Chartered Professional Accountant

Chartered Professional Accountants

Chartered Professional Accountants

The New Accounting Designation

Over the  years there’s been a lot of confusion when understanding the different accounting designations in Canada. The three accounting designations operating in Canada are; Chartered Accountants (CAs), Certified Management Accountants (CMAs) and Certified General Accountants (CGAs). Each designation has has a different set of regulations and governing bodies.

Now in Canada Chartered Accountants (CAs), Certified Management Accountants (CMAs) and Certified General Accountants (CGAs) have agreed to join forces under a new banner Chartered Professional Accountants (CPA). The merger has united 190,000 accountants in Canada and created a single unified accounting profession. The unification will allow the Canadian accounting profession to work together and enhance the public’s confidence in the profession. The new CPA designation will allow accountants to specialize in a different area of finance & accounting, but operate under the same banner. This is exactly how other professions like medicine and law operate.

Majority of the accounting bodies in Canada have unified or are in support of unification as shown below:

Brampton Chartered Accountant

Source: Unification Agreement – Key Terms published by the Chartered Professional Accountant.

How will it help Canada?

The unification will bring together the strengths of each organization while giving the Canadian accounting community a unified voice, reducing the number of governing bodies from 40 to 14. This will simplify operations and governance and reduce confusion in the market place about the different accounting designations. With a single organization representing Canada, it will allow Canada to have a single voice on the international stage.

For more information about the merger visit the following websites:

Chartered Professional Accountant (CPA)
Chartered Accountant (CA)
Certified General Accountant (CGA)
Certified Management Accountant (CMA)

Cheema & Associate Professional Corporation – Chartered Professional Accountants  is an accounting firm located in Brampton, Ontario. Serving the needs of Small Business Owners & Entrepreneurs. Contact us for Tax Help, Personal Tax, Corporate Tax, Year End Financials, Accounting & Estate Taxes.

Capital Gains vs Business Income

 

Capital Gain vs. Business Income

Capital Gains vs. Business Income

Capital Gains vs Business Income

As indicated in our previous articles, the housing market in Canada has attracted many investors. This has allowed real estate investors to make a quick profit. The popularity has also been fueled by the preferred tax treatment on capital gains. In Canada only 50% of the capital gain is taxable at your marginal tax rate.This has allowed taxpayers to shelter large portion of their income from the tax man. However, you should be aware that not all income qualifies as a capital gain. It could be taxed as business income, in which case 100% of the amount is subject to tax.

For example, to determine if the rental income qualifies as a capital gain or business income the following Six factors are considered as cited in Ayala v. The Queen:

  1. The nature of the property sold;
  2. The length of time the taxpayer was in possession as owner of the property;
  3. The frequency and number of operations carried out by the taxpayer;
  4. The improvements made by the taxpayer to the property;
  5. The circumstances surrounding the sale of the property; and
  6. The taxpayer’s intention at the time the property was acquired, as indicated by the taxpayer’s actions.

In the case of Montreal tax payer who sold six of her real estate properties and reported the income as a capital gain, her appeal was denied and income was assessed as business income. The judge in this case concluded that the Montreal taxpayer was probably and likely had acquired the properties “for the purpose of reselling them at a profit at the earliest opportunity rather than considering them as long‑term investments.” The taxpayers appeal was denied and her income assessed as business income forcing her to pay tax on 100% of the sale proceeds.

These rulings will impact many different business and industries. It is critical taxpayers seek adequate legal and tax advise when making decisions.

Capital Losses vs Business Losses 

When it comes to capital losses vs business losses the opposite is also true. A capital loss can only be applied to reduce a capital gain. However, a business loss has more flexibility and it can be applied to reduce a capital gain or other income. Read our article on capital losses vs business losses to gain more insight.

Cheema & Associate Professional Corporation – Chartered Professional Accountants  is an accounting firm located in Brampton, Ontario. Serving the needs of Small Business Owners & Entrepreneurs. Contact us for Tax Help, Personal Tax, Corporate Tax, Year End Financials, Accounting & Estate Taxes.

Capital Losses vs Non-Capital Losses

Capital Losses vs Non-Capital Losses

Capital Losses vs Non-Capital Losses

 Capital Losses Vs. Non-Capital Losses

 Capital Loss

A capital loss arises when you sell a capital property you own for less than its adjusted cost base. A capital loss can be carried back three years and forward indefinitely. The inclusion rate for a capital loss is as follows:

Year Inclusion Percentage
Before 1988 50%
1988 and 1989 67%
1990 to 1999 75%
Jan 1 to Feb 27, 2000 75%
Feb 28 to Oct 16, 2000 67%
Oct 17 to Dec 31, 2000 50%
2001 to present 50%

Non-Capital Loss (Business loss)

A non-capital loss arises when you incur  any loss from employment, property or a business. The carry-forward periods are:

Year of Loss Carry Forward Period Carry Back Period
Taxation years ending March 22, 2004 7 Years 3 Years
Taxation years ending after March 22, 2004 10 Years 3 Years
Taxation years ending after 2005 20 Years 3 Years

Capital Losses vs. Business Losses 

A capital loss can only be applied to reduce a capital gain. However, a business loss has more flexibility and it can be applied to reduce a capital gain or other income. In the case of Mr. Prochuk vs. Queen he tried to argue his losses were business losses and could be used to reduce other income. Mr. Prochuk was not successful in arguing his claim because he did not meet the criteria for a business loss. Mr. Prochuk was an engineer turned investor, he should have considered the following seven factors to determine if his losses were capital or non-capital.

