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Logbook for Vehicle Expenses

Jan 4th, 2012 by

I regularly get questions from my business and tax clients about how they should record their vehicle expenses and the records that need to be kept.  A simplified logbook for vehicle expenses was announced in 2010 by Canada Revenue Agency (CRA).   According to the CRA, the introduction of the simplified logbook was to ease the tax compliance burden on business owners.  The logbook can be used for businesses and those that incur vehicle expenses as a requirement through employment.

The type of logbook can be one that you purchase, a spreadsheet that you create or record in software like QuickBooks. In whatever format you choose, there is specific information that must be included. The following is the information required for business and employment expense;

1)    The date of travel

2)    The destination

3)    Number of kilometers driven

4)    Purpose of the trip

Remember to record your odometer reading at the beginning of the year for each vehicle.  If you change vehicles during the fiscal period, record the date of change and the odometer reading at the time you buy, sell or trade.

What you will end up with, is a record of the total kilometers you drive and those that are driven to earn business. An example of this is – if you drove a total of 50,000 Kms in a year and 25,000 Kms were for business (number 3 above) then you potentially could expense 50% of your vehicle expenses (25,000/50,000 = 50%). If you click here, you’ll find a handy automobile worksheet you can work from.

To be eligible for the simplified logbook method, you need to keep a detailed logbook book for one year. If you kept a detailed logbook for 2011 then you will be eligible to use a simplified logbook for 2012.  The 2012 logbook is a detailed continuous 3 month period which the CRA considers a sample period.  The 2011 logbook establishes a base year and is used to help determine the percentage of allowable expenses you can use for 2012.   It does not take into consideration the actual expenses incurred. For more information regarding the calculation, please click here.

The types of expenses that you will want to collect and include are:

  • Gas/Fuel
  • Insurance
  • Repairs & Maintenance
  • License & Fees
  • Interest on money borrowed to purchase the vehicle
  • Leasing costs and
  • Capital cost allowance (depreciation).

Records and supporting documents are required to be kept for a period of 6 years from the end of the tax year to which they relate.  But, the full year, or 12 month logbook, must be kept for a period of six years from the end of the tax year for which it was last used to establish business use.

If you have any questions, please post them right here on the blog! I love getting feedback. And, here on this blog, you’ll get commentluv. This is a great opportunity to leave a link back to your own blog when you leave a comment.

Until next time,

Maureen

 

 

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7 Steps to Consider After Incorporating Your Business

Dec 15th, 2011 by

Whether you started out as a small business ownership or partnership and then incorporated, or incorporated originally when starting your business, there are a number of steps you need to be aware of once you’ve incorporated.  With incorporating done online more frequently, you’re not always given the “what do I have to do now” scenarios.  Here are 7 steps that must be considered after incorporating your business.

1.  Year End

You must determine your year end.  This must be established within 53 weeks of your incorporation date.  You may have stated your year end when incorporating but you do not have stick with it.  The first filing of your year end will determine what it will be going forward.  You may want your year end to be when your inventory level is at its lowest level or during your slow period, when you can gather all your information required for filing your corporate taxes.

2.  Company Directors

You need to determine the number of Directors the company will have.  The Directors will be responsible for creating the by-laws, appointing the Officers and making bank arrangements.

3. Director Meetings

Where will the Directors meet and how frequently?  If it’s not convenient for the Directors to meet physically, then the resolutions can be written and passed.

4. Authorizations

Establish who is authorized to sign documents on behalf of the company.

5. Appointment of  Company Officers

You will need to appoint Company Officers.  President, Treasurer, Secretary are some of the types of Officers you will require.  An individual may hold more than one Company Officer position.

6. Shareholders

Where will the Shareholders meet and how will those meetings be handled?  The purpose of the meeting is to;

  • Confirm the election of the Directors named in the articles of incorporation or
  • Elect new directors.
  • The Shareholders also need to adopt the by-laws passed by the Directors. By law, the Shareholders are required to meet.

