Yes, it’s only January but the end of April comes quickly so now is a good time to think about tax-related issues. One of those is, does the Canada Revenue Agency (CRA), have your current information. That could be a new address, marital status, and more. What has happened in your life this year, that the CRA may need to know about.
Moved? - If you’ve moved in the year, then you should’ve informed CRA as soon as you were at your new address. Even if you signed up for online mail, you should let them know about your new address; you can do this through My Account where you get your online mail.
Why is this important? Keeping your information up to date will ensure that you keep receiving benefit payments to which you may be entitled and important correspondence from the CRA. Otherwise, your payments may stop or you may not receive important correspondence, such as your notice of assessment.
CRA will not forward your new information to other government departments, except Elections Canada if you authorized such on your tax return. Contact other departments or organizations directly to give them your new address.
Marital Status? During the year you may have gotten married, or lived with someone for 12 consecutive months during some point in the year. In either case, you need to inform CRA as soon as your marital status changes.
This also goes for getting divorced. If your marital status changes during the year and you are entitled to any Canada child benefit (CCTB) payments, GST/HST credit, or working income tax benefit (WITB) advance payments, you must let CRA know by the end of the month after the month of your divorce. In the case of separation, do not tell CRA until you have been separated for more than 90 consecutive days.
If you changed your name, let CRA know as soon as possible. Call them at 1-800-959-8281 to update our records. CRA does not accept changes of name by email or over the Internet.
Birth of a Child?
You’ve had a big event this year having a child, and you may be eligible for some tax credits from the government. The first one being the Child Tax Benefit (CTB).
To be eligible for the CCB, you have to meet all of the following conditions:
The Automated Benefits Application is a partnership between the Canada Revenue Agency (CRA) and the Vital Statistics Agency of the participating province. The CRA will use the information from the child's birth registration to determine your eligibility for benefits and credits.
You can use the Automated Benefits Application if all of these situations apply:
What you need to do
After your baby is born:
We recommend that you sign up for direct deposit before your baby is born to get your payments faster.
If you use the Automated Benefits Application, do not apply any other way.
If during the year you’ve become disabled, there are tax credits you can apply for to reduce your tax burden.
Disability Tax Credit
What is the disability tax credit?
The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC. This amount includes a supplement for persons under 18 years of age at the end of the year.
The purpose of the DTC is to provide for greater tax equity by allowing some relief for disability costs, since these are unavoidable additional expenses that other taxpayers don’t have to face.
Being eligible for the DTC can open the door to other federal, provincial, or territorial programs such as the registered disability savings plan, the working income tax benefit, and the child disability benefit.
Who is eligible for the DTC?
You are eligible for the DTC only if we approve Form T2201. A medical practitioner has to fill out and certify that you have a severe and prolonged impairment and must describe its effects. Answer a few questions to find out if the person with the disability may be eligible.
If we have already told you that you are eligible, do not send another form unless the previous period of approval has ended or if we tell you that we need one. You must tell us immediately if your medical condition improves.
Disability supports deduction
Individuals who have an impairment in physical or mental functions and have paid for certain medical expenses can claim the disability supports deduction under certain conditions.
Who is eligible?
If you have an impairment in physical or mental functions, you can claim a disability supports deduction if you paid expenses that no one has claimed as medical expenses. You must have paid them so you could:
Only the person with the impairment in physical or mental functions can claim expenses for this deduction.
Home Accessibility Expenses
If you became disabled and had to make adjustments to your home for your mobility and use of the home, you may be entitled to claim expenses for doing so. What renovations or expenses are eligible and ineligible?
A qualifying renovation is a renovation or alteration that is of an enduring nature and is integral to the eligible dwelling (including the land that forms part of the eligible dwelling). The renovation must:
An item you buy that will not become a permanent part of your dwelling is generally not eligible.
These expenses are outlays or expenses made or incurred during the year that are directly attributable to a qualifying renovation of an eligible dwelling. The expenses must be for work performed and/or goods acquired in the tax year.
Work performed by yourself
If you do the work yourself, the eligible expenses include expenses for :
However, the value of your own labour or tools cannot be claimed as eligible expenses. This includes someone who is related to you, unless they have a contracting business and are registered to GST/HST.
