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Is the Home-Office Deduction Worth it?

By Randall Orser | Small Business

There’s been much speculation about the Federal Liberals and their approach to home-based businesses with them possibly taxing you when you sell your home (principal residence), as your either ran a business out of it or rented part of it out. We’ll talk about the home-office deduction as it relates to business for now. It still could be worth taking.

If you’re working out of your home, it pays to look into the tax deductions available for home office expenses. Even though Canada Revenue Agency has recently tightened its rules regarding these expenses, you can still save significant tax dollars by taking advantage of home office deductions whenever they’re available to you.

If you have an office in your home, and it qualifies as a “home office” for income tax purposes, you can claim a portion of your ongoing home expenses. The portion will normally be based on the fraction of the home that is used for your office (you can usually exclude common areas, such as hallways, kitchen and washrooms, when making the calculation). The fraction of your home can be based on either square feet or the number of rooms.

Your home expenses can add up to quite a bit today, as mortgages are higher and you’re paying more interest (wait until rates go up), property tax and city utilities continue to climb, and insurance rates go up; so, it can add up to quite a bit. Some people can spend quite a bit on their home expenses in a year.

The expenses you can claim include:

· rent, if your home is rented

· mortgage interest (but not the principal portion of blended mortgage payments) for self-employed individuals only

· property taxes

· utilities: electricity, heat, water

· telephone (if you have a separate business telephone which is fully deductible, consider whether you also use your personal phone for business calls)

· outside maintenance: lawn care, snow plowing

· minor repairs and supplies

· home insurance.

These expenses can add up to $20,000 or more per year. Even if you’re only claiming 10%, that’s $2,000 off your net income, and $2,000 you’re not taxed on. Of course, the savings go higher, the more you use your home for business. However, be careful how much you use as depending on your business, too high and it could flag you with CRA.

Currently, you might convert a portion of a principal residence to an office or other work space to use for the purpose of earning income from a business. In such a case, a partial change in use of the principal residence will occur for income tax purposes. This will give rise to capital gains tax implications as described in Income Tax Folio S1-F3-C2, Principal Residence. However, it is the CRA’s practice not to apply the partial change in use rules and resulting capital gains tax implications if the following conditions are met:

  • the income-producing use is ancillary to the main use of the property as a residence;
  • there is no structural change to the property; and
  • no capital cost allowance is claimed on the property.

Whether the use of a work space in a home is secondary to the main use of a home as a residence in any particular case is a question of fact. For example, an individual may convert a portion of a principal residence to a bed and breakfast. In order to have no change in use, it must be determined that the bed and breakfast operation is secondary to the main use of the property as your principal residence.

Now if the government does change its mind and tax you on when you run a business out of your home, then sell that home, you will incur a capital gain based on the percentage of the home you used for business. How much is this going to cost you? Well, that depends on many factors. Here’s a quick example.

Joe Smith has been running a business out of his home for 10 years, and has owned the home for 20 years. He feels it’s time to sell as the home is worth so much more than what he paid for it, and doesn’t need as much space with the kids gone. Joe ends up selling for $1.5 million. He bought the place for $175,000 and put about $50,000 into over the years, for a total of $225,000; his costs to sell were $100,000 (including realty & lawyer fees). That gives him a total cost base of $325,000. His gain is $1.175 million. His business used 25% of the home, therefore, he will be taxed on that portion which equals $293,750. Since Joe is married and his wife is an owner they split this gain.

As you can see this could add up to a lot of taxes owing when you sell your home.

Anything with government can change at the drop of a hat, or a change in who’s running the country. The Federal Liberals haven’t at this moment put up plans to tax Canadians, however, that could change. I believe a change will come after the next election if the Liberals win, and you will be taxed if you ran a business out of your home and sell it. I believe, eventually, we’ll be taxed on the sale of our homes period; there’s just too much money at stake.

Our governments are broke and looking for money, why wouldn’t they when they spend like drunken sailors on leave.

Now’s the Time to Check Your RRSP

By Randall Orser | Personal Income Tax

I know, I know, it’s only July, I don’t want to think about tax stuff. However, now is the perfect time to check where you RRSP contributions have been for the year, and where they’ll be in 6 months. Do you have the room to put more in? Do you have some extra funds lying around? It’s not too late to think about a monthly RRSP contribution rather than that lump sum you do in January or February.

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.

Save Your Small Business with Five Money Measures

By Randall Orser | Small Business

Your business needs money in order to thrive. If capital is insufficient, your business goes under. If your business is not able to make money, then it ceases operations. The fact is that you need to handle your money accordingly for your business to flourish. Cash is king, and the practices below will allow you to take good care of it.

Monitor Accounts Receivables and Accounts Payable

At its essence, a successful business hinges on it making more than it spends. As long as your income is greater than your expenses, you’re making a profit. Your Accounts Receivable are those customers that owe you money, and your Accounts Payable are the suppliers that you owe money, and you need to watch these two very carefully. By not watching the money owed to you and that owed by you, you’re ignoring the essence of business, and you could fail.

