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Save More in 2012 With the Tax-Free Savings Account

January 20, 2012 By Leave a Comment

Canadians will have a new $5,000 of room to invest in their Tax-Free Savings Account (TFSA).

“TFSAs will continue to enable Canadians to more easily meet their savings goals by allowing them to earn investment income absolutely tax-free,” said Minister Flaherty. “Savings contribute to economic growth by increasing the funds available for economic investment, which leads to a higher capacity to produce goods and services and improves the standard of living of Canadians.”

Each year, an individual’s annual TFSA contribution room is made up of three components:

  • the annual TFSA dollar limit of $5,000;
  • any unused contribution room from the previous year; and
  • the total amount of withdrawals from the individual’s TFSA made in the previous year.

For more information visit the Department of Finance website.

Annual Tax Expenditures & Evaluations Report

January 20, 2012 By Leave a Comment

This report provides estimates and projections of the revenue impacts of federal tax measures designed to support the economic and social priorities of the Government of Canada.

The publication reflects tax relief measures from the Next Phase of Canada’s Economic Action Plan, the Harper Government’s low-tax plan for jobs and growth.

“In an uncertain global economy, our Government will stay the course with our low-tax plan for jobs and growth—a plan that has worked and served Canadians well,” said the Honourable Jim Flaherty, Minister of Finance.

“Our economic leadership will continue as we stick to our plan to return to fiscal balance in the medium term, implement our deficit reduction action plan to find savings within government spending, and take targeted actions when necessary to support the recovery.”

For more information visit the Department of Finance website.

We’re Moving

January 10, 2012 By Leave a Comment

On February 6th 2012, Padgett Business Services will be moving to our new offices in Kanata South on 160 D Terence Matthews Crescent Suite 2.

“We are really going to enjoy this new location,” said Karen Jerome, CMA, “it will facilitate our continued growth and I think clients and prospective clients will find it more convenient.  We’re all looking forward to the new office; the office is situated close to other businesses, fitness facilities, and restaurants.”

Our new address effective February 6 will be:

160 D Terence Matthews Crescent
Suite 2
Kanata, Ontario
K2M 0B2
 

For more information please contact via  email

Padgett Nominated for Professional Services Business of the Year

January 10, 2012 By Leave a Comment

KANATA, Ontario – Padgett Business Services® was recently nominated for Professional Services Business of the Year through the Kanata Chamber of Commerce.  Padgett is a financial reporting, tax consulting, and payroll business that specializes in servicing independent businesses with less than 20 employees. Karen Jerome opened her office in 2007, which is located in the Beaverbrook Mall in Kanata.

“It is an honour to have been nominated for this award with the Kanata Chamber of Commerce.  Our specialized advice and personalized service will always be the strength behind what we do for small business owners,” said Karen. “These are the tools that have taken our Kanata office to the forefront of our company and Padgett to the forefront of our industry.”

The Kanata Chamber of Commerce will be holding its People’s Choice Awards on February 23rd, 2012 at the Brookstreet Hotel.

For those interested, you can place your votes through the Kanata Chamber of Commerce website at www.kanatachamber.com . Voting will remain open until February 3, 2012.

Since 1966, Padgett has provided financial reporting and tax consulting services to independent business owners throughout North America. Padgett has been ranked as a #1 small business accounting firm by Entrepreneur, Success, and Income Opportunities magazines, as well as being ranked in Accounting Today’s Top 100. The local operation is part of a network of over 400 independently owned and operated Padgett offices throughout North America.

Form T2200 – Declaration of Conditions of Employment

January 9, 2012 By Leave a Comment

Canada Revenue Agency (CRA) expects employers to complete Form T2200 for employees that have reasonable grounds to make expense claims against employment income. If there is some doubt, CRA will provide interpretive assistance.

 

For more information about the T2200 visit the CRA website.

Remitting GST/HST on Taxable Benefits

January 9, 2012 By Leave a Comment

Did you know that GST/HST must be remitted on a taxable benefit unless the benefit is tax exempt or zero-rated, for example the benefit on low-interest loans? An example of a tax benefit that is not exempt includes the automobile standby charge and operating expense benefit. GST/HST must be remitted on shareholder benefits if they fall into Subsection 15(1) and are not tax zero-rated or tax exempt.

