Another Increase in the QST Sales Tax Rate

Allan | December 22, 2011 - 10:33 am

On January 1, 2012, the rate of the Québec sales tax will rise from 8.5% to 9.5%. The new rate will apply to taxable supplies for which the QST will be payable as of January 1, 2012.

The QST is compounded on top of the 5% GST. The new effective combined sales tax rate is 14.975%.

The rules for determining when the QST will apply at the rate of 9.5% 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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Pros and Cons of Using a Credit Card to Finance Your Business

Guest Blogger | December 12, 2011 - 9:25 am

There have been plenty of success stories of people financing large ventures purely from plastic credit cards. Guitar Hero, Google, and Kevin Smith’s first movie “Clerks” are just a few. However, many more people have found themselves in bankruptcy court while also paired with an irreparable credit score. It can be very high risk, high reward, so you should be prepared before accumulating credit balances to start up your new business.

Advantages

  • Availability. Since the 2008 financial crisis, lenders have been backing off, making it even harder to find the capital to finance a startup. If you report a high enough income, you might just have a high enough limit to get your business going.
  • Take credit as you need it. Whereas you will likely be paying back the interest of a business loan before you are even able to spend it all, financing with credit cards allows you to only pay interest on the essential items you need to run your business.
  • Financial freedom. If using credit cards, you don’t have to justify every business expense to a consultant, investor, or shareholder. This might make the business process much less tedious.
  • Business rewards. This applies only if you have a business credit card, as opposed to a consumer card. Many business cards give nice cashback for office supplies and the like as well as frequent flyer rewards.
  • Simplifies tax issues. Again, this applies only to business credit cards. Having a separate credit card for your business purchases make filing taxes less of an issue. I wouldn’t advise financing a business with the same card you use for personal expenses.

Disadvantages

  • Availability of funds. While I mentioned earlier that credit cards may get you financing power where business loans were denied, you must also keep in mind that creditors have also seriously limited credit lines as well since the financial crisis. Unless you have an amazing credit history, you might not be able to get enough in credit cards to finance a business.
  • Sink or swim. When financing your business through credit cards, you are just about on your own. You will receive little oversight, and for many people, this could lead straight to a business failure. This is why it’s best to consult your business idea with many people before sacrificing your own debt, making the financial freedom advantage above somewhat moot.
  • Harsh consequences for failure. Failing any business is never a good thing, but failing a business primarily funded from credit cards is credit history murder. You will lose your savings, be under a huge pile of debt, and paying out interest for the rest of your life.
  • Limit cutoffs. It can often take time for a business venture to finally start bringing in capital, and there is a good chance that you may run up such a large balance on your card for a long enough time that your issuer will lower your credit limits. This could happen at a time where you need it the most.

Bottom Line

All things considered, financing a business primarily from credit cards should be avoided as much as possible. You should look for other methods of financing including loans, credit lines, or even peer-to-peer lending.

Ideally, business credit cards should be used as a means to pay unexpected business expenses like broken equipment, unexpected travel, and last-minute client dinners that might seriously impede your cash-flow. These are smaller business investments that would be easier to pay off over time than an entire start-up cost.

If you see no other alternative to finance your business, be incredibly meticulous. You will have to find a way to eventually pay these balances in addition to the interest they accrue. Having a detailed payment plan for your business credit cards (before you realize that you are having trouble paying them off) is a must. You must scrutinize how much you can afford to spend as well as form where and when your payment money will come.

This is a guest post by Eliza Morgan who is a full time blogger. She specializes in writing about business credit cards. You can reach her at elizamorgan856@gmail.com.

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How Do Canadian Tax Treaties Work?

Guest Blogger | December 7, 2011 - 11:40 am

If you are Canadian and thinking about working abroad or you are from another country and considering making Canada your new home for family and work, you’ll need to understand the tax treatment you’ll receive from the two countries involved. Canada maintains tax treaties with almost one hundred countries around the world, some large, some small.

The idea of a tax treaty is that you can legally avoid double taxation in circumstances where you would otherwise pay tax on the equivalent income in both countries. Usually, the planning behind a tax treaty decides how much tax is paid in one country and the level in the other. Tax treaties often cover pensions, wages, salaries and interest.