If you have had any changes in relation to the above, it’s best to inform the CRA as soon as possible. If you don’t and later changes are made to any credits you were receiving, then CRA will claw back any overpayments, and charge penalties and interest. At the same time we always appreciate knowing about any changes so that we can keep your file up to date.
If you took the time to make a list of all the tasks you need to do to manage your business and then ordered them in terms of how much you liked doing them, where would record management come in? Two hundred and seventy? Or even lower?
But while most of us consider business record management to be scut work and tend to give it a low priority, good record management not only makes our working lives easier, but can give us real stress relief at tax time. Here’s what you can do to make record management easy:
Sounds easy, doesn’t it? But this is the part of record management that trips up most people. If you take a potential client out for a round of golf, for instance, is that a personal expense or a business expense? (The answer is personal, because green fees are not a deductible business expense.) Vehicles that you use for both personal and business reasons are another perennial problem.
You need to know what qualifies as legitimate business expenses and what doesn’t, and be sure that your business record management reflects this accurately.
Many business people make the mistake of thinking that “lists” are good enough for record management purposes. For instance, they have a list of purchases on their credit card statements, and think that that’s good enough in terms of claiming those purchases as business expenses.
Unfortunately, the CRA (Canada Revenue Agency) is more demanding. They do not accept credit card statements or cancelled cheques as sufficient documentation for expenses when an invoice or receipt would normally be issued.
In terms of good business record management, there are two points to bear in mind:
a) Always get a receipt. Get in the habit of asking for a receipt whenever you make a purchase – no matter how small. Little expenses add up, too, and you need the documentation for your business records.
b) Label your receipts, if necessary. There are still businesses around that hand out receipts that don’t have anything on them except the date the item was purchased and how much it cost – which isn’t very helpful when you’re staring at a receipt trying to figure out what the item in question was and which business expense category it fits into.
When you get a receipt, look at it and write the missing/relevant information on it, such as what the receipt is for and the expense category.
While the fees for business bank accounts are notoriously high compared to personal accounts, a business bank account is absolutely necessary for good business record management. A business bank account helps you keep your business and personal expenses separate. You will deposit all your business revenues into the business account, and withdraw any business-related expenses or payments from the business account only.
What kind of business bank account should you get? A chequing account – preferably one that delivers monthly statements and returns your cancelled cheques to you.
Business cheques help make your record management easy because you can use the memo line on the front of each cheque to document the business purpose of the expense.
Using your personal credit cards for business purposes will swiftly drop you into a record management quagmire. A business credit card greatly simplifies your business record management by helping keep your personal and business expenses separate. (It also helps make your business look more professional.)
If you use any of your vehicles for business purposes, a mileage log will be a big help in record management. Note the mileage (or kilometer) reading on the odometer at the beginning of the year and then enter the mileage by date each time you use the vehicle for a business purpose.
Keeping your mileage log in the glove box of your vehicle will make this easy. If you have more than one vehicle that you use for business purposes, keep a mileage log in each.
Having your business records scattered all over the place is a real time-waster when it comes to accounting or preparing your taxes, and organizing your business record management system by fiscal year will make it much easier to find the business records you need when you need them.
For some reason, there seems to be a lot of confusion about how long you must keep your business records. For tax purposes, “if you file your return on time, keep your records for a minimum of six years after the end of the taxation year to which they relate” (CRA).
This six-year period starts from the last time you used the business records, not from the time the transaction occurred.
The CRA also has rules about the destruction of business records; see Canada Revenue Agency’s website for details.
These seven things you can do to make your record management easy aren’t difficult. Like a lot of the administrative business related to running a business, they just require establishing good habits and persistence. But if you apply these rules of good record management now and follow through, you’ll see a huge difference next tax time and your accounting will be easier all year long.
When it comes to income tax preparation, there are do-it-yourselfers and there are those who have their income tax prepared by professionals.
For many businesses, having a professional such as a tax accountant prepare their income tax returns is the most sensible option. We don’t all have time to become income tax experts and income tax mistakes can be costly. So why not hire an expert to get the job done right and cut down on tax time anxiety?
To do the job right, though, your tax accountant or other income tax preparer will need to have all the right tax records at hand – preferably organized. Use this checklist to get your records together for your tax accountant.