Margins are low for most small businesses, so you need to give yourself breathing room as well as take risks to outsmart your competition. That means you need to watch your cash flow so you’re never put yourself out on a limb, and can’t meet payroll or produce your product or service. Always collect your receivables on time, and never let anyone get over your terms, and you’ll have a better picture of what monies are available.

Multiple Streams of Income

Your small business has a collection of devoted customers, which feels awesome, and means a steady income stream, so you can support your plans. Counting on just this small group of devoted customers could end up disappointing you in the end. It’s like a sand castle at the beach, the water eventually comes up and brings it down. Your clients could change their mind at any time and not renew their business with you.

Your best bet is to always be marketing. Don’t just sit back and rest, you need to keep marketing and finding new clients. This doesn’t mean a new product, however, revising your product or service or adding value to what you’re doing now may help. You could look at product or services you could add that are compatible with your existing ones. In the online marketing world, it’s all about the upsell (to try to persuade a customer to buy a more expensive item or to buy a related additional product at a discount), and that’s something you may want to do too. Your safety net is always looking for new clients, that way if your current client base wavers, it won’t bring the entire business down.

Always Be Bootstrapping

When you start out you’re usually not buying things, or paying more than you have to for the items you need in your business. This shouldn’t really stop, though don’t become what I call ‘stupid cheap’. That’s where you are so cheap it hurts the business. That said, spending more than you have to on materials or staff, gives you less to spend in other areas, such as marketing. This wrong spending will ultimately have you questioning what happened.

One area you are probably paying too much is income taxes. Are you keeping all your business receipts? For any expense you claim, you must have a receipt, no exceptions. To learn about what you can and cannot deduct, talk to your bookkeeper or accountant, and if you don’t have one then you need to get one. If you put the effort in now, you won’t end up paying over again for the things you bought for the company. Your bookkeeper/accountant should understand your company, and how it works.

Another thing you probably spend on is office equipment, and this turn into a money waster fast, especially technology. Do you really need that expensive desk? Or that advanced computer? Probably not. Standing desks are great, and I do have one. However, does everyone in the company need one? That can get expensive. As I said before, don’t be ‘stupid cheap’, however, don’t go crazy either and spend on things you don’t need.

Know Your Cost of Goods Sold and Profit Margins

Your products cost money to make, deliver, and store them. This is your cost of goods sold or COGs. Your COGs are all the expenses vital to make your product that you sell. COGs aren’t just how it’s produced, but include labour, customer conversion costs, and more. The goal is to keep this number low, so when you sell you make a profit.

You don’t want to go too low on your costs, as your product quality will suffer. Your COGs are a mix of art and science. The art is in determining what people will want, and what they’re willing to pay. The science is in determining where to price it. Your pricing needs to be fair and steady. In order to compete, you must know all facets of your product’s cost, and if you do then you’ll better manage your money.

Time is Money

You can actually save, or even make, money by outsourcing work, projects, even hiring cleaners. Successful businesses outsource what they can, and as a business owner you should too; look at your weaknesses and hire for those. As they say, time is money, and wasted time is money gone. You’re not bringing in cleaners just to keep the office clean, but to lessen your employees’ stress of having to do it. If you’re employees are having to clean, then they can’t spend their time and energy on the work that needs to be done.

This works for allocating tasks, too. A sick employee is not as productive as a healthy one, so they end up costing you money. Burnout is a major cause of many employees getting sick, or worse, leaving a company. Share the load and save yourself money in sickness and turnovers. The Japanese even have a word for death from overwork called 過労死 (Karō shi). Your business is important, but don’t let it kill you or your employees.

Is this everything to keep in mind about managing your businesses money? No, but it is a step in the right direction. Always be proactive when it comes to keeping your numbers high, being reactive just gets you into trouble, especially when it comes to money. Don’t wait for the problem to be big enough to grab your attention, as you may be too late. Take control now, and these headaches won’t happen to begin with.

Why a Large Refund is Not Necessarily a Good Thing

By Randall Orser | Personal Income Tax

Another tax year’s been filed, and you’re excited as you’re getting a huge refund again this year. That’s great! Or, is it? A large refund is really saying you’re not managing your money as well as you probably could. Financially, getting a refund every year may be doing more harm than good. Wouldn’t you rather get that money on each pay cheque, rather than in one lump sum? Hopefully, after you read this you’ll talk to your human resources department, tax preparer, and your financial planner.

What Does That Large Refund Mean?

What you’ve basically done when you get a large refund is loan the government your funds for a whole year without any interest. Why would you do that? You probably wouldn’t loan a friend or family member money without interest, but you give it to the government. Just think of the ways you could use that large refund, even if it’s only $2,000, you could put that money into an RRSP, or TFSA. Or, invest it into non-registered investments to make some additional cash.