Automobile operating expense benefit

If your employee ordinarily worked in, or the location to which he or she ordinarily reported to, is located in a p a r t i c i p a t i n g province (British C o l u m b i a , New Brunswick, Newfoundland and Labrador, Nova Scotia, or Ontario), you are considered to have collected an amount equal to a percentage of the value of the benefit for GST/HST purposes, based on one of the following rates:

  • 5% for British Columbia;
  • 11% for Nova Scotia;
  • 9% for New Brunswick, Newfoundland and Labrador;
  • 9% for Ontario, or 6% if the registrant is a large business for the purpose of the recapture of input tax credits for the provincial part of the HST.

If your employee ordinarily worked in, or he or she ordinarily reported to, a location in a non-participating province or territory (the rest of Canada), you are considered to have collected 3% of the value of the benefit for GST/HST purposes as calculated above.

Other Than Automobile Operating Expense Benefits

If the last establishment where your employee ordinarily worked, or to which he or she ordinarily reported in the year, is located in a participating province (British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, or Ontario), you are considered to have collected the GST/HST as a percentage of the value of the benefit as follows:

  • 11/111 for British Columbia;
  • 14/114 for Nova Scotia;
  • 12/112 for Ontario, or 4/104 for benefits relating to a motor vehicle that is subject to the recapture of the input tax credits for the provincial part of the HST, if the registrant is a large business;
  • 12/112 for all other participating provinces.

If the last establishment where your employee ordinarily worked or to which he or she ordinarily reported in the year is located in a non-participating province or territory (the rest of Canada), you are considered to have collected 4/104 of the value of the benefit for GST/HST purposes as calculated above.

Estate Planning

January 9, 2012 By Leave a Comment

There are several areas that are included in estate planning. Here is a brief list of some of them:

  • You should have a will that includes your desires and tax considerations.
  • You should consider steps to minimize probate fees (or Estate Administration Tax) on your death, if applicable.
  • You should have enough insurance to meet the needs of your family on your death.
  • If you have any assets in other countries or you are a U.S. citizen, you must consider the effects of foreign estate taxes.
  • If you plan to leave assets to your children who may be or are married, you can plan around the provincial family laws that apply on marriage breakdown.

To discuss any of these tax aspects of estate planning, talk to your Padgett Business Services representative.

2012 Sales Tax Rates in Canadian Provinces and Territories

December 22, 2011 By Leave a Comment

The following table shows the general rates of provincial sales taxes or HST for most purchases, and provides links to the provincial (or federal) web sites regarding provincial retail sales taxes.

Prov/TerrHST/GSTPSTProvincial Websites
Prov/TerrHST/GSTPSTProvincial Websites
BC12% HSTn/a (3)BC Consumer Taxes
PST in BC and BC HST
BC Harmonized Sales Tax
AB5% GSTn/a
SK5% GST5%Saskatchewan Provincial Sales Tax
MB5% GST7%Manitoba Retail Sales Tax
ON13% HSTn/a(4)Ontario Retail Sales Tax
Ontario HST
Ontario What is the HST?
QC5% GST9.5% (1)Québec QST and GST – for businesses
Québec QST and GST – for individuals
NL13% HSTn/a
NS15% HSTn/a
NB13% HSTn/a
PE5% GST10% (2)Prince Edward Island Revenue Tax
NT5% GSTn/a
NU5% GSTn/a
YT5% GSTn/a

(1) The sales tax is applied to the total of the selling price plus the GST.  The 9.5% QST rate is effective January 1, 2012.
(2) The sales tax in PE is applied to the total of the selling price plus the GST.
(3) BC still has some sales taxes, such as the tax on designated property (vehicles, boats and aircraft).  See the link above to BC Consumer Taxes for more information.  The HST in BC was overturned by a referendum, so BC will return to a PST plus GST system some time in 2013.
(4) Ontario still has retail sales tax on insurance and on private sales of used motor vehicles.  See the link to Ontario Retail Sales Tax for more information.

Businesses which sell taxable goods and/or services in each province are required to register as a vendor to collect the provincial retail sales tax where applicable.

Get Out of Debt Now!

December 22, 2011 By Leave a Comment

Most developed countries in the world are increasing their spending and debt.  Most governments will not stop their excessive spending until they are forced to do so.  This happens because they cannot sell their debt (e.g., Canada Savings Bonds, Government of Canada bonds, provincial government bonds, crown corporation bonds, t-bills) without paying substantially higher interest rates.  Once they are required to pay higher interest rates they can no longer afford the interest on the debt.  Therefore, they will have to slash spending, raise taxes, or both.

