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Should I Invest in my RRSPs now?

By Randall Orser | Personal Income Tax

Now is the perfect time to check where you RRSP contributions have been for the year, and where they’ll be in by the end of February. Do you have the room to put more in? Do you have some extra funds lying around? You may want to put the funds in now, and earn some income on them rather than wait until February; plus, you’re beating the rush and not scrambling to get them in by March 1st.

I’m going to assume you know what is an RRSP, and have hopefully checked what your contribution limit is for the year. Does your work have a pension plan? If so, how much have you contributed so far, as that comes your contribution limit.  If you’ve reached your contribution limit, then what about your spouse? You can always put money into their RRSP, up to their contribution limit (they would need to be the contributor and annuitant).

Planning Opportunities

Contribute early in the year. This helps shelter income for a longer period and increases the compounding of the income in the plan. A monthly plan can also be used to help with cash flow.

Use the spousal plan (including common-law spouse) as much as possible to split the income tax upon withdrawal. Remember not to withdraw from any spousal plan until 3 years after the last contribution was made or it will be added to the income of the contributor. Note that it is the timing of the payment of contributions to a spousal RRSP that governs this recapture rule, not when (or whether) you claimed a deduction.

Make your money work for you. Consider other investments within your RRSP, such as mutual funds. Carefully consider what you invest in to maximize your return. (See schedule on page 3)

Utilize “rollovers” (special RRSP contributions). You may find yourself in a situation where you receive a payment which qualifies for special contribution treatment.

These special situations include:

  • Special payments you receive on leaving employment, either in recognition of long service or as damages for loss of office. Note that years of service after 1995 no longer qualify;
  • Lump-sum payments received from foreign pension plans for services performed outside Canada;
  • Lump-sum payments received from a United States IRA and taxable in Canada;
  • Amounts received from the RRSP or RRIF of a spouse, or in some cases, a parent or grandparent, who has died; and • The “cost amount” of shares you receive, directly or through a trust, in a special lump-sum distribution from a DPSP.

The magic of compound interest! Annual contributions of $13,500 at an average interest rate of 8% per annum made at the beginning of each year accumulate over $15,000 more interest in the first 10 years than contributions made at the end of the year. After 25 years, the difference is over $75,000!

The compounding effect of interest earned on the RRSP is clearly demonstrated above by the difference in interest rates. An investment of $13,500 per year at 6% interest per annum grows to $785,111 at the end of 25 years, while the same amount invested at 8% grows to $1,065,885.


Should You Borrow to Finance an RRSP

Interest on money borrowed to make RRSP contributions is not a deductible expense for tax purposes. If you have a choice between borrowing to make an RRSP contribution or borrowing to make another investment, you should always borrow to make the other investment. The interest paid on the investment loan may well qualify for tax deduction and thus offset the cost of borrowing.

Spousal RRSP

A spousal RRSP is an RRSP which names your spouse rather than yourself as the “annuitant” but you have made the contribution. Any amount, which you could have contributed to your own plan under your current contribution limit, can instead be contributed to your spouse’s plan. Contributions made by you to your spouse’s RRSP can be deducted from your income. Your spouse will be taxed when the funds are withdrawn subject to the 3-year rule described in Planning Opportunities above.

Once a cohabitation relationship achieves the status of a common-law marriage under the 12-month or child rule, that marriage is considered to continue until there is a marital breakdown marked by a separation of at least 90 days.

Common-law spouses are included in the definition of spouse and are, therefore, eligible for the spousal plan, although there are still some questions as to how Canada Customs and Revenue Agency will monitor the common-law relationships.

The special rules on spousal RRSPs are very beneficial. Ideally, you and your spouse should have the same amount in your RRSPs at retirement. However, when using a spousal RRSP, you should note that the contributing spouse would be taxed on any withdrawals within 3 years of the last contribution to any spousal plan.

Are You Leaving Canada?

If you leave Canada for an extended period, you must determine whether you are going to become a non-resident for income tax purposes.

If you have withdrawn funds from an RRSP under the Home Buyers’ Plan (you qualify as “first-time home buyers” could borrow up to $20,000 from an RRSP to purchase a “principal place of residence”), and become a non-resident before acquiring your Canadian home, your withdrawals will be disqualified and added to your income in the year of withdrawal. You may cure the disqualification by refunding the withdrawal and cancelling your participation in the plan.

If you have withdrawn funds from an RRSP under the Home Buyers’ Plan and become a non-resident after acquiring your Canadian home, you must repay the entire withdrawal within 60 days of becoming a non-resident. To the extent that you do not repay the amount within 60 days, the unrepaid balance will be included in your income for the period of the year in which you were still a resident of Canada and taxed accordingly.