What Should You Do Instead?

If you’re finding that large refunds are a way of life, then you need to figure out what to do so you don’t get those large refunds. The first thing to do is talk to whomever is in charge of payroll at your work: boss, payroll preparer, human resources, etc.

Get a copy of Form TD1, Personal Tax Credits Return, and go through each section and fill in amounts that apply to you. The TD1 form used to determine the amount of tax to be deducted from your employment income or other income, such as pension income. The payroll person, or your tax preparer, can help you figure out the amount of tax exemptions for which you qualify, and fill out the form. You should do a new TD1 each year.

If you find that your tax situation has changed during the year, you can update the TD1 at any time. Many things could change during the year, such as a marriage, divorce, children aging out of credits or going off to college, which could cause either a balance owing or a large refund.

Now What?

You’ve talked to your payroll department, and made the changes to your TD1. You will start to see an increase in your pay cheque as less tax is coming off. The amount won’t be huge; however, you need to look at the overall view. This is where things can get interesting. Figure out how much extra you’re getting on each pay cheque, and setup a new direct deposit with work for that much to go into a savings account (or even a TFSA). If you can’t do that through work, then an automatic transfer into a savings (or TFSA) account will work too. Whether the amount is $20 or $100, do this each pay, and watch your savings grow.

Getting that large refund at tax time, is not necessarily a good thing, especially if you’re using to pay certain bills that come due at that time, such as property taxes. You’re much better off taking that money for yourself each pay cheque, rather than giving it to the government interest free.

Increase your Net Promoter Score and Create Brand Advocates 

By Randall Orser | Small Business

A big thing for larger companies is the Net Promoter Score (NPS). What is this Net Promoter Score? The Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of your customers to recommend your products or services to others. It is used as a proxy for gauging the customer's overall satisfaction with your product or service and the customer's loyalty to your brand. A consulting firm out of Toronto, Bain and Company, says the NPS of companies that attain long lasting, profitable growth are twice that of their competitors.

According to Bain and Company, two beloved brands Apple and American Express, which claim ardent brand advocates, also have high Net Promoter Scores. The inevitable result is that both companies are high valued businesses with profitable organic growth.

Your company if it delivers a higher quality customer experience may get a greater NPS and therefore long-lasting profitable growth. The following three tips can help you do just that.

One approach is to learn where and how to invest in order to boost your customers’ experience and determine the possible outcome.

A favourable customer experience can transform them into a brand advocate; becoming a long-term customer as well as someone who promotes you to others. One way these brand advocates get others to purchase your product or service is to post on websites or blogs a glowing review.

One way to improve your customers’ experience and increase the possibility of them becoming a brand advocate is through ‘loyalty economics’. Improving the customer experience through investment, when done correctly, will achieve direct and quantitative monetary rewards thanks to increasing sales and profits.

Looking at how you can increase your sales is one thing to determine how you should invest to improve the customer experience. Your website is one such place to invest; this could include: load time, minimizing the time and or steps the customer must make before doing an online purchase. You may also want to look at ways to improve the customers’ favour by improving product/service quality, and even making a return or exchange of the purchase much easier.

Another approach to take is look at your company from your customers’ eyes.

The customer experience is the act of interacting with your brand through marketing (ads, flyers, etc.); the attributes of your products and/or services; and customer touch-points, such as your website, storefront or office.

Feedback from your customers is the best way to gauge your customers’ experience from a typical purchase. This feedback will improve your understanding of customers’ expectations and your businesses procedures that don’t positively impact your customers’ experiences. Feedback can also be used to revise processes, such as your marketing or service practices, to improve your customers’ experience.

Create and employ processes that achieve an extraordinary customer experience.

Armed with this customer feedback, you can create a website, and process enhancements that boost the chances of your customer becoming a brand advocate. A restaurant might, for example, focus on diners’ needs, and change check-in processes so reservations are seated in less time with less effort. The experience you provide will ideally be superior to that of your competitors.

Revising your business processes, systems, products and/or services, can be challenging and tedious; however, it’s the best way to accommodate your customers’ needs who are in your profitable customer segments. This process is well worth the effort, as it increases the possibility that doing so increases the number of your businesses brand advocates. You must be customer-focused to create these brand advocates, and this requires you to commit time and effort to your customers’ experience, and aware of their expectations.

Your Notice of Assessment (NOA)

By Randall Orser | Personal Income Tax

You’ve filed your taxes for the year, and now just wait for the notice of assessment to arrive. Many people just ignore this notice until the next tax year, or their mortgage comes due. Your Notice of Assessment has a lot of information in it that could help you to understand your tax filing, your carry forwards for the next year, and any issues that may have turned up with your tax filing. You should keep your notice of assessment for at least 6 years, along with your other tax filing records for that year.

