How Can You Participate in the Government’s Home Buyer’s Plan?

By Randall Orser | Personal Income Tax

The Home Buyers Plan is a government program that allows you to withdraw up to $25,000 in a calendar year  from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.

How to Participate in the HBP:

  • You must be considered a first-time home buyer, this is a person who has not occupied a home that you, your spouse, or common law partner owned in a four-year period prior to withdrawing funds.  
  • You must have a written agreement to buy or build a qualifying home for a related person with a disability or to help a related person with a disability buy or build a qualifying home.
  • You or your related person with a disability must intend to occupy the qualifying home as your principle residence within one year of building or buying it and it must also be occupied as a principle residence.
  • You may be able to participate again if your repayable HBP is at zero at January 1stin the year of your next withdrawal

To Meet the Withdrawal Conditions:

  • You must be a resident of Canada at the time of the withdrawal
  • You have to receive all withdrawals in the same calendar year
  • You cannot withdraw more than $25,000
  • You can only withdraw from your own RRSP, but you can withdraw from more than one RRSP and your RRSP issuer will not withhold tax on withdraws of $25,000 or less
  • Usually you cannot withdraw from a locked-in RRSP or a Group RRSP
  • Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP or they may not be deductible for any year
  • Neither you nor your spouse or common-law partner or the related person with a disability can own the qualifying home more than 30 days before the withdrawal is made.
  • You have to buy or build a qualifying home before October 1st of the year after the year of the withdrawal.
  • You have to fill out Form T1036, Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.

You have to make sure that all HBP conditions are met otherwise your withdrawal may not be considered eligible.  You must include part or all of the withdrawal as income on tax return for the year that you received the funds. 

For more information visit the Government of Canada webpage at

Buying or Selling a Home? Tax Information You Should Know

By Randall Orser | Personal Income Tax

If you buy or sell your principal residence in Canada, since 2016 you have to report the sale on your income tax return.  This ensures that only those who are entitled to the principal residence exemption can claim it. 

A principal residence can be any type of housing unit including a house, cottage, condo, apartment, trailer, mobile home or houseboat. It qualifies as a principal residence if you own the property alone or with another person, you, your spouse or children lived in it for some point during the year and you designated the property as your principle residence.

You can only have one principal residence at a time. If you sell your principal residence and buy another in the same year you can use the “plus one” rule when calculating the principal residence exemption amount.  This allows you to claim for both properties but only one can be designated as your principal residence.

What is the Principal Residence Exemption?

When you sell a housing unit you may realize a capital gain which can be taxable.  However, under the Principal Residence Exemption rules this capital gain may be reduced or eliminated if the property was your principal residence for all the years that you owned it.  If it was not your principal residence at any time, then you may have to report capital gains.   

What Happens if you Don't Report the Sale

If you do not report the sale on your income tax, or don't make the designation then you will have to ask the CRA for an amendment to your return for the related tax year.  The CRA may accept a late designation but you may have to pay a penalty.

For more information on buying and selling your principal residence visit:

Why Your Business Needs Financial Statements

By Randall Orser | Small Business

Why do I need a financial statement? is a question that bookkeepers and accountants are asked many times by clients.  There are three main reasons why your business needs a financial statement.

  • It is a measurement of how well your business is doing today, has done in the past and what it expects to do in the future.  Investors and potential investors look at financial statements to assess the management of the company and the viability of the business.      They also use a financial statement as a starting point to forecast the company’s future performance.  Lenders look at the financial statement to assess a business’s ability to repay debt.  The financial statement can also decrease the costs that a business may have to pay for capital, seen in lower return rates for investors and lower interest rates from lenders. 
  • You are expected to have financial statements especially by your bank.  Your financial statement assists in bridging the information gap most lenders will not even consider a loan application without up to date financials.  Bankers are notoriously unsympathetic to the stress put on entrepreneurs trying to get their business off the ground and providing an up to date financial statement will make it easier to deal with them.
  • Financial Statements are required by the CRA.  To file corporate tax returns Canadian corporations are required to produce financial statements.   If a corporate tax return is not filed within three months of the corporation year end interest on taxes begins to accrue. Within six months significant late filing penalties are also charged.  In order to avoid these extra costs, it is important to have a financial statement prepared on at least a yearly basis. 

