You are here: Home / Archives for T2

Employer-Paid Disability Premiums

March 23, 2012 By Leave a Comment

If you think that paying for your employee’s disability premiums is always a good thing, think again.  As a non-taxable fringe benefit, payments they receive upon their disability will be, in most cases, FULLY taxable to them!

Payments received due to disability are not taxable if:

  • Your employees paid the premiums on the policy with after-tax funds, OR,
  • You paid the premiums but deducted the amount from their income.

The cost of disability insurance – even over a good amount of time – can be far less than the tax due on the income received under the policy. Like all insurance, it all depends on whether you actually collect under the policy.

RESP Canada Learning Bond

March 7, 2012 By Leave a Comment

The Canada Learning Bond (CLB) is part of the Canadian RESP program. Actually the CLB is a grant. The big difference between this grant and the regular RESP grants is that no contribution is required. Once you qualify, you apply, and you can receive up to $2,000 deposited in your RESP account per child. The family net income must be below $42,707, in 2012 ($41,544 for 2011) An RESP account can be set up at a financial institution. This grant will provide more low income families the opportunity to get their children started in advancing their education. Go to www.canlearn.ca for more details.

Employees vs. Independent Contractors

March 6, 2012 By Leave a Comment

It’s crucial to know whether your workers are employees or independent contractors. Big dollars may be at stake in the form of Federal and provincial assessed penalties resulting from mis-classification. The validity of your company’s pension plan may also be at stake.

A periodic review of the status of your workers to see if they are properly classified is critical, but the process isn’t easy due to the complexity of the issue. The Canada Revenue Agency has published a guide called “Employee or Self-Employed?”, which contains an extensive analysis to determine whether there is an employer – employee relationship or a business relationship. The four factors which are considered are: control of the worker, ownership of the tools, chance of profit/risk of loss and integration. There is no litmus test for exactly how many factors must be satisfied, nor are the factors uniformly applied.

If you’d like to discuss these complex rules with us and see how they apply to your business in order to make sure that none of your workers are misclassified, please call our office to arrange for an appointment.

Claiming Automobile Expenses

March 6, 2012 By Leave a Comment

One of the more common expenses claimed by taxpayers are automobile expenses (applies to any motor vehicle such as van, bus, pickup truck, station wagon, SUV or other truck). Many individuals use their automobile for work or business and incur personal expenses in doing so. It is important to note that only expenses of a business nature are eligible as a deduction against their related income. As such, the Canada Revenue Agency (CRA) has strict requirements in ensuring that only business-related expenses are claimed. As a result, the retention of automobile tax records becomes imperative for every taxpayer that uses an automobile for work or business.

Registered Educational Savings Plan (RESP)

March 6, 2012 By Leave a Comment

A RESP is a savings plan for post-secondary education which allows funds to accumulate on a tax-deferred basis up to certain limits. There is no annual limit for contributions. For each beneficiary the lifetime limit on contributions is $50,000. Although there is no tax deduction, the interest and income earned within the plan is sheltered, which means that the tax is only payable on the funds withdrawn to fund the student’s education. And it is taxed at the student’s low rate.

CRA revokes the registration as a charity

February 14, 2012 By Leave a Comment

The Canada Revenue Agency (CRA) will revoke the charitable registration of Escarpment Biosphere Foundation Inc., a Toronto area charity. The notice of revocation will be published in the Canada Gazette with an effective date of February 11, 2012.

On January 3, 2012, the CRA issued a notice of intention to revoke the charitable registration of Escarpment Biosphere Foundation Inc., in accordance with subsection 168(1) of the Income Tax Act. The letter stated, in part, that:

Our audit revealed that the Escarpment Biosphere Foundation Inc. (the Organization) received cash and pharmaceuticals with a purported value of over $407 million as a result of its participating in the Canadian Humanitarian Trust tax shelter gifting arrangement (Donation Program). It is our position the Organization failed to verify the value of the properties and to maintain direction and control over the distribution of the properties. Further, we believe the Organization agreed, for a fee of approximately $1 million, to lend legitimacy to the Donation Program by representing that it had received and distributed the properties in its own charitable programs. As such, it is our position the Organization failed to operate exclusively for charitable purposes by acting as a conduit for the Donation Program and redistributing 99% of the cash received to other parties in the Donation Program.

