Corpcentre's Blog

May 11, 2010

What Happens if I Get Audited?!

It’s certainly not a campfire horror story but many Canadians fear that they may be subjected to a tax audit. Is there basis to that fear?

The truth is that, for most personal tax returns, the chances of an audit are slim. The vast majority of Canadians, more than 90%, completes their tax returns accurately and files them on time. Of more than 26 million personal and corporate returns filed annually, the Canadian Revenue Agency (CRA) audits less than 2%. Most personal returns are accurate as the bulk of personal income is recorded on T4 slips. However, returns from small and medium sized businesses may be prone to error or may be fraudulent. As such, most CRA audits are directed at the business community.

This is not to say that you should assume that whatever you include in your personal return will slide through unnoticed. For example, if you live in a neighbourhood of stately, expensive homes, yet your income is barely above minimum wage, you may expect to be queried by the CRA as to other sources of income to support your lifestyle.

Should you be chosen for a tax audit, it is wrong to assume that the CRA is searching for criminal activity. A tax audit is conducted to ensure compliance with the Income Tax Act. An auditor may actually discover that you overpaid taxes and a refund is due. In any event, don’t be confrontational. Cooperate with the tax auditor and make all your records available. It is possible that you made an honest error and you have the opportunity to discuss this with the auditor. The auditor is also well versed in tax issues and may be able to offer helpful advice in your tax matters.

Overall, be prepared. Keep careful records and don’t discard them immediately after filing your return. If the tax auditor knocks at your door, be ready and be helpful.

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May 9, 2010

How to Master Canadian Taxes Before Next Year

If you compiled a list of Canada’s greatest complexities, chances are very good that the Canadian Income Tax Act would command a respectable spot on that list. In recent years, it has expanded incredibly, becoming a quagmire of confusion to the average citizen. It is no wonder that more than half of all Canadians now secure professional help to prepare and file their tax returns.

Have you tried to hold a conversation with a tax preparer during tax season? It is limited to several words as most tax professionals literally work around the clock to prepare as many returns as possible. If you are one of the clients, appreciate that your expectations are linked directly to your level of cooperation. In other words, your accountant cannot use information, sometimes basic and crucial, if you don’t supply it. Due to the tremendous workload and seasonal pressure, the accountant may not ask every question. Therefore, be prepared to supply certain information, along with your receipts and T4’s or T5’s.

The amount of tax you pay depends on a number of key facts that your accountant should know. Marital status and exact age are crucial as these affect possible tax credits or deductions. Your children, depending on their ages, create numerous tax credits and deductible expenses. Accuracy is essential; there is no room for approximation.

If you were employed at several jobs, be sure that each employer is listed in your return, even if you did not receive a T4. You are responsible for paying taxes on earned income and your accountant must be aware of every dollar that you earned.

If you own a business, compile a detailed list of every possible expense and revenue. Your accountant can decide which are not relevant, if any. Don’t make assumptions by yourself; let the professional decide.

List all your financial holdings, including any overseas investments. With all the pertinent information available, your accountant can determine your tax liabilities. Similarly, don’t forget to list “non-employment” income such as rental income, capital gains from sale of property, etc.

Finally, don’t forget medical expenses. Keep all your receipts for treatments, medications, insurance, etc. You paid dearly for your health and some of the expenses may return to you.

Spend some time researching tax credits and benefits. If you’re not sure whether you are eligible, ask your accountant. It is better to err on the side of caution. It’s easier to remove some numbers but much harder to add them if they were never included.

Incorporate in Canada with CorporationCentre.ca
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May 5, 2010

How Can I Find a Good Accountant?

May 2010; the tax season is behind us for another year. If you are like almost half the Canadian population, you prepare your own taxes each year. But, as the Canadian tax code is growing increasingly more complex, a greater number of Canadians are seeking professional assistance from accountants in order to reduce the risk of paying unnecessary taxes.

Locating accountants is relatively easy. Finding the accountant suitable for your specific needs is far more difficult. Canada boasts three professional accounting bodies whose members are certified to serve the accounting needs of the nation. However, each organization has different standards and requirements for membership. Therefore, if you are shopping for an accountant, it’s best to decide precisely what your needs are and interview prospective accountants carefully.

By far, Chartered Accountants (CA’s) are the best trained accounting professionals. Only CA’s can audit and sign financial statements. Roughly 40% of CA’s in Canada work with the public, while the remainder is employed in the private sector, government, or education. Although advertisements for CA’s will make many claims, it is wise to get several references.

In addition to CA’s, Canada also has 37,000 Certified Management Accountants (CMA’s). Generally, CMA’s do not have private practices but, rather, work in large organizations, monitoring and interpreting operating results to help management develop operating strategies. Nonetheless, a CMA should have adequate training to help a small business or a self-employed individual with basic tax management and preparation.

Finally, Certified General Accountants (CGA’s) offer a little something for everybody, working both in private practice as well as corporate or government settings.

Whomever you choose, your best bet is to ask friends and colleagues for recommendations. Also, take the time to interview at least three prospective candidates. Be sure that the chemistry is right between you. But, as much as possible, try to be your own accountant. A wealth of information is available online today. If you can’t do it yourself, gather as much information as possible so you know what to request of your accountant. By learning to prepare your own taxes, you’ll gain valuable insight into managing your everyday financial affairs.

Incorporate in Canada with CorporationCentre.ca
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April 25, 2010

Canadian Tax Deductions to Keep in Mind

Get ready, Canada – April 30th is rapidly approaching. As most Canadians are aware, this auspicious date heralds the end of the tax season for the previous year. It is your last opportunity to make any adjustments to your taxable income and, hopefully, reduce the tax due.

