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Business Advisory, Personal and Corporate Taxes, Business Start-Up, Bookkeeping

News You Need to Know

Hiring an Accounting Company To Protect Against Malicious Prosecution

Posted October 4, 2018

One big reason to have an accounting firm take care of your business’ money is to keep you protected from wrongful prosecution. 

Although the Canada Revenue Agency is usually good about only going after people who have broken the law, sometimes they make mistakes, such as in a case recently described in canadianaccountant.com.

The story is about Tony and Helen Samaroo, a hard-working immigrant couple who did not trust Canadian banks, so they kept their savings in cash for decades. Because the older Canadian $100 bill was due to be discontinued, they proceeded to deposit their cash savings in banks. The CRA took the position that large cash deposits are unreported income, with no allowance for any other explanation.

What is unusual in this case is the lengths to which the CRA investigator went to try to convict the Samaroos of tax evasion, and the extreme actions he took to create this outcome.

As noted in the article, “The recent ruling by the BC Supreme Court to award $1.7 million for malicious prosecution by the Canada Revenue Agency to a Vancouver Island couple was met with satisfaction by many Canadian tax accountants and lawyers.

“In 2008 they [the Samaroos] were charged with 21 counts of tax evasion for allegedly skimming $1.7 million from the business.” 

They were found not guilty of these charges, and the CRA was subsequently found guilty of malicious prosecution in their pursuit of these defendants. In the judgement against the CRA, “Justice Punnett found that the conduct of the CRA “must be denounced. It affected the reputations of the plaintiffs, their professional lives and their family lives. It involved the concealment of exculpatory evidence. It involved the power imbalance of the State over the individual. It violated fundamental rights and was highly reprehensible.””

The Samaroos were not comfortable with doing their own accounting, and hired an accounting firm to do their bookkeeping, do their income taxes for them, and submit their GST and PST remittances. 

Because they had professionals working for them, these professionals were able to prove that they had not evaded taxes and skimmed money from their businesses, and that the case created by the CRA was not accurate or valid. Indeed, not only were the CRA’s charges found to be unjustified, but the CRA employee was found to have acted unprofessionally in his pursuit of this couple.

This is of course an extreme case. It does, however, serve to highlight how important it is to have a professional accounting company like Shaw & Associates handling your books, finances, and taxes. Not only do they keep your business running smoothly day-to-day by taking care of your finances, but they are an invaluable resource in your corner should the CRA ever become interested in your business.

Contact Shaw & Associates Chartered Accountants to give you peace of mind about the accuracy of your books. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Getting to Know Shaw and Associates – A Very Happy New Client

Posted September 21, 2018

Hiring Shaw & Associates Chartered Accountants means more than just getting your taxes done once a year. We are dedicated to providing our clients with top quality service that goes above and beyond expectations!

Shaw & Associates recently did a thorough review of the previous bookkeeping for a new client. We and the new client were astonished to find out that they owed $25,000 to the Canada Revenue Agency for GST. It was clear that this could not be correct, and we were able to quickly find the issue (sales were not entered correctly and the GST had been double entered, making it look like there was still a large amount owing). 

While sorting through the GST issues, we discovered that not only did the client not owe the additional GST, but there were also GST credits available that hadn’t been claimed back!

Shaw & Associates was able to go above and beyond for this new client in helping them integrate their point-of-sale system with their accounting software as well. This is a fairly easy task when you know what you’re doing, but it was not a high priority for a business owner who just wanted to run their business effectively. 

We made it a goal of ours to get this done for the client, to help them run their business more efficiently, and also provide excellent service for the client because helping clients is what we do.

When you’re running a business, it is crucial that you get responses to your accounting questions and concerns right away. At Shaw & Associates, we understand this and make it a priority to respond to phone calls and emails quickly. Our business is helping your business, and when you need our expertise, you need it when you need it!

This new client was also impressed with Shaw & Associates in our ability to help them find the most beneficial way to pay themselves. As a business owner, you can choose how to pay yourself (salary, dividends, or shareholder loan, for some examples), with advantages and disadvantages for each option. We were able to go over these options with our client and figure out what would work best for him and his business.

Contact Shaw & Associates Chartered Accountants to help you manage your finances more effectively. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Changes for the 2018 Income Tax Year

Posted August 29, 2018

As always, the federal government has included some income tax changes in 2019, for the 2018 tax year. Most of the changes that have been announced or proposed are related to businesses, with a few changes for individuals.

The small business tax rate is scheduled to be reduced from 10.5% to 10% for 2018, and reduced again to 9% for 2019. Passive income schemes, taxable dividends, securities lending arrangements, repurchase of shares, and at-risk rules for tiered partnerships have all had changes made; for an in-depth look at these changes, it is recommended that you talk to the accounting professionals at Shaw & Associates Chartered Accountants to see how these changes might affect you.

Certain trusts have had additional reporting and filing requirements added. Again, it is recommended that you talk to an income tax professional to see if the income tax changes for trust reporting will affect you.

A few of the changes that affect individuals include:

  • The Employment Insurance Caregivers Benefit for taking time off to be a caregiver has been extended to include maternity and sickness benefits.
  • Renaming the Working Income Tax Benefit to the Canada Worker’s Benefit has been proposed, and is set to be enhanced starting in 2019. The maximum benefit will be increased to $1,355 for singles, and $2,335 for families.
  • The Disability Tax Credit has increased.
  • Costs for a service animal for people with severe mental impairments such as post-traumatic stress disorder are proposed to be included under medical expense tax credits.

