Accountants Corner

Tax Tweet - Are you Divorced or Separated?

2012-02-24T06:45:00.001-08:00

Tax Tweets: Tidbits of Canadian Tax Info

Recently I met a gentleman who has been divorced for some time. He is a seemingly kind and considerate person who has prepared his own tax returns for several years. Being divorced with three children, he shared custody with his ex-spouse. Early in our conversation, I became aware that he did not utilize deductions and/or tax credits available to his situation. For several years, he has not benefited from the tax laws available to his situation.

Sometimes as a tax accountant, I take for granted the level of knowledge that the average Canadian has for our complex tax system. At times I can get wrapped up in the complexities of tax planning and laws that I assume the basics are known by all. It is a shortfall on my part, for sure. So I decided to start a series of Tax Tweets that cover some basic tax information, partly to educate or remind us of some important aspects of our tax system, and partly to ensure I do not overlook the obvious. So I welcome you to read, participate and invite others. I look forward to learning more about you.

The very first Tax Tweet is on the topic of separated of divorced individuals who may not be aware of some benefits to them in our tax laws. Why this topic? Well, I am not sure exactly. Perhaps it is because it relates to the gentleman I recently met or maybe it is because my wife is a Collaborative Law Lawyer and she has many clients that may use this knowledge. Regardless, I have to start somewhere, so why not here…

Tax Tweet #1: Amount for Eligible Dependent

For some situations, separated or divorced parents who have not lived common law over the previous tax year may be eligible to claim the amount for an eligible dependent. This claim can be huge. In 2011, the non-refundable tax credit was $10, 527 which would result in a reduction of federal tax payable of $1579 as well as an additional provincial tax credit, depending on your province or territory. In New Brunswick the provincial tax credit is about $958 for a combined tax reduction of $2537.

There are certain criteria to qualify for this claim such as the custody and living arrangements, any child support involved, is the child claimed by another parent, ect. So please consult a tax professional to find out if you are eligible for this credit. More details can be found on CRA website entitled “Can You Claim the Amount for An Eligible Dependent?” and What are the situations in which you cannot claim the amount for an eligible dependant?

Tax Tweet #2: Children born after 1994 (for Tax Year 2011)

Parents of children born after 1994 receive a federal tax credit of $2131 in the tax year 2011. This results in a federal tax reduction of $320. Although your children may not live with you full time, you may still be eligible to receive this federal tax credit, assuming no one else is claiming it for the child.

Tax Tweet # 3: Ensure only one Person is Claiming the Child

One main criteria of Tax Tweet #1 and #2 is that only one parent can claim the tax credit for the child. If you are separated and have only one child together, this could be difficult as both parents may want to claim the tax credit. In this case, CRA will revert to the court ordered divorce or separation agreement to see if it is stipulated in the agreement. If a determination is not provided for in the agreement, and the parties cannot agree on who claims the child, then CRA has ruled that neither party can use the deduction. It would be a shame if this was to happen so please ensure you and your ex-spouse discuss this and come to an agreement.

These tax tweets are meant to promote alerts that may potentially affect the reader’s situation. It is not meant as tax advice and should not be taken as such.

Gerard is an experienced accountant located in Rothesay, just outside Saint John, NB. He established CG Jones CGA in 2011 to offer expert services in Tax, Finance, Project Management and Consulting. His intention is to provide these expert services, usually affordable only to large corporations, to small and medium businesses as well as Professionals and business owners at rates more in line to what this group can manage. Gerard is just a call or email away if you would like to discuss ways your firm can look at tax savings, finance options, or project management needs. He can be reached at (506) 849-0913 or by email.

Starting a Small Business in New Brunswick (NB)

2012-02-17T06:35:00.000-08:00

Starting a new business venture can be a very exciting, yet overwhelming task. Once you have decided you are ready to start the process, the following task list may be of some help.

1. If you do not currently have one, find a qualified public practice accountant. There are three professional accounting designations in Canada and New Brunswick. Make sure your accountant is a professionally designated accountant in good standing. The three are

Certified General Accountant (CGA)
Chartered Accountant (CA)
Certified Management Accountant (CMA)

Regardless of the designation, you will want to find an accountant that you can connect with and build a long term relationship. Your accountant will become an integral part of your business and life. Make sure you can at least tolerate each other. It also helps if they are up on the new trends of social media and internet marketing. An accountant should be someone that helps with more than just taxes and accounting, they should also be able to help with growth plans and other business development. Therefore, their understanding in the changing trends of today’s business is imperative. Check out their website, Facebook page, LinkedIn, Twitter, ect.

