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Employee Expense Claims: The Good, The Bad, and the Head-Scratchers

Posted July 28, 2019

Shaw & Associates Chartered Accountants is happy to take on all of your accounting needs, including checking and reimbursing employee expenses. 

There is a rise in non-allowed employee expense claims in Canada, with some of those claims varying from puzzling to outrageous. Having a good plan for employee expense reimbursement and having someone like Shaw & Associates working with you will go a long way to preventing employees from taking advantage of an expense reimbursement plan.

Legitimate Expenses Reimbursed – No Problem

Most companies reimburse employees for legitimate expenses they have incurred on behalf of the company. These include things like travel costs that an employee pays for a work trip, supplies that an employee buys for use in the business, or costs incurred while meeting clients for the business. These expenses should be reasonable and common for your industry. For example, a salesperson who is often required to meet with clients at their job would normally be reimbursed for the expense of driving their car to the client’s worksite.

Nope, No One Gets to Claim for THAT!

While most employees who put in claims for expense reimbursement are not trying to take advantage of their employer, some employees seem to operate on the basis of a, “You never know if you don’t try it” system. 

Some of the more notable claims for expense reimbursement that employees have tried to claim are for illegal activities, expensive restaurants (far beyond what would be normal for taking a client out for a working meal), hiring a limousine when a taxi would have sufficed, or buying personal items for the employee or the employee’s house.

Expense Plan and Employee Engagement

Your best plan is to have an employee reimbursement plan, discuss employee expense reimbursement with all your employees regularly, and make sure everyone understands what is and what is not a legitimate business expense. It’s also an extremely good idea to require proof of expenses for all expense claims, and make sure these receipts are checked before money is given out.

Here’s a quick video with some tips on staff expenses and reimbursement.

Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Death and Taxes

Posted July 3, 2019

No Inheritance Tax In Canada—Except…

There is no inheritance tax as such in Canada, and you do not need to pay income tax on money you inherit. What happens in Canada virtually amounts to an inheritance tax, however, and should be planned for with a financial expert.

Your Assets Will Be Considered Sold And Taxed

In Canada, an estate will be considered to be liquidated upon the death of the owner of the assets, bank accounts, RRSPs, TFSAs, etc., and the estate will be required to pay any taxes owing on these assets before releasing any money to beneficiaries.

As noted in RetireHappy.ca, “Reme[m]ber that at death there is no tax on the asset but there is a potential deemed disposition of the asset for taxation purposes.” This is a critical point and the reason estate planning needs to be done with a financial professional like those at Shaw & Associates—preparing for this type of taxation in advance can save the estate quite a bit in taxes.

This Includes Real Estate, Land, Investments, Etc.

Real estate, land, businesses, RRSPs, RRIFs, TFSAs and other investments may all be considered to be “sold” upon death of the owner, with the taxation rates that come along with that.

Again from RetireHappy.ca, an example comes from Real Estate, “whether it’s an investment property or a recreational property. Let’s pretend Elizabeth has an investment condo that she has owned and rented out for over 15 years. When Elizabeth passed away on June 30th, her condo is deemed to have been sold for tax purposes. Let’s say she paid $150,000 originally for the condo and now it’s worth $275,000. There is a capital gain of $125,000 of which 50% is taxable. Elizabeth’s final tax return would have to show net rental income for 6 months of the year plus the $67,500 of taxable capital gains.”

Plus The Probate Fees

There are also probate fees to be considered: “Probate is a legal proceeding whereby the Will of a deceased person is validated by the courts. The fees vary from province to province and in most cases these fees are based on a percentage of the value of the estate.”

Here is a brief video talking about the process of filing a tax return for a deceased person.

Don’t Pay More Tax Than You Have To

A death in the family is a very stressful thing, but talking to a financial professional like Shaw & Associates well in advance and making good plans is a very, very good idea. And can save you from having to pay the government a ton of money!

Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Accounting Reports For Small Businesses

Posted June 19, 2019

Keeping An Eye On Your Business Health

The accounting reports you need to have done regularly for your business are very important for success–you need to know where you are to see where you need to go. Checking your reports quarterly or even monthly can also help you to see trends–what is working and what is not. We’ll look at a few of the more important ones here.

Profit And Loss Statement

From Investopedia, “The profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs and expenses incurred during a specified period, usually a fiscal quarter or year.”

This is a very important report to run and examine. It can tell you at a glance how your business is doing–are you generating income (and how much), or are you running at a loss? Where is your income coming from, and what are your biggest expenses?

Balance Sheet

Says The Balance Small Business, “A balance sheet is a statement of the financial position of a business that lists the assets, liabilities and owner's equity at a particular point in time. In other words, the balance sheet illustrates your business's net worth.” 