Tax deductions exist within the legal system to allow a degree of parity amongst taxpayers and create a balance between earned income and the relevant taxes. However, as most accountants will point out, although the government will allow you legal deductions on your tax return, they will not contact you to point out possible deductions that you missed claiming. Therefore, research and consulting may be worth money in your pocket.

Here are a few sample deductions you may have missed:

Certain adult family members living at home can reduce your taxable income. If you have a relative over 18 with a physical or mental disability, and they live with you, you can deduct more than $4,000 of your taxable income for the expenses incurred for them.

Do you work from home in your rented apartment? If you have dedicated workspace at home, and work there at least 50% of your time, a portion of your rent and maintenance expenses may qualify as a tax deduction

If you are required to use your own car for business purposes, and do not receive a nontaxable allowance from your employer, you can deduct a portion of your auto expenses including lease payment, loan interest, maintenance, licence and repairs.

Who ever thought that your hobby may be tax deductible? If you earn some side income from your hobby and travel in order to do so, a portion of the travel expenses can be claimed against your taxable income.

A person who drives for a living can claim a portion of their food expenses while traveling. Similarly, when you travel for work, it is expected that you need lodging and showers. These, too, are deductible expenses.

If you are filing a simple return, it may not be necessary for you to incur the expense of a professional tax preparer. The Canada Revenue Agency maintains a highly informative website. On the other hand, if you feel you may be missing something, consult with a professional. After all, as honest hardworking Canadians, we all pay our taxes. But, we wouldn’t mind paying just a little less.

Incorporate in Canada with CorporationCentre.ca
Click. You’re incorporated ®

February 18, 2010

Ontario’s Growth Spurt

Get ready, Canada! Ontario is about to set a new record.

With the country now emerging from the recession, it’s time to take stock and assess the damages. As a province dependant heavily on its manufacturing sector, Ontario’s GDP was one of the worst performing, matching those of Newfoundland and Labrador, contracting in 2009 by 3.5%. However, as many companies have a need to restock depleted inventories, Ontario is now benefiting from a business boom. Economic forecasts predict that Ontario’s GDP will grow by 2.4% in 2010, outpacing the national rate that is projected at 2.3%. This will be the first time in eight years that Ontario has excelled in terms of national growth. This growth is expected to continue into 2011 and reach 2.8%, although national levels are expected to reach 3% next year. Economists fear, though, that restocking inventory will only provide temporary relief. As the warehouses and shelves are filled, orders will taper off and return to earlier levels.

The growth in the GDP is good news for a province that is burdened by a massive deficit, the largest of all the nation’s provinces. Higher energy prices as well as competitive foreign markets are making it difficult to cope with the deficit. On the other hand, the HST, due to take begin on July 1, is expected to help ease the deficit burden. Combined with the HST, new, lower corporate taxes are expected to attract investments and new jobs to the province.

While manufacturing will experience a temporary post-recession growth spurt, Canada’s abundant natural resources will still lead the way economically. Saskatchewan is expected to remain the leader among provinces, based on the strength of its oil, potash, agriculture and uranium sectors. British Columbia and Newfoundland, both of whom suffered during the recession, are also expected to experience significant economic expansion in the coming year.

Incorporate in Canada with CorporationCentre.ca
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February 7, 2010

Tips for MBA’s Seeking Work in Canada

It’s not easy. There’s a lot of competition out there, and every unemployed MBA, whether recent or not, is looking for a job. What’s the best job search strategy?

Recruiters and career experts offer the same advice to job seekers. Analyze your strengths and focus on your interests. Being an all-around expert in everything will work against you. Have a clear-cut idea of how to best sell yourself. Also, while you’re still in school, start making connections. Long before graduation is the time to start developing your network of contacts. Let the business world know who you are and what it can expect down the pipeline. You want business to be waiting for you.

Don’t be overly picky. As small, temporary jobs and internships come your way, take them. Each job affords you additional experience and contacts, both of which are vital down the road.

Another avenue to follow is temporary contracts. With a growing number of entrepreneurs starting businesses in Canada, many are seeking business consultants to help them in their start-up ventures. However, while ideas abound, money doesn’t. Many cannot afford to hire “top” consulting firms and would rather pay less for younger talent. While these contracts will rarely offer job security to a young MBA graduate, it will help establish credentials and afford opportunities to gain vital hands-on experience.

Current MBA graduates should be aware that patience would have its rewards. A large segment of today’s senior management is at the front end of the baby boom generation. Many will be retiring over the next decade, making way for the next generation to make its mark on the business world. Therefore, the time is right for “the next generation” to gather experience and be ready and waiting for the opportunities that are just around the corner.

Incorporate in Canada with CorporationCentre.ca
Click. You’re incorporated ®

July 20, 2009

Corporation Minute Books – Do I need one when Incorporating?

Filed under: Canada,incorporation minute books for corporations in Ontario — corpcentre @ 11:04 pm

As a lawyer dealing with small business owners that are starting-up a business on a shoe string budget – Do I really need to have a corporate minute book?

The answer is simple: yes – it is required by law; and no it does not have to be a binder.

Most Canadian laws do not specifically mention a “minute book” but rather of keeping records of specific kinds of information. Most jurisdictions in Canada require corporations, and therefore its directors, to keep records containing the articles and by-laws and any amendments, minutes of meetings and resolutions of shareholders and directors, copies of all notices of change of directors, and securities registers.

Accordingly, it is legally required to maintain these records and information in one place. These records are kept in a “Minute Book” which has the properly named sections and tabs of the records required to keep. Moreover, the maintenance and keeping up to date of the minute book ensures easy access to the desired information especially if there have been many changes over the years. As you grow your business more documents will be inserted in same.

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