2. Decide on the type of business you would like to operate

a. Sole proprietorship

i. Operate as an individual and taxed as an individual.

ii. No protection from creditors

iii.Least expensive to set up and operate

iv.May have tax disadvantages

b. Partnership

i. Two or more owners

ii. Income divided according to partnership agreement and taxed as individual

iii.May be liable for partners actions and debt

iv. Less tax advantages

c. Corporation

i. One or more owners

ii. Private or public

iii.Separate legal entity

iv.Limited liability

v. Tax advantages

vi.Tax planning opportunities

vii.Most costly to setup and maintain

3. Prepare a Business Plan – having a well laid out business plan, including a marketing plan, can be a huge benefit especially if you are looking for financing. There are many basic templates available on the internet, but the strength of a successful business plan is in the details and professional judgment. Typically, if you require a business plan, it would be worth the investment to have a professional accountant assist with the process to ensure it is realistic, accurate and objective.

4. Register your Business

a. Choose a name- select a variety of potential names for your business and prioritize by order of preference

b. Get name search done and secure name (NUANS)

c. Register your name and business with the province of New Brunswick. This also gives you a business number with Canada Revenue Agency.

5. Register for Sales Tax - Depending on the jurisdictions you will do business in, register for the appropriate sales tax

a. Harmonized Sales Tax (HST) and Goods and Services Tax (GST)(Federal) -NB,NS, NFLD, ONT, BC. The number is a federal number and can be used for HST and GST together.

b. Provincial Sales Tax (PST) – Manitoba, Saskatchewan, Prince Edward Island – this is a provincial tax and must be registered with the province in which you are doing business.

c. Quebec Sales Tax(QST) – Register with the province of Quebec if doing business in Quebec

6. Register for Payroll – If you are employing at least one person, you must register for payroll with the federal government and/or the province of Quebec if employees in Quebec.

7. Select Accounting System- Depending on your type of business, you may find it easier with an industry specific software package that caters to your particular needs. Most small businesses use an off the shelf software package which is fairly inexpensive. For example, QuickBooks or Sage Simply Accounting are both user friendly and can be purchased for around $300. Most accountants use these packages so collaborating with your accountant provides for seamless integration.

As overwhelming as it may seem, taking the process one step at a time and having a trusted advisor, enables you to focus on the business operations and frees your mind to creativity. Best of luck in your new business venture, it is a rewarding experience for the right entrepreneur.

Gerard Jones, CGA

Principal, CG Jones CGA

Cash is King

2011-12-16T05:56:00.000-08:00

Have you ever wondered why the busy business down the street ended up closing its doors? Or why a seemingly low volume business has stayed stable for years? Perhaps you have seen a solid business fail when it went through an expansion phase. There may be many reasons to explain the discrepancy, one of which is cash flow.

If I may use an analogy to the human body, cash flow to a business is the bloodline. Business net income may be the heart of the business and assets may be the entire body, but without blood flowing to the body, it dies.

When you think about it, it’s a pretty good analogy. Investment, Net Income, Assets and Cash flow work in tandem to operate successfully much like the heart, blood flow, oxygen and body does to allow the entity to survive. It is a life cycle that requires each part to function properly. The heart (income) pumps the blood (cash flow) through the body, carrying oxygen (investment) to each body part (assets). The more active the body, the stronger the heart to pump more blood to the areas of the body, therefore providing adequate oxygen levels for the body parts to operate with ease and efficiency.

In our society today, cash is not something we see a lot. With credit card debt at an all-time high, and debit cards being used more than ever, handling cash is becoming a thing of the past. More and more transactions are settled using alternatives to cash, such as paypal. And the old proverbial saying, "out of sight, out of mind" rings true when it comes to cash in a business. However, it is crucial to the success of every business to stay on top of cash flow. Let's look at three ways to improve cash flow in business.

1) One of the most common hindrances to small business is outstanding accounts receivable. For every day an account is outstanding, it reduces cash flow as well as reduces income. If you do not have the cash in hand, that is cash that is not put on your line of credit, in your short term savings, or available for reinvestment in your business. Regardless, it reduces your income. If your receivables are out of control, perhaps you need a strategy put in place to make improvements. There are many strategies to control your receivables. Contact an accountant to discuss.