Now is a great time to review your RRSP, and what you want to accomplish with it this year. Think about all that money you’re missing out on by not investing now, and waiting until January or February of next year. That’s a missed opportunity, and that’s just sad.

Drive Your Business to Success with Smart Outsourcing

By Randall Orser | Small Business

You’re going to go through many challenges while running your successful business all the while wearing multiple hats during your work week. There comes a point where you’re spread out so thin that it starts to harm the business, and you need to outsource some work to allow you to focus on the main reasons why you originally got into business. In your business where can you start outsourcing?

Credit Control

As a small business, you have the dilemma of being subservient to your cash flow, but probably don’t have the funds to have a department devoted to making customers pay on time. You could look at a factoring service (where you sell your invoices to a company), which solves the issue of outsourcing your credit control operations and the administration that goes with that. Invoice factoring also greatly strengthens your cash flow. With invoice factoring you get a part of the invoice right away, with the remainder paid upon collection less a fee. By combining the improvement in cash flow and lower administration costs makes credit control your first choice when outsourcing.

Staff Recruitment

Finding the right employees is the essence of a successful business, nevertheless finding and hiring able staff is tedious, and it’s usually not a skill most entrepreneurs have. A recruitment agency can help you find, interview, and select the best candidate for your business that’ll boost your human assets hugely, and for comparative little cost in both your time and money. Remember to hire slow and fire fast, don’t rush to hire someone just to fill a vacant position.

Digital Marketing

Your online presence via a website and social media as given rise to a new term, digital marketing. You could never be expected to keep on top of this whirlwind that is digital marketing, however, it’s a crucial part of success in today’s commerce. Finding the right agency will take time, and you probably will devote much time to finding that professional that is a fit; however, this can totally pay off by driving profitable business for years into the future.

Public Relations

While public relations is related to marketing it is a separate practice than can have a huge impact on your business success. A good public relations agency is continually on the lookout for ways to develop favourable publicity for your business, incorporating your reputation into the fibre of your niche. A PR agency has the expertise, experience, and carefully refined contacts list to promote your business in ways you probably wouldn’t have thought, thereby, allowing you to concentrate on getting your business ready to convert this exposure to profit.

Office Cleaning

You may not think it, but cleaning is a crucial approach to running your business, which is often underestimated as to its value. First impressions count whenever customers or others visit your establishment, and a messy office can suggest a carelessly managed enterprise. Now you’re probably thinking you don’t have the funds to hire a professional cleaner on your tight budget; however, when you do it yourself it’ll always drop down on your priority list. We all want our work place to be pleasant, and outsourcing the unglamourous activity of office cleaning to a professional cleaner can be cost-effective, and repay itself by improving your company’s image.

You started your business to carry out your passion and satisfy a drive and then these day-to-day nuts and bolts get in the way constraining your company when it should be flying. Smart outsourcing releases you, letting you concentrate your energies to drive your business forward toward success.

Cutting Payroll May End Up Hurting Sales

By Randall Orser | Small Business

According to recent studies by both the Harvard School of Business and the Wharton School of Business, striking the balance between too few and too many retail payroll hours is the key to increased retail sales. These studies run counter to the usual practice of cutting payroll when sales are down. 

The Harvard study, which focuses only on operations, suggests that increasing payroll yields up to seven percent in profit. The Wharton study, which includes customer satisfaction, suggests that increasing payroll, even moderately, yields up to 28 dollars in sales per one allocated payroll dollar.

The studies’ common denominator is that products do not sell themselves. Here are seven ways that automatically cutting retail payroll expenses often backfires and hurts retail sales.

In-stock reality. The Harvard study identified the weakest link in the supply chain as the front-line store. Even if shipments arrive on time, often they don’t make it to the floor due to reduced payroll hours. Similarly, items that are already on the floor cannot be replenished properly if retail shops don’t have the personnel to make it happen. A customer can’t buy a product that is not available.

In-stock perception

The Wharton study defines the term “in-stock” as more than availability. In-stock items are both available and sold by a knowledgeable associate, who can explain their benefits. This definition is based on study customers from over 500 unnamed stores. The question, “Did you find everything you were looking for?” is ultimately answered based on satisfaction rather than on actual availability. Hence, the customer may not know exactly what he or she is looking for until an associate explains the choices, benefits, and drawbacks. Fewer associates mean fewer one-on-one interactions with customers. According to Wharton, in-stock perception is the same as customer satisfaction.

Loss of seasoned associates

When hours are reduced, seasoned associates — those who have the most sales experience as well as the most product knowledge — move to greener pastures. This means that customers are assisted by those who neither know the product well nor know how to best maximize a sale. The result is a customer who is less satisfied by his or her shopping experience. Less satisfaction equals less in-stock perception. Customers are more likely to answer “no” to the “did you find everything” question when they do not interact with a knowledgeable associate.