As a business owner, financial statements are vital information for you to make business decisions.  You need to review more than your bank statements to see if you can afford to invest money back into your business.  Having a financial statement will also help you to keep all your information neatly organized for tax time.   

Just having a financial statement is not enough!  You must make sure that you are reviewing your statements regularly.  This will help you to catch mistakes earlier, detect fraud, theft or other illegal activities within your business.  Even if you have a bookkeeper or accountant to do your books you still need to be involved and watchful for any discrepancies.  

Bookkeeper vs CPA – Why you Need Both

By Randall Orser | Small Business

Many people outside the financial sphere have understandably never felt much need to absorb the various terms we throw around, even the basic ones. For instance, you might not have a grasp of the actual differences between a bookkeeper and a Chartered Professional Accountant (CPA). After all, they're both professionals who work with small business that need to outsource critical accounting tasks. But there are some important distinctions to be made between these two types of specialists, and ultimately, you're well advised to make extensive use of both of them for your business accounting needs. 

CPA firms tend to take on big, complex issues that routinely plague businesses of all sizes. These may include tax advice and tax return filing, counseling on what type of structure the business should adopt (proprietorship, partnership, LLC, corporation), in-depth financial reviews, and preparations for loan applications. These are the specialists you rely on for major transitions and CRA transactions. By contrast, full-charge bookkeeping firms help you handle those routine but critical day-to-day accounts receivable and accounts payable issues, including payroll calculations, bank reconciliations, journal entries, and internal financials.

Too many businesses try to get by without a bookkeeping firm by simply throwing together a rough approximation of their financial details and handing that to their CPA firm. This places an undue burden on the CPAs, forcing them to work harder and longer to make sense of your books. A CPA's billable time usually comes at a premium, so you pay proportionately more for their extra efforts. If you've been getting by in an effort to save some money, you would be better off hiring a professional bookkeeping firm to handle your financials. You'll receive smaller bills from your CPA while making better use of your own team's valuable time.

Renting Out Your Mortgage Helper? – The Taxman Cometh

By Randall Orser | Business Income Taxes , Personal Income Tax , Small Business

Once you start renting out that mortgage helper you will need to include rental income on your tax return, using form T776 Statement of Real Estate Rentals.

You must keep accurate records of your rental income and expenses each year and retain them for six years.  These records help you figure out your net profit for the year. The tax you pay will depend on the net income from the rental; any losses will be deducted from your other income and if you have no other income will be carried forward to the next year. Whether a long-term or short-term rental, most rental receipts are considered income for tax purposes.

If your mortgage helper is for a parent, grandparent, or sibling, they are considered a ‘related person’. You may still have to report the income as rental income, however, if you’re renting below fair market value, you won’t be able to write-off any losses, and will have to report the income differently. 

Airbnb is a big thing now, and you need to realize if you’re doing this regularly, then you need to claim it as rental income. You get the same expenses as if it was a long-term rental, plus you can write off bedding, towels, and soap etc. that you use exclusively for this rental. If you supply meals, then the income may be considered business income and not rental income.

Your mortgage helper can definitely help pay for the mortgage and make your dream home more affordable. With experience, managing the rental side does get easier. Finding a good property manager, lawyer and tax preparer can help you manage the details.

For more information about renting visit

Thinking of Renting Out Your Mortgage Helper? – Here are Some Things You Should Know

By Randall Orser | Small Business

Before You Rent Out That Mortgage Helper, here are Some Tips

You’ve been able to buy that new home you want, and it came with an income suite, which can be financially fruitful. To be a good property manager, you should manage your rental as you would a business, which means you need to be an able planner and keep good records (especially for the taxman).
For a first-time landlord, renting out your house to an outsider can be quite the challenge. The following three items are things you should know before renting out that mortgage helper.