2) Review your agreements with your vendors. What are your negotiated terms? Standard terms are net 30, which mean your payment is due 30 days from receipt of the bill. If you are paying everything as soon as you receive it, you should try and negotiate better payment terms. Our society has trained us well in paying what we owe and try not to owe money. It is a great personal trait and characteristic to have when managing your personal reputation and finances. Equally important is ensuring your business reputation is known for similar principles. If your business pays their bill on time (but no sooner than required unless a discount is offered) consistently, you will become a preferred customer and often times are treated much more favorably. However, please remember, you really should pay your bills on time and not ahead of time unless a discount is offered for early payment. One mistake small businesses make is not negotiating their terms to their advantage. The longer you have to pay your bill, the better your cash flow.

3) Use projections to estimate your cash flow. Most businesses have cycles of cash receipts that may or may not coincide with your income. They may also not coincide with your expenses. Having a projected cash flow statement allows for you to plan to have the cash available when you needed. This will help avoid late payments or even getting cut off from suppliers. The last thing you need is a stock out when you are about to enter a heavy sales cycle. Contact a professional accountant who will work with you to prepare proper reports to help you monitor your business.

Cash Flow is King in small business. Taking the appropriate precautions, implementing key strategies and proper planning can avoid the pitfall that poor cash flow management can bring. If you have any questions regarding this or any other strategy, please don’t hesitate to contact me. We are always looking for great clients.

Gerard

This blog is not to be misconstrued as professional advice. CG Jones CGA believes every situation requires individual attention prior to providing professional advice. Please contact use or any other professional accountant to discuss your individual needs.

Marketing in the Clone Age

2011-10-09T10:32:00.000-07:00

Many of you are probably wondering, "What is an accountant doing talking about marketing?" Good question. I am not sure I know myself, but I do know that if we all don't catch up with the times, we will become obsolete, or should I suggest, extinct? We have entered a new age in our world I like to call the Clone Age.

What is the Clone Age? It is the times we are currently living in, when it seems life is so busy we need to clone ourselves to get all the tasks that are required for business in this century (and for personal life as well) done. While scientists continue to work at perfecting the cloning of DNA, the advances in computer technology and brillant minds of this world have essentially developed a concept that many people are involved in without even realizing. Its called the Social Revolution and it is reproducing our marketing efforts many times over what we can achieve ourselves.

For example, let's look at one of the age-old marketing strategies of professionals and small businesses: networking. Not too long ago, a business or professional would need to spend many long hours each weekday evening getting out to meet people face to face and exchange pleasantries and business cards. This is a fantastic way to connect with people, but there are limitations. There are only 7 evenings a week, and if you have any kind of life outside work, it is narrowed down to at least 3 or 4 evenings per week. Heaven forbid, you have a family (like myself), because then you will be lucky to get out 1 or 2 nights per week. Regardless, you are limited in the number of people you meet, the number of people with whom you can share your 1-minute commercial and exchange business cards. This was, and still is to many, an effective way of building relationships that may bridge into business.

Guess what? There is a new way to network. Social networking online has broken the boundaries on the number of contacts you need to meet and the way you share your business information. Social sites like LinkedIn and Facebook are providing 24/7 infomercials for those that have taken time to learn how to navigate and use it for business purposes. The more people you connect with, the more your network grows. It's true you do not have the face to face contact...yet... but it certainly is an effective, time saving way to meet people. You are able to give them your business particulars and allow them to peruse through your various information while they sell themselves on ways your business or profession can be helpful to them. And how much time have you spent telling them all about you? None, except for the time it takes to set up your profile and information you want to share.

The Clone Age is becoming so popular that marketing companies, such as Revolution Strategy in Saint John, NB, are setting up full marketing plans for businesses (businesses that can afford to retain their services), focusing on image building, networking and branding through the interconnected use of social media. For the small business who cannot afford to retain those services, there are ideas and ways to do it yourself. You just need a lot of time, a lot of patience, a vision for what you want to say, and a teenager usually works best. There is no doubt the investment, whether time or money, will reap rewards in the near future. Anytime you can clone your activities, you can reach greater audiences in a shorter period of time.

So why is an accountant talking about marketing? Its all about efficiency and cost savings.

So sell yourself and your business in the new age, the Clone Age.

Gerard