Author Archives: Allan

When Dealing With the CRA Know Your Rights!

The Taxpayer Bill of Rights outlines what you can expect in your dealings with the CRA. Know the services you are entitled to before initiating any dealings with the CRA will help you make the most of your interactions.

Tip # 1 – Be prepared

Have pertinent information and documentation on hand when you contact the CRA.  This can include your:

Income tax report
Social Insurance Number (SIN)
Business number
GST registration number
Any correspondence relevant to your request or complaint to the CRA.

Tip # 2 – Be quiet and respectful

Addressing issues of taxes can be stressful. If you feel you that were treated unfairly and you are contacting the CRA to make a complaint, your emotions may be running high. Remember that the agent you are speaking to is probably not responsible or even aware of the situation you are seeking help with. They are there to assist you. If you are disrespectful or remove your frustration on them, you make it difficult for them to effectively understand your situation and provide the assistance you require.

Tip # 3 – Keep track of your communications

Take detailed notes of all your communications, written or verbal, with the CRA, including dates.

If you deal with the CRA by phone, make a written summary of the conversations.

Keep all correspondence you send and receive from the CRA.

A record of your transactions with the CRA may be useful at a later date in case of dispute about what was discussed.

Tip # 4 – Ask for the phone agents for their identification.

When you contact the call center of the CRA or general line of investigation, you are entitled to know the identity of the agent who handles your call. Ask the agent for their first name, agent identification number and regional suffix.
This information will will reinforce the agent’s accountability and may be useful if at a later date, you must prove that you spoke with someone at the CRA or to confirm that you have received advice.

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Have a Laugh!!

During this tough time of the year, we are all stressed with our pending income tax returns. Here’s a little video we found which might brighten up your day!

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Tax Information for People with a Disability

The Canada Revenue Agency (CRA) administers a range of benefits and credits for people with disabilities or those caring for a dependent with a disability.

Child Disability Benefit – The Child Disability Benefit (CDB) is designed for families caring for a child under age 18 suffering from severe and prolonged physical or mental functions. The CDB is paid monthly with the Canada Child Tax Benefit on the 20th day of each month. The CDB, which is based on family net income, provides up to a maximum of $205.83 per month for each child eligible for the disability amount. The CDB is reduced when family net income exceeds $ 40,970. For more information, visit www.cra.gc.ca/cdb

Disability Amount – If a qualified practitioner certifies on Form T2201, Disability Tax Credit Certificate, that you have a severe and prolonged physical or mental disability, you can claim the disability amount of $ 7,239 when filing your 2010 return. The disability amount can be transferred in whole or in part if the disabled person does not need to reduce its taxable income.

Medical Expenses – You may be able to claim the cost of medical expenses for a period of 12 months ending in 2010 (provided they were not claimed before) for yourself, your spouse or common-law partner, or your dependents. For 2010, your total expenses must exceed 3% of your net income or $ 2,024, whichever is less. For more information on medical expenses, including a list of common eligible expenses, visit www.cra.gc.ca/physician.

Registered Disability Savings Plan – A Registered Disability Savings Plan (RDSP) is a plan that provides for long-term financial security of a beneficiary who has a serious impairment of physical or mental function. The beneficiary under an RDSP must be eligible for disability tax credit. Although contributions are not tax deductible, income earned on contributions are tax-exempt while the funds remain in the plan. When earnings are withdrawn from the savings plan, they are taxable to the beneficiary. For more information, www.cra.gc.ca/disability.

For more tax information for people with disabilities, see Guide RC4064, Medical and Disability-Related Information, or go to www.cra.gc.ca/disability.

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When is the due date for 2010 Personal Tax Returns?

Generally, your return for 2010 has to be filed on or before April 30, 2011. As April 30, 2011 falls on a Saturday, this deadline will automatically be extended until Monday, May 2. 2011

The Income Tax Act specifies the due date for Personal Tax filing to be April 30th. The Interpretation Act s. 26 indicates that when the due date falls on a holiday, then the due date will be considered to be the next day that is not a holiday. The Interpretation Act s. 35(1) defines “holiday” by listing the applicable statutory holidays, and indicates that Sunday is considered a holiday. According to the Interpretation Act, Saturday is not considered a holiday. However, the CRA information on Important Dates for Individuals indicates that “When a due date falls on a Saturday, a Sunday, or a public holiday, we consider your payment to be paid on time or your return to be filed on time, if we receive it or if it is postmarked on the next business day.”

Source: Canada Revenue Agency Important Dates for 2011

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What is the Quebec Solidarity Tax Credit?

As announced in the March 2010 Provincial Budget, the Solidarity Tax Credit replaced the following:

  • QST credit
  • Property tax refund
  • Tax credit for individuals living in a northern village

To claim the solidarity tax credit, an individual must:

  • Be 18 or over
  • Be resident of Québec
  • Have legal status (Canadian citizen, permanent resident, refugee, etc.)
  • Not be confined to a prison or similar institution

Only one solidarity tax credit claim can be made per couple. To receive the tax credit payments, individuals must be registered for direct deposit. Individuals who are not already registered for direct deposit can register online using the Register for Direct Deposit service or submit their request for direct deposit along with their 2010 Personal Income Tax filing.