Hiring and training

When seasoned employees leave, companies must hire new associates. The notoriously short lifespan for newly hired retail associates, especially those under 30, means that each new hire is a gamble. Companies must gamble with training dollars as well as with putting an inexperienced sales person on the floor. And if the new hire doesn’t work out, they must repeat this process again and again until they find a talented associate. Naturally, without sufficient hours, talented associates tend to look for more profitable work, exacerbating the vicious cycle.

Customer focus

Customers who bond with a particular associate will look for that person again and again to help them find the right product. If a customer finds that the trusted associate has moved on, the customer may be disappointed enough abandon the planned purchase altogether. In the same way, seasoned associates can inform regular customers of new merchandise and special deals, bringing customers into the store without expensive marketing. Without long-term associate/customer relationships, potential sales are lost.

Task management

Shelves and racks need to be restocked. Bathrooms need to be cleaned. Floors need vacuuming. Check-out lines need to be expedited. The sales floor needs to be tidy. And the stock room needs a full-time manager. When associates perform task management, they are not helping customers. On the other hand, if they neglect task management, the shop begins to look run-down and cheap. Both on task or off, too few employees drive customers to other stores.

Online competition

If associates cannot help customers in the store, then customers soon find no reason to leave home. Online operations are almost always fully stocked, never have a line at the cashier, and do not require a drive to the mall. Associates are the primary difference between brick-and-mortar stores and online merchants. If associates are unavailable, then customers will stay home.

The ways that retail sales are affected by reduced payroll can be summed up in five key areas:

  • The product is unavailable.
  • Associates are unavailable.
  • Associates are not knowledgeable.
  • Associates are distracted by task work and are too busy to be helpful.
  • Check out is difficult.
  • In order to maximize profits, retail businesses should reconsider automatically reducing payroll to save money. While it may be illogical to those at head office, reducing payroll too much actually hurts the bottom line while increasing it only slightly can make a significant difference to retail the bottom line — as much as 28 dollars in sales per one allocated payroll dollar.

    Grow Your Business Profits – Five Simple Tips

    By Randall Orser | Small Business

    A well-managed business has the capability of growing its revenue and profits, however, not all business types are profitable. There are countless elements that will determine your business success, including the nature of your business, target market, management, customer care and marketing. The following tips should give you some clarity in your business setup and allow you to prosper.

    Management

    Management can greatly contribute positively or negatively to your company’s growth, so take responsibility for the daily running of your business. Are you looking at hiring? Look for experienced professionals who have worked in your industry and are acquainted with the nature of your business. Can you motivate your employees? Probably not as well as you think you can. Good leaders lead by example, and get their employees on board quickly.

    What’s your company culture? Have you developed one? Find people that’ll fit into that culture. Don’t be afraid to ask your employees, or your customers, for suggestions on product or services development. You should be doing lots of research to enable you to make savvy business choices.

    Build Up Your Numbers

    You could increase your sales by spreading out your territory, whether geographic or demographic. The internet, especially social media, is a powerful tool which you need to embrace and expand your audience into other countries. Today it’s ensuring your online presence is set for mobile, this will allow you to tap into many more customers, especially the younger generations, as they’re mostly on mobile now. You need to boost your website ranking and visibility using Search Engine Optimization (SEO).

    Quality over Quantity

    If you want customers to return, you need to create quality products and package them professionally. Enhance your customers’ experience by offering your staff training in good customer etiquette. You could start a loyalty program for repeat customers, or offer gifts or discounts. Be very careful with discounts, as once you start offering them it can be very hard to stop. Of course, the most powerful form of marketing is ‘word of mouth’; give your customers a great experience and they’ll refer friends, family, etc.

    Expand to Other Market Segments

    Look around and see what products and/or services compliment what you’re doing. For example, an automobile dealership could grow sales by selling spare parts, a restaurant could offer catering services for special occasions, and a web designer could offer site hosting or server maintenance.

    Diversify

    You shouldn’t just offer one product or service, you need to look at creating new products and services to expand your market. Also, look at bundling existing products and/or services, and you’ll probably find you can charge more. What product and/or service can you find that’s ready for market, and allow you to grow your market share. Your best investment in those new products and/or services that will extend your reach.

    Reduce Expenses

    You need to look at your costs and audit them so you can maximize profits. This may require hiring someone, or perhaps your bookkeeper or accountant, however, that could be well worth the investment over time.

