Bookkeeping is an important part of your business!

The information in your bookkeeping system tells you how your business is performing and helps you make informed decisions. Without an effective bookkeeping system, you can easily lose track of you cash flows and potentially get in some hot water with the CRA.

Bookkeepers Save Time

As a busy business owner, it’s easy to let your bookkeeping get out of control. After only a few months, the amount of receipts and paperwork can quickly pile up and become a major distraction.

By using an experienced bookkeeper, you can spend more doing what you do best … running your business.

Cost Effective

The cost of hiring a bookkeeper is not as expensive as you might think. For about $150 per month, you can drop off your invoices, receipts, bank statements and other information and your bookkeeper will:

• prepare all of your accounting records,
• file your HST & WSIB returns,
• file payroll remittances,
• and prepare your payroll, and
• Other administrative tasks.

Far less than hiring someone part-time to do this for you!

How It Works

We will work with you to determine what information you need and set up a schedule a regular schedule for you to bring in your information. We can help you identify areas to improve your business and save you money in the long run.

Call us at (289) 288-1206 to find out how we can help you free up more of your valuable time and take on this administrative burden.

Perhaps you moved out of the country for a few years and then decided to make it permanent or you have purchased property in Canada as an investment to generate income.

No matter the reason, you should be aware that Canada imposes a withholding tax on the rents and sale of real property.

Knowing the highlights can help you avoid nasty surprises when the tax man comes calling.

Real Estate & Tax Residency

Although the ownership of a residential property in Canada may be considered a significant residential tie, the property in Canada must be available for your occupation.

By renting the property, under a long-term lease to an unrelated third party, you may be able to avoid t being considered a resident for tax purposes.

Principal Residence Exemption

If you are leaving Canada, you can likely claim the principal residence exemption and avoid any immediate gains.

If you sell your home after you leave, the issue becomes more complex because you cannot claim the principal residence exemption for years in which you were not a resident of Canada.

You will also be subject to the 25% withholding tax applied on gains of the sale of real estate located in Canada.

Tax On Rental Income

Renting the property may generate much needed cash flow and may be more than sufficient to maintain the property while you are away.

Like most endeavours, rental income is still subject to Canadian income tax.

There are withholding taxes as well as annual non-resident rental tax filing requirements that you must comply with if you are a non-resident earning rental income from Canadian real estate.

Failing to comply with these requirements could result in significant interest and penalties. Some filing requirements must be met even if you never rented the property.

Final Words

Owning and renting property as a non-resident or former resident of Canada can carry with it significant tax obligations for non-compliance. There are withholding taxes that must be remitted monthly if the property is being rented and penalties for the failure to comply can be significant.

If you are a non-resident and are renting property in Canada, it is important to make sure that you are filing the proper returns and making the required installments.

We Can help

We can help you comply with these important regulations by assisting with the necessary filings and help reduce the overall tax burden.

If you have not complied for several years, there are programs available to help bring your tax situation up to date.

Call us at +1 (289) 288-1206 or send us an email to arrange an appointment to discuss your situation and what we can do to help.

Ontario allows regulated health practitioners to incorporate and reap the benefits of operating through a corporation. This means that Physicians, Dentists, Surgeons, Audiologists, Dental Technicians, Psychologists, Nurses, Midwives, Chiropractors, Physiotherapists and Massage Therapists to incorporate their practices.

In addition, other professionals such as veterinarians, social workers, and lawyers are also permitted to incorporate and take advantage of the same tax benefits explained here.

In order to incorporate, you must gain approval the regulating organization and adhere to the naming requirements. Once incorporated,

Tax Benefits of Incorporation

A significant income tax deferral opportunity is derived from the fact that a medical professional corporation is considered like any other small business corporation: It will pay tax at only 15.5% on its first $500,000 of income.

Compare this to Ontario’s highest personal tax rate of 46.41% on income in excess of $132,000 and the difference is nearly 31%!

This means that for every $100,000 you retain in the corporation and not use for any other expenditure, you can defer $31,000.

This provides an additional $31,000 that can be put to use for investments, expanding your practice, or acquiring additional equipment.

Income Splitting Opportunities

The first $40,000 or so of income paid out of the corporation by way of dividends is not subject to any personal income tax (assuming no other personal income).

You can multiply this savings by issuing shares to your spouse and paying them an additional dividend of up to $40,000 without additional income tax.

If you have children who are 18 or older, you can issue them dividends as well, or if you wish to retain control over the funds, you can use a family trust.

Cash Flow Comparison

Let assume a fictional doctor operates a practice and generates $250,000 of income after direct expenses. The doctor is married and her spouse does not work. To meet her family’s lifestyle goals, she needs to have approximately $100,000 of after-tax cash.