Business Records Your Accountant Needs
· Revenue and business expenses for the year
· Business use of auto
· Auto operating expenses
· Vehicle driving log with business kilometres driven
· Asset additions
· Business use-of-home details
Your tax accountant will also need any tax records such as:
· Last year’s Notice of Assessment
· Amounts paid by installments
· A copy of your income tax return filed last year (if you’re a new client)
Other records your tax accountant will need will depend on whether you’re asking him or her to prepare a T2 (corporate) or T1 (personal) income tax return.
If the latter, your tax accountant will need all the relevant information slips and tax-related documents. Here are some of the most common:
· T4 slips (if you have employment/business income)
· T4A commissions & self-employed
· T5013 Partnership Income
· T3 Income from Trusts
· T5 Investment Income
· RRSP contribution slips
· Charitable donations
· Medical and dental receipts
· Child care information
Save Money on Your Tax Accountant’s Fee
Accountants generally charge by the hour, so the harder you make their job, the more it will cost you.
Summarize and tally records wherever possible. Cheques, invoices, business expenses - all should be categorized and totalled. Sort all your information slips by type. Having your tax accountant do the organizing and tallying is the expensive way to go.
If you have several businesses, remember that you will have to have separate revenue and business expenses figures for each business, as business income should be listed by individual business on the T1 form.
Be as organized as you possibly can. For example, clip groups of receipts together by type and put a post-it-note stating what the category is on the top. The less your accountant needs to figure out, the less time she’ll be spending on your file.
And remember, having a tax professional prepare your income tax return(s) isn’t costing you as much as you think when you see the bill – it’s a legitimate business expense.
Many shoppers in Canada quickly decline the offer of a receipt when a store clerk asks them. You won’t ever catch a small business owner doing this. It’s not that they like drowning in thousands of little slips of paper; instead, they just know that without every receipt they can get their hands on, their tax return could get out of hand. What businesses need, then, is a way of cataloging and organizing receipts to present to the Canada Revenue Agency (CRA).
The CRA has very strict rules about businesses providing proof of their expenses. They also offer lenient treatment in these matters sometimes. For instance, CRA may let businesses get away by merely showing detailed accounting and other records as proof that they have spent the money they claim and may only look at certain items. In an audit, the auditor usually has a dollar figure he wants to look at and skips over anything under that amount. Sometimes, the CRA will accept these defenses for a lack of receipts. At other times, they will have none of it. It is safest to keep receipts for everything. Two items where this is never the case is automobile and meals.
There are two parts to providing the CRA with the proof required – getting all the receipts from all the vendors you deal with and then organizing them to present to the CRA as proof. Getting the receipts is easy enough – you only have to resolve to ask for them. Organizing receipts in a manageable and presentable way, though, is the other. These tips below help you keep your records well-sorted.
To organize receipts in proper form, you need to first know what each receipt is for. When you have a load of receipts at the end of the year, it can be hard to know which proves what. Each time you get a receipt, then, you need to make notes on it for what it is for. You may not be able to use the receipt otherwise.
It can be difficult to keep hundreds of little slips of paper organized for years. The CRA can come back long after a tax year is done and ask for additional proof for something. This is what receipt scanners are there for. The CRA accepts scans in place of original receipts. Make sure that you keep a couple of backups of your scans, though. If you don’t, you could be sunk if you lose your hard drive for some reason. Taking pictures on your smartphone camera could be a great alternative, too. There are dozens of apps that help you organize your receipts.
It is hard to overestimate how confusing hundreds of receipts can be when you need to find a specific one for a specific expense. If you have the misfortune to be in a tax audit, you can find that merely having an organized set of receipts is not enough. The CRA auditor may ask for additional corroboration – in the form of a business calendar. If you are deducting travel expenses, for instance, the auditor may want to look at your business calendar to see if you actually have travel plans jotted down in there. Maintaining a detailed Outlook calendar could be a great idea.
It is important to keep all your bank and credit card statements. These aren’t good enough to take the place of actual receipts, though. These statements typically use short descriptions for each expense. An expense line may say that you’ve spent $700 at Amazon – it won’t say that you bought business software with that money. As far as the CRA is concerned, you could have bought $700 worth of Silly String cans. You need to keep your receipts as well as your credit card statements.