    Hire slow and fire fast. Do you have any unproductive employees? Get rid of the deadwood. If your energy bills are out of hand, look at alternative sources such as solar-powered water heating. Look for wherever there’s waste and seal those leakages. Do you have space you’re not using? Consider subletting it for extra revenue.

    Social Media

    Social media is pretty much a must in this day and age. It’s a great place to engage (that’s the operative word here) with your existing and potential customers. You need to figure out where your customers frequent and go there. If very few are on Facebook, that may not be the best place for your business. It all boils down to having a social media strategy, and hiring the right person who gets your business ethos, mission and vision.

    Social media is a great place to get feedback on your products and/or services, plus you find out where you can improve your offering. Be warned, people can be brutally honest on social media, and there are those that’ll diss you for no real reason. You can use social media to market to your new customers and respond appropriately when required. Social media is a great way to build trust and develop positive relationships by providing useful information to your audience.

    The point of all these strategies to is add value to your offering. You need to stop focusing on pricing and focus on value, which is what your customer is really looking at. Always be adding value, even when the price is high. Your customers are happy to spend more for what they feel as extra value, which leads to great profits despite the higher investment in cost.

    Your TFSA and Ten Things You Should Know

    By Randall Orser | Personal Income Tax

    In 2009, the government of the day created the Tax Free Savings Account (TFSA) as a means to efficiently invest more. Surprisingly, eight years in to the TFSA’s existence, some Canadians are still confused about how they actually work. And, no it’s not another way for the rich to save on taxes, it can benefit the ordinary Canadian too. We’re going to talk about 10 things you should know about the TFSA.

    You Can Have More Than One TFSA Account

    You can have multiple TFSA accounts at different institutions, however, they all share the same contribution limit. As of 2017, that limit is $5,500 per year. Good records are a must when you have multiple accounts, as you need to track your contributions and withdrawals as it’s much easier to over contribute by accident.

    Over Contributions Incur Penalties

    Whenever you go over your contribution limit, you will incur a penalty of 1% per month on that excess amount. This over contributing is a simple mistake because many people don’t under understand how the contribution limit works. This gets more complicated when you have multiple TFSAs, and you have several transactions happening throughout the year. Your best method of determining your contribution limit is to keep track of it yourself, or chat with Canada Revenue Agency (CRA). They can let you know what your limit is for the year.

    Successor Holder vs. Beneficiary

    You can name a beneficiary to your TFSA, however, you may not realize you can name someone a ‘success holder’. Your beneficiary can be anyone you choose, such as a child, parent, or sibling; a successor holder can only be your spouse or common-law partner. Your beneficiary receives the proceeds of your TFSA upon your death, and the TFSA is closed. With a successor holder, your account is rolled into their TFSA which doesn’t affect their contribution room. If you have a spouse or common-law partner and want them to inherit your TFSA, it makes sense to name them successor holder as they can continue to grow your investments tax free; and, avoid taxes payable on any income on the account from your time of death to when the account is closed.

    Contributions in Kind

    Are you thinking about transferring from your non-registered account to your TFSA? You need to ensure there are no unrealized capital gains or losses. Once you transfer in-kind to a TFSA, it’s considered a deemed disposition for tax purposes; however, there’s a catch, unrealized gains are realized immediately upon disposition, but unrealized losses are not claimed. You should never ever transfer an investment in a loss position to your TFSA. What you should do is sell the security in your non-registered account so you can claim the loss, transfer the cash into your TFSA, then wait at least thirty days before repurchasing so you avert prompting a superficial loss.

    Non-qualified Investments

    While most investments can be help in your TFSA, there are some that are considered non-qualified. The non-qualified investments are:

    • Any personal debt in your name;
    • Any debt or share of a corporation in that you hold a significant interest;
    • Any debt or share of a corporation that you don’t deal with at arm’s length.

    Any time you have a non-qualified investment in your TFSA, there is a one-time tax equal to 50% of the fair market value at the time it’s acquired or became non-qualified.

    Foreign Withholding Tax

    If you have foreign investments and receive dividends, they’ll be subject to a non-resident withholding tax. Usually on your foreign investments in non-registered accounts you can claim the foreign dividend tax credit against that foreign tax withheld; however, that is not the case with TFSAs.

    Non-resident contributions

    If you are considered a non-resident and you make a contribution to your TFSA, you are taxed at a rate of 1% per month on said contributions. This generally applies to someone who is a dual citizen of Canada and the United States. Unlike RRSPs, there is no tax treaty between Canada and the United States that recognizes the TFSA as an exempt foreign trust. As far as the Internal Revenue Service is concerned, you need to disclose and pay tax on income generated by your TFSA. If you are a US citizen, you’re better off keeping your investments in an RRSP or non-registered accounts rather than a TFSA.