7. Minute Book

Create a Minute Book for the company.  This book, usually kept up to date by the Secretary, contains the following;

  • Articles of incorporation
  • By-laws
  • Resolutions
  • Record of the names and addresses of the company’s Directors and Officers, indicating dates they started and stopped their position with the company
  • Blank share certificates
  • Record of names and address of the company’s Shareholders, indicating the number and class of shares issued to each of them
  • All additional documentation as it pertains to major contracts, government reporting and financial statements.

So if you’re now incorporated and some or all of the above steps have not been addressed, it’s extremely important to talk to your accountant or lawyer.  You need to ensure you remain in good standing with the government agencies that you are required to report to.

I’d love your feedback. Here on this blog, you’ll get commentluv. This is a great opportunity to leave a link back to your own blog when you leave feedback.

Happy Holidays!

Maureen

 

 

 

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5 Canada Revenue Agency (CRA) (Re) Assessments You Can Dispute

Dec 6th, 2011 by

Do you feel that once you’ve received THE envelope from CRA that it’s the end of the line and you need to pay what they have determined you owe?  Well you don’t have to leave it at that, especially if you feel you have additional information with the relevant facts and documentation that could change their position. Here are the top most frequent 5 CRA (Re) Assessments tax liabilities that arise in my office:

1. Income Tax
2. GST/HST
3. Registered Savings Plans
4. Charities
5. Employment Insurance (EI)

You must first file a Notice of Objection in all situations.  These come with their different procedures and forms.

1. Income Tax

This is not just personal income tax.  This also covers personal GST/HST and the Canada Child Tax Benefit.  You can file the Notice of Objection by using one of the 3 following options;

1)     using My Account or My Business Account which is done on the CRA website
2)     using Form T400A, Notice of Objection – Income Tax, or
3)      writing to the Chief of Appeals at your tax service office or tax centre – you can determine which one yours is by the address indicated on your Notice of (Re) Assessment.

2. GST/HST

For business goods and services tax (GST) and the harmonized sales tax (HST) you would file a notice of objection using Form GST 159.  This form is not applicable to Quebec.

3. Registered Savings Plan

I usually only see this problem if there has been an excess of RRSP contributions made.  If that is your situation then the form you need to complete is a Form T1-OVP

This is probably one of the most complicated CRA forms I have ever had to work with.  Be prepared to work with the source of your contribution. Whether your contributions were made through your employer, a financial planner or your bank, you may need their assistance.  The amount of detail required can be overwhelming.

4. Charities

There are usually two situations which can cause this;

1)     The designation of the charity is questionable or their registration is refused, revoked or not renewed.
2)     There are taxes and penalties pertaining to the charity and its under notice of suspense.

What I see in my office is an “if it looks too good to be true…” scenario.  I’ve had clients that have donated monies to athletic organizations, for school supplies and for medical supplies.  A tax client can make a $500 donation and receive a $2,000 tax receipt.  Each time those have been presented to me, I have; a) asked to see all paperwork and how this donation came about and b) warned them of a potential audit. Since they all believed in what they were told, I processed their tax returns with the donation receipts.  In all cases they were audited, which lasted almost 2 years.  And the donations were refused, which meant they had to refund the tax difference from the original filing, plus interest.

Here are the links if you need to file an appeal; a) through the Federal Court of Appeal or b) through the Tax Court of Canada .  This is almost as challenging as filing an appeal for RRSP excess contributions.

5. Employment Insurance

On the CRA website, this is listed as Employment Insurance but it actually includes information for dispute resolution for Canada Pension Plan (CPP).

1) Like the Income Tax appeal, you can also do this on My Account and My Business Account on the CRA website.
2) For CPP and EI, use Form CPT100 to appeal a CPP/EI ruling.
3) For CPP and EI, use Form CPT101 to appeal CPP/EI ruling as it pertains to a payroll assessment
4) You can also write a letter to the Chief of Appeals. They are your local tax service office.

As you can probably tell, none of these are easy or quick to appeal.  The response time from the CRA can be 6 weeks or 6 months before a decision is made.  If you are not satisfied with the results of your appeal, you can go to a higher source in most cases.  That information is included in the links above.