Personal Taxes

Without a corporation, the doctor’s cash flow will look something like this:

Using A Professional Corporation

Professional Income	$250,000
Corporate Income Taxes:	($38,750)
Dividends to Generate $100,000 of personal lifestyle needs	($120,000)
Personal Income Tax	($18,973)
Remaining Cash	$72,277

By using the professional corporation, the doctor has saved $21,354.

If the doctor has issued shares to her spouse, and her spouse had no other income, the dividends could have been split equally between them and the combined personal tax bill would have been only $7,840. The remaining cash flow would have increased by a further $11,130.

Other Benefits of Using A Professional Corporation

Some of the other opportunities available through a professional corporation come in the way of tax savings generated from alternative business practices:

• Bonus Deferral: A bonus may be declared and deducted but does not need to be paid until 179 days following the corporation’s year end. By selecting an appropriate year-end, the deferral can be effective.
• Health & Welfare Trust: A health and welfare trust is a tool that helps pay uninsured medical dental expenses without the need to acquire group medical insurance. The funding is tax deductible.
• Creditor Proofing: Provides limited liability from leases, contracts and other liabilities. The PC cannot shield you from professional liability and you still require malpractice insurance.
• Pay Salaries to Family: If you employ family members in you practice you can pay them a reasonable salary and further split income.
• Building Acquisition: If you use the corporation to acquire a building to house your practice, the lower rate of tax will help accelerate the repayment of the mortgage.
• Defer Tax Installments: You have the opportunity to defer income tax installments for the first full tax year of the corporation.

Dean Paley Can Help

Dean Paley CFA CFP is the Principal of Dean C Paley Certified General Accountant, a public practice firm that provides professional accounting and tax services to small and medium sized businesses and professional in Burlington Ontario. Dean has more than 15 years of experience as a professional accountant. You can reach him at (289) 288-1206 or by email at dcpaley@deanpaley.com.

The shareholders agreement is an important part of your business. It addresses many common situation business owners may face when they have partners in the business.

Your shareholders agreement is also part of your succession plan and deals with what happens on your death.

If you have a shareholders agreement, does it provide enough flexibility for your executor and the remaining shareholders to structure the buyout to minimize taxes and provide positive cash flow to your estate?

The tax-free nature of life insurance payments may help. Here’s how:

Life insurance proceeds received by a corporation or individual is normally received tax free. In a corporation, the proceeds are credited to a notional account known as the the capital dividend account.

An amount equal to the proceeds less the adjusted cost basis of the policy can is added to this account and in turn can be paid to the shareholders tax-free as a capital dividend.

This tax-free dividend can be used by the surviving shareholders to purchase your shares and potentially preserve $750,000 capital gains exemption.

On the other hand, the corporation may redeem your shares and your estate receive a tax-free dividend to the extent of the balance in the company’s capital dividend account.

Without life insurance, the tax-free transfer of ownership cannot occur and there will be either a capital gain or a deemed dividend reported.

It is important to structure the agreement properly and have the proper insurance in place to minimize the tax bill and provide more value to your family.

Is Your Succession Plan Tax efficient?

Call us today at (289) 288-1206 to email us to arrange your appointment.

If you are an IT consultant or work on a contract basis, you should be aware that in October 2012, the government increased the tax rates for personal services corporations by 13%!

This change in the tax rate and the recent focus on IT contractors by the CRA can have a dramatic effect on your business if you fall into the personal services category.

Understanding The Tax Impact

The tax rate for most Canadian small businesses in Ontario is 15.5%. If you are considered a personal services business then you can expect the following:

• Most of your expenses will be denied,
• You will be denied the small business deduction, and
• You will be denied the general rate reduction.

The result is that your basic tax will increase to a flat 39.5%. And when you pay those out in dividends, the combined tax rate can approach 58%!

What is a Personal Services Corporation?

A personal services corporation is a corporation where a specified shareholder (normally you or your spouse) perform services to another business and you would normally be considered an employee of the hiring firm if it weren’t for the corporation.

How Do You Define A Personal Services Corporation?

There are four factors that will be considered when evaluating if you are a personal services corporation:

Control

Consider that an employee is generally under the supervision of management of the hiring company and the he or she must commit to a certain number of hours. On the other hand an independent contractor is free to organize their day and is independent from the company.

Integration

Is the work performed an integral part of the business? For example, an independent contractor may be hired to install a system or component in a hiring firms facility. The contractor is performing a one-time job for a specific purpose and after the work is done, the contractor has no further obligations.

On the other hand, if the work being performed is integrated with the operations, to the extent that the work performed would be a continuous function, then this would lean towards being an employee.

Economic Considerations

Who has the business risk, legal liability and responsibility for expenses?