Interestingly, $90.6 million have been earmarked to be invested by the federal government over the next five years to fight tax avoidance.

Some past changes to tax measures that have been proposed but not implemented have also been addressed. Per Osler.com:

“Budget 2018, in accordance with the government’s customary disclosure of previously announced measures, confirms the government’s intention to proceed with the previously announced tax and related measures, as modified to take into account consultations and deliberations since their release, including the following:

  • Measures confirmed in Budget 2016 to expand the scope of the GST/HST joint venture election, which had been promised in previous budget proposals;
  • The measure announced in Budget 2016, on information-reporting requirements for dispositions of an interest in a life insurance policy;
  • The legislative proposals released on September 16, 2016, relating to technical amendments to the ITA;
  • The legislative and regulatory proposals to amend the Excise Tax Act released on September 8, 2017, relating to the GST/HST; and
  • Measures released on December 13, 2017 to address income sprinkling.”

For more details on the upcoming changes, look at summaries from Deloitte.com and Macleans

Contact Shaw & Associates Chartered Accountants to help you understand the tax laws and how they impact you. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Medical Expenses and Income Taxes: Changes and Unusual Items

Posted August 15, 2018

Canadians can claim medical expenses on their income taxes as a deduction, but it can be an underutilized deduction. 

You need to keep your receipts and total them up, and you don’t get to deduct the full amount of your medical expenses (there are thresholds and percentages involved), but you’re paying the expenses anyway—why not take advantage of any deductions you can get with them?

Fertility Treatment Deductions

The Canadian federal budget in 2017 included a clarification to rules on claiming medical expenses for the purposes of conceiving a child. In the past, only people who had been diagnosed as infertile were able to claim fertility treatment expenses as an income tax deduction. The changes included in the 2017 budget now allow anyone using fertility treatments to conceive a child to claim them as a Medical Expense Tax Credit (METC) on their income taxes. 

This clarification also included the rather unusual condition that the METC can also be claimed retroactively for up to 10 years—people wanting to claim a METC that they were previously ineligible for can re-file their taxes for that year with the updated METC amounts.

Other Medical Expenses

Another interesting thing about claiming medical expenses on your income taxes is just how many medical services and devices are eligible to be claimed. Some of the more unusual items that are allowed by the Canada Revenue Agency (CRA) are:

  • an air conditioner or air purifier;
  • computer peripherals;
  • electrolysis;
  • a furnace;
  • laser eye surgery;
  • medical marijuana;
  • medical services provided outside of Canada;
  • moving expenses;
  • premiums paid to private medical plans;
  • renovation or construction expenses;
  • tutoring services;
  • wigs.

These are just a small sampling of some of the medical expenses that might be considered a claimable medical expense by CRA. Many of these items require a prescription from a doctor to be eligible to be claimed, but if a doctor has decided that you need a specific item or service because of a medical condition, it’s worth looking into. 

Your next stop after seeing your doctor might be seeing Shaw & Associates Chartered Accountants—find out if you can claim the expenses or not, and what you need to do to claim them!

Contact Shaw & Associates Chartered Accountants to help you understand the tax laws and how they impact you. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Changes To Tuition Credit Usage And Accumulation

Posted August 3, 2018

Students in post-secondary institutions and trade schools in Canada have historically been able to claim tuition deductions, as well as education credits for time spent in school, and textbook credits to offset the cost of purchasing textbooks. 

Changes to Canadian federal tax laws beginning in 2017 eliminated the federal education and textbook credits (the tuition credit remains). Some provinces and territories have also done this—it varies from province to province. 

Alberta passed legislation to remove ties that caused Alberta to follow suit automatically when the federal government made changes to education tax credits. At this point, Alberta is maintaining the education tax credit.

As per the Canada Revenue Agency, the federal income tax changes regarding education also included a change to occupational skills course deductions. If a student is taking an occupational skills course at a post-secondary institution, they may qualify for a tuition deduction for that course, even if the student is not at the post-secondary level. The requirements for students to qualify for this deduction are that they must be 16 years of age or older at the end of the year, and they must be enrolled in the course for the purpose of becoming trained at an occupation.

This is not a change, but rather a strange part of Canadian tax law regarding carrying forward tuition credits that many people may not be aware of. If you CAN take the tuition credits, the federal government will assume that you HAVE taken the credits, and reduce your balance accordingly, whether you take them or not.

From the Advisor, “After careful review, the judge found that the law requires a taxpayer’s unused tuition, textbook and education credits to be reduced by the amount that the taxpayer “may deduct […] for the year.”

In other words, it’s irrelevant whether the taxpayer chooses to deduct her tuition, textbook and education credits in a year to reduce her tax to zero. Since she was permitted to claim the amounts, her credits are simply reduced whether she actually claims the amounts or not.

To support this conclusion, the judge referred to both the Department of Finance technical note that accompanied the rule’s enactment along with the 1996 federal budget, which states: “[T]he budget proposes to allow the student to carry forward these credits indefinitely until they have sufficient tax liability to make use of them.”

As the judge explained, such phrasing “indicates that a student will be forced to use the credit once he or she has income against which the credit could be applied.”

Canada’s tax laws can be a strange and mysterious place—using an accounting service to help you navigate these waters can save you time, money, and sanity.

Contact Shaw & Associates Chartered Accountants to help you understand the tax laws and how they impact you. One complimentary meeting with us will put you and your business on a more profitable and positive path.

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