The picture above of the revised notice of assessment that the Canada Revenue Agency will start sending out in February 2016. It includes four notes explaining how the notice’s contact information, account details, key information, and account summary are simplified and easy to understand. The four notes read:

  • “1. Contact info – Appears in the top left corner”
  • “2. Notice Details – Organized so you can easily identify your notice details”
  • “3. Key info – Provides your most important information and if any actions are required”
  • “4. Account summary – Provides you with a status of your account and useful tips”

The Sections of the Notice Explained

Account Summary

The account summary section on your notice shows you the result of the assessed or reassessed return. The result may be a refund, a zero balance, or a balance owing. The amount shown in the account summary also includes any outstanding balances you owe from previous returns.

The account summary may also show the result from concurrent assessments or reassessments.

When you file several consecutive-year returns at the same time, we do a concurrent assessment. For example, you file your 2011, 2012, and 2013 returns together to claim some credits that you didn’t know about before.

When you send us new information that changes your returns for several consecutive years, we do a concurrent reassessment. We reassess all your affected returns at the same time. The result appears in the account summary on the last notice of the series.

Tax assessment summary

The tax assessment summary on your notice lists the main lines on your assessed or reassessed tax return. Beside each line, you can see the amounts CRA used to calculate your balance on this return. You can compare these amounts to the ones on your return to see where CRA made changes, if any.

The summary also shows any penalty and interest we calculated on your refund or amount owing. If you have a balance owing from a previous assessment or reassessment, it will also appear here. If the amounts on any of the main lines differ from yours, see the Explanation of changes and important information section for more details about our changes.

Explanation of changes and other important information

The explanation of changes section on your notice explains in detail the changes or corrections made to your tax return. These changes are based on the information sent with your return and the information CRA has on file.

If, after reviewing your notice, you realize you have new or additional information you want to send in to change your return, see How to change your return.

If you disagree with your assessment or reassessment and want to register a formal dispute, see Complaints and disputes; you have 90 days from the date of the notice to register your dispute.

RRSP/PRPP deduction limit statement

This statement shows your deduction limit for your registered retirement savings plan (RRSP) and your pooled retirement pension plan (PRPP).

Deduction limit

Your deduction limit is the amount of RRSP/PRPP contributions you can deduct for the next year. Your deduction limit will appear on line (A) of your statement. Your statement also shows how CRA calculated your deduction limit. The calculation is based on your:

  • earned income in the previous year;
  • pension adjustments (PAs);
  • past service pension adjustments (PSPAs);
  • pension adjustment reversals (PARs); and
  • unused RRSP deduction room at the end of the previous year

When calculating your deduction limit, CRA takes into account the information you sent with your previous tax returns and the information they have on file.

Available Contribution Room

The last line of the statement gives you your available contribution room for the next year. Your available contribution room is your deduction limit minus any unused RRSP/PRPP contributions you reported in past years that you can deduct for next year. Your unused contributions appear on line (B) of your statement.

If the total RRSP/PRPP contributions, including your current and unused contributions, you claim on your return are less than your deduction limit, you have available contribution room to carry forward to the next year.

Excess Contribution

If your RRSP/PRPP contributions are more than your deduction limit, you have an excess of contributions. You may have to pay tax on this excess amount. For more information on RRSP/PRPP contribution and deduction rules, see How much can I contribute and deduct?

Other Sections You May Find on Your Notice

Home Buyers’ Plan (HBP) statement

If you participate in the Home Buyers’ Plan (HBP), you will see your HBP statement on your notice of assessment or notice of reassessment. The HBP lets you withdraw up to $25,000 in a calendar year from your RRSPs to buy or build a qualifying home for yourself or for a related person with a disability. Your statement shows your remaining balance to repay, and your minimum required repayment for the next year.

CRA calculates your balance by subtracting the following amounts from the total you withdrew from your RRSP: total repayments, cancellations, differences included in income

Your minimum required repayment is a portion of the balance you have left to repay. If you pay less than the minimum amount, you will have to include the difference as RRSP income on your return.

Lifelong Learning Plan (LLP) Statement

If you participated in the Lifelong Learning Plan (LLP), you will see a Lifelong Learning Plan Statement on your notice of assessment or notice of reassessment. The LLP lets you withdraw amounts from your RRSPs to pay for full-time training or education for you or your spouse or common-law partner. This statement shows the balance left to repay, and the minimum required repayment for the next year.

CRA calculates your balance by subtracting the following amounts from the total you withdrew from your RRSP: total repayments, cancellations, differences included in income

Your minimum required repayment is a portion of the balance you have left to repay. If you pay less than the minimum amount, you will have to include the difference as RRSP income on your return.

If your notice included a cheque

If you think the amount is correct, you can cash your cheque at any time. If you believe that the amount of your cheque is incorrect, review the information on your notice to see if there are any changes or errors. If you find a mistake in the calculation of your refund or benefits, go to How to change your return to find out how to ask for an adjustment.