    Social Security Benefits

    Your TFSA withdrawals are not considered taxable income. As such, and a major advantage, is that withdrawals won’t count against you for the purpose of determining your social security benefits, such as Old Age Security (OAS) or Guaranteed Income Supplement (GIS), which get clawed back based on your income level for the tax year.

    Loan Interest Tax-deductibility

    Any time you borrow money to invest in a non-registered investment account, the interest is tax deductible. However, this doesn’t apply with your TFSA or any other registered accounts. Of course, this makes total sense, as with TFSAs there are no tax ramifications for contributions or withdrawals, so you shouldn’t be able to claim a deduction for the interest paid. You can’t have your cake and eat it too.

    Retroactive Contribution Room

    The beauty of the TFSA is that you have accumulated contribution room that depends on how long you’ve been a Canadian resident, and not when you first opened your TFSA. If you open your TFSA today, you still have contribution room retroactive back to when TFSAs were first introduced in 2009, as long as you were 18 or older at the time. If you weren’t 18 in 2009, then you have no accumulated contribution room for those years. If you turned 18 in 2013, then you would have no accumulated contribution room for 2009 to 2012.

    The TFSA is an excellent investment vehicle for all Canadians. As the contribution limit continues to accumulate, and, hopefully, the government increases the yearly amount, in the future, you’ll need to ensure you know everything about your TFSA.

    Your Passion as a Business? Some Things to Contemplate First

    By Randall Orser | Small Business

    Working from home on something you love while making enough money to thrive is many peoples’ dream. A freelance career is how many go for this ideal, and though the rewards can be grand, they can’t deny how much effort is really required building that thriving business.

    Making a business or career out of your passion, can create a whole set of problems. You need to do a meaningful mind shift; however, you probably won’t recognize that when first starting out. Below are some things to contemplate before taking that leap.

    It’s a Serious Business

    You must treat your freelance career as a serious business because in the end how talented you are doesn’t matter. You may be very talented and that will earn you lots of money, however, the everyday concerns of running your business are the building blocks to your success. Paperwork, government filings, invoicing, customer relations, time management, and more are just some of the less exciting aspects of the freelance life, but it’s necessary to get those right if you want to build a solid business, and not just follow a hobby.

    Self-discipline

    Are you working in a creative field? Your passion may involve following pipe dreams and having the ability to make mistakes. However, as a business you need to keep a tight focus on what acutally makes your business run. Of course, you should nourish your creativity when you can, but don’t overlook the fact that you need to please your clients, produce work that sells, and do so as cost effectively as you can, instead of letting your creativity run too wild.

    Prioritize Productivity

    Maintaining a firm hold on your productivity is a major part of self-discipline. You’re going to have days where you’re just not at peak performance, and when creating something useful is just too hard. You’ve seen and heard the clichés; however, few freelancers can simply afford to pack up and head to the beach when the creative juices just aren’t flowing. It’s not just about meeting deadlines, if you don’t put in the hours, then the money is coming either. At those times that your just not brimming with creativity, what will you do to be more productive?

    Workflow

    It is very important to setup a beneficial and constant workflow, which means creating systems for what you do. Your talent and instinct won’t get you through your working day. You need to have a framework to ensure you meet deadlines and produce good work, even when you’re not running at your best.

    Maintaining Passion

    Can you keep the passion no matter what? Many freelancers fail to foresee the passion going away once they turn it into a business, as that may just kill the enjoyment you got from it. Your passion could start to feel like a chore, even if it started out as relaxing and rewarding hobby. When the pressure mounts, or the lean times come, are you still going to be as excited and assured in your skills? When you lose your pastime as your outlet, is there something else that can take its place? A crappy work-life balance is a prevalent issue amongst freelancers, and can be a big problem if you combine your hobby and business.

    Don’t think that this is an argument against taking the freelancer path, quite the contrary. Most freelancers who started their own business would not want to go back to the nine-to-five grind, however, you need to begin with your eyes wide open. You can have a rewarding business if you have the talent, desire, and an enterprising mindset. Nonetheless, you must acknowledge that passion alone is never enough.

    Thinking of Moving Up North for a Job? 

    By Randall Orser | Personal Income Tax

    The north is thought to be a desolate place, however, that’s not the case anymore. It could be a good time to find a job in the Northern parts of Canada. There are credits for being a northern resident, and they could be good enough to make that move worthwhile.

    Northern Residents Deduction

    There are two northern residents’ deductions:

    • a residency deduction (Step 2 of Form T2222) for having lived in a prescribed zone; and
    • a deduction for travel benefits (Step 3 of Form T2222) you received from employment in a prescribed zone that was included in your income.

