tax – Page 3 – Small bussiness accounting solutions

PROTECTING YOUR TAX INFORMATION: CRA guidelines

November 25, 2019 0 By Xienan Shaw

PROTECTING YOUR TAX INFORMATION, CRA guidelines, identity theft protection, CRA suggestions to safeguard tax information

PROTECTING YOUR TAX INFORMATION comments from CRA

CRA released a Tax Tip (Protecting your personal information) on August 6, 2019 which provided various suggestions to safeguard tax information, including the following:

1. Signing up for My Account or My Business Account and registering for email notifications. Notifications will be sent when paper mail is returned to CRA, or when certain other changes are made on one’s account.

2. Using CRA protocols to authenticate a caller’s identity. An option is being introduced to set a unique Personal Identification Number which must be provided before a call centre agent can access the individual’s accounts.

3. Verifying a purported CRA caller by requesting their badge number and calling the individual or business enquiries line for confirmation.

The Tip also provides guidance on steps individuals who may be victims of identity theft should take, including contacting CRA to request enhanced security measures be placed on their accounts.

ACTION ITEM: Review the above suggestions and adopt those that are appropriate.

PARKING PASS taxable benefit?

November 4, 2019 0 By Xienan Shaw

The Court upheld the previous Tax Court decision which classified an employer-provided parking pass as a taxable benefit to an employee of an airline

Parking pass taxable benefit?

In a June 10, 2019 Federal Court of Appeal case, the Court upheld the previous Tax Court decision which classified an employer-provided parking pass as a taxable benefit to an employee of an airline. However, in doing so, the Court provided differing reasons which may affect employees in all sectors.

Taxpayer loses

In the previous Tax Court case, the argument focused on whether the primary beneficiary of the pass was the employer or the employee. However, in this decision, the Federal Court of Appeal stated that the ultimate goal should be determining whether the employer conferred something of economic value on the employee. The determination of whether the employee was the primary beneficiary is useful in determining whether an economic benefit was conferred but is not the ultimate test in and of itself. Instead, the factors weighed in the primary beneficiary test may help determine that there was only incidental or no personal economic benefit, in which case it would not be a taxable benefit.

The Court also noted that the fact that the good or service provided is necessary for the discharge of employment-related activities is relevant in drawing an inference about whether it is also providing a personal benefit to employees. Basically, if the benefit provided is necessary for the employee to do their job, it is less likely personal.

Since having the employee’s car at work was not necessary to, or required by, the employer, the Court determined that the cost of parking was a personal expense and, therefore, a personal benefit.

ACTION ITEM: This case may result in a change in CRA assessing policy. Benefits not previously taxed may need to be reviewed in the upcoming year to determine if they are now taxable.

IS IT TAXABLE? LOAN FROM A SIBLING’S CORPORATION

October 28, 2019 0 By Xienan Shaw

Loan from a corporation controlled by family members, personal loans to a shareholder of a corporation, or a family member

LOAN FROM A SIBLING’S CORPORATION: Is it Taxable?

In a July 8, 2019 Tax Court of Canada case, CRA had reassessed the taxpayer to add loans received from a corporation controlled by her brother and his wife to her income. Special rules apply to loans advanced from a corporation to a shareholder or a “connected person” (which includes any related person). These rules effectively require an income inclusion in the hands of the borrower if loans are not repaid by the end of the corporation’s year following the year in which the loan was advanced.

Loan from corporation – taxpayer loses

The Court held that the taxpayer had made a misrepresentation by failing to report the loans as income. Her knowledge that she had borrowed $45,000 from a corporation controlled by family members over the period from 2009 to 2012, and her failure to seek advice from anyone, including the corporation’s accountant, regarding the tax implications of such a loan was sufficient neglect or carelessness to permit reassessment of each year in which funds were advanced, even beyond the ordinary three-year reassessment period. As the loans had not been repaid in time, the full amounts were included in income.

ACTION ITEM: Advice should be sought if you currently have, or are considering, personal loans to a shareholder of a corporation, or a family member.

NOV 2019 TAX TICKLERS- some quick points to consider

October 28, 2019 0 By Xienan Shaw

Employment outside of Canada may entitle taxpayers to employment insurance benefits…

Tax ticklers

1. In limited cases, employment outside of Canada may entitle taxpayers to employment insurance benefits upon their return to Canada.

2. A recent Supreme Court of Canada decision found that Revenue Quebec could access information from entities outside of Quebec. As National Bank operated in Quebec, branches outside of Quebec were not outside the Revenue Agency’s territorial scope.

3. The Government of Canada estimates that the difference between the taxes that would be paid if all corporate tax obligations had been fully met, and the tax actually paid and collected in 2014, was between$9.4 and $11.4 billion ($2.7 to $3.5 billion for small and medium enterprises, and $6.7 to $7.9 billion for large corporations).

DEMAND FOR CLIENT INFORMATION: CRA’s Abilities

October 21, 2019 0 By Xienan Shaw

Gathering information about taxpayers using third parties. CRA must first obtain the authorization of a judge.

DEMAND FOR CLIENT INFORMATION: CRA’s Abilities

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:

the customers’ legal name, business or operating name, contact person, business address, postal code, and all telephone numbers on file;
the customers’ business numbers, if known;
the customers’ itemized transaction details including invoice date, invoice number, total sales amount, method of payment, and address of delivery; and
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.