Look At An Example of a Treaty

As an example, let’s look at the tax treaty between Canada and Ireland as there is a high exchange of workers between these two nations. Most tax treaties are quite similar although if you are planning on making a move which involves use of a tax treaty, you will need to take professional advice to ensure you completely understand any taxation system you are entering.

It’s always a difficult time moving to another country, especially if you are taking family with you and maybe arranging schooling as well. Nevertheless, planning and information gathering is an immense task that you should start sooner rather than later so you are able to consider matters including:

  • New personal relationships
  • New job
  • New living conditions
  • New school
  • Health care arrangements
  • Tax arrangements
  • Business start up planning

You shouldn’t base your taxation planning on this article; it’s here to help you decide which information you should go and find out more about.

At least you know a tax treaty exists between the two countries. Now it’s time to read all the documentation, making notes as you go along so you are able to ask the right questions later.

Domiciles And Residence

Domiciles and residence are two important concepts. Your permanent home is your domicile. It has nothing to do with nationality or tax residence. If you have no fixed expectation of moving to the other country, your domicile won’t change.

If you are moving to Ireland, in our example, but remain a Canadian for domicile purposes, your taxation will be paid on a remittance basis, even if you are noted as resident in Ireland. Only taxable work and money you bring into Ireland will be taxed there.

Residence is confirmed by legislation. If you spend 183 days or more in Ireland in a tax year or 280 days or more over two years, you will be considered tax resident in that country.

The main reason for this legal jargon is to show that you won’t be taxed in both countries. So as a Canadian, resident in Ireland and earning income in Canada, your Canadian government will charge a withholding tax against the income. That turns into a tax credit when you arrange your affairs in Ireland – so you don’t pay the tax twice.

Inheritance or Estate Taxation

Thinking ahead, Ireland applies what it calls Capital Acquisitions Tax on gifts and inheritances – remember there’s been no inheritance or estate tax in Canada since 1972. If you live in Ireland for five years you will be open to their taxation of Irish gift and estate taxes.

If you’re thinking of staying in Ireland for a long time (and are allowed to do so) you will need to learn their pay-related social insurance plans – regular contributions from salary which include a health levy. Ireland has a social security agreement with Canada. This means that any contributions you pay in either country are treated towards your final pension arrangements, wherever you take them. So either your Canadian Pension Plan counts over there or your Irish pension counts in Canada.

Essentially, you won’t pay tax on the same worldwide assets and income in both countries. One will offset against the other. It is imperative that you take serious accounting and taxation advice before considering such a move as the implications may be long term and not that friendly if you don’t plan properly.

Olivia Lennox is a personal finance writer and frequently writes on tax issues. She writes on behalf of a 0% balance transfer service and other consumer sites

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PayPal Fees, FreshBooks and Cloud Accounting Systems

Guest Blogger | November 14, 2011 - 12:37 pm

FreshBooks is an online invoicing software as a service for freelancers, small businesses, agencies, and professionals. The software integrates well with many Cloud based accounting systems such as Xero and WaveAccounting.

So how does it work?

FreshBooks allows for instant online payment via PayPal. As soon as a Payment is received by PayPal, PayPal notifies FreshBooks electronically and FreshBooks enters the payment and marks the invoice as paid (or partially paid, depending on the amount). FreshBooks will then send an automatic Payment Notification email to the client who paid (if you enable this setting). In the meantime, the business owner receives a Payment Notification email from PayPal (“You’ve got money!”) and another from FreshBooks. Great! Seamless.

Except that if a business owner is used to charging a separate 4% PayPal or credit card handling fee to customers, and processing it manually, it comes as a shock to learn that there’s no way to automatically add it in FreshBooks. You can add a fee if you know in advance how someone will pay, but if you’re not sure, or if they change their mind at the last minute and pay via PayPal, there is no automatic addition of a 4% fee. Instead, the owner has to “eat” the fee. There’s also no way to turn it on just for certain customers: either all your customers can pay online, or none of them can.