The Government of Canada is switching to direct deposit. For information about direct deposit and how to sign up, see Direct deposit.

If your notice indicates you need to make a payment, you can pay via your online banking using Pay Bills; send a cheque along with the remittance portion to CRA, you may be able to make a payment at your local branch; however, many banks are no longer taking government payments.

Your notice did not include a cheque or a remittance voucher

If you received a notice with no cheque or remittance voucher, it could be because:

  • CRA calculated a zero balance on your return, so you don’t have a refund and you don’t owe any money on this return. CRA sent you the notice for your information only. Keep it for your records; or
  • you paid the amount owing at the time you filed your return, so your return should show the amount due and the amount already paid. CRA sent you the notice for your information only. Keep it for your records; or
  • CRA deposited your refund directly into your bank account. Your notice should show the amount that was deposited. Keep your notice or statement for your records

Your notice of assessment can come in pretty handy, and gives you information on your tax filing. If you are using a tax preparer, it is important to ensure they get a copy of this notice, especially if the assessment is different than what was filed. Today, CRA has instituted a way for preparers to get copies of NOAs without you having to directly give consent, but by ticking a box on the T183 Electronic Filer form.

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Stand Head and Shoulders Above Your Competition 

By Randall Orser | Small Business

Value matters to your customers, and they’re willing to pay well for it. The problem. How is that value perceived? While appealing to your customers’ tastes can be a good strategy, it’s unpredictable. For example, cilantro is in a love/hate relationship with many people. A large portion of the population hate it as it tastes like soap to them; I’m one of those. If you’re running a restaurant and want to regularly perform well, you may have to take peoples hate of cilantro into consideration.

Make the Customer Lazy

Sheer convenience is why the fast food industry does so well, and has for quite some time. You know the food won’t be that great, but you do know it’s consistent and fast when you’re in a hurry. If you want to increase value, convenience, is the easiest action, as you’re taking up as little of the customers’ time as feasible.

We’ve done that with our Just Say: “Stuff It” To Bookkeeping™ system. All the customer has to do is stuff an envelope, we pick it up and that’s it for them. No scanning or taking pictures of receipts. Pretty simple and convenient.

Improve Customer Experiences

In this day and age of business, it’s all about the experience, not just your product or service. Take a restaurant for example, it’s not just judged on the food, but the wait time, the servers, the feel of the place, etc. A rude or distracted server can ruin your healthy appetite, or worse, drive your customers away before even eating a meal. For your business, no matter what it is, cheerful and affable surroundings is best. Many in the internet marketing business use upsells, and you may want to think about it for your business, too. However, toning down the upsells, may be best, especially if you’re using hard sell tactics. Options are always a good thing, but browbeating your customers, not so much.

Anticipate What Your Customers Want

“Customers don't know what they want until we've shown them," Steve Jobs. This quote is certainly true as most customers don’t know what they want until shown. Ironically, they also want something they don’t know they wanted before they even know it exists. Confusing, right? Look at customer complains that just don’t seem to make sense—they know they want something, but just can’t put it into words. For your business to succeed, you need to figure out a way of answering those wants. The easiest way, say for a restaurant, to meet such wants would be to offer a selection of cold desserts or drinks as the summer season begins.

Make Your Offer a Cut Above

Your business will thrive if you offer your customers a product/service that is superior to that of your competition. What is superior? That’s the thing you need to figure out. For a restaurant, it’s not just about taste, though that’s crucial. What does your customer want? Once you establish what they want, create that. For a place that does fast food, then consider easy to eat foods. For a buffet restaurant, look at offering a better selection, or more of what customers truly want.

Value, Value, Value and the More the Better

On occasion, quantity can trump quality, especially in the case of value. Want to get customers to pick you over the competition? Then make them feel that they’re getting lots for their money. The best way to evaluate your customer offerings is to look at your industry standards. What does everyone else in your industry offer at that price point? How can you improve on that? Get people to flock to your door by offering some so much more and different than the competition.

You may think everyone needs your product or service, and they may just so, but that doesn’t mean your business will be successful. Competition is harsh, but isn’t that what you signed up for anyway? You will have a successful business if you concentrate on your customers’ wants, and work hard.

How to File a Formal Dispute with Canada Revenue Agency (CRA)

By Randall Orser | Small Business

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You’ve just gotten back your tax notice of assessment, and notice that it’s different. Perhaps you missed something when you filed your taxes, or maybe, CRA has made an error when processing your tax return. If you disagree with an assessment, determination, or decision, you have the right to register a formal dispute.

What happens if I do not agree with the Notice I received from the CRA about my income tax or I have more information to provide?

If you have received a Notice of Assessment, Notice of Reassessment, Notice of Determination, or Notice of Redetermination and you do not think that it is correct or you have additional information for CRA to consider, please review the following Questions to determine the best course of action for you to take.

Question:
Do you want to provide the Canada Revenue Agency (CRA) with missing information for a tax return you have filed with us previously?

