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Tax implications of the 2016 budget

Tax implications of the 2016 budget

Tax implications of the 2016 budget

Tax implications of the 2016 budget

The 2016 federal budget included a number of measures that will impact Canadian taxpayers. Here are some of the tax aspects of the budget which will impact individuals and small business owners.

1. Reduction of middle-income tax bracket

The middle-class income tax bracket would be cut from 22% to 20.5%, starting this year. That means if your taxable income is between $45,282 and $90,563, you’ll pay less tax.

2. New High Net worth (HNW) tax bracket

The Liberals introduce a new 33% tax bracket for high net worth people who earn more than $200,000 each year.

3. Increasing the attention on tax evasion

The Liberals will invest $444.4 million over five years to help the Canada Revenue Agency ensure tax evasion is difficult. This money will go to hiring more tax auditors and specialists, developing robust business intelligence infrastructure, increasing verification activities and investigating criminal tax evaders.
The Liberals will also spend $351.6 million over the next five years to help the Canada Revenue Agency improve its ability to collect outstanding tax debts.

4. Closing tax loopholes for HNW

For those private corporation business owners, this Budget will close loopholes that allow them to use a life insurance policy to make distributions tax free.

5. Retirement age rolled-back to 65

The retirement age will stay at 65. This reverses the Conservatives’ decision to raise it to 67 beginning in 2023.

6. Low-income seniors get 10% more in GIS benefits

Starting in July 2016, low-income seniors who rely almost exclusively on Old Age Security and Guaranteed Income Supplement (GIS) benefits can expect a 10% increase to their total maximum GIS benefits.

7. Introduction of the Canada Child Benefit

Starting in July, the Universal Child Care Benefit (UCCB) and Canada Child Care Benefit (CCTB) will be replaced with one non-taxable Canada Child Benefit (CCB).
Under the current system, families with one child and with annual earnings of $30,000 would receive $4,852, after tax, if their child was under age 6, or $3,916 if their child is aged 6 to 17.
Under the new Canada Child Benefit, these low-income families could see $6,400 per child under age 6 and up to $5,400 per child per year for children aged 6 to 17. As a result, most Canadian families will see an average increase in child benefits of almost $2,300 starting this year.

8. Increased Child Disability Benefits

An additional amount of up to $2,730 for each child who is eligible for the Disability Tax Credit will be added to the existing Child Disability Benefit.

9. Elimination of income splitting for couples with kids

The prior Conservative government’s introduction of the Family Tax Cut allowed couples to income split and save up to $2,000 in taxes each year. This income splitting for couples with children under age 18 will be eliminated.

10. Elimination of fitness or arts tax credit for kids

Currently, families can get a tax credit of $150 and $75 per child through Children’s Fitness and Arts Tax Credits (up to $1,000 and $500 in eligible expenses, respectively).
There will be a 50% reduction of the maximum eligible expenses for the Children’s Fitness and Arts Tax Credits in 2016, and a complete elimination of both credits by 2017.

11. Elimination of education and textbook tax credit

This Budget eliminates the Education and Textbook tax credits, effective Jan. 1, 2017.

12. Introduction of School Supply Tax Credit

Budget 2016 has introduced a new credit for the cost of educational supplies. The credit is available to teachers and early childhood educators who incur the cost of supplies for the purpose of teaching or otherwise enhancing students’ learning in the classroom or learning environment. This new credit will allow an employee who is an “eligible educator” to claim a 15% refundable tax credit based on up to $1,000 in expenditures made by the employee for “eligible supplies.”

Teachers will qualify as eligible educators if they hold a teacher’s certificate that is valid in the province or territory in which they are employed. Similarly, early childhood educators must hold a certificate or diploma in early childhood education.

13. Elimination of capital gains tax exemption on donations

Budget 2015 included a proposal to provide an income tax exemption on capital gains of donated private corporation shares or real estate beginning in 2017. To qualify, the cash proceeds from the disposition would need to be donated to a registered charity or other qualified done within 30 days. This is now eliminated in 2016 Budget.


