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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.


Have You Made Donations Yet This Year? 

By Randall Orser | Business Income Taxes

As we’re nearing the end of 2017, it’s a good time to look at your potential deductions for the tax year. Whether you’re someone who donates throughout the year, or just in one lump sum. It’s a good idea to see how much you’ve donated so far, this year, and should you top it up.  You may also be doing a bit of cleaning out this fall and getting rid of things, so may be a good time to think about donating something in kind to your favourite charity. Now is definitely the time to look at what you can contribute to make the most of your tax deduction.

Your donations can consist of monies or gifts to registered charities, and political parties, too. You can look up on Canada Revenue Agency (CRA)’s website to see if the charity you wish to donate to is registered on the Charities Listing page. Ensure the charity is registered here before you give any of your money; this includes charities of foreign countries. Qualified donees are:

  • registered charities;
  • registered Canadian amateur athletic associations;
  • registered national arts service organizations;
  • registered housing corporations resident in Canada set up only to provide low-cost housing for the aged;
  • registered municipalities in Canada;
  • registered municipal or public bodies performing a function of government in Canada;
  • the United Nations and its agencies;
  • registered universities outside Canada that are prescribed to be universities the student body of which ordinarily includes students from Canada;
  • Her Majesty in Right of Canada, a province, or a territory; and
  • before June 23, 2015, registered foreign charitable organizations to which Her Majesty in Right of Canada has made a gift. For gifts made on or after June 23, 2015, registered foreign charities (which now include foreign charitable foundations) to which Her Majesty in Right of Canada has made a gift.

What is the eligible amount of my gift?

In most cases, the eligible amount of your gift is the amount shown on your charitable donation receipt.

However, in more technical terms, the eligible amount of the gift is the amount by which the fair market value of the gifted property exceeds the amount of an advantage, if any, received or receivable for the gift.

The advantage is generally the total value of any property, service, compensation, use or any other benefit that you are entitled to as partial consideration for, or in gratitude for, the gift. The advantage may be contingent or receivable in the future, either to you or a person or partnership not dealing at arm's length with you.

Look at all the donations you have given this year, do they add up to $200 or more? If not, you want to top that up to over $200 as you get a bigger credit for the amounts over $200. Currently, you get 15% tax credit on donations up to $200, and 29% on any amounts over that. For example, you give $750 to charity, you get $30 on the first $200 and $159.50 on the rest for a total of $189.50.

Generally, you can claim on line 340, all or part of these donations, up to a limit of 75% of your net income (line 236). As an exception, gifts of capital property are limited to 100% of your net income. Also, for the year a person dies and the year before, the 75% limit is extended to 100% of the person's net income.

Of course, as always, keep your copies in case CRA asks for them; usually, if you donate quite a bit of your income they’ll check.

First-time donor’s super credit

The First-time donor's super credit (FDSC) supplements the value of the charitable donations tax credit (CDTC) by 25% on donations made after March 20, 2013, by a first-time donor.

For the purpose of the FDSC, you will be considered a first-time donor if neither you nor your spouse or common-law partner (if you have one) have claimed and been allowed a charitable donations tax credit for any year after 2007.

The FDSC applies to a gift of money made after March 20, 2013, up to a maximum of $1,000, in respect of only one taxation year from 2013 to 2017.

If you have a spouse or common-law partner, you can share the claim for the FDSC, but the total combined donations claimed cannot be more than $1,000.

Example

An eligible first-time donor claims $700 of charitable donations in 2016, of which $300 are donations of money. The charitable donations tax credit (CDTC) and the first-time donor's super credit (FDSC) would be calculated as follows:

  • On the first $200 of charitable donations claimed, the CDTC is ($200 x 15%) = $30.
  • On the donations claimed in excess of $200, the CDTC is [($700 − $200) x 29%] = $145.
  • On the donations that are gifts of money, the FDSC is ($300 x 25%) = $75.
  • The total of the CDTC and FDSC is $250.

You do not have to claim all of the donations you made this year on your current year return. It may be more beneficial to carry them forward and claim them on your return for any of the next five years, or over the next ten years for a gift of ecologically sensitive land made after February 10, 2014.

Donating to charity is a worthwhile effort as you are able to help people, feel good about yourself, and get a tax deduction. As with anything in life, it’s a good idea to plan, and track what you’re donating for the year, so as to maximize your tax benefit the most. Check here for some samples of official donation receipts.


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

By Randall Orser | Small Business

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

Keep Your Property Presentable

You must keep up the property in a tidy manner, no one wants to rent a messy place. You may also get a higher rent if you maintain the property, and keep it looking nice. Your renters will feel more confidence that you are a professional landlord when the residence is maintained. If something is in need of repair, fix it, clean up the floors and walls and keep up the landscaping; this makes your rental much more attractive to potential tenants.

