Apply For Child Benefits’ section and fill in the required fields like your contact, citizenship, marital status, name of your child, gender, place and date of birth. After you have reviewed your application, submit it. You might have to provide additional documents to the CRA, if asked for it. You can do that by navigating to the ‘Submit Documents’ section in your CRA account.

The third method consists of mailing the application package. You would have to download form RC66 and fill it up. This is the Canada Child Benefits Application, and you have to attach other required documents too. Next, you would need to mail the entire package (make sure it is signed) to your tax centre.

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Filing Income Tax

Tax Time
So it is tax season once more and you are struggling to understand whether you are required to file a return. Below we have answered the basic question of who is considered for income tax purposes.

Who should file income tax

If you fall into any one of these status living or working in Canada, you will be required to file your returns,
– Permanently living in Canada
– Leaving Canada temporarily or permanently
– Temporarily living in Canada

Here, we will discuss a little more in depth each status group,

Permanently living in Canada

Canadian Residents
If you are a resident or citizen living and working in Canada, you will want to file your return so you receive credit and benefit payments you are entitled to. If you are a legal representative of someone that had died in the year 2020, you may have to file a return for that person.

Newcomers to Canada – Immigrants & returning residents
If you are a newcomer leaving another country and settling in Canada, you will want to file your return as you may be eligible for the Canada Child Benefit, GST/HST Credit and other provincial and territorial programs.

Indigenous People
If you fall into the Indigenous People’s category, you are subject to the same tax rules as any other Canadian resident. We encourage you to file as you may be tax exempt under section 87 of the Indian Act based on your income. You are eligible and have access to all the same benefits and credits as all other Canadians.

Leaving Canada temporarily or permanently

Factual Residents & Government Employees
A factual resident of Canada is anyone who has left Canada however, has significant residential ties in Canada while travelling outside of the country whereby, you must file your return. You may be considered as factual in situations where you may be working, teaching, commuting, vacationing etc. outside of Canada and in another country. Government employees are usually considered factual residents

Live part-time in the U.S
If you live, vacation or spend most of the year in our neighboring country, the U.S. you are still obligated to file your return if you are still maintaining residential ties in Canada.

Leaving Canada – Emigrant
If you leave Canada to live in another Canada and sever your ties with Canada, you may be considered an emigrant for income tax purposes.

Temporarily living in Canada

If you are a non-resident of Canada with the following statuses, you will be considered a non-resident for income tax purposes.
– Non-resident of Canada
– Non-resident of Canada with rental income
– Deemed Resident
– International Student
– Seasonal Worker

Regardless of what status you are in, H&T Accounting Services are here to assist you with all your questions and concerns regarding your income taxes. Call today for a consultation!

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That Time…YES…It’s Tax Time!

Many people including huge businesses and corporations truly dread taxes when it comes to their money. These compulsory expenditures make the financial systems of all businesses quite complicated. At H&T Accounting Services, understanding tax laws are the fundamental basis of our expertise. Because we understand how these laws work, we know how to help you save big bucks. We hold strong knowledge in all areas of taxation and we work hard with our customers to save every dollar we can. 

Tax Planning 

One of the most essential areas of understanding taxes in any sort of financial situation is tax planning. This involves productive research into literature so that taxation errors are minimized and the savings is maximized. Special attention is given to large saving plans so we know we are getting you the best service possible. With continuous efforts to analyze plans that our customers can qualify for, we work above and beyond all your expectations. 

Tax Preparation 

We love to prepare and prepare well so that we have your back when you need us the most. We prepare year-round so that our customer, the taxpayer, is at low risk of getting into any auditing circumstances.  Year long, H&T Accounting Services provide exceptional bookkeeping as well that helps us stay on top of our game. With complete bookkeeping, tax preparation is simplified. We work hard to minimize errors so auditing becomes easier for everyone. We take the tax preparation phase seriously, so you are at ease. 

Tax Appeals and Audits 

Defending our customers during an audit or an appeal is also a critical phase of our work. We know our path right up to the Tax Court of Canada, if need be, so that you get the most out of any case. Appeals and audits can be stressful and confusing, but because we know how to take care of you and your finances, we are persistent in lowering any possible penalties and interest charges. 

Saving BIG Bucks!

Savings, savings and savings! Who does not want to hear that when it comes to the complexity everyone deals with over their hard-earned money? Many wonder what they are really able to save when it comes to their taxes. It is a fact that taxes can get quite complicated. This is why knowledge of the tax systems is crucial to the tax savings process. Our experts here at H&T Accounting Services have extensive knowledge of the many savings plans that our customers can qualify for. Everything from business income taxes to employment income taxes is on the table for us and we know how to help our customers!

At H&T Accounting Services, we plan, prepare, defend and yes, most of all, help you save! We have experts in all areas of accounting and bookkeeping services that work year-long to keep your finances in check. Do not wait any longer, let us help you get in control of your money! Call us TODAY….call us NOW!

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Tax Returns Documents (Tax Slips)

Dear Clients:

We hope you are in good health.

For business proprietors and partners and their spouses we do have some time before filing their returns.

For others we are running short of time; deadline to file this year is June 1st.

For many of such clients, we have already filed the returns.  But some clients have yet to provide us their documents (tax slips).  We do have your T4s and T5s if we prepared these slips for you.  But you need to provide us other slips you may have.

Tax Planning takes time but can save a lot of taxes, many times hundreds of dollars and sometimes thousands.  If you bring your documents close to the deadline, we will not have enough time to do proper planning.

To save you maximum taxes we request that you provide us your documents soon.  Send these electronically or drop these through our office door slot at any time of your convenience.  Alternatively send these in the mail.  These days we do not meet our client’s in-person for reasons known to you.

Teji Singh, Manager

H&T Accounting Service

T: 905-858-0775

F: 905-858-8645

Website: www.hAndT.ca

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EU VAT CHANGES FOR 2015

There are two new directives, first for the fast reaction mechanism aimed towards preventing VAT fraud. Second one is for the optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services. Quick Reaction mechanism provides the legal basis to the countries that are members of the EU to integrate an emergency measure in they are in position to serious case of sudden and massive VAT fraud.

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FUNDAMENTAL ACCOUNTING

Financial statements are prepared according to agreed upon guidelines. In order to understand these guidelines, it helps to understand the objectives of financial reporting. The objectives of financial reporting, as discussed in the Financial Accounting standards Board (FASB) Statement of Financial Accounting Concepts No. 1, are to provide information that

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SAVE ON TAXES

Value Added Tax (VAT) is a tax on consumption levied in the United Kingdom by the National Government. It was introduced in 1973 and is the third largest source of government revenue after Income Tax and National Insurance. It is administered and collected by HM revenue and customs, primarily through the Value Added Tax Act 1994. VAT is levied on most goods and services provided by registered businesses in the UK and some goods and services imported from outside the European Union.

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PROPER INVOICE INFO

Financial statements are prepared according to agreed upon guidelines. In order to understand these guidelines, it helps to understand the objectives of financial reporting. The objectives of financial reporting, as discussed in the Financial Accounting standards Board (FASB) Statement of Financial Accounting Concepts No. 1, are to provide information that

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