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
Updates on 2017 Proposed Tax Changes for Business

Updates on 2017 Proposed Tax Changes for Business

Hello friends!  Yes, I have an update on the latest rumblings from the government on the proposed changes to the tax rules for businesses released this past fall (2017) . In this video I discuss the latest updates and what they might mean for you and your company. I have also provided links (below) to more in-depth information on each topic that I discuss in this video. So, make some time to watch this video and read up on these proposed changes… because it’s better to be prepared that to be sorry and owe the tax man!

If you have any questions about these changes please contact our office, we’d be pleased to speak with you.

For more information click on the topic 

Thanks for stopping by!

Kelly

Kelly Melanson, CPA, CMA is the founder and owner of Kelly Melanson Professional Corporation. She and her team specialize in helping companies grow via strategic financial management practices. For almost 25 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.

If you would like to speak to us regarding  Business Accounting, financial  retirement or tax planning, tax returns, bookkeeping or any of your other  please contact us anytime – we’d love to chat with you.

Kelly Melanson Professional Corporation – Chartered Professional Accountant, CPA 11 Stanley Ct, #13 Whitby, ON L1N 8P9 – Local: (905) 666-5071 Toll-free: 1-800-942-5558 – Email: admin@kmpc.ca  Web: https://kmpc.ca

How Will the New Income Sprinkling Rules Impact Your Business?

How Will the New Income Sprinkling Rules Impact Your Business?

Proposed New Income Sprinkling Rules Go Too Far

Heads up people, the federal government has proposed some chilling private corporation tax changes that will have a profoundly negative impact if they should pass. They are looking to change some common tax planning practices used by private corporations. Many of these changes have raised the alarm because they are not good news for Canadian entrepreneurs!

How New Rules Impact Canada’s Entrepreneurs?

The government is looking to change the rules for income sprinkling. The practice of income sprinkling typically involves issuing shares and paying dividends to family members with lower or no income to reduce the family’s overall tax burden. Tax on split income currently applies, also known as “kiddie tax”. If an individual under the age of 18 receives a dividend or other specific income, it’s automatically subject to top marginal tax rates.

The proposed changes mean that the Kiddie Rule could now apply to everyone who receives split income from a family business, aside from employment income.

This new scope will apply to adults who receive split income deemed “unreasonable.” A reasonableness test will apply, based on contributions of labour and capital, and on previous returns and remuneration. As a rule of thumb, it is judged that an amount is “unreasonable” if it exceeds what an arm’s-length party would agree to pay to a person for the contribution. In order to be deemed legitimate labour contributions, those aged 18 to 24 must be “actively engaged on a regular, continuous and substantial basis in the activities of the business”. This is an even more rigid test than for those who are  older.

And if this wasn’t enough to shock you, the government is also proposing if business owners earn income through their corporation on which they pay tax at the corporate rate, the additional capital they have left to invest, if it’s not invested back into the business or paid out to them personally, would be viewed as them investing for their own benefit and not that of their corporation. So people that means that the present refundable tax system, in respect to those invested retained earnings, would no longer exist as an option.

Under the current refundable tax system, the option exists to pay a lesser corporate tax rate and have more to invest in the business or capital purchases such as a commercial property.  This practice has allowed business owners to use passive corporate investment portfolios as a very-much-needed nest egg that can act as the entrepreneurial benefits and pension fund.  As business owners are not guaranteed income, and often forego salaries during lean times, this practice can provide a critical financial reserve for business owners to keep operations going during lean times.

The absurd hypocrisy of these proposed changes is staggering. The government is forever touting that Canada is the land where entrepreneurs are encouraged and celebrated. They applaud the moxie of our entrepreneurs because they are courageous enough to strike out on their own and take on the risks of launching and growing a business, without the usual safety nets that come with most regular employment – health benefits, paid vacations, training, pensions… the list goes on! And in their bravery, these entrepreneurs drive the economy by creating jobs, purchasing services and supplies from other businesses and paying their taxes to support the social and economic infrastructure of our country. And yet the government, in a move one can only describe as draconian, creates these misguided changes which completely undermine Canada’s small business community by exponentially increasing their financial vulnerability and threatening their future!  And it is highly doubtful that there will be a line up of eager wannabe entrepreneurs willing to take the place of those businesses that don’t make it in this harsh new reality if this proposal is adopted.

What Proposed ‘Income Sprinkling’ Rules Could Mean to You

The changes contained in the government’s proposal will effectively handcuff entrepreneurs and make it incredibly difficult for many of them to keep their businesses viable. If the government implements these ruthless measures they should do only do so once they have publicly acknowledged that this proposal has the power kill off a good portion of our economy as businesses across this country are forced to lay off their employees and ultimately close their doors forever.

If you would like to share your input on this topic, I urge you to make your voice heard by using the email feedback channel provided by the government. They will be accepting comments until October 2, 2017, at fin.consultation.fin@canada.ca.