Budget 2016: How budget could affect Canadian communities


What the Liberal budget means for high-income Canadians

 

2016 Income Tax Deadlines

Important dates for 2016 (Individuals)

2016 Income Tax Deadline

2016 Income Tax Deadline

Individuals should make note of the below key dates impacting 2016 tax season:

2016 Income Tax Deadlines

Generally, your return for 2015 has to be filed on or before April 30, 2016. Since April 30, 2016 falls on a Saturday, individuals have until Monday May 2, 2016 to file.

Balance owing

Your balance is due no later than April 30, 2016. When a due date falls on a Saturday, a Sunday, or a holiday recognized by the CRA, your payment is considered to be made on time if it is received or it is postmarked on the next business day.

Registered Retirement Savings Plan (RRSP)

Deadline to contribute to an RRSP for the 2015 tax year is February 29, 2016.

GST/HST credit payments

If you qualify for GST/HST credit, the payments are generally issued on the 5th day of each quarter.

  • GST/HST credit payment dates
    • July 3, 2015
    • October 5, 2015
    • January 5, 2016
    • April 3, 2016
RESP contributions, 2016 charitable contributions and 2016 TFSA contributions

Deadline for RESP contributions, 2016 charitable contributions and 2016 TFSA contributions is December 31, 2016.


For more dates and other information visit the CRA website. For more information on the above dates that may impact you, contact Cheema CPA Professional Corporation. We are a Brampton and Mississauga based accounting firm. We can help you prepare your 2015 income taxes. Contact us for all your 2015 income tax and accounting needs. 


 

Canada Revenue Agency (CRA) HST Audit

Canada Revenue Agency (CRA) HST Audit

CRA HST Audit

CRA HST Audit

Canada Revenue Agency CRA HST Audit

The Canada Revenue Agency (CRA) frequently conducts HST audits and reviews to make sure Canadians are complying with the regulations. CRA HST Audits can also be referred to as GST Audits or GST/HST Audits. GST/HST audits focus on GST/HST filing errors and omissions. The CRA does have the right to examine records of the organization that are relevant to determining its tax liabilities.

What causes a CRA HST audit?

The CRA has a complex computer system that allows it to select returns to be audited by sorting them into various groups. There are four common ways the CRA selects files for audit:

  1. Computer-generated lists – In order to select specific returns for audit, the CRA often compares selected financial information for current and previous years of taxpayers engaged in similar businesses or occupations.
  2. Audit projects – The CRA often tests the compliance of a particular group of taxpayers, particularly if there is reason to believe that there is significant non-compliance within a group.
  3. Leads – Leads for audits often are the result of other audits or investigations, as well as information from outside sources.
  4. Secondary files – A business may be selected for audit if it is associated with another file that is being reviewed for audit, since the CRA often finds it convenient to look at all the records at the same time.

What is the CRA’s new approach?

The way the CRA conducts its audits has changed over the years. The CRA has switched from a combined audit approach to a detailed approach. In the past, most audits of smaller businesses have been done as combined audits – one audit covering both income tax and GST/HST. Combined audits have now been discontinued. Therefore, businesses are now subject to an income tax or GST/HST audit, leading the CRA to request more detailed information.

What can you do to prepare for a CRA HST audit?

Before you release any information to the CRA, make sure you seek professional advice. Once the information has been released the CRA can use it against you to assess penalties and interest. This requires you to be well prepared and know your rights as a business owner. In case of an audit remember the following:

  • Maintain good records: Organize the receipts and documentation to support your claims. You are required to keep your records and supporting documents and financial information for at least six years. Well-kept records will likely reduce the time required to complete the audit. some tips on good record keeping include:
    • Ensure you have copies of any GST/HST elections you have been relying on.
    • Ensure your documentation is neatly organized and in order. The CRA will likely request a copy of your electronic books and records.
    • If you have a combination of exempt and taxable supplies, ensure your ITC allocation methodology is documented and explained.
  • Be knowledgeable: Before the auditor begins the audit, confirm what taxation years are under review and what records he or she will require. This will ensure you have the required information ready for the auditor upon arrival.
  • Know your rights: Don’t give the auditor full accessibility to your files. Understand your rights as a taxpayer and exercise them when necessary.
  • Understand the information you are providing: Carefully review all information provided to the CRA and ensure that you are not providing more information than required.
  • Be courteous and professional: It is important to cooperate with the CRA and provide them with the information they request. However, always remember your rights as a business owner. Responding promptly and professionally to all correspondence received from the CRA may help complete the process faster and smoother.