If you provide the tools and equipment, must cover your own business overhead and have legal liability or contractual liability, you may be self-employed. On the other hand if the hiring firm assumes the risk then you are an employee.

Results

If you are hired for a specific purpose and objective as opposed to committing only to a time-frame, then you may be considered self-employed.

What Can You Do?

If you feel you may be considered a personal services business, you may go back and renegotiate your contract to have it provide enough autonomy and control to classify you as a business.

You should meet with your accountant to discuss these matters and determine if there are other strategies you can use to avoid these rules.

Accountants do more than your bookkeeping and prepare your taxes. In fact, an accountant with a professional designation has expertise in finance, business management, technology, taxation, and business management.

Your accountant has a stake in you and your business. We are your advisor and counsel who can be depended on to deliver objective advice.

Other ways an accountant can help you includes:

Succession Planning

Can your business succeed without you? Your succession plan helps ensure that your business is self-sufficient and allows you enjoy the fruits of your labour. Your succession plan also positions you to sell your business or transfer it to others.

Business Start Up

Your accountant can help you select to best operating structure for your business (sole proprietorship, partnership or corporation).

We have the skills and expertise to guide you through the business planning stage and can introduce you to bankers and lawyers and help bring your concept to market.

Estate Planning

Whether you are an individual or business owner, an accountant has the expertise and skills to ensure you are able to provide the maximum value for your heirs.

We will work with your lawyer to ensure that your beneficiaries get the full benefit from your estate.

Financial Planning

Do you have enough for retirement? Are you getting objective and independent advice? Your accountant can help you realize your dreams or prepare cash flow projections for your business.

Controllership

No business is too small for a chief financial officer!

We provide part-time controllership services that provide advice on financial controls, help with month end processing, and ensure your business is in compliance with government regulations.

Accounting

We offer a wide range of accounting services including the compilation of your financial results on an interim or year-end basis.

We provide payroll administration, tax compliance, cash management, projections and bill payment, as well as analysis, assessments, calculations and reviews.

We help you to interpret financial information so that you can make informed decisions.

Tax Planning & Preparation

Tax planning is more than preparing your tax return and filing it on time.

Planning is an integral part of the financial planning process. We will help you reduce the taxes you pay — now and in the future!

Whether you are an employee or self-employed, an investor or small business owner, a farmer, student or landlord, we will save you money through effective tax planning and preparation.

Want to Find Out More?

Call us at (289) 288-1206 to arrange your appointment today.

You may be surprised to know that the federal and provincial governments offer generous personal tax credits for:

• Persons with disabilities, or
• The person who supports another person (family member) with a disability.

If you or the person you support qualifies, you may be entitled to claim these credits retroactive to the start of the disability (or 10 years back, whichever is less).

In some cases these tax credit can exceed $15,000.

What Qualifies as a Disability?

If a medical professional (usually a doctor) certifies that you have a pronged physical or mental impairment that restricts the ability to basic activities for daily living, then you may qualify.

Call us at (289) 288-1206 or e-mail us to arrange your appointment today.

When you sell certain types of property including shares, real estate, a business or farm for a gain you may be able to defer the tax on the capital gain for up to 5 years and in in certain circumstances, 10 years.

The Income Tax Act allows you to defer a portion of your capital gain when you sell property but do not receive payment immediately. For example, assume you sell your rental building an incur capital gain. As part of the deal, you agree to have the buyer pay you over 5 years. You will be required to include a portion of the gain in your income each year but and defer the remainder.

The above example is simplistic and property care must be taken to ensure that you have sufficient cash on hand to pay the resulting tax bill each year.

If you are a member of a group medical insurance plan and you pay all or a portion of the premium through payroll deductions, those premiums may qualify as medical expenses for the medical expense tax credit.

Other commonly overlooked medical expenses include:

• Co-payments or non-reimbursed portions of medical expenses
• Dental bills
• Certain attendant care expenses for persons with disabilities
• Certain transportation expenses
• Certain renovations to make your home more accessible (such as a wheel chair ramp)

If you are unsure of whether an expenditure qualifies, contact your accountant to discuss the matter. If you are planning on making a large expenditure, discuss the matter with your accountant do that you fully understand the availability of the tax credit.

If you would like to have us prepapre your personal income tax, please give a call at (289) 288-206 or email us to arrange your appointment. If you are out-of-town, you may take advantage of our tax-by-email or tax-by-fax services.

Here is a proven strategy to reduce your overall tax bill by incorporating your business.

The top personal tax rate in Ontario is 45% on income over $132,000 and 48% on income over $500,000. For small business corporation, the tax rate is 15.5% and the personal rate for dividends is quite attractive.

By incorporating your business and issuing shares to yourself and your spouse, you may be able to significantly lower your overall tax bill and Pay Less Tax!