It also might be an idea to give your Member of Parliament and Member of Provincial Parliament a call to share your concerns as a business owner.

I will be keeping close tabs on this proposal and consultation process so that I can share updates with you. If you’d like to read the proposal, you can view it online at http://www.fin.gc.ca/activty/consult/tppc-pfsp-eng.pdf. In the interim, if you have any questions or concerns please contact my office.

Regards,

Kelly

Kelly Melanson, CPA, CMA the author of Money Is Not The Root of All Evil: Debt Is! and founder/owner of Kelly Melanson Professional Corporation. She and her team specialize in helping people reach their dreams via strategic financial management practices. For almost 25 years, Kelly Melanson, Chartered Professional Accountant (CPA, CMA) has been helping people and businesses in Whitby, Oshawa, Ajax, Durham Region and the Greater Toronto Area (GTA) to reach and surpass their financial goals.

 If you would like to speak to Kelly regarding your retirement or tax planning, tax returns, bookkeeping or any of your other accounting or financial planning needs, please contact the office anytime – we’d love to chat with you.

Kelly Melanson Professional Corporation – Chartered Professional Accountant, CPA

11 Stanley Ct, #13 Whitby, ON L1N 8P9 – Local: (905) 666-5071 Toll-free: 1-800-942-5558 – Email: admin@kmpc.ca  Web: https://kmpc.ca 

Cottage Life: Preparing for Tomorrow Requires Some Thinking Today

Cottage Life: Preparing for Tomorrow Requires Some Thinking Today

 

As you lounge on your dock this summer it might be a good idea to give some thought about the future fate of your cottage hideaway. While cottage life is fabulous, it does come with some potential issues that could cause heartache down the road for you or your family if you don’t address them now.

Your Family Trust Might Need Some Tweaking

If you own a home or cottage through a trust you should speak to a Chartered Professional Accountant to ensure that your family trust structure meets the requirement of the recent CRA tax law amendments. You might find that you need to make some changes to ensure that your estate planning is still appropriate. Here’s an example: if your trust is no longer eligible to designate a property as a principal residence under the new rules, but owned that property at the end of 2016, then it must separate its gain into two components:
1) The gain accrued to 31 December 2016 (which may be sheltered by the principal residence exemption)
2) The gain accruing from the beginning of 2017 to the date of disposition (this portion will be subject to tax).

Do You Plan to Live at Your Cottage Full-time When You Retire?

If your plan is to sell your home and eventually use your cottage as your principal residence, it’s a good idea to sketch out that plan to forecast the tax implications of various scenarios.  If you were to sell your principal residence and then move to your cottage to live, you do not have to pay capital gains tax on the sale of your house, but you would need to report the sale because CRA (the Canadian Revenue Agency) now requires the reporting of your sale on your income tax return for tracking purposes.

Once you move to your cottage it would become your principal residence. However, if you chose to sell your cottage at some future date you will trigger a capital gain tax bill because it has not been your principal residence for the entire time you have owned that property.  In order to calculate the tax you owe, CRA would use the following calculation:

 

 (# of years home is principal residence + 1)  x capital gain
# of years home is owned

Do you plan to pass down the cottage to your kids?

If your wish is to pass along your cottage to your children, then you will need to give careful thought regarding how you intend to do this and what implications it may have for your children. You can pass down the cottage as a part of your estate:

Scenario One: You have been living full time in your cottage at the time of your death. In this scenario, the capital gains tax owed by your estate will be calculated as though you sold the property (see calculation above).

Scenario Two:  You have NOT been living full time in your cottage at the time of your death.  The tax triggers for each property will be based on their status as property: principal residence (home) and personal-use property (cottage). Both properties will be treated as though they were sold and the tax owing will be determined thusly:

 

  • Your Principal Residence –  exempt from capital gains tax
  • Your Cottage –  your estate will be required to calculate the increase in the value of the cottage from the purchase date to the date of death. If the cottage has been owned since before 1972, only the increase in value since December 31, 1971 is taxable, because taxation of capital gains began with the 1972 taxation year.  December 31, 1971 is the valuation day for properties owned prior to that date.
If you are worried that your estate may not have the funds to pay this tax bill and your kids might be forced to sell the cottage because of it, you might want to think about getting a life insurance policy that can be used to pay the tax bill when the time comes.
Note: Remember life insurance premiums gets more expensive as you get older, so don’t wait too long to buy or you’ll be paying more!  You can think of creative ways to pay the premiums like sharing the cost with your kids or having them pay it entirely.  Just be sure to discuss this with everyone before buying anything, to ensure that each person agrees with this plan.