Action:
If so, rather than filing an objection, generally you can ask for a change to a personal tax return (T1) for a tax year ending in any of the 10 previous calendar years. For example, a request made in 2016 must relate to the 2006 or a later tax year to be considered. You will find the steps to follow and processing timeframes by visiting www.cra.gc.ca/changereturn.

You can also ask for a change to a corporate tax return (T2). You will find the steps to follow by visiting Requesting a reassessment of your T2 return.

The Voluntary Disclosures Program gives you a second chance to change a tax return you previously filed or to file a return that you should have filed. You can apply to the CRA to ask for relief of prosecution and penalties. www.cra.gc.ca/voluntarydisclosures/

Question:
Did the CRA send you an income tax assessment notice for a tax year that you had not previously filed a tax return and did you want to provide the CRA with information that may change that assessment?

Action:
If so, rather than filing an objection, you can still send your tax return to CRA. Information on how to send us your return can be found here by visiting Send us your return.

Question:
Did you submit your receipts and records to CRA and you did not receive the outcome you expected or the issue was not resolved to your satisfaction? This means, that you provided the requested information to CRA and you received your Notice of Assessment, Notice of Reassessment, Notice of Determination, or Notice of Redetermination and you think they have misinterpreted the facts or applied the law incorrectly.

Action:
You may have the right to object and submit an objection. Information about filing an objection can be found below.

Please note that if you received a request to provide information during an audit or were otherwise contacted by CRA with a request to provide additional information and you did not respond to those requests and you chose instead to provide this information as part of an objection, your information may be referred back to the original area for a second review.

Can I file an income tax objection?

You or your authorized representative can file an income tax objection if you have received any of the following:

  • Notice of Assessment;
  • Notice of Reassessment;
  • Notice of Determination; or
  • Notice of Redetermination.

You cannot file an objection to dispute the following: a Statement of Account, or a proposal letter from an auditor.

You are required to clearly explain why you disagree with the assessment or determination and also include all of the relevant facts and reasons.

The time limits for filing an objection are as follows:

If you are an individual:

  • the time limit for filing an objection is whichever of the following two dates is later:
    • one year after the date of the filing deadline for the return (April 30 or June 15), or
    • the day that is 90 days after the day of sending the Notice of Assessment (the date of the notice or notification).

If you are a business or for assessments of taxes in respect of over-contributions to a registered retirement savings plan (RRSP) or tax-free savings account (TFSA):

  • the time limit to file an objection is within 90 days of the day we sent the Notice of Assessment or Reassessment (the date of the notice or notification).

What if my objection is past the time limit?

If you did not file your objection on time because you attempted to have your change made by contacting the originating CRA office or because of circumstances beyond your control, you can apply for a time extension to file an objection. You can apply by writing to the Chief of Appeals at your Appeals Intake Centre (see Appendix B of pamphlet P148), or by using the My Account or My Business Account online services. You have to explain why you did not file your objection on time along with the facts and reasons of your objection.

The application for a time extension to file an objection must be made within one year after the expiration of the time limit to file an objection.

How do I file an income tax objection?

Here is what you provide when you file an income tax objection:

  • clear details of the issue(s) you are disputing, for example: I received a reassessment and my expenses were reduced because my receipts were disallowed. I believe that my receipts qualify as proof of my expenses because (insert reasons), and
  • any documentation to support your claim.

For an example of an income tax objection letter, see Appendix A of pamphlet P148 Resolving your dispute: Objection and appeal rights under the Income Tax Act.

You will find the steps to follow to file an objection and processing timeframes below. It is important to always provide all relevant information to CRA to allow for a complete consideration of the issue, at the assessing, audit, and objection stages.

You or your authorized representative can file an objection in one of the following ways:

In all cases, you should clearly explain why you disagree and include all relevant facts, reasons, and supporting documents.

Filing an objection to a notice of assessment or (re)assessment is your right, and you should take advantage of such if you feel the assessment is incorrect. Make sure you have all the documents you need to support your appeal, and that you have explained all the circumstances that apply to said appeal. In the end, CRA is reasonable and usually an appeal does get you some satisfaction, and at least a better understanding of why your claim was originally denied.

Kill Your Dream Faster with These Five Mistakes

By Randall Orser | Small Business

How many dreams die because of a mistake? As an entrepreneur, you’re going to make mistakes, maybe learn from them, however, you don’t have to be learning from mistakes. Yes, you remember better from mistakes, but you can learn better without having to throw away months of hard work.

Forgetting Profit

Emotional rewards abound from starting a business. Being the boss of the whole thing is a great freedom, and isn’t that why you started in the first place. As Harry Truman said, ‘The buck stops here’, and that’s a great feeling. Your emotional rewards are definitely important, however, don’t get stuck on those alone as you can’t survive on joy and contentment.