For More Information Visit the CRA Newsroom

Ontario Takes Action to Eliminate Deficit

February 14, 2012 By Leave a Comment

The Ontario government is moving forward with a responsible plan to eliminate the deficit so that more jobs are created and the economy continues to grow.

Since the introduction of the 2011 Budget, growth in the global economy has slowed. This means additional steps must be taken to slow down the rate of growth of government spending in order to keep the plan to eliminate the deficit on track.

Ontario Finance Minister Dwight Duncan outlined today the next steps in the government’s plan to eliminate the deficit. These steps will give Ontarians better value for money and lead to improved public services.

The LCBO headquarters, currently located on some of the most valuable, under-developed real estate in Canada, will be sold and redeveloped. A retail store will remain in the vicinity while the headquarters will be moved. The LCBO will realize ongoing savings and after the land is sold and a new, modern facility is built, it is expected to generate well over $200 million for taxpayers.

The government will move to greater involvement of the private sector in Service Ontario through a strengthened public-private partnership. This will deliver better value for money and improve customer service for families.

Since 1998, Ontario taxpayers have been supporting horse racing with a subsidy of up to $345 million a year. The province will evaluate that subsidy given the need to continue to invest in health care and education.

Non-Pensionable Earnings and Underpaid CPP Contributions

February 14, 2012 By Leave a Comment

There are some types of employment payments and other payments from which CPP or QPP contributions do not have to be deducted. Also, if a person has more than one employer in the year and earns total employment income which is less than the maximum pensionable earnings, this will have the result that the basic exemption used to withhold CPP or QPP contributions is more than $3,500, resulting in an underpayment of contributions. There is no obligation to remit the underpaid amount, but a person can elect to do so, or to pay Canada Pension Plan contributions on certain types of income from which no CPP contributions have been deducted.

For More Information Visit TaxTips.ca

2012 Tax System Indexation

February 8, 2012 By Leave a Comment

On January 1, 2012, all indexed personal income tax amounts, including tax bracket thresholds and amounts used to calculate non-refundable tax credits, were adjusted by 2.8%. The Canada Child Tax Benefit and the goods and services tax credit will take effect July 1, 2012.
For 2012 the federal tax bracket thresholds are:

  • 22% for taxable income above $42,707
  • 26% for taxable income above $85,414 ; and
  • 29% for taxable income above $132,406.

2012 Automobile Deduction Limits and Expense Benefit Rates for Business

February 8, 2012 By Leave a Comment

The ceiling on the capital cost of passenger vehicles for capital cost allowance (CCA) purposes remains at $30,000 (plus applicable federal and provincial sales taxes) for purchases after 2002. This ceiling restricts the cost of a vehicle on which CCA may be claimed for business purposes.

The limit on deductible leasing costs remains at $800 per month (plus applicable federal and provincial sales taxes) for leases entered into after 2002. This limit, which ensures that the level of deductions for leased and purchased vehicles is consistent, is one of two restrictions on the deduction of automobile lease payments. A separate restriction prorates deductible lease costs where the value of the vehicle exceeds the capital cost ceiling.

The limit on the deduction of tax-exempt allowances paid by employers to employees will increase by 1¢ to 53¢ per kilometer for the first 5,000 kilometers driven and to 47¢ for each additional kilometer. For the Yukon Territory, Northwest Territories and Nunavut, the tax-exempt allowance will increase to 57¢ for the first 5,000 kilometers driven and to 51¢ for each additional kilometer. The allowance amounts reflect the key cost components of owning and operating an automobile, such as depreciation, financing, maintenance and fuel costs.

The maximum allowable interest deduction for amounts borrowed to purchase an automobile remains at $300 per month for loans related to vehicles acquired after 2002. This limit reflects the reasonable cost of financing a vehicle for business purposes.

The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers will increase by 2¢ to 26¢ per kilometer. For taxpayers employed principally in selling or leasing automobiles, the prescribed rate will increase 2¢ to 23¢ per kilometer. The amount of the benefit reflects the costs of operating an automobile. The additional benefit of having an employer-provided vehicle available for personal use (i.e., the automobile standby charge) is calculated separately and is also included in the employee’s income.

« Older Posts
Newer Posts »