Payments for this new refundable tax credit will be paid once a month.

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2011 Brings Many Tax Increases

Make sure to count all your pennies because you are going to need them!

As of January 1, 2011 there have been a broad range of tax increases for all Quebecers and those individuals who live on the island of Montreal. Below is a list of all increases:

  • The Provincial sales tax rate (QST) increased to 8.5%. The combined GST/QST rate stands at 13.925%
  • QPP contributions will be calculated on the first $48,300 of earnings in 2011, up from $47,200 in 2010, so that the maximum payable by Quebecers will rise to $2,217.60 from $2,163.15 in 2010.
  • For the Quebec Parental Insurance Plan, the earnings threshold rises to $64,000 from $62,500 and the employee contribution rate increases to 0.537% from 0.506%, boosting the maximum payable to $343.68 from $316.25 in 2010.
  • Employment Insurance dues will be calculated at 1.41% on the first $44,200 of income, up from 1.36% on the first $43,200 in 2010, raising the maximum annual cost to $623.22, up from $587.52 in 2010.
  • The Quebec prescription drug insurance plan, also had its maximum annual premium increased to $600 from $585, though Quebecers who use the plan won’t face that cost until they file their provincial income-tax returns in early 2012.
  • A new provincial health contribution was announced in the last Quebec budget: $25 for all tax filers on 2010 returns, $100 in 2011 and $200 in 2012.
  • Individuals living on the island of Montreal will be subject to a new “car tax” which will be capped at $50 per vehicle owned. This new tax will be collected at the time of payment of the vehicle registration.
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What are the Corporate Tax Rates in Canada?

Corporate taxes are based on the business net income and not the sales. The Federal small business corporate tax rate is 11% for up to $500,000 in net income. The General rate is 16.5% for net taxable income above $500,000.
In addition, each Province has its own tax rates which vary from Province to province as per the table below:
2011 Corporate Income Tax Rates
General Small Business Business Limit
Federal 16.5% 11% $500,000
Alberta 10% 3% $500,000
BC 10% 2.5% $500,000
Manitoba 12% 0% $400,000
New Brunswick 11% / 10% 5% $500,000
Newfoundland & Labrador 14% 4% $500,000
Nova Scotia 16% 5% $400,000
Northwest Territories 11.5% 4% $500,000
Nunavut 12% 4% $500,000
Ontario 12%/11.5% 4.5% $500,000
Prince Edward Island 16% 1% $500,000
Québec 11.9% 8% $500,000
Saskatchewan 12% 4.5% $500,000
Yukon 15% 4% $400,000
Personal income tax needs to be paid on the money you withdraw from your corporation. You can withdraw money in the form of a salary or a dividend. Salary, an expense to your business, is tax deductible for your corporate tax. Dividends are paid out of your company’s after tax net earnings.

Both salaries and dividends are taxed at different rates on a personal level. There are a lot of Canadian accounting software deals so you do have a wide variety of systems to choose from.

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Audit from the Canada Revenue Agency

Canada’s tax system is based on self-assessment, which means that individuals are responsible for accurately completing and filing their tax returns on time. The Canada Revenue Agency (CRA) provides Canadians with the information they need to meet their income tax obligations.

Auditing is a way for the Canada Revenue Agency to monitor and inspect GST/HST and income tax returns, excise taxes and duties, and payroll records. Although there is a high standard of compliance with the law in Canada, audits help maintain public confidence in the fairness and integrity of Canada’s tax system.

There are four common ways of selecting files for audit; computer-generated lists, audit projects, leads and secondary files.

For additional information on how the audit is conducted, please consult the “Audit” section of the Canada Revenue Agency’s website.

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Increase in the QST sales tax rate

On January 1, 2011, the rate of the Québec sales tax will rise from 7.5% to 8.5%. The new rate will apply to taxable supplies for which the QST will be payable as of January 1, 2011.

The rules for determining when the QST will apply at the rate of 8.5% depend on the nature of the good or service supplied and the type of supply made.

For more information on how this increase affects your business, please consult Revenu Quebec’s website link.

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The Economics of Seinfeld

Recently, we came across a very interesting website about our favourite television show of all time, Seinfeld! Seinfeld ran for nine seasons on NBC and became famous for “a show about nothing”. In reality, the show was about all kinds of things which appear in our daily lives.

The website titled “The Economics of Seinfeld”, uses simple examples from the Seinfeld show to teach Economics in a fun and easy way to understand. Most people find Economics to be a very boring class taught in high school and college, however this website makes learning Economics fun!

You can learn all about imperfect information, price ceilings, cost benefit analysis, game theory, competition, saving, free entry and exit, etc… Unfortunately, we have not yet been able to find any learnings about income taxes or government.

The website can be found here.  The Economics of Seinfeld

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