Significant changes due to the COVID-19 pandemic, and numerous tax issues to be aware of this year
Different ways to legally smooth income over a number of years… Maximizing access to the lowest marginal tax rates.
A list of tax deductions or credits to consider in the upcoming tax season
Deducting personal expenses in a corporation can lead to a very costly bill, as in Tax Court of Canada case, July 23, 2020
A webpage, was launched to help manage one’s business during COVID-19; Canada Emergency Wage Subsidy estimator 2.0.
As of August 9, 2020, the Government has approved 813,570 Canada Emergency Wage Subsidies (CEWS), with a total value exceeding $26 billion.
To estimate your CEWS entitlement, consider using the CEWS 2.0 Estimator at WageSubsidyCalculator.ca, or CRA’s more complete calculator at https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html.
The Government has launched a webpage, https://www.canada.ca/en/services/business/maintaining-your-business.html, to help manage one’s business during COVID-19. It provides links to government financial supports and loans, reopening guidance and rules, employee issues, industry-specific assistance, tax issues, and a support phone line.
Factors should be considered for businesses struggling to collect outstanding amounts
Demonstrate how different portions of the home were used for business, and to what extent to make the expenses eligible for deduction
Where the 20-hour test is not met, the ongoing nature and labour requirements must be considered and still not be subject to TOSI.
Criterion for identifying individuals who have significant control over a corporation
Over the past few years there has been much discussion at both the federal and provincial levels in respect of increased disclosure and tracking requirements of beneficial owners (those who may be considered owners even if not on title) of various types of property.
Recent changes to the Canada Business Corporations Act , which came into force on June 13, 2019, incorporated these discussions. The legislation sets out a criterion for identifying individuals who have significant control over a corporation and also requires certain corporations to keep a register of these individuals.
For these purposes an individual may have significant control over a corporation if the individual has any of the following interests or rights, or any combination of them, in respect of a significant number of shares (more than 25% of voting rights or value) of the corporation:
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the individual is the registered holder;
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the individual is the beneficial owner; or
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the individual has direct or indirect control or direction over.
A group of two or more individuals whose joint holdings meet these criteria are considered to be an individual with significant control.
Also, an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation, would be considered to have significant control. The legislation also provides that other prescribed situations may result in an individual having significant control.
Directors, shareholders and creditors of the corporation may, on application, be able to access the register.
Failure to comply with the requirements to maintain a registry may be subject to a $5,000 penalty. A director or corporation who “knowingly authorizes, permits or acquiesces” in not fulfilling this requirement or who provides false or misleading information in the registry may be subject to a fine of up to $200,000 and/or imprisonment of up to six months.
Similar requirements are currently being considered or enacted in respect of corporations governed by various provincial corporations acts.
ACTION ITEM: Consider whether your corporation is subject to this new requirement. If so, ensure that a proper register is being maintained.
Gathering information about taxpayers using third parties. CRA must first obtain the authorization of a judge.
CRA uses third parties to get information about other taxpayers to ensure they are complying with their tax responsibilities. This could include obtaining information from a business about its employees, customers or suppliers, without needing to list their specific names. CRA has recently announced that they intend to continue and increase the use of these information gathering methods. In order to obtain such information without providing specific names, CRA must first obtain the authorization of a judge.
In an April 24, 2019 Federal Court case, CRA applied for judicial authorization to require the taxpayer, a roofing material supplier, to provide information about residential and commercial construction contractors who had an account with them. Specifically, CRA requested:
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the customers’ legal name, business or operating name, contact person, business address, postal code, and all telephone numbers on file;
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the customers’ business numbers, if known;
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the customers’ itemized transaction details including invoice date, invoice number, total sales amount, method of payment, and address of delivery; and
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all bank account information for the customer from credit applications and/or otherwise maintained by the taxpayer.
The information was sought for customers whose total annual purchase and/or billed amount was $20,000 or greater for the period January 1, 2015 to June 30, 2018. For January 1, 2018 to June 30, 2018, information on customers whose total annual purchase and/or billed amount was $10,000 or greater was to be provided.
The Court authorized the CRA to impose the information request on the taxpayer.
ACTION ITEM: CRA has indicated that they will make increased use of this ability to obtain information from one taxpayer about their customers. Consultation should be sought immediately if such a request is received.