tax – Page 2 – Small bussiness accounting solutions

Reimbursing Employees for Technology Costs: Working from home

August 23, 2020 0 By Xienan Shaw

Up to $500 reimbursement to employees for the personal purchase of equipment for working remotely

Reimbursing Employees for Technology Costs: Working from home

In an April 14, 2020 French Technical Interpretation, CRA was asked whether amounts paid to an employee for costs of equipment for working remotely would be a taxable benefit.

Generally, a reimbursement for a personal purchase of equipment used for working remotely would be a taxable benefit. However, CRA noted that in the context of the COVID-19 pandemic, which has required many employees to work remotely, acquisition of computer equipment may be primarily for the employer’s benefit. In that context, CRA indicated that no taxable benefit would arise for a reimbursement, supported by actual invoices or receipts, of no more than $500 towards such equipment.

CRA also stated that a non-accountable allowance would always be taxable, as no provision would provide for an exclusion of such amounts.

CRA did not comment on the consequences if the equipment were used exclusively for employment and was owned by the employer, not the employee. CRA has indicated in the past that, where equipment is property of the employer, and any personal use is incidental, there would be no taxable benefit to the employee.

ACTION ITEM: Consider providing a reimbursement to employees for the personal purchase of equipment for working remotely of up to $500.

ELIGIBLE EXPENSES-BUSINESS USE OF HOME

June 27, 2020 0

Demonstrate how different portions of the home were used for business, and to what extent to make the expenses eligible for deduction

TAX ON SPLIT INCOME: The 20 Hours Test

March 11, 2020 0 By Xienan Shaw

Where the 20-hour test is not met, the ongoing nature and labour requirements must be considered and still not be subject to TOSI.

EMPLOYMENT EXPENSES Costs of an Assistant

February 19, 2020 0 By Xienan Shaw

A deduction can be claimed for salary paid to an assistant. Any deduction must be for salary, requiring it be paid to an employee.

EMPLOYMENT EXPENSES Costs of an Assistan

A November 5, 2019 Tax Court of Canada case reviewed the deductibility of employment expenses by a manager overseeing the Canadian sales force and operations of a multinational manufacturer of dental instruments and products. The taxpayer’s employer had no Canadian office, and she travelled extensively to meet with sales representatives, dealers and customers throughout Canada.

Expense of assistant

Almost half of the taxpayer’s claimed expenses, which exceeded $80,000, related to her husband’s role as her assistant. The Court noted that a deduction can be claimed for salary paid to an assistant, but that there were several problems with her claim, including the following:

The taxpayer’s husband was treated as self-employed and not as an employee. Any deduction must be for salary, requiring it be paid to an employee. This alone was fatal to the deduction claim.
The amount was not paid to her husband. Rather, they simply had a single joint bank account through which they both transacted. Lack of payment alone would prevent any deduction.
The taxpayer’s employer indicated it was the taxpayer’s decision whether she required an assistant. As her employer didnot require her to hire an assistant, no deduction was available. This item alone would also prevent any deduction.
The husband’s services described were largely clerical, administrative, secretarial or driving, for which his hourly fee of $75 was not “anywhere close to the range of reasonable”.
The husband’s hours set out in quarterly billings were not supported – he could only account for a small fraction of the hours invoiced.
The husband claimed business expenses of almost 75% of his fees; however, the couple could not describe what expenses he incurred. The taxpayer “was sure this was a mistake”.

No deduction was allowed for these costs.

ACTION ITEM: Support and documents are often requested by CRA when deductions against employment income are claimed. Ensure to retain all such support. If no T2200 has been provided for the current year, enquire with your employer as to whether one is available for the next.

MOTOR VEHICLE EXPENSES Deductible?

February 12, 2020 0 By Xienan Shaw

Produce a T2200 which indicate that motor vehicle expenditures were requirements of employment with records such as repair receipts

MOTOR VEHICLE EXPENSES Deductible?

In a September 17, 2019 Tax Court of Canada case, at issue was the deductibility of vehicle expenses, and in particular, the portion of total vehicle use that was for employment purposes. While initially challenged by CRA, the Court eventually accepted the credit card statements as support for the amounts expended. The taxpayer held and produced a T2200 which indicated that motor vehicle expenditures were requirements of employment.