FreshBooks has purposely *not* added this automatic PayPal fee feature because (I just learned), it’s against PayPal’s TOS (terms of service) and US and Canadian law to charge a separate fee for using a credit card or PayPal. Charging customers a surcharge for using a credit card has been against the law in Canada (and many US states) for 35 years. In Canada, Visa and MasterCard currently allow Merchants to offer a cash/check discount. PayPal does not: they insist on a one-price-fits-all policy. Canada’s independent law enforcement agency, the Competition Bureau is engaged in a legal battle on behalf of merchants but, as it stands, if you want to conduct business using Visa/MasterCard/PayPal, you must agree to the Terms of Service.

The good news is that PayPal fees are 100% tax deductible! Assuming all your online transactions are for business, PayPal fees are considered an expense and a cost of doing business, just like a credit card fee or a monthly bank account fee. True, the business owner has to pay the fee at the time of each sale and wait until tax time to be reimbursed, but this is true of all business expenses. (Incidentally, both Wave and Xero can track PayPal fees on an invoice-by-invoice basis so you’ll know exactly how much to complain about to your spouse on any day of the year.)

So, yes, business owner need to raise their prices to include this business expense. And when their loyal cash customers see the new one-size-fits-all price? The correct response is: “I’m sorry, I don’t make the laws; I just try to follow them.” As more customers switch to using credit cards or PayPal for their convenience, the business owner may ultimately welcome not having to trudge to the bank so often, especially in winter, carrying large amounts of cash. Not to mention the bonus of having all payments entered automatically.

Belinda Darcey is a web & graphic designer, specializing in custom website design for ecommerce sites. She is also a cloud systems integration analyst: helping clients evolve the back-end of their businesses from ye olde paper and desktop solutions to more efficient and cost-effective cloud-based online systems.

http://www.dolcedesign.com

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When I Grow Up, I want to be a Tax Accountant!

Allan | November 11, 2011 - 9:36 am

It’s Friday so we decided to post something funny to lighten up the mood heading into the weekend. YES, all this is true and YES we love dealing with this stuff on a regular basis! Enjoy!!

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How Many Credit Cards Does a Person Require?

Allan | October 21, 2011 - 10:04 am

Having the right number of credit cards can really affect your credit score, but you may be wondering if you have too many or too few. The truth is that there is no perfect number of credit cards you should have or a mathematical function to help you figure out the right number for you. The most important thing to remember with credit cards is that it doesn’t matter how many you have. What will make a difference in your credit score is how you manage them.

Thanks to the recession, banks are now looking for many new cardholders, so it is much easier to be approved for a credit card now more than ever before. However, just because it may be easier to get a new credit card doesn’t mean you actually need to apply for one. You can have a great credit rating if you only have one credit card or even if you don’t have a card at all. The important factor here is how you use the credit you are given.

Those consumers who have decent credit scores usually follow three rules.

  • They fully pay all of their bills on time.
  • They keep a low balance on the credit cards they have.
  • They only take on new credit obligations when absolutely necessary.

Those who follow these guidelines can consistently build great credit over time and don’t have to worry about their number of credit cards.

One of the factors to remember when deciding how many credit cards you need is that your credit score could suffer if you don’t have enough credit information. If you don’t provide the credit bureau with enough information, they may not feel comfortable with your ability to make payments on time, which could cause them to lower your credit score. In this way, no credit can be just as troublesome as bad credit.

On the other hand, if you have too many credit cards, the credit bureau may think that you are a risk as well. People with more credit available to them are more likely to go into debt. Therefore, their credit score may suffer the consequences. Websites such as TransUnion Canada can help you keep track of your credit score as well as provide tips and advice on how to maintain good credit.

If you want to build a credit history, but you don’t want to have credit cards, there are other options for you. Paying a mortgage or student loan will show lenders that you are responsible and capable of handling other types of loans, and that good behavior will improve your credit rating.

Be very careful when you decide to open new lines of credit. Your credit score can fall for a period of time when you apply for new accounts. So if you want to apply for a loan or some other major credit obligation sometime soon, then you probably shouldn’t be applying for credit cards as well.