    You qualify if you have lived on a permanent basis, in a prescribed northern zone (Zone A) or a prescribed intermediate zone (Zone B) for a continuous period of at least six consecutive months. This period can begin or end in the tax year specified on Form T2222, Northern Residents Deductions. To determine if you lived in the prescribed zone on a permanent basis, we consider the number of your absences from the prescribed zone and the purpose and length of your absences.

    If you have not lived in a prescribed zone for a continuous period of at least six consecutive months at the time you file your return, you do not yet qualify. File your return without making the claim. When you qualify, you can ask us to adjust your return.

    Your period of residency is not affected if you moved from one place in a prescribed zone directly to another place in a prescribed zone. Absences from a prescribed zone - If you lived in a prescribed zone on a permanent basis, absences from a prescribed zone do not usually affect your period of residency. If you lived in a prescribed zone for work-related reasons (while your principal place of residence was not in a prescribed zone), you may qualify for the deduction.

    Can you claim the deduction for travel benefits?

    You can claim the deduction for travel benefits for expenses you incurred to travel or the value of travel provided by your employer if you meet all of the following conditions:

    • you qualify to claim northern residents’ deductions;
    • you are an employee dealing at arm's length with your employer; and
    • you must have included in your income (in the same year that you have the travel expenses) the taxable travel benefits that you received from your employment in a prescribed zone.

    If you take a trip that begins and ends in one year and you are reimbursed the following year, you cannot claim the deduction for travel benefits for that trip.

    You can claim a deduction for travel benefits if you leave on a trip in one year and return the next year. For example, you may leave on a trip in December and come back in January. If you receive non-refundable tickets or travel vouchers, the taxable travel benefit should be included in your T4 slip or T4A slip for the year the trip begins.

    Taxable travel benefits include:

    • travel assistance provided by your employer such as airline tickets or a trip on the company owned airplane; and
    • a travel allowance or a lump-sum payment you received from your employer for travel expenses you incurred.

    Any travel expenses, excluding those for employment purposes, which are paid for by your employer, are generally considered taxable benefits.

    The maximum deduction you can claim for each eligible trip is the lowest of the following three amounts:

    You can claim a deduction for travel benefits even if you are not claiming a residency deduction. For example, if your spouse or common-law partner claims both the basic and the additional residency amounts, you can still claim a deduction for any taxable travel benefits you received.

    You cannot claim a deduction for travel benefits if:

    • you or any member of your household received or was entitled to receive non-taxable amounts as travel assistance, a travel allowance, or as a reimbursement for travel expenses; or
    • someone else has already claimed the deduction for travel benefits for this trip on their return.

    There are two parts to the residency deduction: a basic residency amount and an additional residency amount. The amount you can claim for these will depend on whether you lived in a prescribed northern or an intermediate zone.

    For 2016, you can claim a basic residency amount of $11 for each day you lived in a prescribed northern zone. Or if you lived in a prescribed intermediate zone, you can claim $5.50 per day.

    The additional residency amount is $11 for each day you lived in a prescribed northern zone. Or if you lived in a prescribed intermediate zone, it is $5.50 per day. You can claim this additional amount only if you maintained and lived in a dwelling in the northern or intermediate zone and you are the only person in your household claiming the basic residency amount.

    • Example 1: Eric and his wife Geneviève lived in a prescribed northern zone for 300 consecutive days during 2016. Eric’s basic residency amount is $3,300 (300 days x $11). Geneviève’s basic residency amount is also $3,300 (300 days x $11). Eric and Geneviève cannot claim the additional residency amount. This is because they lived in the same dwelling during the same period and they are each claiming the basic residency amount.
    • Example 2: Jane lived in a prescribed intermediate zone for 300 days during 2016. Her basic residency amount is $1,650 (300 days x $5.50). Her additional amount is also $1,650 (300 days x $5.50). This gives her a total claim of $3,300 ($1,650 + $1,650). Jane can claim the additional residency amount because she maintained and lived in a dwelling and is the only individual in her dwelling claiming the basic residency amount.

    As you can see, moving up north may not be all that bad, and many people I know that moved up north are enjoying it very much.

    Is it Time to Explore Getting a Partner? 

    By Randall Orser | Small Business

    Partnerships can be complex. Adding an employee can be disruptive enough, however, a partner can create an upheaval. That said, a partner can be indispensable to growing your business. Your partners aren’t just those working with you at the top, it’s your manufacturers, and such.

    Finding the right partner could let your business grow beyond your expectations or levels you might not reach by yourself. A partner also allows you to have someone you can empathize with, and divide the duties. Of course, it’s not all sunshine and unicorns. You need to be careful who you bring aboard as they may go from your greatest ally to your worst nightmare. Before you leap into that partnership, here are some things to consider.

