Chartered Professional Accountant, Experienced Bookkeepers, Personal and Business Tax Return Specialists - Whitby ON - Call - Toll Free: 1-800-942-5558 or Local: 905-666-5071 admin@kmpc.ca
Summer 2019 Newsletter

Summer 2019 Newsletter

The weather is starting to look more like summertime so, I thought this would be a great time to send out our KMPC newsletter to keep you up-to-date on all the news before it’s time to head off to enjoy your summer fun!

Feeling Green?  Well You May Be in Luck If You Purchase A Zero Emission Vehicle

The government has recently said that they will provide rebates for those people who buy zero emission vehicles. Effective as of May 1, 2019, the federal government is providing point of sale incentive for consumers who buy or lease an eligible Zero Emission Vehicle (ZEV).

Which ZEV’s qualify?

  • Battery-electric, hydrogen fuel cell, and longer-range plug-in hybrid vehicles are eligible for an incentive of $5,000
  • Shorter range plug-in hybrid electric vehicles are eligible for an incentive of $2,500

How Do You Access This Incentive?
The purchase incentives for zero-emission vehicles will be applied at point-of-sale (i.e. at dealerships or online) directly on the bill of sale or lease agreement of eligible vehicles purchased or leased. Your dealership will be responsible for completing the documentation required to receive the incentive. The federal purchase incentive for zero-emission vehicles will be applied in addition to any provincial zero-emission vehicles incentive offered.

Sound interesting? You can view the information on this exciting ZEV incentive initiative here

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Health Spending Accounts – Does Your Business Qualify?

CRA has noticed several businesses improperly claiming deductions related to Health Spending Accounts (HSA), and it is now starting to review for proper usage. If you are considering using a HSA be sure that you qualify. Here are a few tips to assist you to evaluate suitability and eligibility:

What are HSAs?
HSA’s are self-insured health plans arranged by employers for their employees residing in Canada. They provide a way that small businesses can provide tax-free health and dental benefits to their employees (and their employees’ family members). This makes the HSA appear to be an extremely attractive and cost‑effective way of getting and providing health and dental benefits. However, a valid HSA plan must conform to private health service plan rules set out in the Income Tax Act. 

What HSA’s Are Acceptable?
Incorporated businesses, including shareholder employees and all other corporate employees, are eligible to participate in an HSA. Corporations with as few as one employee can be eligible as well. However, the HSA cannot be solely for shareholders unless the shareholders are also employees earning a T4 income.

In the case of unincorporated businesses or sole proprietors, the owner and their employees are also eligible if the owner has at least one arm’s-length employee.

If the business is a sole proprietorship with no arm’s-length employees, the CRA does not consider a HSA to be a private health services plan and any costs incurred for amounts paid to this account are not deductible business expenses.

Do you think that a HSA might be a good fit for your business?  It’s always a good idea to review all the qualifying criteria with a qualified Certified Professional Accountant.  Contact us if you would like to book a meeting to discuss utilizing a Health Spending Account for your business.

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Is All Employer Provided or Reimbursed Clothing A Taxable Benefit?

The short answer – no.  CRA does state that there are a few exceptions in which clothing, clothing allowances or reimbursement are NOT considered a taxable benefit.

Your employee does not receive a taxable benefit if either of the following conditions apply:

1) You supply your employee with a distinctive uniform (distinctive being defined as a uniform would not be typically worn in settings other than work) they must wear while carrying out the employment duties
2)  You provide your employee with protective clothing (including safety footwear, reflective vests and safety glasses) designed to protect them from hazards associated with the employment.

If you reimburse or pay an accountable advance to your employee to buy uniforms or protective clothing and require receipts to support the purchases, the reimbursement or accountable advance is not a taxable benefit if:

  • the cost of the uniforms or protective clothing is reasonable
  • by law, the employee must wear the protective clothing on the work site

Therefore, an employer reimbursement of safety footwear would generally not be considered a taxable benefit. However, a reimbursement of clothing expenses meant to compensate an employee for increased wear and tear on clothing that does not meet the exceptions – that would generally be considered a taxable benefit.

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CRA Focus Areas to Note

  • Indirect Income Verification: Testing and Assessing

CRA has stated that it is ramping up its Indirect Income Verification (IVI) testing and assessing when initial reviews seem to indicate that an individual appears to have more income than that year’s tax return shows.  So, it’s important to ensure that you are capturing, or accounting for, all your income streams in your tax return or you be the focus of an IVI testing or assessment.

It appears that this initiative is bearing fruit for CRA as they claim 36% of the small to medium businesses tested show some discrepancies in reporting and 20% of those are enough to become the focus of a full assessment by CRA.  A full assessment is a through investigation requiring verification through bank statements, credit card statements and receipts reviews.

