Category: Blog

Individual (personal) taxes – the deadline for personal tax filing has been pushed out from April 30th to June 1st. Sole Proprietors and those in a Partnership are considered individuals but their normal regular tax deadline is June 15th, so there is no filing change for them, it will still be June 15th. Individual payments (including sole prop and partnerships) was due April 30th, but this deadline has now been extended to August 31st.

https://www.canada.ca/en/department-finance/news/2020/03/canadas-covid-19-economic-response-plan-support-for-canadians-and-businesses.html#Flexibility_for_Tax-filers

For Corporations – the deadline for any corporate taxes that are due between now and August 31st, will be extended to August 31st. So anyone with a corporate tax payment due date before August 31st, 2020 will have an extension until August 31st.

https://www.canada.ca/en/department-finance/news/2020/03/canadas-covid-19-economic-response-plan-support-for-canadians-and-businesses.html#Extension_of_Deadline

HST Deadlines – Update as of 03-27-2020

The Canadian government has announced that HST deadlines will now be extended to June 30th, 2020.

https://www.canada.ca/en/department-finance/news/2020/03/additional-support-for-canadian-businesses-from-the-economic-impact-of-covid-19.html#_Deferral_of_Sales

“To support Canadian businesses in the current extraordinary circumstances, the Minister of National Revenue will extend until June 30, 2020 the time that:

• Monthly filers have to remit amounts collected for the February, March and April 2020 reporting periods;
• Quarterly filers have to remit amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and
• Annual filers, whose GST/HST return or instalment are due in March, April or May 2020, have to remit amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.”

Is mortgage interest tax-deductible in Canada?

Generally, mortgage interest cannot be claimed as a tax deduction since it is not subject to GST or HST. However,  if an individual borrows against home equity to purchase income-producing investments (for example, purchasing stocks) then the interest paid on that loan can now be claimed as a tax-deductible. Therefore, creating savings or additional cash flow the homeowner.

Source:

https://www.canada.ca/en/financial-consumer-agency/services/mortgages/borrow-home-equity.html

What can I write off as a homeowner?

Below are the different tax deductions a homeowner in Canada may be able to claim:

Home Buyer’s Plan (HBP)

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.

Certain conditions must be met in order to be eligible to participate in the HBP, including the following:

• you must be considered a first-time home-buyer
• you must have a written agreement to buy or build a qualifying home, either for yourself or for a related person with a disability
• you must be a resident of Canada when you withdraw funds from your RRSPs under the HBP and up to the time a qualifying home is bought or built
• You must intend to occupy the qualifying home as your principal place of residence within one year after buying or building it. If you buy or build a qualifying home for a related person with a disability, or help a related person with a disability to buy or build a qualifying home, you must intend that that person occupies the qualifying home as his or her principal place of residence
• In all cases, if you have previously participated in the HBP, you may be able to do so again if your repayable HBP balance on January 1st of the year of the withdrawal is zero and you meet all the other HBP eligibility conditions.

Source:https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan/participate-home-buyers-plan.html

Rental Income

If you are renting out your property and generating rental income, then you may deduct any reasonable expenses that you incur to earn rental income.

The two basic types of expenses are current expenses and capital expenses. A current expense is one that generally reoccurs after a short period while a capital expense generally gives a lasting benefit or advantage.

The following is a list of expenses that are deductible:

• Advertising
• Insurance
• Management and administration fees
• Office expenses
• Prepaid expenses
• Professional fees (includes legal and accounting fees)
• Property taxes
• Repairs and maintenance
• Salaries, wages, and benefits (including employer’s contributions)
• Travel
• Utilities
• Interest and bank charges
• Motor vehicle expenses
• Other rental expenses

Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/rental-income-line-126-net-line-160-gross.html

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form-t776-statement-real-estate-rentals.html

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form-t776-statement-real-estate-rentals/rental-expenses-you-deduct.html

Moving Expenses

Generally, you can claim moving expenses you paid in the year if both of the following apply:

• you moved to work or to run a business, or you moved to study courses as a full-time student enrolled in a post-secondary program at a university, a college, or another educational institution
• you moved at least 40 kilometres closer to your new work or school

Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-219-moving-expenses.html

Work-space-in-the-home expenses

You can deduct expenses you paid in 2019 for the employment use of a workspace in your home, as long as you meet one of the following conditions:

• The workspace is where you mainly (more than 50% of the time) do your work.
• You use the workspace only to earn your employment income. You also have to use it on a regular and continuous basis for meeting clients, customers, or other people in the course of your employment duties.