Rental properties will need periodic repairs. If you’re not handy yourself, it is a good idea to find a local handyman you can rely on when needed. Your job as a landlord will be much easier if you can find reliable professionals you can call on when needed. Yes, it’s going to cost you money to maintain the property, however, it could cost you more in lost tenants. Plus, you get to write off minor repairs off the rental income.

Always Get it in Writing

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

You should include the following details in any tenancy agreement:

· Start and end date of the rental term

· Security deposit amount

· Monthly rental amount

· The date of the month the rent is due

· Acceptable methods of payment

o How rent should be paid

· If you are allowing direct payments into your bank account, you need to note on the form your bank details.

· The number of keys your giving the tenant

· Who’s responsible for utilities and maintenance

· Any additional fees and disclosures

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

Some other forms to include:

· Pre-tenancy application form

· Security deposit receipt form

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

Acquiring Great Tenants

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

The Taxman Cometh

You need to include rental income on your tax return, using form T776 Statement of Real Estate Rentals. You must keep accurate records of your rental income and expenses each year. These records help you figure out your net profit for the year. The tax you pay will depend on the net income from the rental; any losses will be deducted from your other income and if you have no other income will be carried forward to the next year. Whether a long-term or short-term rental, most rental receipts are considered income for tax purposes.

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

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

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

Are you considered Common-law for Tax Purposes?

By Randall Orser | Personal Income Tax

You and a significant other have decided to take a leap and moved into together; however, you didn’t get married. You may be considered common-law for tax purposes after living together for a certain length of time, whether, you believe so or not. And, you’d better not lie about living together, as this could catch up to you and cost you $1000s in taxes, fines, etc.

What is a Common-law Partner?

This applies to a person who is not your spouse, with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. He or she:

  1. has been living with you in a conjugal relationship, and this current relationship has lasted at least 12 continuous months;
    1. In this definition, 12 continuous months includes any period you were separated for less than 90 days because of a breakdown in the relationship.
  2. is the parent of your child by birth or adoption; or
  3. has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.

If the 90-day period includes the end of the tax year (December 31st), you may want to wait until 90 days have elapsed before filing your return, to avoid confusion and possibly having to submit a request for a change to your return.

If you were separated because of an involuntary separation, you are still considered to have a spouse or common-law partner if you were separated involuntarily. An involuntary separation could happen when one spouse or common-law partner is away for work, school, health reasons, or incarcerated.

And, these rules apply for same-sex couples, too.

What do I do Now that I’m Considered Living Common-law?

The first thing you should do is inform Canada Revenue Agency (CRA) in one of these ways:

  • log in to MyBenefits CRA or MyCRA on CRA’s mobile apps page
    • select “Manage profile details” or "Personal information" then “Marital status”
  • log in to My Account
    • select “Personal information” then “Change my marital status”
  • call the CRA at 1-800-387-1193
  • fill out Form RC65, Marital Status Change, and send it to the CRA

What Changes on My Taxes When I File Common-law?

The benefits you’ve been receiving, such as the GST/HST credit, or Canada Child Benefit (CCB), will be affected by being common-law. As a single person, you may have qualified for the GST/HST credit; however, as a common-law couple you may not. As a couple, CRA combines your income, so you need to have less than $45,000 combined family income to qualify.

The same for the Canada Child Benefit, as a couple the more your combined family income is the less benefit you get. The CCB decreases to zero around $150,000 in combined family income.

There is a plus side to being common-law. You can combine deductions for medical and donations under one spouse. If you don’t have enough medical to qualify individually, you may as a couple. For donations, you only get 15% on $200 in donations, however, you get 29% on the amount over $200. For example, you each have $175 in donations, individually you get 15% of that or $26.25; combined you’d have $350, you get $30 on the first $200 and $43.50 on the other $150 for a combined deduction of $73.50 (that’s almost 3 times as much).

Pension splitting is another area where you can save taxes when living common-law. If one person has a lower income (doesn’t have to be pension), and the other person has a higher income (must be pension based), then they can split the income to lower their tax bill.

There is also the spousal credit which is equivalent to the Basic Personal Exemption. If the spouse has no income then you get the full amount, otherwise, it decreases based on how much the other spouse makes.

If one spouse is going to school then the higher income spouse can claim a tuition/education transfer of up to $5000. And, the higher income spouse can claim the child care expenses if the spouse going to school has no income.

When you’re in a relationship, and you move in together, even without getting married, CRA will consider you common-law after 12 consecutive months. You need to inform CRA once you have lived together 12 consecutive months as any credits you are getting now will change once you are common-law. And, CRA will make you pay back any overpayments.