Western Europe, Japan, United States and Canada are in imminent danger of having to pay higher interest rates on their debt.  This will start a downward spiral of their economies, which will lead to a recession.  Some people think parts of these economies have been in a recession since 2008.  A recession is falling Gross Domestic Product (GDP) and higher unemployment.  Governments usually try to counteract this by increasing spending and lowering short term interest rates.  Unfortunately (or fortunately), the governments will not be able to increase spending because of the debt, and interest rates can’t really go much lower.  Canada and the rest of the developed countries are going down the same road as Greece, Ireland, and Portugal.  See our article on Debt in Selected Countries.

Recessions are a normal part of the business cycle, but if we go into a recession now because of sovereign debt, it may be long and nasty.  You can’t really tell when a recession begins or ends until probably five years after it’s over.  We entered a recession in 2008, but at this point we can’t really tell if the recession ended in 2010, or if it is a double-dip recession that we are still in.

 

What can you do?

The most important thing you can do is reduce your debt, especially debt on which the interest is not tax-deductible.  You can also lobby your governments (federal, provincial and local) to eliminate the deficit, reduce debt, and become better managers of your money.  You can do this by contacting your Member of Parliament (MP), provincial and local government representatives.  For a limited time, you can provide input to the Federal government through the online pre-budget consultations.  You could also sign petitions that are on the Canadian Taxpayers Federation website.

Rollover of RRSP, RRIF or RPP to RDSP

December 22, 2011 By Leave a Comment

Budget 2010 proposed to allow a tax-deferred rollover of a deceased individual’s RRSP/RRIF or RPP proceeds to the Registered Disability Savings Plan (RDSP) of a financially dependent infirm child or grandchild.  This is effective for deaths occurring on or after March 4, 2010.  The actual transfer to the RDSP, however, cannot be made until after June 2011.  Previously, the proceeds could only be received on a tax-deferred basis by a financially dependent infirm child or grandchild under 18 years of age by a transfer to the RRSP, RRIF or eligible annuity of the child or grandchild.

The Sustaining Canada’s Economic Recovery Act, Bill C-47, was introduced in the House of Commons on September 30, 2010, including the legislation for the rollover to RDSPs, and received Royal Assent (became law) on December 15, 2010.

Who is eligible?

An eligible individual:

  • is a child or grandchild of a
  • deceased RRSP or RRIF annuitant, or
  • deceased RPP member
  • was financially dependent on the deceased, at the time of the deceased’s death, by reason of infirmity of the dependent.

What proceeds are eligible?

Eligible proceeds means any of

  • a refund of premiums from an RRSP
  • an eligible amount paid from a RRIF, or
  • a lump sump payment (other than from actuarial surplus) from an RPP

that is received by an eligible individual as a result of the death, after March 3, 2010, of a parent or grandparent of the eligible individual.

Specified RDSP payment

A specified RDSP payment:

  • is an amount paid after June 2011 to an RDSP under which an eligible individual is the beneficiary
  • must be designated as a specified RDSP payment by the eligible individual
  • will be included in the income of the recipient on withdrawal from the RDSP
  • complies with the following RDSP contribution conditions:
  • contributions may not be made to the RDSP in any year in which the beneficiary is not eligible for the disability amount tax credit, or after the death of the beneficiary
  • contributions may not be made if the beneficiary is not a resident of Canada
  • contributions may not be made after the end of the year in which the beneficiary turns 59
  • contributions must not exceed the lifetime maximum of $200,000
  • the holder of the plan must provide written consent for the contribution

Transitional eligible proceeds

Where the death of the RRSP or RRIF annuitant or RPP member occurred after 2007 and before 2011, transitional rules apply that recognize that individual estate plans may not have been amended to reflect the new rules.

Transitional eligible proceeds include an amount received as a result of the death after 2007 and before 2011 that is:

  • any of a refund of premiums from an RRSP, an eligible amount paid from a RRIF or a lump sum payment (other than an amount of actuarial surplus) from an RPP; or
  • any amount that had been rolled-over under s. 60(l) of the Income Tax Act to the taxpayer’s RRSP or RRIF (i.e., the taxpayer claimed a 60(l) deduction for the amount), and which is subsequently withdrawn from the RRSP or RRIF in order to make a “specified RDSP payment”.

These transitional rules apply where the deceased individual may have provided a bequest directly to the eligible individual, to the spouse or common-law partner of the deceased, or to another beneficiary.  These rules allow this beneficiary to contribute to the RDSP of an eligible individual.  If the bequest had been included in the income of a taxpayer, for instance the recipient or the deceased, then a deduction will be allowed for the contribution of the transitional eligible proceeds to the RDSP. Where the death occurred after 2007 and before 2011, the contribution to the RDSP must be made before 2012.

 

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