You can deduct the part of your costs that relates to your workspace, such as the cost of electricity, heating, maintenance, property taxes, and home insurance. However, you cannot deduct mortgage interest or capital cost allowance.

Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-employment-expenses/commission-employees/work-space-home-expenses.html

Can you deduct property taxes in Canada?

Yes. You can deduct property tax assessed by a province or territory and by a Canadian municipality that relate to your rental property for the period when it was available for rent.

Sources: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form-t776-statement-real-estate-rentals/rental-expenses-you-deduct/line-9180-property-taxes.html

Is there a tax credit for homeowners?

Yes. Below are the different tax credits a homeowner in Canada may be able to claim:

Homebuyers’ amount

A homeowner can claim $5,000 for the purchase of a qualifying home in the year if both of the following apply:

• you or your spouse or common-law partner acquired a qualifying home
• you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer)

A qualifying home must be registered in your or your spouse’s or common-law partner’s name in accordance with the applicable land registration system and it must be located in Canada. It includes existing homes and homes under construction.

Sources: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-369-home-buyers-amount.html

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-369-home-buyers-amount/qualifying-home.html

GST/HST new housing rebate

A homeowner may be eligible for a new housing rebate for some of the GST/HST paid if he/she is an individual who:

• purchased new housing or constructed or substantially renovated housing, which could include housing on leased land (if the lease is for at least 20 years or gives you the option to buy the land), for use as your (or your relation’s) primary place of residence
• purchased shares in a co-operative housing (co-op) complex for the purpose of using a unit in the co-op for use as your (or your relation’s) primary place of residence
• constructed or substantially renovated your own home, or hired someone else to construct or substantially renovate your home for use as your (or your relation’s) primary place of residence and the fair market value of the house when the construction is substantially completed is less than $450,000

The GST/HST new housing rebate allows an individual to recover some of the goods and services tax (GST) or the federal part of the harmonized sales tax (HST) paid for a new or substantially renovated house that is for use as the individual’s, or their relation’s, primary place of residence, when all of the other conditions are met.

Source:https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-home-construction/new-housing-rebate.html

Home Accessibility Tax Credit (HATC)

Renovations or expenses incurred which make homes safer or more accessible for Canadians 65-years of age or older or for the disabled may qualify for the HATC provided they are being claimed by the eligible individual or by someone who looks after the individual and meets all of the CRA’s requirements.  Up to $10,000 in expenses can be claimed under the HATC.

A qualifying renovation is a renovation or alteration that is of an enduring nature and is integral to the eligible dwelling (including the land that forms part of the eligible dwelling). The renovation must:

• allow the qualifying individual to gain access to, or to be mobile or functional within, the dwelling
• reduce the risk of harm to the qualifying individual within the dwelling or in gaining access to the dwelling

An item you buy that will not become a permanent part of your dwelling is generally not eligible.

Source:https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-398-home-accessibility-expenses.html

Medical Expenses Tax Credit

The medical expense tax credit is a non-refundable tax credit that you can use to reduce the tax that you paid or may have to pay. If you paid for healthcare expenses, you may be able to claim them as eligible medical expenses on your income tax and benefit return.

Fees related to the changes made to a home that you can claim as medical expenses:

Driveway access – reasonable amounts paid to alter the driveway of the main place of residence of a person who has a severe and prolonged mobility impairment, to ease access to a bus.

Furnace – the amount paid for an electric or sealed combustion furnace bought to replace a furnace that is neither of these, where the replacement is necessary because of a person’s severe chronic respiratory ailment or immune system disorder – prescription needed.

Renovation or construction expenses – the amounts paid for changes that give a person access to (or greater mobility or functioning within) their home because they have a severe and prolonged mobility impairment or lack normal physical development.

Sources:https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-330-331-eligible-medical-expenses-you-claim-on-your-tax-return.html

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4065/medical-expenses-2016.html#cnstrctn

What is income splitting?