When you do get that letter requesting your valuable tax dollars, I suggest you pay it as soon as possible.  Do not wait for the decision of an appeal.  The amount of interest you could be charged over the period of decision time, could accumulate to a substantial amount.  If your win your appeal the CRA will repay you, plus interest.  The current rate of interest on your money sitting with the CRA is 3%.

As the CRA mentions on numerous websites, it could be a matter of misinterpretation of the facts or the law was applied incorrectly. What have you got to lose?

Share your stories with me. I love getting feedback. Here on this blog, you’ll get commentluv. This is a wonderful opportunity to leave a link back to your own blog when you leave a comment.

Until next time,

Maureen

 

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$1,000 Possible Hiring Credit for Canadian Small Business

Nov 30th, 2011 by

If you’re a small business and your total employer’s EI premium paid in 2010 was  less than $10,000 and your total premiums increased in 2011, you could be eligible for this credit. The difference in the premium costs, to a maximum of $1,000, is the basis for this credit.

This is a one time credit that is calculated by Canada Revenue Agency (CRA) when you file your 2011 T4 information return.  There is no application or adjustment required by you, the employer.  As an employer, if you have any outstanding CRA debt, the credit will be applied to it.  And since this is a CRA initiative, it applies to all of Canada.

You cannot deduct what you calculate the credit will be from your final 2011 payroll remittance. The deadline for obtaining this credit? – Your 2011 T4 information return must be filed not later than January 1, 2015.  Yes that is correct, 2015.

According to the CRA Action Plan , “This temporary credit will be available to approximately 525,000 employers whose total EI premiums were at or below $10,000 in 2010, reducing their 2011 payroll costs by about $165 million.”

To a small business, this means hiring an additional worker at a salary of $40,000 with no additional EI premiums required by the employer. Or, it could help increase the wages of current employees without increasing the EI premiums.

But don’t be tricked into thinking the CRA is demonstrating any form of generosity.  The credit received will be taxable income for the small businesses that qualify!

What are your thoughts? I’d love your feedback. And here on my blog, you’ll get commentluv. This is a great opportunity to leave a link back to your own blog when you leave a comment.

Until next time,

Maureen

 

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2012 QuickBooks Pro – 3 Great New Features

Nov 22nd, 2011 by

The recently released 2012 QuickBooks Pro has impressed me. There have not been these many significant changes that are actually practical, in years. In total, there are 13 new key features and 4 improved features.  Here are my top 3 picks of the new features, in no particular order:

1.  Calendar View – you now have a QuickBooks calendar displaying in summary form, transactions that you entered that day, those that are due and those that you need to do. By clicking on any of those summaries,  the details for that day will be displayed at the bottom of the screen. It also shows past due tasks on the right hand side.  You can chose which tasks you want showing on the calendar and even add tasks that are not associated with QuickBooks, i.e. meetings.

2.  Collection Centre – by going to your Customer Centre and clicking on ‘Collection Centre’, you will see a screen with headings titled; Customer Name, Balance, Days Overdue, Contact, Warning/Notes. You can determine in which order you want to see the balances listed, from largest receivable amounts past due or lowest to highest.  In the Warning column, it will ask you to include an email address (if not already listed) with the phone number.  The notes section is my favorite new feature. When you click on  Notes, the current date and time is stamped in that section.  This is where you would;

  • detail the efforts of your collection calls or emails,
  • do they prefer contact by phone or email, and
  • who you spoke to.

I can see this being a great resource if you have different individuals responsible for collections and require some continuity.

3.  Webmail Integration – In the past, emailing invoices and estimates from QuickBooks did not always go smoothly unless you were using Outlook. You can now easily configure your Yahoo, Live Hotmail and Gmail to email reports, invoices, estimates and other transactions directly from QuickBooks.

In the past, I’ve recommended users of QuickBooks to hold off on updating their versions until mid-way through the following year. I didn’t want myself or my clients frustrated by the flaws or errors of the new releases. But from what I’ve seen and tested, our office is going to move all our client bookkeeping files to the 2012 version. We know there will still be some challenges with the new version, but the time that will be saved in recording day to day transactions, follow-up and management, will be worth it for them and ourselves.