Not taking into account profit of your business, can kill your dreams faster than anything. Wanting more out of your business than profit is great, and that emotional connection is needed. That said, you’ll doom the business if it’s not making money (profit). You need a business plan that helps you make money, so you can run your business, and sell your product or service.

Doing it all Yourself

A business is a many armed beast, you can’t do it all, and can’t be everywhere. Let’s face it, we all have our weaknesses, and need to think where we fall down. Are you good at marketing? What about the numbers side of things? Figure out your weaknesses find people to work them, do what you can’t and be where you’re unable. Delegation is a big key to running a successful business, otherwise you’ll kill it.

Is your venture meant to expand? Not all are, depending on your offering, or your desires. In such a case, doing it all may be okay, if you’re going to stay small.

Misjudging Demand

As an entrepreneur, you probably understand if no one buys, you don’t make money, but that’s as far as your understanding may go. Many businesses get caught up on one person buying, which proves that someone wants it, but a successful company is not made on one client.

As an entrepreneur, misjudging the number of prospective clients is the biggest mistake you can make. That’s more than just miscalculating future revenue; it’s misunderstanding your businesses viability. Once you have your product or service idea, think about your ideal client who’d buy it before even producing said product or service. You don’t want to waste time or resources because you had to change direction halfway. Think about pre-selling or crowdfunding as a way to get interest, and have some startup money.

No Unique Selling Proposition

A great product is pointless, and not a determining factor in your businesses success. Competition is fierce nowadays, and doing the same thing as you, so to get your market’s attention you need a Unique Selling Proposition (UPS), which shows how your product or service is unique from everyone else’s. You need on for each product or service you sell. Apple and Samsung are good examples. Their smartphones have comparable performance, but different in the apps available, how their app stores are setup, to how they work with other devices. Apple’s real difference is their ecosystem, which most others don’t have.

The days of jumping into an industry, and putting out your product or service are gone. You need something to urge customers to leave their existing supplier and come over to you. You can’t compete if you don’t have something unique to offer. That could be something as simple as a pickup service or drop off service.

Your Accounting Sucks

Everything has a cost. Especially when it comes to finding a business location, as you may have to focus on one area over another, or be home-based at the start. Money & time are one of the more literal and direct costs of your business. Under-funding is one of the biggest startup killers. Remember, if you don’t have money you can’t work your business.

You need room to breathe, whether it’s your plan, or your estimates. More than likely, it’ll take longer than expected, and cost more than you thought. Keep yourself safe by overestimating (being conservative).

Entrepreneurship is risky, even if it’s done perfectly. You may be strong in your way, but some errors will kill your business. You don’t need to see your business crash and burn to learn from those mistakes. Do your due diligence before you start, and you’ll succeed.

Home Accessibility Expenses 

By Randall Orser | Small Business

For the 2016 tax year, the government added Home Accessibility Expenses. This a non-refundable tax credit for those expenses you incurred to make your home more accessible for yourself, or a spouse, a parent, or a child that you care for. Whomever the expenses are incurred for, they must either qualify for the Disability Tax Credit, or be over 65 years of age. This being a non-refundable tax credit, it must be used in the year the expenses are incurred, and cannot be carried forward.

Are you eligible?

You can claim an amount for the eligible expenses for a qualifying renovation of an eligible dwelling, if:

  • you are a qualifying individual; or
  • an eligible individual making a claim for a qualifying individual.

A qualifying individual is:

  • an individual who is eligible for the disability tax credit for the year; or
  • an individual who is 65 years of age or older at the end of a year.

An eligible individual is:

  1. a spouse or common-law partner of a qualifying individual; or
  2. for a qualifying individual who is 65 years of age or older, an individual who has claimed the amount for an eligible dependent (line 305), caregiver amount (line 315) or amount for infirm dependents age 18 or older (line 306) for the qualifying individual, or could have claimed such an amount if:
    • the qualifying individual had no income;
    • for the eligible dependent amount, the individual was not married or in a common-law partnership; and
    • for the amount for an infirm dependent age 18 or older, the qualifying individual was dependent on the individual because of mental or physical infirmity.

OR

  1. If (2) does not apply, an individual who is entitled to claim the disability amount for the qualifying individual or would be entitled if no amount was claimed for the year by the qualifying individual or the qualifying individual's spouse or common-law partner.

Do you have an eligible dwelling?

An eligible dwelling is a housing unit (or a share of the capital stock of a co-operative housing corporation that was acquired for the sole purpose of acquiring the right to inhabit the housing unit owned by the corporation) located in Canada and meets at least one of the following conditions:

  • it is owned (either jointly or otherwise) by the qualifying individual and it is ordinarily inhabited (or is expected to be ordinarily inhabited) in the year by the qualifying individual, or
  • it is owned (either jointly or otherwise) by the eligible individual and is ordinarily inhabited (or is expected to be ordinarily inhabited) in the year by the eligible individual and the qualifying individual, and the qualifying individual does not throughout the year own (either jointly or otherwise) and ordinarily inhabit another housing unit in Canada.