Taxpayer loses – vehicle expenses

The taxpayer had initially claimed 90% employment usage but later asserted that only 1,015 of her total 1,353 kilometres travelled (75%) were for employment purposes. This percentage is used to determine the portion of total vehicle expenses that can be deducted. The Court then noted that the total kilometres driven for the year were more likely approximately 10,000 based on the odometer readings listed on the third-party garage repair invoices provided throughout the year. As the reported employment kilometres (which were supported by a vehicle log) were about 10% of the total reported on the invoices, only 10% of expenses were allowed.

ACTION ITEM: In addition to employment/business travel logs, CRA may ask for support of total travel. Retain records that support total kilometres traveled such as repair receipts.

U.S. EXPATRIATES New Relief Procedures

February 12, 2020 0 By Xienan Shaw

IRS announced a new process to facilitate eligible individuals in becoming compliant with their U.S. tax obligations, in conjunction with renouncing their U.S. citizenship

U.S. EXPATRIATES New Relief Procedures

On September 6, 2019, the IRS announced Relief Procedures for Certain Former Citizens, a new process to facilitate eligible individuals in becoming compliant with their U.S. tax obligations, in conjunction with renouncing their U.S. citizenship (IR-2019-151). There was no announced specified termination date; however, a closing date will be announced in the future.

Eligible individuals will be required to file U.S. tax returns, including all relevant disclosure filings, including financial account disclosures, for the year they renounce their citizenship and the five preceding years. Eligibility criteria include the following:

Only individuals (not corporations, trusts, partnerships, estates or other entities) are eligible.
Past non-compliance must be non-willful.
The individual must never have filed as a U.S. citizen or resident (an FAQ question indicated that prior filing of a 1040NR return, in the belief the individual was neither a resident nor a citizen will not disqualify them).
The individual’s net assets cannot exceed $2 million U.S. at either the date of relinquishing citizenship or the date of the submission under these procedures, and their average net income tax for the five years preceding loss of citizenship cannot exceed an inflation-adjusted amount ($168,000 U.S. for 2019).
Taxes payable for the six years required to be filed cannot exceed $25,000 in aggregate after foreign tax credits and before penalties or interest are calculated. This does not include the “exit tax” which might apply outside the procedure, but is also not reduced for any U.S. withholdings.
The individual must have relinquished U.S. citizenship after March 18, 2010.
The individual must obtain a Social Security Number, if they do not already have one.

Assuming these criteria are met, no penalties or interest will apply, and any taxes payable for the six years, up to the $25,000 maximum, will be waived entirely. The individual will also be exempt from the “covered expatriate” rules, which could otherwise impose additional tax and filing requirements. However, the IRS will process submissions by non-eligible individuals under the ordinary rules, potentially attracting significant interest and/or penalty charges.

ACTION ITEM: Often, children of U.S. parents are surprised to learn that they too are considered U.S. persons and subject to U.S. taxation. This program may assist them in correcting their affairs and obligations.

ADOPTION EXPENSES Step-Child

February 5, 2020 0 By Xienan Shaw

Legally adopting the child of a common-law partner may claim the costs under the adoption expense tax credit.

ADOPTION EXPENSES Step-Child

In a June 20, 2019 Technical Interpretation, CRA was asked whether a taxpayer legally adopting the child of his or her common-law partner would be eligible to claim the costs under the adoption expense tax credit ($16,255 @ 15% for 2019). CRA opined that the credit could be claimed by the adoptive parent, but not by the biological parent, despite the usual ability for spouses to split this credit. CRA also noted that the provincial adoption law would have to be reviewed to determine whether a step-parent could legally adopt the child. In this case, noted as being in Alberta, provincial law allows the claim.

ACTION ITEM: Ensure to provide receipts associated with the adoption of a step-child when delivering your personal tax information.