Finally, whatever happens, always pay with checks or plastic. Cash expenses do come with receipts; they don’t have additional corroboration in the form of bank or credit card statements, though. As far as the CRA is concerned, there is no such thing as too much proof.
You’re much better off trying to ensure you have all your receipts for your business expense, and for those personal expenses you can deduct such as donations and medical expenses, now rather than waiting until April (June for small business); in which case, you may end up filing late.
The CRA is happy to give you thousands of dollars off your tax bill. The only thing they ask in return is solid corroboration for each expense you deduct. Collecting and organizing receipts, though, proves to be a tall order for many small businesses. These tips that follow show you where many businesses make mistakes and what you can do to keep your tax return safe. Or better yet, hire Number Crunchers® and get this headache off your shoulders.
The start of a new year is the perfect time to take stock of your financial situation and see how you can make changes to improve it. You need to make firm resolutions to help you get closer to your financial goals whether it be saving for retirement, a down payment for a house or starting a business. Here are some considerations that you might want to add to your resolutions list.
RESOLVE TO DO BETTER IN 2020 – Identify the financial mistakes that you made in 2019 and how you could have avoided them so that you are armed with that knowledge to help you avoid making the same mistakes in 2020.
Prioritize Your Debts – Make a list of all your debts and organize them according to the annual interest rate. Plan to pay off those with the highest interest rate first, these will probably be your credit cards. It makes no sense to save money in an account with a low interest rate when you are paying high rates of interest on your credit cards. You might want to also think about selling any assets that you might have such as matured savings bonds and using the money to pay off high interest debts.
Open a Registered Retirement Savings Plan – It’s never too late to start saving for retirement. Meet with a financial planner and let them advise you about the right plan for you. Even if you only contribute $50 a month it soon starts to add up and any contributions will help to lower to your income tax bill.
Rebalance Your Investment Portfolio - Meet with your financial advisor to ensure that your investments are still working for you, and that once attractive investments are still that way or no longer appropriate. If your financial goals have changed then you may need to rebalance your investment portfolio.
Set up an Automated Savings Plan – If your willpower to save money is not too great then consider setting up an automated savings plan with your bank. “Paying Yourself First” is one of the most effective ways to save money. With an ASP a specific amount of money will automatically be transferred to your savings account at regular intervals before you have the chance to get your hands on it. With regular deposits like this earning compound interest your savings will grow faster.
Collect Your Change – You may think that this is not a great way to save money, but you could be surprised! Whenever you pay with cash save the change or take the money that you get back from recycling bottles and cans at the store and put it into a jar. At the end of the year take the change you have accumulated and use it to pay down debt.
Commit to No Spend Days – Plan on taking regular no spend days or weekends, eat at home, find free entertainment and skip shopping. This is probably best done during cold and rainy weather that makes you want to stay indoors. Maintain the habit throughout the year to get the best financial benefit.
Get Healthy Without Joining a Gym – Save money on expensive gym memberships by doing free exercise videos on-line, working out at the park or taking winter hikes. There are a number of free apps such as Fitbit Coach and Nike Training Club that you can use to do workouts at home.
Cut Back on Your Bad Money Habits – these usually include eating out too much and buying too many clothes. Identify what makes you want to indulge in your bad habits and try a different activity to replace it. If you eat out too much try prepping your meals for the week on Sunday and ask friends and family to help you.
Start Using Personal Finance Software - This will enable you to keep track of where your money goes. If you don’t know how much you spend on coffee, haircuts, movie tickets or eating out how can you start to cut your spending?
Read a Financial Book Regularly - Some books recommended for Canadians are:
Personal Finance for Canadians for Dummies (2018) Eric Tyson
Millionaire Teacher (2nd ed 2017) by Andrew Hallam
Wealthing Like Rabbits by Robert R Brown
Worry Free Money (2017) by Shannon Lee Simmons
Happy Go Money (2019) by Melissa Leong
The Value of Simple (2018) – John A Robertson
The Latte Factor (2019) David Bach
Retirement Income for Life (2018) Frederick Vettes
Wow, it’s hard to believe that 2019 is coming to a close already as it feels we just started it a few weeks ago. I do hope your 2019 has been a good one, and that 2020 is even better. Ever been curious as to how New Year is celebrated in other parts of the world?