To answer the question “How many credit cards does one person need?” I have researched articles written by many experts, and they all seem to say the same thing. Three to five credit cards is generally acceptable because this number of accounts will give the credit bureau enough information for a proper analysis of your credit habits, and the card holder is still able to maintain a decent level of credit card manageability. If you don’t have three, you should probably open a few accounts as long as you can use them wisely. If you have more than five, however, closing the extra accounts isn’t the best idea. The credit bureau views older accounts as more reliable sources of information, and closing some of your accounts could lower your average credit card age. Therefore, the information from your remaining credit cards could be less valuable, and closing the accounts probably won’t help improve your credit score. Instead, stop applying for new accounts and keep all of your balances very low from month to month so you can show the credit bureau that you can be responsible, even with multiple cards.

Amy Young is an author working for a financial education company. Her articles relate to various topics including business, finance, and important credit card information for consumers.

 

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Tax Credits for Senior Home-Support Services

Guest Blogger | October 17, 2011 - 10:13 am

If you are a senior who uses home-support services, you could be eligible for a tax credit for your expenses.  The government makes this offer as a way to keep seniors in their homes and out of public services and social services homes either all together or for as long as possible.

Are You Eligible?

In order to be eligible, you must be 70 years-old or older, and be a resident in Québec as of December 31 of the year that you apply for the tax credit.  For instance, if you wish to apply for a tax credit this year, 2011, you must be a resident on December 31, 2011.  Any services incurred before your 70th birthday are ineligible for the tax credit offer.

How Much Money Will You Receive?

The amount of tax credit you receive is dependent on two factors:

  1. Your living situation.
  2. Where you live.

If you are an independent senior living alone, you are eligible to receive a tax credit of 30 percent of up to $15,600 in home-support expenses per year.  If your expenses met or exceeded $15,600 in a given year, then you will receive a tax credit of $4,680 for that year.

If you are a dependent senior living alone, you are eligible to receive a tax credit of 30 percent of up to $21,600 in home-support expenses per year.  If your expenses met or exceeded $21,600 in a given year, then you will receive a tax credit of $6,480 per year.  Note that the Revenu Québec may require something in writing from your physician certifying that you are a dependent senior.

If you are an independent married couple, you are eligible to receive a tax credit of 30 percent of the maximum combined home-support expenses of $31,200 ($15,600 per member of the marriage).

If you are a dependent married couple, you are eligible to receive a tax credit of 30 percent of the maximum combined home-support expenses of $43,200 ($21,600 per member of the marriage).

If you are a dependent and your family receives an income that exceeds $52,080 per year, then your eligible tax credit will be 27 percent, as opposed to 30 percent, of your home-support expenses.

Which Home-Support Services Are Eligible?

Where you live will affect the amount of tax credit you receive.  Condos, apartments, houses, health establishments, and senior citizens’ residents may receive credits for living expenses.  For instance, if you live in a condominium, you may receive credits for condo fees.  If you live in an apartment, the government will credit you 30 percent of 5 percent of your monthly rent that does not exceed $600.  So, let’s say your rent is $1,000 per month; you will receive 30 percent of 5 percent of $600, as that is the rent cap: .30 *($600*.05) = $9/month.

Additionally, you can receive credits for expenses not included in your rent or condo fees.  For instance, you may receive credits for cleaning services for the outside or inside of your residence.  However, in order to receive tax credits for the expenses not included in your rent or condo fees, someone other than you or your caretaker must prove the monetary amount; for example, a receipt from the company that you hired to clean the outside of your house will suffice as proof.  To see the full details of the tax credits for living expenses and services, you should visit the Revenu Québec website.

How to Apply for the Tax Credit:

There are two ways to file for a tax credit for home-support services if you are eligible.  The first is by filling out Schedule J of your income tax return.

The second is applying for advanced payments.  If you would prefer advanced payments for your services, then you must apply for direct deposit by December 1st of the year in which you incurred your expenses, otherwise you will have to claim them on your Income Tax Return.  In order to apply for advanced payments, you must:

  1. Register for direct deposit.
    1. If you are not registered, you can do so by either 1) mailing a blank cheque to the Revenu Québec.  The cheque should have “VOID” written across it and include your name and social insurance number; or 2) Filling out a Request for Direct Deposit form.  If you live closer to the Montréal office then you should complete form LM-3.M-V.  If you live closer to the Québec office, then you should complete from LM-3.Q-V.
  2. Complete the application form relevant to your living situation.
    1. For rent and services included in rent, fill out TPZ-1029.MD.7-V.
    2. For services included in condominium fees, fill out TPZ-1029.MD.8-V.
    3. For occasional services (like the cleaning of the outside of your house), fill out TPZ-1029.MD.9-V.