Income splitting, in a nutshell, is a tax term that describes splitting a person’s income on a tax return to reduce taxes owing.  Income splitting is a strategy that can be used by high-income owners of private corporations to divert their income to family members with lower personal tax rates.

If you do a simple internet search, there are two broad definitions of income splitting that produces results.  Income splitting on pensions relates to retirement planning and how to best optimize income splitting on retirement pensions between spouses (or common-law partners).  The income splitting that will be discussed in this blog post, however, is not for retirement planning, but to lower taxes paid on income earned in a private corporation.

When a private corporation makes a profit, there is a corporate tax on the net profit.  When the net profits are disbursed as dividends to shareholders, the individual shareholders are then taxed at a personal level.  Personal tax in Canada is taxed in a tiered system, and so the more income earned the higher the overall tax.  The idea behind income splitting is to disburse the dividend income among multiple family members so as to reduce the personal tax paid on this income.

Who is eligible for income splitting in Canada?

The strategy for income splitting is typically used for high-income owners of private corporations to divert income to family members with lower personal tax rates.

What needs to be considered?

There are a lot of considerations to be made when taking on this tax reduction strategy.  Generally speaking, there are rules that would prevent simply transferring income from a corporation to various family members.  There are rules in place that require family members receiving dividends from a corporation to be at least 17 years of age and be significantly involved in the corporation.

The rules are called tax on split income (TOSI) and if these rules are not followed then the income transferred to the receiving family member may be taxed at the highest income bracket, which then defeats the entire purpose of splitting income.

It is highly advisable to talk to an accountant when splitting income to avoid this exact case of being taxed at the highest income bracket.  Furthermore, there are other tax strategies that should also be considered in these types of situations.

A few articles for reference:

Income Sprinkling – https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/income-sprinkling/frequently-asked-questions-income-sprinkling.html

Tax on Split Income – https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/income-sprinkling/guidance-split-income-rules-adults.html

Since the inception of Fint Cloud Accounting, we’ve had numerous interns from volunteers to high school students to international university students.  Interns can be so difficult to manage due to their short work-term, lack of real work experience and misalignment in expectations.  I hear this same feedback about interns across the board.  In this blog post, I want to share my own experiences and how I’ve tried to overcome some of these challenges.

Commonplace challenges of internships

Here is a summary of my experience with my first batch of interns that hopefully captures some of the challenges that I’ve had.  *Note that real names are not being used in these examples.

Sarah was a recent graduate with experience in retail, but wanted experience working in an office.  I thought it would be a great idea for her to be my administrative assistant, to which she agreed.  I even got her an opportunity to shadow a professional administrative assistant.  Turns out, Sarah didn’t know how to manage a calendar and she hated talking on the phone. She was reluctant to reschedule appointments if it required a phone call and she hated this position so much that she turned down the opportunity to shadow a professional.

David was an experienced manager in the retail industry, and wanted to learn more about bookkeeping.  After he did the bookkeeping training, I assigned him a task that had some urgency to it and while I checked in with him during the week the task was not completed by the due date.

A new approach to internships: Allowing interns to lead their own internship experience

These stories are commonplace when managing interns.  In the cases that I had, I felt that the issue lies with me trying to drive the direction of their internship too much.  I took this as a learning experience for myself and created a new approach for managing new interns.  Here are some guidelines that I’ve adopted:

1. The bulk of tasks assigned to interns now are general training tasks or tasks that have low urgency.  Interns are expected to take their own initiative with these tasks, and they have one dedicated hour each day where they can ask any questions they might have.
2. We discuss our expectations weekly.  This is a two-sided conversation about what they expect to get out of the internship and what I expect from them.
3. Should the intern be ambitious about taking on additional tasks, we work together to figure out assignments that they can do during their term that would add value to the company.

The key in my new approach is that the interns now are leading their own internship experience.  With this approach, the internship experience becomes the priority (as opposed to adding value to the business).  I found that this worked much better for us.  It allowed me to discern interns who need more time with the training or just want to do the bare minimum to the interns who were looking for more.  I do not push interns to do work, but I help guide interns to a more fulfilling internship experience.  I also provide continuous weekly feedback on their performance.