We post thousands of bookkeeping transactions monthly into QuickBooks for ourselves and our clients and these new features will save us time, which in turn saves our clients money.

Next time, I’ll detail some additional changes to 2012 QuickBooks Pro, both new and improved.

If you have any questions regarding 2012 QuickBooks Pro send me a note and I would be happy to try and answer them for you. Here on this blog, you’ll get commentluv. This is a great opportunity to leave a link back to your own blog when you leave a comment.

Until next time,

Maureen

 

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9 Items to Consider When a Death Occurs

Nov 15th, 2011 by

A client, the mother of a friend of mine, passed away quite recently.  Needless to say, she is still overcome by grief but there is also the overwhelming emotion of “what needs to be done now and where do I start?” In this post, we’ll discuss an initial list of 9 items to consider when a death occurs. These will have to be addressed immediately if you are responsible for settling an estate.

1.     Make sure you have a copy of the Last Will and Testament prior to the death.

2.     Has the deceased said they want organs or tissue donated?

3.     A copy of the birth certificate is required by the funeral home to prepare the Certificate of Death.

4.     Was the funeral prepaid detailing their desires or was it outlined in the will or discussed previously?

5.     Is there a list of friends and family that need to be notified?

6.     Do you have all the details that need to be posted regarding the obituary notice, either in print or online?

7.     Is there a prepaid cemetery contract?

8.     Contact all insurance companies and inform them of the death.

9.     Make sure you have the key for access to any safety deposit boxes.  There could be additional directions or information that needs to be attended to immediately.

This list is based on the requirements of an Executor dealing with the estate of a senior citizen, whose spouse has already passed away.

Since my friend was named Executor of her mother’s estate, she was fortunate enough to know where all the paperwork was located. But she’s still concerned that she might overlook or not understand something in particular.

In the next few weeks I will be sharing with you, additional lists as they relate to a surviving spouse and those with dependants, plus dealing with the government.  I know very few people that are comfortable talking about their pending death. But preparing for it, even in small increments, will lessen the burden of those trying to deal with the final arrangements and the grief.

Going forward I would like to try and convey as much information as possible to ease the confusion and burden of those with the responsibility of honouring those last wishes, while still coping with grief.  Please share your thoughts or experiences regarding situations where no will was prepared or siblings were named as Co-Executors and the families were torn apart because of it.

Until next time,

Maureen

 

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6 Considerations When Hiring a Potential Employee

Nov 8th, 2011 by

Like me, I know there are many other small to medium sized business that have been challenged with the hiring process.  I’m not talking about hiring the right employee based on the guidelines set out by the Canadian Human Rights Commission. I’m talking about truly knowing you’ve selected the right person, not just for the job, but also for your company. In this blog post, we’ll cover 6 considerations when hiring that potential employee.

We all know that a detailed job description should be complete before placing the ad or getting the word out to your network of who you’re looking for.  It’s also more than reading resumes that are logical and obviously spell checked. And who’s going to give you a list of references of people that aren’t extremely impressed with them!  What I’m referring to, are the very basics that may have been forgotten about in our very hectic business schedules.

The following is a list of some of the items either I or my associates have run into by not looking a little closer or taking the time to consider;

1.   In the resume regarding work history, are there instances where the potential employee has stated they’ve gone back to being self-employed?  I had a potential employee send her resume and where it indicated that she was self-employed. I actually knew she was working for someone else during that time.  That employer/employee relationship was volatile to say the least.  It was easier for my potential employee to say she was self-employed then disclose the legal ramifications she was defending.

2.     I’ve had to really press a referral for answers other than that potential employee is kind, hardworking, resourceful, skilled etc……As much as I never thought I would refer to the internet for a reference, checking LinkedIn and Facebook have been very enlightening.  And Google can certainly add to any additional information where court cases, arrests and areas that would not be deemed complimentary to your business.