Keep Your Property Presentable
You must keep up the property in a tidy manner, no one wants to rent a messy place. You may also get a higher rent if you maintain the property, and keep it looking nice. Your renters will feel more confidence that you are a professional landlord when the residence is maintained. If something needs repairs, fix it, clean up the floors and walls and keep up the landscaping; this makes your rental much more attractive to potential tenants. 
Rental properties will need periodic repairs. If you’re not handy yourself, it is a good idea to find a local handyman you can rely on when needed. Your job as a landlord will be much easier if you can find reliable professionals you can call on when needed. Yes, it’s going to cost you money to maintain the property, however, it could cost you more in lost tenants. Plus, you get to write off minor repairs off the rental income.

Always Get it in Writing
That old adage is never truer than when being a landlord. You need to have a tenancy agreement, though there is no standard agreement you must use. You can look at one of those online law documents services and grab one from there, or chat with a lawyer that specializes in rentals. If you decide to just create your own, it is advisable to have a lawyer check it over for its legality. 
You should include the following details in any tenancy agreement:

  • Start and end date of the rental term
  • Security deposit amount
  • Monthly rental amount
  • The date of the month the rent is due
  • Acceptable methods of payment
  • How rent should be paid
  • If you are allowing direct payments into your bank account, you need to note on the form your bank details.
  • The number of keys you are giving the tenant
  • Who is responsible for utilities and maintenance
  • Any additional fees and disclosures

Depending on your particular circumstances, you may want to incorporate other terms you deem appropriate.

  • Pre-tenancy application form
  • Security deposit receipt for

It may be a good idea to contact a property law specialist to help create the tenancy agreement to your particular needs. The lawyer will be over legal disclosure requirements and explain how insurance can curb your liability.

Acquiring Great Tenants

At the beginning of a successful landlord-tenant relationship you need to get the right tenants. To find financially suitable applicants for your property seek the help of a credit check agency and ask for references from previous landlords.   After that, there are tools that can help you locate good tenants. Look for a local property investment association, as this can be a great resource for networking with other landlords. You’ll be able to get tips, and share yours, that you and they have learned over the years.

Employees or Contractors? Which Makes Better Sense for Your Business?

By Randall Orser | Small Business

Different businesses like to handle their staffing needs in different ways. Some prefer to keep a consistent team of permanent employees, while others are perfectly content to hire contractors on an as-needed basis. Both scenarios can make sense, but don't expect to impact your finances in the same way. Here are the respective pros and cons: 

Contractors-- If you're not determined to keep the same people on the job indefinitely, and you're willing to keep re-filling it as needed, hiring contractors can be a big money saver for your business. That's because you don't have to pay state unemployment compensation, worker's compensation, or half of the contractor's Social Security and Medicare taxes, as you would for an employee. You're also off the hook for many of the standard types of lawsuits filed against employers by employees. On the negative side, you arevulnerable to the personal-injury lawsuits that worker's compensation is designed to prevent. 

Employees-- Employees usually cost more to maintain than contractors. In return for the job security and benefits you're providing, you can offer a substantially lower hourly wage for the same work. You may also save on training-related expenses because you only have to train a permanent employee once, as opposed to constantly training an ongoing parade of new contractors. But you'll also have to pay your portion of Social Security and Medicare taxes on each paycheck, maintain worker's compensation, and pay state unemployment compensations. 

There is no "better" or "worse" in choosing to hire employees vs. contractors; ultimately, you have to weight the financial pluses and minuses against the qualities that will help your business run better (which also affects your bottom line).