  • Limited Reviews of Line Items

This practice has been a trend within CRA for the past year or so. Basically, the CRA selects a line item on the tax return form and randomly selects businesses upon which to conduct a review of their details on this line item.  So, if you have not been crisp and comprehensive in your bookkeeping, documentation and receipt collection, you could find yourself having to produce proof that your return calculations are accurate. If you are unable to do so, the outcome could range from a disallowance of claimed costs to a thorough assessment of your entire tax return for that year and perhaps even additional years. A staggering 40% of those who are selected for a random review proceed to an additional assessment by CRA. Save yourself time and stress, do it right the first time and keep all your records and receipts!

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Welcome to Our Latest Team Member!

Julie Herbacko – Executive Assistant – We would like to extend a warm welcome and introduce the newest member of our team to those of you who did not meet Julie at the reception desk during this tax season.  Julie is the first face you see upon entering KMPC and the welcoming voice on the phone when you call our office. Her background working in fast-paced business settings, along with her outstanding customer service skills and attention to detail make Julie a valued member of our team. Welcome aboard Julie!

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Do You Have A Topic Idea?

We would love to hear from any of our KMPC client family on topics that YOU would like to see as the focus for a future blog/article/newsletter.  Over the summer we will be creating our editorial calendar for the next year and we would really like to include topics that cover a range of interest.  If you have a suggestion or idea, please email it to us at admin@kmpc.ca .  Thank you!

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Summer Hours

Please take note of our special summer hours, effective immediately:
Summer Business Hours are: 9:00 am – 4:30 pm Monday to Thursday
Please note that we will be closed Friday’s from June through August.

The entire KMPC team wishes you and your family a fun and safe summer season!

Warmest Regards,
Kelly Melanson, CPA

kelly@kmpc.ca 
www.kmpc.ca
+1 (905) 666-5071

Kelly Melanson Professional Corporation: Outstanding Chartered Professional Accountant, Bookkeeping and Tax Preparation Services

For 26 years, Kelly Melanson, Chartered Professional Accountant (CPA, CMA) has been helping businesses in Whitby, Oshawa, Ajax, Durham Region and the Greater Toronto Area (GTA) to reach and surpass their profit goals.

Our team of qualified professionals specialize in providing the highest quality of service in the areas of accounting, bookkeeping, personal tax returns, business tax returns and corporate year ends.

Should I Incorporate My Business?

Should I Incorporate My Business?

This is a question I have been asked many times by small business owners during my 26 years as a Chartered Professional Accountant. The answer, however, is not a straightforward one. Recent tax law changes have removed some of the benefits but there are still some key advantages that warrant serious consideration for incorporating a small business.

When you incorporate your business, it is considered to be a legal entity that is separate from its shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation. It is always wise to seek legal advice before incorporating.

Benefits of Incorporating:

  • Limited liability
  • Ownership is transferable
  • Continuous existence
  • Separate legal entity
  • Easier to raise capital than it might be with other business structures
  • Possible tax advantage as taxes may be lower for an incorporated business

For more details visit the government’s webpage on this topic.

If you do decide to incorporate and you have a lot of value in your sole proprietorship business such as, receivables, inventory and fixed assets, you need to do something that’s called a Section 85 rollover. That’s basically where you take those assets and transfer them into your incorporated business. You can’t simply start an incorporated business and ignore all the assets and issues from your sole proprietor because it doesn’t simply magically disappear in a puff of smoke. You must shift those assets into an incorporated company.

It’s important to follow the proper process while making the shift because you do not want CRA (Canadian Revenue Agency) auditing your transfer protocol. In CRA’s eyes this needs to be tracked on paper as though it was a sale of a company.  CRA may interpret any lack in protocol as an intent to evade some taxation issues if you do not properly addressed all of the issues with your sole proprietorship before starting an incorporated company. Be sure you understand the process and follow it to the letter of CRA so that you don’t create unnecessary problems for yourself. Click here to learn more about the process

If you are considering moving your company from a sole proprietor to an incorporated company and are not sure about all of the ins and outs of the proper process please contact us for an appointment to sit down thoroughly review your options and which path is best suited to your company.

Regards,

Kelly Melanson, CPA

kelly@kmpc.ca
www.kmpc.ca
+1 (905) 666-5071

Kelly Melanson Professional Corporation: Outstanding Chartered Professional Accountant, Bookkeeping and Tax Preparation Services

For 26 years, Kelly Melanson, Chartered Professional Accountant (CPA, CMA) has been helping businesses in Whitby, Oshawa, Ajax, Durham Region and the Greater Toronto Area (GTA) to reach and surpass their profit goals.

Our team of qualified professionals specialize in providing the highest quality of service in the areas of accounting, bookkeeping, personal tax returns, business tax returns and corporate year ends.

@kmpc #shouldiincorporatemybusiness #kellymelanson #corporateaccountant #cpa

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