The factors to be considered for a investment transaction to determine the type of loss:

  1. The number of transactions
  2. The intention of the purchaser when buying the securities
  3. The length of time that the securities are held
  4. The quality of the securities
  5. The time devoted to stock market transactions
  6. The extent of borrowing
  7. The taxpayer’s expertise or special knowledge in the securities market

The court concluded that Mr. Prochuk had acquired his investment for a long-term and was a passive investor, therefore his losses would be capital losses not business losses.

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 Cheema & Associate CPA Professional Corporation is an accounting firm located in Brampton, Ontario. Serving the needs of Small Business Owners & Entrepreneurs. Contact us for Tax Help, Personal Tax, Corporate Tax, Year End Financials, Accounting & Estate Taxes.  

Small Business Tax Tips

Small Business Tax

Small Business Tax

 Small Business Tax Tips

A small business owner faces many struggles everyday just to stay in business. The reporting requirements and red tape continues to grow each and every year. At the end of the year, its tax time; the time of the year every small business owner dislikes. Sorting out books and records and paying the government always gets in the way of running your business. However, year end does force us to clean-up the books and get a grasp of the revenues and expenses. The following small business tax tips will help every small business owner prepare and overcome the tax challenges.

  • Competent tax advice
    There is nobody else that will understand your business better than you. However, when it comes to taxes it may not be your specialty. Getting competent tax advice from a qualified professional can make a big difference to your business. Find the right tax accountant for your business that will guide you and help you overcome tax challenges.
  • Do the math
    Understanding the finances of your business is very important. This would require you to do the math and keep all the records up to date. This will give you a snap shot of exactly how your business is performing month to month.
  • Pay your taxes on time
    There are steep penalties and interest applied by the CRA on late filings. Paying taxes on time will help reduce penalties & interest. Late filings will also tie you up with more paperwork and increased accountant fees. Paying taxes and other liabilities on time will help build trust and a good reputation for your business.
  • Log your travel
    Business owners are always on the go and traveling to generate income. Keeping a log of your travels can help generate tax deductions for your business.
  • Use government tax credits
    The federal and provincial government offers many tax credits and tax deductions to small business owners. It’s important to speak with your accountant to utilize them. There are deductions available for home office and personal car used for the business and even hiring a student.
  • Incorporating your small business 
    Incorporating your business can have legal and tax benefits. By incorporating your business, owners can take advantage of the tax credits such as the Small Business Deduction which brings the tax rate to 15.5% in Ontario. It’s important to speak to your accountant and lawyer regarding this.
  • Income splitting with family members
    Splitting income by legally employing family members can help reduce the tax rate. 

Work closely with your accountant and financial planners to overcome the year end tax challenges. Engage your accountant in advance so they have time to make a plan of action and implement strategies.


 For more small business tax tips on incorporating read our article How to setup a business?
For more small business tax tips on tax rates read our article on Income Tax Rates.

Tax Preparer

Tax Preparer

Tax Preparer

  Preparing Your Tax Return

Preparing your tax return can be a complicated process with all the different tax credits available to taxpayers. Tax laws continuously change and it has made it difficult for tax payers to keep up with these changes. At our firm we continuously attend CRA seminars and tax conferences to enhance our knowledge. This has allows our firm to deliver direct quality to our valued clients. We have licensed tax prepares who will professionally prepare your tax returns. Our accounting firm is located in Brampton, Ontario and services clients from Oakville, Mississauga, and Toronto. Contact our firm for all your tax preparation needs. We go the extra mile and optimize all tax returns to ensure you get the maximum refund possible.

Download our 2014/2015 Personal Tax Checklist:

 

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Helpful Resources:

  • If you have decided not to use a tax preparer this year for your taxes you should definitely visit all about your tax return to help you prepare  your return accurately
  • Students: are you moving to attend school? Buying textbooks? Paying tuition or student loan interest? Paying for child care? You could be eligible for a tax refund! Read about what you can include in your tax return if you are a student or recent graduate.
  • Canada Revenue Agency’s My Account connects you to your personal tax and benefits information 24 hours a day, 7 days a week, and allows you to check for your tax refund, check your Registered Retirement Savings Plan (RRSP) limit, track your GST/HST payments and change your address.

  Visit our Tax Centre for more helpful resources: 

Our Office Location:

Cheema & Associate CPA Professional Corporation is an accounting firm located in Brampton, Ontario at the main intersection of Kennedy Rd S and Clarence St. Our office address is 143 Clarence st. Suite 5, Brampton ON L6W 1T2.

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Rental Income Taxed

Rental income tax

How is rental income taxed?

 How is Rental Income Taxed in Canada?

The real estate market in Toronto and the suburbs has been booming over the last several years because of the favorable economic conditions and the low interest rates. Individuals have invested in rental properties of all sorts. Rental income is generated when you rent a property you own. Rental income could be generated from a house, apartment, or a commercial building. The rental property may be acquired in your personal name, in a partnership, in a trust or a corporation. Depending on who owns the property, the tax consequences are very different.

Rental Income Taxed– personal name

If the rental property is owned in your personal name, this income is taxed on your T1 personal income tax return. The tax you pay will depend on your marginal tax rate.

 Rental Income Taxed –  partnership

The partnership’s rental income is  attributed to the partners, who must include their respective share of it in their personal income.

Rental Income Taxed – corporation

If a renal property is held in a corporation there are multiple factors that have to be considered in determining the tax rate. The General Corporate Rate is 38% Federal and 11.50% Provincial (Ontario). Therefore we have a combined General Corporate Rate of  49.50%. However, not all corporations pay this rate because there are tax breaks offered by the federal and provincial governments. The federal government offers a 10% abatement which brings the tax rate down by 10% to 28%. We also have the Small Business Deduction of 17% and the General rate reduction of 13%. To receive preferred tax rates, the corporation has to meet certain conditions.