In Finland, each new year family and friends gather to burn metal in a pan for a ritual called "molybdomancy". The Finns inspect the shadows the metal casts by candlelight, as those shapes are supposed to predict the future. Although, this metal is customarily called “tin,” it’s actually sometimes lead, which, among other things, is known to spark severe mental illness... that might explain why this ritual has persisted for hundreds of years. And while that's all pretty well and weird, the Finns aren't alone: Ecuadorians burn paper-filled scarecrows, the Swiss drop ice cream on the floor, and people in Siberia plunge into frozen lakes while carrying a tree trunk -- all to ring in the new year.
Only around 40% of us will even make a resolution. While nearly all of those vows err on the side of improvement (e.g. start exercising, improve your finances, quit smoking), the 8th most common resolution is to get along better with someone else, according to a 2012 Harris poll. So what’s the number one New Year’s resolution? Weight loss (duh).
Why does the New Year begin on January 1st? Because our contemporary (Gregorian) calendar is based on the Julian one (named after none other than the Big Ceas) and he made January month numero uno (which is latin for "number one" btw).
The first indication of a new year’s celebrations crop up around 2000 BC in the Middle East. Or, as its known in 9th grade history class, “Mesopotamia". At that time (2000 BC, not 9th grade), each year began on March 20th, AKA the vernal (or Spring) equinox. That's the one where the sun crosses directly over the equator. Nowadays, celebrating New Year’s is illegal in much of the same region (e.g. Saudi Arabia). Fertile crescent? More like festive crescent!
We have ancient Rome to thank for our year beginning in January. The Roman god the month is named after, Janus, was described as having two faces. That's not a catty put-down either. We mean he literally had double the mug. When depicted in ancient Roman art, one of Janus' faces looks forward, while the other looks back. You know, like how you do on New Year's. Mad metaphorical.
Thought to have been derived from a Jewish New Year (Rosh Hashanah) custom, Americans in the South annually gobble black-eyed peas. Most Southerners (and many historians) maintain the tradition began to take hold stateside when the first Shepari Jews moved to Georgia in the 1730s. By the end of the Civil War, the Rosh Hashanah tradition had evolved into a widespread practice in the South, enjoyed by both Jews and gentiles.
Before Times Square was the home of M&Ms, naked cowboys, and hard-haggling middle-aged men in Elmo costumes, it was a classy little bit of town, called One Times Square. Its first New Year’s ball dropping took place December 31, 1907. Since then, it’s tumbled down every year (save for a couple during World War II). Over a million-people flock to watch every December.
Historians reckon that the New Year’s kiss is derived from either German and English folklore (it was a tradition in both). Both customs contended this: the first person you encounter in a new year will set that year’s tone. So, if the person you encounter likes you enough to make out with you, things are looking pretty good. Or maybe you're just looking pretty good.
The lyrics of Auld Lang Syne (which we can't abbreviate because ice buckets) are from a 1788 poem by an old Scot called Robert Burns. Well, Burns attributed the lyrics to unwritten remarks by an unnamed old man. But a few graphs of it very closely (near verbatim) resemble a poem called "Old Long Syne" written in 1711 by a man called James Watson. It's assumed Burns at least wrote the rest of it. Things like: Is thy sweet Heart now grown so cold, that loving Breast on thine. Catchy. Apparently, the Boy Scouts of America sing it at the end of their jamborees. Now you want a "Things you didn't know about Boy Scouts", right!?
About 22% of Americans cop to passing out before the clock strikes 12. Unless you’re Cinderella and you gotta go before your carriage turns into a pumpkin, then there's no excuse. Being conscious to recognize midnight is the whole reason there was even a party, man. So enjoy the countdown to 2020 and raise a glass of bubbly to a Happy New Year.
When we think about making New Year’s Resolutions, we usually think about trying to improve our personal lives in ways such as losing weight, stopping smoking, exercising more etc. However, you can also create resolutions for your small business to do things differently and try to bring about positive change. Here are some suggestions for resolutions that you could make to improve your small business in 2020.