3.     Claims to having years of experience with almost everything you listed in the job description – then test them.  If they have years of experience with bank reconciliations, have a dummy template and bank statement ready to see how long it takes or even if they can do it.  I’ve always told potential employees that there could be a test and they must not have believed me.  When they couldn’t complete a simple bank reconciliation in an hour, I knew that the truth had been stretched somewhere.  And if they’re not forthcoming about experience regarding a relatively simple bank reconciliation, what other areas of their resume might also be exaggerated?

4.     Handwriting – this is another test I now give.  If their handwriting is illegible then it’s a problem.  Not everything is electronic and sometimes the printers act up or you have more people in the office than you have computers.  The post office needs to be able to read an envelope that’s enclosing your company cheques or invoices.

5.     Ask them what they would do to change things if they were hired.  If they say they will start by auditing the way you currently do things, make changes as necessary and overall improve the company you’ve been building for many years……show them the door.  They won’t play well with others.  For me the correct answer would be something along the lines of… helping to get things caught up, by listening and learning as much as possible of what is currently being done.  And after a month or two, come to me with any suggestions.

6.     Last but not least – trust your instinct.  When I look back at my good and bad hires, I either did, or didn’t listen to my gut instinct.

Whether you’ve hired someone or are currently contemplating taking the first big step, please the successes and the ‘not so favorable’ decisions that you made along with any concerns you may have.  As time goes on we will eventually look back on those uncomfortable choices and laugh.  At least I’m hoping so. Don’t forget to make use of the commentluv feature on my blog. It allows you to leave a link back to your own blog when you leave a comment.

Until next time,

Maureen

 

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Personal Taxes and Expenses in Greece

Nov 2nd, 2011 by

Santorini Island

I do not have strong political views. I seem to go with the flow.  But when I travel, I am curious about the economy and how others live in their own country. What do they earn, how much do cars and houses cost are questions I ask any locals who will understand, and speak to me.  The quest for information pertaining to Personal Taxes and Expenses in Greece caught my interest while I was there recently.  And with all the media attention concerning Greece and its finances, I thought this would be a timely overview.

An individual whose only income is from wages, is not required to file a personal tax return.  The employer deducts the taxes and remits them to the tax authority each month.  From the tax remittance aspect, it is handled the same as our system. All employees are paid once a month and minimum wage is 600 Euros.

A self-employed individual is obligated to make advance payments on income tax that will be offset on filing an annual return. The advance payments are payable three times a year.  These deductions are Greece Social Security, which covers pension, unemployment and care insurance.  Like us, they are taxed based on the progression of income.  There is no tax if the income is under 12,000 Euros a year.

The VAT (Value Added Tax), comparable to our HST, can range from 4.5% to 23% depending on the categories.  While in Greece, I only saw the VAT listed on a few receipts. All menus, price lists and activities include the VAT.  For a hotel room in Athens, the VAT was 6.5% while the internet access for that same room was 23%.

On Santorini Island, the cost of a regular cup of coffee was 4 Euro, which translates to approximately $6.00 Cdn.  And they don’t do any free refills at that price!  Every additional cup, in the same mug, costs 4 Euro. All water for human consumption has to be purchased.  That price was 1 Euro, or $1.50 Cdn.

Compact cars, with a 1.5 exchange rate were comparable to our prices.  House or Cave Homes are considerably smaller than what we as Canadians are used to.  Their houses have a distinct style and very thick walls, inside and out. From what I saw for location and transportation, it seemed reasonable, as difficult as it would be to make a comparison to ours. There are wood burning fireplaces in their homes and the wood has to be imported from the mainland or Crete.

Despite some of the expenses and taxes, the trip was amazing.  The people, food and scenery were 10 out of 10.  If you have any trip experiences that you would like to share as it pertains to a country or region and its economy, I would enjoy hearing from you.  And, here on my blog, you’ll get commentluv. This is a great opportunity to leave a link back to your own site when you leave a comment.