Advice to interns

When I give advice to interns, I think about what helped me the most when I started my professional career.  What was it that made me stand out from my peers?  And this may vary from industry to industry.  The one thing I stand behind is thinking about how I can add value to the organization and then making sure that it is recognized.

For me, this meant taking notes when my manager was talking and actually understanding what it is that he does.  From there, I can figure out what I could do to make my manager’s work-life easier.  This means thinking of ways to add value to the organization that even my manager has not yet thought of.

I tell my interns that getting recognition for accomplishments is just as important as the work that goes into doing these tasks.  Each week, I ask my interns to write a short update on what they have accomplished last week and what they aim to accomplish this week.  In a competitive field, this is what made me stand out against my peers.  As a manager now, an update like this allows me to understand that my team has a direction, and also that it is the direction that I’d like for them to take.

Some might say that I take this bit of advice too far.  More recently, a friend asked me why I always say things like, “I would like to cook this dish, FOR YOU,” or “Let me know what you want for dinner so I can cook it, FOR YOU,”.  I didn’t even realize how obnoxious it sounded until he pointed it out to me.  I was just so used to internalizing this concept that I forget that it can come across as imposing when not in a business setting.  Personal interactions and business interactions can be and sometimes need to be different.  These are the kind of subtleties that can only be learned through experience.

A personalized approach to internships

Notice that the heading to this blog has a year stamp.  I think the internship approach needs to constantly be evaluated and tweaked.  As a millennial, I have to say that I was a bit difficult to manage.  I share many common traits of this generation which included being ambitious, but I also had this notion that I knew how to do things better.  Each generation of interns will have their own traits, their own nuances.  And so it would only make sense that this approach would have to be tweaked or updated to accommodate the changing needs of the new interns that come through our doors.

In our first year of operation, my main challenge was building a great team. Today, I am very proud of my growing team.  In our second year of operation and with a client base of over one hundred and growing, my operations manager and I reviewed our numbers.  Our team was consistently going above and beyond in their level of service.  It was not surprising then when an internal analysis showed that roughly fifteen percent of our clients were not profitable.

There are certainly reasons to continue to service clients who generate a net loss: future gains, building a brand, other mutual benefits etc.  What concerned me more than the losses were that the clients who were showing up on the non-profitable list were the same ones who gave my team the most grief.

We provide a unique service in our landscape, as one of the first completely virtual cloud accounting firms in Canada.  It is not surprising then that a small percentage of our clients were just not a good fit.  As a leader, it is my responsibility to ensure that my team does not burn out by servicing clients who do not see the true value in the services that we provide.  I did this by reviewing our existing client relationships and ensuring that we have a more rigorous screening process for new clients.

As a leader, it is my responsibility to ensure that my team does not burn out by servicing clients who do not see the true value in the services that we provide.

Reviewing Existing Client Relationships

The client receiving steeply discounted services

When you’re starting a new service company, more likely than not, there will be a few clients that you develop a personal rapport with due to the sheer fact that they were one of your first clients.  This happened to me.  I didn’t set clear expectations, because I was still figuring out the whole thing when they first became my clients.

It was extremely difficult to have these conversations with these clients to raise prices or discontinue services.  This is because the clients that pay the least for the services are the same clients that do not know the true value of the services being provided. It was not feasible for us to continue providing these services at steep discounts, and not only that but it was taking away from my company’s operational efficiency and taking away from clients who were paying full price for services.

…the clients that pay the least for the services are the same clients that do not know the true value of the services being provided.

The client that thinks that everything they need is urgent

Setting expectations is key here, but if that doesn’t work then steering clear is my advice.  I’ve had very emotionally driven clients that treat every request they send to us as urgent.  Having a client like this puts additional emotional strain on the team, this I think is something important that service companies need to think about.  Taking on a client like this could be the difference between your team member having more bad days at work.  While not completely unavoidable, it’s something that’s not insignificant and should be considered.

These were the two glaringly obvious red flags in our client-based that we addressed immediately.

Developing a Screening Process

Our existing client screening process was quite lenient.  If a client was opened to moving to cloud accounting and they knew how to use email for communications, they were in!  We needed to move beyond that and so we are in the process of refining our screening process to ensure a better client fit before moving forward.