If you want to make your new business a more prosperous one right from the beginning, assemble your bookkeeping and CPA team, hire the types of workers most likely to help your bottom line bloom, explore your eligibility for special ACA health insurance options, and talk to your financial team about any upcoming franchise taxes. Get your financial ducks in a row right now, and your business is more likely to enjoy a smoother glide toward success!

Starting Your Own Business – Sole Proprietorship, Partnership or Corporation?

By Randall Orser | Small Business

Once you have decided to take the plunge and start your own business, the next step is to decide upon the structure of your business.  In Canada, there are three kinds of business structure. Sole Proprietorship (one owner), Partnership (2 or more owners), and Corporation.  

With a sole proprietorship, you would be fully responsible for all debts and obligations related to your business and all profits would be yours alone to keep. As a sole owner of the business, a creditor can make a claim against your personal or business assets to pay off any debt. 

A partnership is a good business structure if you want to carry on a business with a partner and you do not wish to incorporate your business. With a partnership, financial resources are combined and put into the business. You can establish the terms of your business with your partner and protect yourself in case of a disagreement or dissolution by drawing up a specific business agreement. As partners, you would share in the profits of your business according to the terms of your agreement. If you wish to share profits or losses with your spouse, then you must form a partnership; CRA will not allow a split of profit or losses otherwise.

Another type of business structure is incorporation. Incorporation can be done at the federal or provincial/territorial level. When you incorporate your business, it is considered to be a legal entity that is separate from the shareholders. As a shareholder of a corporation, you may not be personally liable for the debts, obligations or acts of the corporation. When making such decisions, it is always wise to seek legal advice before incorporating.

Buy Assets for Your Business Now to Take Advantage of the Capital Cost Allowance

By Randall Orser | Small Business

As we’re coming up to the end of the year, it’s time to think about year-end. Even if you have a fiscal year-end other than December 31st, this is still something to think about. You’re probably looking at buying a new piece of equipment, or furniture, or such and wonder when I should buy such items. Now or at the beginning of the fiscal year? 

I say buy assets when you actually need them, and just a bit before so you have them ready to go when production gets ramped up, they’re ready to go. You might need to add a new computer for new staff or just figure it is time to upgrade (I like to upgrade my laptop every 4 years). You should be proactive in your asset purchases so that you’re not running into a lag time as you don’t have the asset ready.

For tax purposes, it’s always better to buy them before the year-end and get them ready to function. Why? The half-year rule that Canada Revenue Agency (CRA) has in place for asset purchases. Let’s say your fiscal year-end is December 31st, and you need new computers. If you wait until January to buy them the half-year rule applies and for that whole year you only get to write off a percentage of ½ that asset. If you buy it in, say, November, the ½ year rule applies, but then you still get the capital cost allowance on ½ the amount then the next year on the full amount. 

If you’ve just started your business this year, then the CCA is prorated based on when you started the business. For example, Jane starts a business on June 1st and her first fiscal period ends on December 31st. She calculates her CCA to be $3,500. Since Jane’s fiscal period is only 214 days, the amount of CCA she can claim is limited to $2,052 ($3,500 × 214/365).

As your business grows and you need equipment, etc. it’s always best to buy assets as you need them and not worry about depreciation expense. Not buying something could actually end up hurting your business as it could slow down production or your productivity.

Some Less Common Tips for the Small Business Owner

By Randall Orser | Small Business

Being aware of your competition is important to every entrepreneur. Competitors are everywhere and come in all shapes and sizes. Some are immediately recognizable, and some may be just sitting back and watching your progress. Some may be huge multi-national organizations who want to make sure that they retain their market share.  You need to develop a competitive edge to keep you in the game and to achieve your goals, here are some ideas. 

Put Yourself in Their Shoes 

Some businesses do not take the time to make themselves familiar with their customers and their needs.  A customer may have a long history with a company, so the business does not take the time to discover how this relationship can be improved and made more profitable for both parties. 