    Trademarks

    You should always protect yourself legally, even if you’re getting along with your partner before joining forces. Too many people shy away from a legal contract with too much detail, believing such contracts exemplify an absence of trust. This just is not a good idea.

    If the partnership collapses, your partners’ responsibilities are to themselves or their investors to ensure they get the most out of the collapse as possible, as well as your responsibility. Your trademarks represent ownership of your company and what you do. By not protecting those trademarks, former partners can claim ownership, and while you might win the legal battle, you may lose the war by crippling your business with legal and other fees.

    If may be a good idea to have any trademarks owned by another company, and have your operating company pay the other company royalties or licensing fees.

    Secrets

    Whether your partner is human or a corporation, trust is mandatory for it to survive. That doesn’t mean you give away the farm (so to speak), so they don’t get to learn the many things about your business. After all, it’s still your small business. You should only give away what you must, however, be overly cold about it. Ask your potential partner what they need to know to ensure things to gently. For anything sensitive that you may need to share, get the new partner to sign a non-disclosure agreement, and anyone else relevant.

    Patents

    Ideas are at the heart of any small business, which makes them incredibly desirable. Be assured if you don’t protect your ideas, someone else will steal them. Potentials partners could take your ideas and start their own business, especially if they believe you can’t handle it, and if you don’t protect your ideas.

    It may not be something you’d think someone would do, but if someone can get an advantage, they’ll probably take a shot. Don’t let partners have the opportunity of using you as a jumping-off point; protect your ideas at all costs. There are ways to work around a patent, most notably if they were there from the beginning, however, the fact that patents exist can avert legal battles from cropping up in the first place.

    Due Diligence

    Having a partner means you’re putting your small businesses future in their hands. The same with a manufacturer, you put the quality of your product in their hands. You don’t want to let just anyone get a piece of your dream, so it just makes sense to do your due diligence. You need to do research on any potential partners. Get references from previous businesses or jobs they’ve worked with, and chat to them so you get a feel for how the will fit you and your small business. You may even want to do social media and background checks to ensure they’re on the up and up.

    Non-competes / Non-solicitations

    At some point in your business employees or partners will exit. That’s all-in course of running your business, and you do get used to it. What is harder to get used to is seeing them using their training and knowledge to join the competition right after the exit, or worse, starting their own business. It’s not just your ideas your former partners have their eyes on, it’s your top talent too. A non-competition or non-solicitation agreements limit the liability a former partner or employee represents, and can keep your company safe. Always get legal advice on any non-compete agreement you’re preparing.

    Partners can be a crucial component of your small business. Your partners, including the ones you do business with, embodies your potential growth and ability to do great things. Sadly, if the times turn bad they can turn on you too. Always work to protect yourself for most contingencies. It is your business after all.

    Are You Having a Baby? 

    By Randall Orser | Personal Income Tax

    Congratulations! If you are a new parent, or about to be one, there are some things that can benefit you tax wise when having children. Children can be expensive to raise and the government recognizes this and gives parents different tax credits and benefits to somewhat offset those costs.

    If you are a single parent, then you can claim the child as equivalent to spouse, which gives you an additional $11K non-refundable tax credit.

    Apply for child benefits

    With the Automated Benefits Application (ABA), you can automatically apply for child benefits when registering the birth of your new baby. If you live in a province that has ABA and give your permission, you will automatically be applying or registering for:

    • the Canada child benefit (CCB)– A tax-free monthly payment made to eligible families to help them with the cost of raising a child under 18
    • the goods and services tax/harmonized sales tax (GST/HST) credit - A tax-free quarterly payment that helps families and individuals with low and modest incomes offset all or part of the GST or HST that they pay
    • any related provincial programs – Most provinces and territories also have child and family benefits and credits, which families can receive in addition to the CCB and the GST/HST credit. We won’t get into these in this post as there are just too many of them.

    If you live in a territory that does not have ABA, you can apply for child and family benefits using the “Apply for child benefits” service through My Account or by completing and mailing Form RC66, Canada Child Benefits Application to your tax centre.

    Canada Child Benefit (CCB)

    The Canada child benefit (CCB) is a tax-free monthly payment made to eligible families to help them with the cost of raising children under 18 years of age. The CCB might include the child disability benefit and any related provincial and territorial programs.

    The Canada Revenue Agency (CRA) uses information from your income tax and benefit return to calculate how much your CCB payments will be. To get the CCB, you have to file your return every year, even if you did not have income in the year. If you have a spouse or common-law partner, they also have to file a return every year.

    Benefits are paid over a 12-month period from July of one year to June of the next year. Your benefit payments will be recalculated every July based on information from your income tax and benefit return from the previous year.