FEDERAL CARBON TAX Costs and Rebates

February 5, 2020 0 By Xienan Shaw

The Department of Finance announced the climate action incentive payment amounts for 2020. The following amounts may be claimed on the 2019 personal tax returns:

FEDERAL CARBON TAX Costs and Rebates

On December 16, 2019, the Department of Finance announced the climate action incentive payment amounts for 2020. These payments are associated with the provinces that are subject to the federal backstop legislation. The following amounts may be claimed on the 2019 personal tax returns:

Category	Ontario	Manitoba	Saskatchewan	Alberta
Single adult/first adult in a couple	$224	$243	$405	$444
Second adult in a couple or first child of a single parent	$112	$121	$202	$222
Each child under 18 not already included above	$56	$61	$101	$111
Baseline example for family of four	$448	$486	$809	$888

A 10% supplement is available for those that live in rural areas (communities outside of census metropolitan areas, CMAs).

The 2020 climate action incentive payment payable to eligible Albertans will reflect fuel charge proceeds generated over a 15-month period. This consists of three months (January – March 2020) with a carbon price of $20 per tonne, plus 12 months (April 2020 – March 2021) with a carbon price of $30.

Also note that no federal incentive payments will be available for residents of New Brunswick this year since it will introduce a provincial program commencing on April 1, 2020 which removes the applicability of the federal backstop legislation.

ACTION ITEM: Ensure that changes in family status (marriage, new children etc.) are included in your 2019 personal tax return to get the full benefit of the program. Also note that most other provinces have similar rebate/incentive programs in place.

TAX TICKLERS some quick points to consider JAN 2020

January 28, 2020 0 By Xienan Shaw

zero-emission vehicles, associated with an income earning purpose, may be eligible for a 100% immediate write-off

TAX TICKLERS some quick points to consider

The amount of income an individual can earn without paying tax (basic personal amount) will begin increasing in 2020. In the first year, it will rise to $13,229 (from $12,069 in 2019), and will reach $15,000 in 2023. The benefit will begin to be phased out when an individual has earnings of approximately $150,000.
The purchase of a zero-emission vehicle, if associated with an income earning purpose (e.g. used in a business), may be eligible for a 100% immediate write-off as long as the federal government purchase incentive was not obtained.
TFSAs– As of 2017, the average number of contributions per individual was 14.49, the average fair market value of each account was $19,633, and the average unused space was $30,947.
There are 2.21 million corporations in Canada (according to 2016 statistics that were recently released). Total tax payable for 2016 was $72.21 Billion.

EMPLOYMENT EXPENSES Commuting

December 2, 2019 0 By Xienan Shaw

Commuting employment expenses taxable? Can i deduct employment travel costs, job, business related travel cost from taxes?

EMPLOYMENT EXPENSES Commuting

In an August 15, 2019 Tax Court of Canada case, at issue was the deductibility of a number of employment expenses (primarily travel, lodging and motor vehicle expenses) incurred by the taxpayer. While the taxpayer resided in Ottawa, he signed an employment contract with a company based in Regina. The employment contract stated that the new employment position would be “based from our yet to be determined office in Ottawa, Ontario.” For the 2012 and 2013 tax years, the taxpayer shuttled by air between Ottawa and Regina weekly. In order to deduct travel costs incurred by the employee, the employee must have been required to travel away from the employer’s place of business.

The taxpayer argued that his home in Ottawa was a place of employment, and therefore, costs of travel between his work location in Ottawa, and the work location in Regina, were deductible as they were incurred in the course of employment.

Taxpayer loses, mostly

The Court rejected the taxpayer’s assertion, finding that the employer did not have a place of business in Ottawa. The Court observed that the fact that the employee might choose to “squeeze in” work (in this case on some Mondays or Fridays) at his home in Ottawa did not, without more, constitute the home being an employment location. Further, there were no photographs of the home office, testimony describing it, or home office expenses claimed. The Court stated that the employment contract did not alter its decision as there was no evidence that the employer made any effort to find an office in Ottawa, and no evidence related to work pertinent to Ottawa was provided.

As such, travel between Ottawa and Regina was personal, and the associated lodging and travel costs were denied.

The Court also reiterated that the appeal was considered without regard to the distance between the employee’s home and the employer assigned office: the two locations could be in the same municipality or different provinces. In other words, commuting to work, no matter how far, is considered personal. However, note that there are some exceptions to this rule, such as where the individual travels to a temporary special work site, or a remote work location.

ACTION ITEM: If considering the acceptance of employment that requires significant commuting, consider that the commuting costs likely will not be deductible.

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Tag: tax