WORKERS COMPENSATION: Replacement Payouts by Employer

October 14, 2019 0 By Xienan Shaw

If receiving full salary even after being injured, consider whether some of it could be classified as Worker Compensation and therefore tax-free

WORKERS COMPENSATION: Replacement Payouts by Employer

In a March 29, 2019 Tax Court of Canada case, the taxpayer had been injured on the job and was held eligible for workers’ compensation (WC) payments by the relevant provincial authority. However, in accordance with the collective agreement setting out his terms of employment, he was paid 100% of his salary by his employer and, therefore, did not receive payments from the provincial WC authority. He argued that the maximum provincial WC should be included in income as WC and not as employment income. The distinction is important because an offsetting deduction is available for WC such that no tax must be paid.

Taxpayer wins

The taxpayer’s eligibility for the employer-paid compensation was determined under provincial law. As such, the Court found that the maximum WC benefits, 85% of his salary, were properly considered WC and, therefore, deductible from taxable income.

ACTION ITEM: If receiving full salary even after being injured, consider whether some of it could be classified as WC and therefore tax-free, even if not received directly from the provincial WC authority.

ANXIETY DEPRESSION AND PHOBIAS Disability Tax Credit

October 7, 2019 0 By Xienan Shaw

If the impairment(s) represents a marked restriction in the ability to perform a basic activity of daily living

ANXIETY DEPRESSION AND PHOBIAS Disability Tax Credit

In an April 3, 2019 Tax Court of Canada case, at issue was whether the impact of an individual’s mental impairment entitled her to the disability tax credit (DTC). The taxpayer suffered from social anxiety, depression and phobias.

A taxpayer may be eligible for the DTC if the impairment(s) represents a marked restriction in the ability to perform a basic activity of daily living. In particular, the impairment must affect and permeate the individual’s life to the degree that they are unable to perform the mental functions that would enable them to function independently and with reasonable competence. This is to be examined in the context of:

memory;
adaptive functioning; and
problem-solving, goal-setting and judgment (taken together).

Each of the three elements are to be considered separately.

Taxpayer wins

The Court found that although the taxpayer did not have trouble with memory, she did have a marked restriction with respect to the other two elements, either of which would qualify her for the DTC.

The Court noted that adaptive functioning was described in the explanatory notes to the legislation as abilities relating to self-care, health and safety, social skills, and common simple transactions. Also, the Court referred to a provincial government publication which described it as how well a person handles common demands in life and how independent they are compared to others of similar age. While the taxpayer was able to dress, bathe, feed herself, do her own laundry, manage her medications, and live on her own, these were all primarily done in a controlled environment (her apartment). In respect of social skills and common simple transactions, the taxpayer could not work except to a limited extent in the family business, avoided social interactions with all but family and close friends, and remained in her apartment as much as possible. She was heavily reliant on her mother for almost all external daily life functions. The Court determined that she had a marked restriction in respect of adaptive functioning.

In respect of the third element (problem-solving, goal-setting and judgment), it was noted that her anxiety resulted in what might be considered poor judgment. It led to avoidance, procrastination and withdrawal which in turn lead to failing school, loss of employment, self-harm activities, reluctance to pursue therapy, and taking on too many projects. While the Court noted that there was more uncertainty as to whether there was a marked restriction in respect of this element, it noted that the taxpayer should be given the benefit of the doubt, especially since mental illness can be invisible.

Since there was a marked restriction in at least one of the three elements, the Court determined that the taxpayer was eligible for the DTC.

ACTION ITEM: To determine if eligible for the DTC due to a mental condition, form T2201 should be reviewed with, and completed by, a medical doctor or psychologist.

ZERO-EMISSION VEHICLES: Personal and Corporate Incentives

September 30, 2019 0 By Xienan Shaw

Transport Canada released details on the purchase incentive of up to $5,000 for zero-emission vehicles as originally proposed in the 2019 Budget

ZERO-EMISSION VEHICLES: Personal and Corporate Incentives

On April 17, 2019, Transport Canada released details on the purchase incentive of up to $5,000 for zero-emission vehicles as originally proposed in the 2019 Budget.

The incentive will apply to new purchases or leases on or after May 1, 2019. To receive the incentive, the manufacturer’s suggested retail price must be less than $45,000 for vehicles with six or fewer seats, while a vehicle with seven or more seats must have a suggested retail price of less than $55,000. Higher priced versions (trims) up to $55,000 (six or fewer seats) or $60,000 (seven or more seats) will also qualify. Delivery, freight and other fees, such as vehicle colour and add-on accessories, which push the actual purchase price over these limits will not result in the incentive being lost.

The full $5,000 incentive will be available for eligible battery electric, hydrogen fuel cell, or longer range plug-in hybrid vehicles (battery capacity of 15 kWh or more), while shorter range plug-in hybrid vehicles will be eligible for a $2,500 incentive.

Leases of 48 months or more qualify for the full incentive, with reduced amounts available for shorter leases. It will be reduced to 75% for a minimum 36-month lease, 50% for a minimum 24-month lease, or 25% for a minimum 12-month lease.

The purchase incentive will be applied at the point of sale (i.e. at dealerships or online) directly on the bill of sale or lease agreement of eligible vehicles.

The dealership is responsible for completing the documentation required to receive the incentive. Claims can be submitted through the Transport Canada online portal. Funding will be provided on a first-come, first-serve basis.

Individuals can only get one incentive per year. Businesses (including NPOs and provincial, territorial and municipal governments) can get up to ten incentives per year.

As an alternative to receiving the cash incentive, a temporary enhanced first-year capital cost allowance (CCA) rate of 100% may be claimed by those using the vehicle for income earning purposes. Specific restrictions and conditions apply. The deduction may be restricted to the first $55,000 in cost depending on the size, seating, and use of the vehicle.

ACTION ITEM: Review the Transport Canada website to determine if a future vehicle purchase would be eligible. The website includes a list of eligible vehicles and responses to frequently asked questions. https://www.tc.gc.ca/en/services/road/innovative-technologies/zero-emission-vehicles.html

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Tag: tax