    If you want to know if you qualify for the CCB check out CRA’s website here.

    GST/HST Credit

    The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low and modest incomes offset all or part of the GST or HST that they pay. You no longer have to apply for the GST/HST credit. The Canada Revenue Agency will automatically determine your eligibility when you file your next income tax and benefit return for the 2014 and later tax years.

    There are various provincial programs related to the GST/HST credit, which you can check on CRA’s website here. For British Columbia, there is the BC Family Bonus and the BC Low Income Climate Action Tax Credit.

    If you have a spouse or common-law partner, only one of you can receive the credit. The credit will be paid to the person whose return is assessed first. The amount will be the same, regardless of who (in the couple) receives it.

    Working Income Tax Benefit

    Your baby is considered an eligible dependent, which means you may now claim the working income tax benefit (WITB), or the amount you claimed before might increase. The WITB is a refundable tax credit that provides tax help for working low-income families and individuals. Eligible individuals and families may be able to apply for WITB advance payments, which are paid quarterly. This credit is especially helpful if you are a single parent.

    Save For Your Child's Education

    It's never too early to start saving for your child's future education by contributing to a registered education savings plan (RESP). Programs such as the Canada education savings grant (CESG) and the Canada learning bond (CLB) are other reasons for creating an RESP for your child. These programs may provide incentives for using an RESP to save for a child's education after high school (post-secondary education).

    With the above credits, there is a disability portion if your child is diagnosed with any kind of disability. All the above credits get an increase for a disable child under 18 years of age. Note that the disability must be severe and prolonged impairment in physical or mental functions.

    If you are having a baby, then these credits can help with the cost of raising them, and you may as well take advantage of them.


    Renovating the Office? Here are Five Things to Think About

    By Randall Orser | Small Business

    Is your small business office getting tired? It may be a time for a change. Maybe you need to create space for new employees, or maybe it just needs an update look. Perhaps you’re just getting started and want your office to reflect your vision. Here are five things to consider before hitting the sledge.

    The Strength of the New Design

    While blending in and being part of the neighbourhood can be good, but not for your office. Your clients need to be able to find you, so make it as easy as pie. Your design should be readily distinguishable, matching your current branding, so people know it right away. For a lot of businesses, that seems to epitomize a large sign. That can be okay in some circumstances, however, you should be afraid to experiment.

    There is still value into fitting into the neighbourhood and surrounding area. If you stick out like a sore thumb, you seem too out of place and that you don’t really belong. While it can be a headache to not clash with fitting in and standing out, it may be worth thinking about that.

    Energy Efficiency

    Today being energy efficient is a big thing, and can work in your favour business wise. You’re just starting out, so you may not have tons of capital, so if you can save on utilities, then great, and energy consumption is a good place to begin.

    It isn’t just the wiring you need to check. If you’re in a colder clime, then ensuring the insulation is sufficient can save you on the heating costs. Upgrading your windows is a good way to keep the heat in and your costs down. Check into your local utilities energy credits or rebates for upgrading your home/office to become more energy efficient.

    Focus on the Most Important Change

    More than likely, you won’t be able to afford all the changes you wish to make, and that’s okay. You need to focus your resources on the most important areas first. Is there anything your new office just can’t do without?

    Analyze your office space. Do you really need to improve it? Will it do for now. Or does it affect company productivity? Is it bleak and putting off to customers? Check your budget, and see where improvements would give you the biggest bang.

    The People Affected

    You’re not alone in your business, nor is the space just for your workforce. You have to think about your customers and your neighbours. While you may think painting the building yellow is a great idea, that may annoy your neighbours, which could affect deals down the road, and there could be legal considerations (bylaws are the first thing that comes to mind).

    You need to have a chat with those involved. Are there any changes your employees may want? They would know what would work for them productivity wise. Of course, you need to go over the renovation plans with them, and how you’re going to deal with any disruptions. Consult your lawyers and see what laws you need to review. You also want to warn your neighbours about any disruptions that the renovation may cause.

    Costs

    Renovations don’t come cheap, and cutting corners is never a good idea. The old cliché holds true ‘you get what you pay for’, and a well-designed office will pay for itself eventually. Your bookkeeper or accountant should be able to help you develop a budget to get what you want, and keep those costs under control.

    Are you doing the work yourself? If you find you need some piece of equipment, rent it instead of buying it as you probably won’t use it again. Check in your network for a dependable contractor, and maybe you can work out a deal for reduced costs such as promising future work or referring them to others.

    Your office renovations can be a thrilling affair for your small business, however, it should be mildly. Rushing into a renovation and without care, could make the office worse than it was before. Take your time. This is your office you’re creating, so ensure it changes into what fits your vision and needs.


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