Sell The Cottage to Your Kids at a Bargain Price

Some people favour selling their cottage to their kids for a small amount to avoid capital gains tax. The reality is that it doesn’t matter if you sold it to them at a bargain price, CRA will still calculate the capital gain based on the fair market value of the property to determine the tax bill. And just to add to the fun, CRA will use that low purchase price as the calculation for capital gains if they should ever sell the cottage. Ouch!  So basically, there is no getting around it, someone will have to pay the taxes one way or another.
Aside from tax implications there are other scenarios that you might want to chat about with your kids to make sure everyone is happy with the unique dynamics that result from a shared family cottage:
  • How will the taxes, running and maintenance costs be shared/paid for?
  • How will the usage time at the cottage work?
  • What if one of your children decides he/she wants to sell their portion? Or is forced to because of a divorce scenario?

Cottages are wonderful places for families to gather, share experiences and make memories, so it’s important to take some time to plan for a smooth transition into the future. There is a method that can accommodate the unique structure of your family.

As a shared family cottage owner myself, and Chartered Professional Accountant, I can understand the situation from both sides.  If you would like to chat about your cottage or estate planning issues, and determine the best tax planning structures  for you and your family,  please email me at kelly@kmpc.ca  so we can arrange a time to meet.

 

Kelly

 

Tax Tips and Hints for Your 2016 Tax Return

Tax Tips and Hints for Your 2016 Tax Return

2016 Tax Season is Around the Corner!

Yes the clock is ticking and the deadline for filing your 2016 tax return is FAST approaching!!!  In order to help you get prepared and that you don’t shortchange yourself in any way, we shared some handy tips in our most recent newsletter for your convenience.

Just in case you missed them, we also have two recent videos in which Kelly gives you tips on preparing for this tax season and a step-by-step tutorial on how to set up your own “My Account” with CRA.

And if you are eager to look ahead and begin your strategy for future tax planning you’ll want to check out Kelly’s downloadable tip sheet to get a great jump start!

If you have any questions, don’t hesitate to get in touch with us. We have extended hours until the end of April.

To make it more convenient to drop off your tax return files to our offices, we are offering extended hours:

March 2017

– Tuesdays and Thursdays until 7pm
– Saturday March 11th and 25th from 10am to 2pm

April 2017

Mondays to Thursdays until 7pm
Saturdays from 10am to 2pm

And, as always, you are free to drop your files through door slot anytime after hours. If you have any questions, please feel free to contact the office.

 

The KMPC Team

Tick… Tock -Tax Time is Approaching Fast!

Tick… Tock -Tax Time is Approaching Fast!

Hello! I hope that you have had a good 2017 so far, and just to make sure the year proceeds on a positive note I wanted to remind you that you onl

 

You have until February 28th to contribute to your RRSP! You can watch my vlog to learn more. Don’t delay and lose out! The clock is ticking!

And now would also be a good time to start collecting and organizing all your tax receipts and other documentation…watch my vlog to learn why doing that will save you money! Check it out!

Knowledge is power at tax season!

Knowledge is power at tax season!

Learn how to set up your My Account with CRA

You can better manage your finances if you have up-to-date information. That is why I am encouraging all my clients to make sure they sign up for their “My Account” with CRA. It is fast and easy. You can watch the video on my site where I show you, step-by-step, how to to set up your My Account with CRA You will be happy you did, because once you sign up you can:

Knowledge is Power – Get it with your CRA My Account:

• Find out your RRSP limit, home buyer’s plan balance and Tax Free Savings balance
• Print off your notice of assessments going back to 2005
• See if any carryover amounts like tuition
• See if you owe any money, if you made installments how much, etc.
• Request information through sending CRA a message
• Check your child tax benefit payments and when they were paid
• Check your HST credits, disability credits working income tax benefits, Ontario trillium benefits, so if it says they mailed you a cheque and you didn’t get it, you can call and ask where they sent it to… maybe you didn’t change your address?
• Submit required documentation to CRA when there is a request for information from you. Simply scan it and submit it electronically via your account!
• Save yourself money because you can do all these things yourself and save yourself service fees
• MOST importantly – protect yourself and your money! There have been a lot of scams recently so if you receive a request that seems a little strange you can log into your account and review any letters sent to you from CRA through the view mail function to ensure that it is a legitimate request from CRA.


Extended Hours for Tax Season!

To make it more convenient to drop off your tax return files to our offices, we are offering extended hours:

March 2017

  • Tuesdays and Thursdays until 7pm
  • Saturday March 11th and 25th from 10am to 2pm

April 2017

  • Mondays to Thursdays until 7pm
  • Saturdays from 10am to 2pm

And, as always, you are free to drop your files through door slot anytime after hours. If you have any questions, please feel free to contact the office.

Happy Tax Season!

Kelly

If you would like to speak to us regarding your tax planning,  tax returns  or any of your other accounting or financial planning needs, please contact us anytime – we’d love to chat with you.

 Kelly Melanson Professional Corporation – Certified Chartered Accountant,CPA 11 Stanley Ct, #13 Whitby, ON L1N 8P9 – (905) 666-5071 Toll-free: 1-800-942-5558 – Email: admin@kmpc.ca

 

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