Do not let that happen in your business!  Continually place yourself in your client's shoes. Find out what you can do to improve your business relationship. If you give your client suggestions and alternatives that will improve their business, they will be most likely to support your business.  Looking at things from the client's perspective will also help you to detect anything that could cause issues down the line. 

Your Team Is as Important as Your Plan

A great business plan is essential to your success as are smooth operations.   These provide the blueprint for your business and should be utilized as checks and balances to make sure that your company is progressing as planned. 

Some business owners can get over-confident and may start to cut corners by hiring poorly qualified staff who do not follow company procedures. This can do a lot of damage to your company’s reputation and relationships with your customers resulting in a loss of business. 

Well qualified and well-trained staff are a crucial part of your business. They understand the company and work to maximize every opportunity to improve your business.  In addition, savvy specialists can help you to create new ideas and refine your procedures. 

Not All Clients are Worth it 

The mission to find more customers can drive entrepreneurs crazy, not because they are difficult to find but because they can turn out to be more of a liability than an asset to your company. 

Clients who are hard to deal with or request difficult or impossible things from you, can make you feel that the income from these people does not justify the amount of time and effort put in to work with them.  Usually you're right - customers that cause difficulties for you or your employees are best left to other companies. If you lose these customers your workers and you will be less stressed.

In addition, staying away from troublesome customers can help your business’s image. Positive company values will increase your reputation with clients and prospective clients and you will be seen as a good company to do business with.

Understand and Nurture a Good Company Culture 

All companies need to have policies in place regarding the standards of behavior expected from their employees, usually in the form of a company handbook given to new employees. Always be aware of any issues arising concerning your employees and understand how to solve conflicts that may arise. An encouraging working environment is important for the happiness of your employees and the success of your company.

Always Tune in to Your Customers 

Entrepreneurs can be become totally absorbed in their own ideas for their products and their company.  They may not appreciate criticism as they believe that they know best. However, they are not looking at things objectively, it is important to be flexible and to listen to your customer. You need to respond to any requested changes and to what your customer really wants rather than what you think they want.  Be open to input from others, tune into your clients and work with them to satisfy their requirements. 

Plan Ahead for Growth 

Getting to a point in your business where your growth has outstripped your projections is a fantasy for some entrepreneurs. Unfortunately, this can mean that they are not prepared when they do achieve success.  It is like winning the lottery, they may have huge plans, however the majority of these plans are not feasible.  You can't wing your way through expansion you need to be ready by making plans at an earlier date. 

You need to consider what expansion means to you. For example, does it mean moving to a different location, and if so is this convenient for your employees and customers?  All companies need to develop a framework and procedures for future expansion. It's never too soon to get ready for a splendid future! 

Market Size Matters 

Financial specialists and investors who are an important part of any business which is looking for capital, are not as worried about what your business does, as they are with the benefit potential. 

They need to know how much of a market share you could get, and that will determine how much they will agree to put resources into your company. Your projections may be fine and dandy, but you need to able to prove that your business has amazing potential in order to raise capital. 

Remember that company size is relative. The more specialized you are, the greater chance that you will have of gaining a bigger market share in your field. If you are a big fish in a small pond you will not have to work so hard to gain clients and be successful in your venture. 

Whenever Possible, Focus on Timing 

Numerous companies have bombed due to poor planning. A good business plan can be difficult to do but is very necessary.  For example, you may already have a lot of clients, but it is easy to lose them, so you need to make sure that your advertising and marketing is continually attracting more.  Your initial business plans may need to be revised as your number of customers increases. Make sure that you are reading your financial reports regularly so that you are always prepared with the information that you need to make changes. 

These are not the most important things that you will need to do to succeed, but they can be a helpful addition to the information you may already have.  It is not easy to start and run your own business, yet it's not impossible. Continue to be aware of your competition and how it may be affecting your business, and search for ways in which you can improve your own operations.  Having your own business can be difficult and unpredictable at times, yet it can be justified by the rewards and the satisfaction that you achieve.