The profit and loss statement compares the changes in accounts over a set period of time; the balance sheet is a snapshot of your business assets versus liabilities at any point in time. Both are important to see where your business is, and where it is going.

Accounts Receivable Aging

Accounting Tools notes, “An accounts receivable aging is a report that lists unpaid customer invoices and unused credit memos by date ranges.” 

It’s a business fact of life; whatever you excel in, whatever your passion is, you must also take care of your accounting if you want your business to succeed. This means invoicing clients, collecting money from clients, and keeping track of clients who are not paying on time.

For a little more detail on Financial Reporting, have a look at this video.

Shaw & Associates can look after all of your accounting needs, including generating all the reports you need and sitting down with you to go over these reports. 

Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.

What To Expect When You’re Expecting (An Audit)

Posted May 31, 2019

I’ve Been Selected For an Audit—Now What?!?

The Canada Revenue Agency (CRA) performs many audits of personal and business taxes each year, and you may be selected for their close scrutiny. This is not the end of the world, and it does not mean you have done anything wrong. The CRA does audits to ensure that all taxpayers are playing by the same rules, and to maintain taxpayer confidence in the taxation system.

A note regarding tax and audit scams—the CRA will NEVER call you and threaten you with heavy fines and jail time out of the blue. An audit is a process that you go through with an auditor from the CRA; they will work with you and inform you of their findings, if you have been re-assessed and need to pay more taxes. If you receive a call that seems like a scam, call the CRA at 1-888-495-8501 and find out for sure before paying anything or giving out any information.

The Audit Process Itself

The first step in a possible audit is a tax review. This is the most common interaction people have with the CRA—the CRA contacts you with a request for more information and back-up documentation. If you have been a diligent record keeper and you respond quickly with the information the CRA is looking for, this will likely be the end of it. If Shaw & Associates Chartered Accountants have been doing your taxes, your first step is to call us to handle this for you.

The next step is the formal audit process. The CRA will be looking for information and documentation, and they will come to a formal conclusion about your taxation situation. They will create a proposal for you, where you are assessed as no changes required, having overpaid (in which case you will get a refund), or having underpaid (in which case you will need to pay the additional taxes immediately or face fines and/or penalties). You can also file an appeal after the CRA has finished your audit.

We’ve Got You Covered

If you are already using Shaw & Associates for all your accounting, they will deal with the CRA and the audit on your behalf. If you aren’t a client of ours, we can still represent you through the audit process.

The quicker you respond to the CRA, the better. Information requests or formal audit proceedings won’t go away if you ignore them; you could make matters worse for yourself, though, by accruing penalties, interest owing, and losing the goodwill of your auditor.

Shaw & Associates will also be able to tell you if your audit is straight-forward enough to be handled by an accounting firm, or if you will need to get a tax lawyer involved. Any way you look at it, talking to a tax professional like Shaw & Associates if you have been selected by the CRA for closer scrutiny is a very good idea.

Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.

Risk Management and Your Accountant

Posted May 21, 2019

Progress = Risk

Progress involves risk, and risk management has become a common theme in modern business. Our accountants at Shaw & Associates can take a lead role in working to examine and manage the risk for your business.

Accountants and Risk Management

People often think that an accountant’s job is just to do your taxes. But it is so much more than that. For example, a good accountant also assists with risk management. As noted on topaccountingdegrees.org,

“One of the core competencies of the accountancy profession is improving the internal control program of an organization in an effort to managing and reduce risk. While some staff accountants may only be responsible for basic tasks, accounting managers and other lead professionals will play a role in designing, planning, implementing, executing and even monitoring risk managing activities and programs….

“The accounting profession has changed dramatically. Now, accountants are more than just number-crunchers who are stuck at a desk writing reports and balancing the books. In addition to this, an accountant is a strategic partner within an organization that specializes in risk management and helps to protect the company resources.”

Step-By-Step Financial Risk Management

The first step for the decision making involved in risk management is to keep your bookkeeping up to date—you can’t figure out where you want to go if you don’t know where you are! When your books are up to date, the next step is creating accurate, comprehensive, and easily understood reports for you, the business owner.

Future Planning

After that, we can sit down with you and look at what your potential financial risks are for your specific business. Once we have a good handle on the risks you are facing, we can work out plans to mitigate these risks and run scenarios to show you the outcome of different decisions you can take. We will also monitor how things actually play out and suggest course corrections to keep you on the right track.

Safe, Controlled Growth

You want your company to grow in a controlled, safe fashion—Shaw & Associates is your partner in planning the path to a more successful future with managed, foreseeable risks.

Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.

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