Generally, the land on which the housing unit stands, up to ½ hectare (1.24 acres), will be considered part of the eligible dwelling.

A qualifying individual may have only one eligible dwelling at any time, but may have more than one eligible dwelling in a year (for example, in a situation where an individual move in the year). When a qualifying individual has more than one eligible dwelling in a year, the total eligible expenses for all such eligible dwellings of the qualifying individual cannot be more than $10,000.

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:

  • allow the qualifying individual to gain access to, or to be mobile or functional within, the dwelling; or
  • reduce the risk of harm to the qualifying individual within the dwelling or in gaining access to the dwelling.

An item you buy that will not become a permanent part of your dwelling is generally not eligible.

Eligible expenses

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: building materials; fixtures; equipment rentals; building plans; and permits.

However, the value of your own labour or tools cannot be claimed as eligible expenses.

Work performed by a family member

Expenses are not eligible if the goods or services are provided by a person related to the qualifying individual or the eligible individual, unless that person is registered for goods and services tax/harmonized sales tax (GST/HST) under the Excise Tax Act. If your family member is registered for GST/HST and if all other conditions are met, the expenses will be eligible.

Work performed by professionals

Generally, paid work done by professionals such as electricians, plumbers, carpenters and architects for eligible expenses qualifies. If you're planning on hiring a contractor to do construction, renovation, or repair work on your home, the Get it in writing! website has information that will help you.

Ineligible expenses

The following expenses will not be eligible:

  • amounts paid to acquire a property that can be used independently of the qualifying renovation;
  • the cost of annual, recurring, or routine repair or maintenance;
  • amounts paid for household appliances;
  • amounts paid for electronic home-entertainment devices;
  • the cost of housekeeping, security monitoring, gardening, outdoor maintenance, or similar services;
  • financing costs for the qualifying renovation; and
  • the cost of renovation incurred mainly to increase or maintain the value of the dwelling.

Other factors to consider

Medical expense tax credit (METC)

You may have an eligible expense that also qualifies as a medical expense. If so, you can claim the expense as a medical expense and a home accessibility expense.

Condominium and co-operative housing corporations

For condominium or co-operative housing corporations, your share of the cost of eligible expenses for common areas qualifies.

Other government grants or credits

The expenses are not reduced by assistance from the federal or a provincial government, including a grant, forgivable loan, or tax credit.

Vendor rebates or incentives

Eligible expenses are generally not reduced by reasonable rebates or incentives offered by the vendor or manufacturer of goods or the provider of the service.

Business and/or rental use of part of an eligible dwelling

If you earn business or rental income from part of an eligible dwelling, you can only claim the amount for eligible expenses incurred for the personal-use areas of your dwelling.

For expenses incurred and/or goods acquired for common areas or that benefit the housing unit as a whole (such as a ramp or hand rails), you must divide the expense between personal use and income-earning use.

Completing your tax return

To claim home accessibility expenses complete Schedule 12, Home accessibility expenses, and report the amount from line 4 of Schedule 12 on line 398 of Schedule 1, Federal Tax.

A maximum of $10,000 per year in eligible expenses can be claimed for a qualifying individual. When there is more than one qualifying individual for an eligible dwelling, the total eligible expenses cannot be more than $10,000 for the dwelling. The claim can be split between the qualifying individual and the eligible individual(s) for the qualifying individual. If the claimants cannot agree to what portion each can claim, the Canada Revenue Agency (CRA) will determine the portions.

Supporting documents

Eligible expenses must be supported by acceptable documentation, such as agreements, invoices, and receipts. They must clearly identify the type and quantity of goods bought or services provided, including, but not limited to, the following information, as applicable:

  • information that clearly identifies the vendor/contractor, their business address, and, if applicable, the GST/HST registration number;
  • a description of the goods and the date when the goods were bought;
  • the date when the goods were delivered (keep your delivery slip as proof) and/or when the work or services were performed;
  • a description of the work done, including the address where it was done;
  • the amount of the invoice;
  • proof of payment. Receipts or invoices must show that bills were paid in full or be accompanied by other proof of payment, such as a credit card slip or cancelled cheque; and
  • a statement from a co-operative housing corporation or condominium corporation (or, for civil law, a syndicate of co-owners) signed by an authorized individual identifying:
    • the amounts incurred for the renovation or the alteration work;
    • as a condominium owner, your part of these expenses if the work is done on common areas;
    • information that clearly identifies the vendor/contractor, their business address and, if applicable, their GST/HST registration number; and
    • a description of the work or services done and the dates when the work or services were done.

The Home Accessibility Expenses credit can give you a bit of tax relief if you’ve had to make your home more accessible for yourself or a dependent. Even if you’ve gotten federal or provincial assistance, you can still claim the expenses for this credit.

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