I Will Learn to Manage my Cash Flow More Effectively – If you do not really understand the finances of your business it might be time to hire a professional bookkeeper to help you. You need to be better prepared for the ebbs and flows in your cash flow and be able to create enough capital to put back into your business. You may also need to change your methods of payment. Allowing your customers to pay by e-transfer or credit card instead of cheque may mean that you are paid quicker thereby improving your cash flow.
I Will Improve my Digital Presence – If you have not updated your website in more than two years then it is time to make changes. You need to make sure that your site is mobile friendly and make sure that all your product details are up to date, delete discontinued items and make sure prices are correct. If you haven’t already you need to create an email marketing list to send out newsletters with helpful information or offers. If you are not even using digital marketing, then you need to make this a priority resolution for the new year.
I Will Finally Get Social – If you do not have a social media presence then you need to remedy this right away. Consider which network is the best platform to your business and post to it regularly. Think about starting a business blog with content important and relevant to your business.
I Will Get Focused and More Productive – If you waste time on social media or other distractions when you should be focusing on the tasks that you need to do for your business then you need to change your work focus immediately. Rather than letting the day pass you by, get on with completing those important things that you need to do.
I Will Charge What I am Worth – If you are feeling underpaid and undervalued for your work then make a resolution to market yourself to the right audience and make sure that you are charging the industry norm for your work. Revamp your strategy and raise your rates to reflect your value to your clients.
I Will Grow my Team and Delegate More – If you have more work than you are able to handle then you need to make a resolution to bring people to your team who can take over some of the work that you do. Think about hiring a bookkeeper and a social media consultant who can take over this time-consuming part of your business. If you have employees, you need to learn how to effectively delegate to them tasks that you are currently doing to free up your time to build your business.
I Will Become a Better Communicator – If you are constantly having misunderstandings with your employees, wasting time repeating yourself over and over, and there is a lack of employee morale in your company one reason may be that you are communicating ineffectively. Take time to learn how to be better communicator it is very important to get your employees on board with building a successful business.
After you have made your resolutions you need to create a plan to put them into action. Once you have that information then it is time to turn your resolutions into your business goals for 2020.
The week between Christmas and New Year can be a great opportunity to increase the profitability of your business. If you do it right, you can net more from this week than any other week in the year. Here are some tips to help you to have a profitable week.
Creating a Customer Experience – More than likely you will have customers in your store to spend those gift cards that they got for Christmas. Many will be regulars but many of them will be visiting your store for the first time and you need to WOW them so that they will come back. Think of little extras that you can offer to enhance their experience.
Christmas is over, so freshen up your store. Take down Christmas decorations and promotional signage and change the music. For those customers who came in before Christmas a change of atmosphere may energize them to buy.
Sales and Incentives – Have your markdowns ready for the 26th of December. The faster that you move this merchandise the sooner you can freshen up your store. Some retailers believe in having a January sale instead, but this means that you will not be ordering new stock until February and your store will not have a new look until March. Stuff bags with coupons to give customers incentives to return.
Full Price Merchandising - Part of freshening up the store is putting new full priced merchandise out on the floor. As many people are using gift cards, they might be more likely to buy new full priced items rather than those left over from the holiday season, giving you a greater profit margin.
Reduce your spending on Advertising – As it is after Christmas everyone is having sales. So instead of spending money on advertising use that money to motivate your staff to give exceptional customer service or use it on incentives for your customers.
Refocusing Staff - The focus has changed from selling stuff, to keeping it sold. Instead of having staff just concentrate on returns encourage them to focus on converting returns into exchanges and new sales. Train them on suggestive selling techniques to use when they are processing a return. If you sell a lot of gift cards before Christmas ready your staff to sell prospective new customers. This is also a good time to update your customer data base and to encourage customers to join your loyalty program.
Show Appreciation to Your Staff – They have just gone through the most hectic four weeks of the year and you are now asking them to do more. This is a good time to show them that you care, coffee runs, catered lunches or even the services of a masseuse are ways to show your appreciation for their efforts.
Remember most customers are just coasting until New Year and they don’t expect to find much in stores except sales on leftover Christmas items. If you have made your target it can be tempting to sit back as well, but this is a great opportunity to create a good impression with customers by giving them new and interesting things to buy.