Important Things to Know

  1. Power of Attorney

If for any reason you cannot manage the responsibility of dealing with the Revenu Québec, you may appoint a family member to be your Power of Attorney by filling out MR-69.MD-V; this form is called Power of Attorney for Advance Payments – Tax Credit for Home-Support Services for Seniors.

  1. Save your receipts!  You will need them to prove your expenses.  If you do not have proof of services, then you will not receive a tax credit.
  2. Expenses are only eligible for the given calendar year that you are applying to receive tax credits. For example, you will not receive tax credits for expenses incurred in 2010 for the 2011 calendar year.
  3. To qualify an expense for the tax credit, you or your legal guardian must have paid for the expenses.

 

Amy Shoemaker is a guest post and article writer bringing to us her thoughts on tax credits for senior home-support services.

Additionally, Amy writes about nursing home abuse for www.nursinghomeabuse.net.

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Denmark levies the world’s first fat tax

Allan | October 4, 2011 - 8:41 am

Denmark Saturday became the first country in the world to impose a fat tax after a week in which consumers hoarded butter, pizza, meat and milk to save a few dollars.

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Government Spending Habits and Excessive Taxing

Guest Blogger | August 24, 2011 - 9:01 am

An overtaxed society can create a deficient economy when the populous is burdened with the extra expenses of excessive tax. Funds used here can be used on a more productive level or a healthier happier lifestyle. The journey from which the sum of $200 takes from pay check to the last penny is likely taxed in more ways than we realize and below is compromising example.

To begin with, let’s remove the 20% income tax leaving $160.00

From there, a modest 3% for old age pension contribution leaving $152.00 Next, a modest 2% for EI contribution which leaves $148.96 Then of course for the benefit of this example non-food purchases are made from the remaining $148.96 which of course are taxed a further 14% leaving an actual spending net of $128.10 from the original $200. Calculate this example over a year’s time and the average citizen could dish out close to $1,000 in taxes just on this $200 monthly allowance. And this is not inclusive with home expenses, heating, vehicle, gas, clothing, gifts etc.

Additionally upon retirement our little nest egg is taxed once again. Not only does this compound the original taxes taken years prior from the original $200, taxes 30 years later are far higher. Now, if we the people can find ways to adapt our living habits and by force mind you to accommodate this excessive taxing and/or create ways to generate additional income, then why is it so difficult for government to apply the same effort?

Each year the same questions arise within government. How can they raise more money? How can they pay for this service or that project? Yet, each time the answers fall under the same category or are mentioned on their list of solutions; tax the people. A simple and effortless solution is often considered ideal when the labouring efforts of others are involved isn’t it?

Alternative yet Simple Methods

An ideal start might be to revamp the way government and its branching departments spend our tax dollars in the first place. Needless expensive ad campaigns, excessive monthly allowable budgets inclusive with expensive dinner engagements, gas allowance, private travel etc. Do they really need to have that $200 meal? Is that really necessary when lower income earners foot the bill?

With a prosperous income to begin with why is there a need to use income from the people for their extravagant business trips and dinners? An ideal way to re-direct this money back to the people would be to account for it themselves and apply them as business expenses when filing taxes like the rest of the population.

There are far too many small government offices and positions branched out into too many different departments. An example: a simple phone call to any municipality and the prompts are endless as to which department you seek. Multi-tasking within these positions would definitely generate money.

Reason being, the regular job market which is another disturbing problem has developed into a endless array of multi-tasking jobs but are all categorized under one single job description. Yet, our wages are based on a pay scale which is outdated and almost pathetic.

If we the people can adapt to the demanding needs of a competitive job market saturated with multi-tasking jobs, then the thousands of needless departments within government can apply these same methods. This is how companies in Canada survive. This is how government can re-modify their labour costs using the savings to benefit in needed areas that seem to arise year after year.