Until next time,

Maureen

 

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Amounts for Canadian Disability Tax Credit

Oct 25th, 2011 by

Over the last couple of months I’ve had a number of inquiries concerning the Disability Tax Credit and how to request an adjustment. I’ve also completed a number of them, with one in particular going back to 2004. What is also important to know, is the annual amounts for the Disability Tax Credit. The following is a chart to help you complete your T1 Adjustment with the exact annual amounts to help make the application easier for you and accelerate  the Canada Revenue Agency (CRA) processing time.

Year

Amount
2011 $7,341

2010

$7,239

2009

$7,196

2008

$7,021

2007

$6,890

2006

$6.741

2005

$6,596

2004

$6,486

2003

$6,279

2002

$6,180

These amounts pertain to line 316 of your personal tax return. It’s also important to remember that these credits are calculated at 15% of the amounts listed above to help reduce your Federal Tax payable.  An example is for the year 2010.  15% of $7,239 is $1,085.85.  This means that your Federal Tax payable could be reduced by $1,085.85.  If you personally cannot use the total amount of the credit, it can be transferred to your spouse or supporting person. And remember, a T1 Adjustment must be prepared for each year you qualify for the credit.

Send me your comments! I love getting feedback. And here on this blog, you’ll get commentluv. What a great way to leave a link back to your own blog when you leave a comment!

Until next time,

Maureen

 

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Bringing a Spinal Cord Exercise Program to Canada

Oct 4th, 2011 by

I was at a conference recently and ran into a tax client of mine, Heather Cairns Mills.  She and her husband Kevin are amazing people and it was an honour to be able to help them this past tax season. Heather had a few questions regarding eligibility and/or allowable potential medical expenses.   One question in particular was traveling for medical purposes.  According to the CRA, if you travel one way, at least 40 kilometres, from your home to medical services you may be able to claim the cost of transportation.  If you travel at least 80 kilometres one way, you may be able to claim the cost of transportation plus accommodation, meals and parking expense.  You will find more details on the CRA website.

Heather also shared with me, the growth of her not-for-profit organization Walk It Off Spinal Cord Wellness Centre in Newmarket, Ontario and their dream to bring a spinal cord exercise program to Canada.  She told me about the Aviva Community Fund Grant Competition.

Hearing her story of how some businesses come about and the challenge of fundraising, demonstrated to me, a testament to our commitment, love and motivation we’re capable of as human beings.  Please welcome Heather as my guest blogger this week and please check out her web page to find out how you can help.

Thank you Maureen, for allowing me the opportunity to bring awareness to our organization and to the Aviva Community Fund online grant competition.

My husband Kevin suffered a Spinal Cord Injury and was paralyzed from the chest down almost 3 years ago. When it came time for taxes that first year, we where in the dark to what rebates Kevin was entitled to relating to his disability. It was a huge learning curve and we missed some of our entitlements. Kevin and I had been traveling to the States to join a recovery program that was not offered here in Ontario. Fortunately in our second year, we were referred to Maureen. She guided us through what travel for medical and rehabilitation expenses could be addressed in our tax return.

We also saw the need for this incredible exercise-based program here in Canada so we took on the challenge of fundraising to create our Not-For-Profit organization, Walk It Off Spinal Cord Wellness Centre. A year has gone by and we are excited to announce that we are in the midst of obtaining a facility to run our program in Newmarket, Ontario.  We look forward to not only providing this exercise program, but providing support and information to our clients and family members. For those traveling to our facility, remember to keep your travel receipts and record your mileage for tax purposes. Please click here to visit our website.

Continuing with our fundraising efforts, Walk It Off has entered the Aviva Community Fund online grant competition.  Please watch this short video about the contest.

We need the support of the community through online votes starting Monday, October 3rd, 2011 through to the 19th. Simply click here  to register and place your daily votes.

Thank you.

Heather Cairns Mills

What are you doing in your home, community, province, country or the world to lend a helping hand?  There are always others that have it worse than we do, so be grateful daily.   We’d love your feedback. Here on this blog, you ‘ll get commentluv. This is a great opportunity to leave a link back to your own site when you leave a comment.

” No man stands so tall as when he stoops to help a child”- Abraham Lincoln 

Maureen

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