Government needs to address these issues as it’s becoming more difficult to acquire simple jobs and simple housing for the average citizen who can’t afford post secondary education. How does one acquire experience when companies large and small refuse to train even for the simplest positions?

Today’s society and government is far too demanding, far too selfish focusing more on profits gained from citizens with the perfect credit rating, the healthy bank account and that over qualified resume.

Focusing on the whole picture here, a little leniency, human compassion and an overall team effort can go a long way when creating a healthy economy and a balanced government.

Author: Kellie Hastings

Researcher and writer of articles pertaining to health, anti-aging, pollution, and public/health awareness. For health concerns on GE Foods, Cloned animal foods, GE Food Watch List, Diseased Factory Farms- videos and FDA corruption visit [http://www.discovery-health.org]

US Dollar credit card

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Get a Jump-Start! Popular Small Business Owners Tax Deductions

Guest Blogger | August 15, 2011 - 11:48 am

While filing for taxes may be the last thing on your mind—after all, didn’t it just feel like you did that just yesterday?—the truth is that you need to start preparing as early as possible (like right now) so that you qualify for a variety of tax deductions. There are tons of tax deductions you are entitled to a small business owner but since agents need solid documentation, receipts, and ledgers in order to approve your deductions, it’s important that you start collecting all the proper paperwork as early as today. That said, to learn some of the most common tax deductions you qualify for as small business owner and to know all of the materials you need to claim the deduction, continue reading below.

Home-Business Tax Deductions - If you conduct your business from the comfort of your own home then yes you can qualify to receive a deduction. For example if you run an online business from your bedroom, design and make clothes in the common area of your home, or provide legal services in the den, you can qualify for this deduction. Note that auditors are really strict when it comes to this deduction—your home must be your principle place of business. This means that it is your main source to earn business income and that you meet with clients and customers in your home regularly. Do not confuse this with having just a “home-office” (a space with a desk where you catch up on work over the occasional weekend or so). This deduction can be hard to claim. That’s why to earn this deduction it’s typically best to keep records of all business-related activities that occur within your home, including appointment ledgers and supply order forms with your home address on them. To claim this deduction you must also actually live there. Some small business owners like to dupe the system by purchasing cheap homes for office space and then “pretend “that they live there. If you are investigated and get caught in your lies be prepared to suffer the consequences. That said, the amount of deduction you qualify for will be based on the percentage of your home that you can allocate to your home business. So for example, if you run an online business through your bedroom which is 10 by 10 feet in size and your home is 1800 square feet then your business-related home expenses would equal to 5% —it’s the work space divided by the total area. You would then take this percentage and apply it to your allowable household expenses that pertain to your business such as utilities.

Wine and Dine Tax Deductions - If your line of business requires you to take out clients, customers or investors to dinner in order to earn or negotiate business then you can claim a deduction on all meals. You can’t write if off completely, the CRA allows up to 50% in deductions of each meal since it is assumed that you are eating as well. But you can essentially write off half of whatever the meal (or event) costs with tip included if it is just you and a business associate. Note that business matters must be discussed in order to claim this deduction either during or after the meal/event. In either case the CRA is really strict with this deduction and you must have receipts in order to claim this, no exceptions. One of the easiest ways to avoid an investigation (which is common with this deduction) is to not only save every receipt and make photocopies, but to include the following information on the back of the receipts: date, names of people present for the dinner meeting for example, what business-related matters where addressed/discussed, and why this type of meeting was found most appropriate.

Travel Deductions - Lastly, small business owners can also receive tax deductions for a good chunk of their traveling expenses that they spend going on business trips, conferences and meeting up with clients or customers. This includes receiving a deduction on public transportation passes, taxi fares, flights, vehicle rentals and gas and repairs if you choose to use your own vehicle for business travels. Similar to the wine and dine deduction you must have impeccable records. This includes organizing all of your receipts and documenting the date, mileage, and the client you went to visit. Note that there is a limit of how much you can deduct in this category however.

This guest post is contributed by Carol Wilson who writes for business insurance reviews. She contributes articles about a variety of marketing, business, stock market, small business topics. She can be contacted at: wilson.carol24@gmail.com.

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