A CRA audit can be time consuming and costly when you don’t have the right resources. For assistance, contact Cheema CPA Prof. Corp. and we will work with you through this process.

What are your rights GST/HST CRA audit?

Your rights are outlined in the Taxpayer Bill of Rights, which states the 16 rights that apply to all taxpayers and registrants. This video, will mention three of the 16 rights that we want to highlight for you as you go through the audit process.

 

  • Right number three says you have the right to privacy and confidentiality. Auditors must respect the confidentiality of tax information and are obliged to take safeguards to protect your information.
  • Right number five says you have the right to be treated professionally, courteously, and fairly. You should expect this treatment from an auditor.
  • And right number six says you have the right to complete, accurate, clear, and timely information. You should expect to be kept informed throughout the audit.

If you need to learn more about your rights as a taxpayer please refer to the Taxpayer Bill of Rights. 

Who can help during a GST/HST CRA audit?

Having the right team of professionals handling your HST audit is the key to success. As a taxpayer and a business owner you have rights. Before you release any information to the CRA make sure you seek professional advice. Once the information has been released, the CRA can use it against you to assess penalties and interest. Our firm is specialized in CRA HST Audits and Reviews. We can help you achieve a favorable result. Our team of lawyers and tax accountants can professionally handle your CRA HST Audit or Review.

Brampton Accountant: 2015 Income Tax Checklist

Brampton Accountant: 2015 Income Tax Checklist

Brampton Accountant: 2015 Income Tax Checklist. Cheema CPA Professional Corporation is a Chartered Professional Accountant firm located in Brampton, Ontario. We provide professional tax and accounting services. Each year we put together a checklist to help our clients assemble all the information required for personal taxes. This checklist will help you get more organized and help us minimize your taxes. To download: Tax Checklist.

General Items

  • A copy of last year’s return
  • 2009 Notice of Assessment
  • Other years reassessments
  • Details of changes to your personal status such as dates of marriage, separation, divorce or widowed, births and deaths
  • Note consenting to provide your income tax information to Elections Canada
  • Installment payments
  • Details of foreign property holdings (if any*) including cost of property held

Income

  • Universal child care benefit (RC62)
  • Employment income (T4)
  • Pension income (T4A, T4A(P), T4RIF, T4RSP)
  • US social security
  • Old age security (T4OAS)
  • Investment income (T5)
  • Income from trusts such as mutual fund investments (T3)
  • Income from employment insurance (T4E)
  • Income from partnerships (T5013)
  • Workers compensation/social assistance payments (T5007)
  • Details of the sale of securities such as stocks and bonds (eg. trading summary from your broker)
  • Income from foreign investments
  • Spousal support payments received

Deductions General

  • RRSP contributions
  • Medical, dental, prescription drugs, nursing home expenses
  • Payments to a private health insurance plan
  • Charitable donations
  • Tuition fees/education amount (T2202A) for yourself or transferred from a dependent such as a child or grandchild
  • Interest paid on student loans c Professional dues, union dues c Public transit passes
  • Childrens participation in programs related to physical activity
  • Interest on loans assumed to purchase investments
  • Safety deposit box fees
  • Professional consultant fees
  • Legal fees paid to establish child or spousal support or to enforce a pre-existing agreement
  • Legal fees paid to recover wages from your employer
  • Details of people you support and their medical status
  • Child care receipts (for camp, list dates attended)
  • Moving expenses if you moved 40km or closer to work or school
  • Property taxes or residential rent paid and to whom
  • Political contributions receipts
  • Disability tax credit claim form completed by authorized health practitioner (T2201)
  • Spousal support payments paid
  • Adoption expenses

Deductions Employees

  • Declaration of conditions of employment form (T2200)
  • Details of expenses not reimbursed by your employer including travel expenses (eg. parking, taxis, bus fare), supplies and assistant salaries
  • Office rent if required as a condition of employment
  • Home office expenses if it is your principal workplace or used exclusively, on
  • a regular or continuous basis for activities such as business-related meetings; include details of rent paid, repairs and maintenance costs, utilities and if you are
  • a commissioned salesperson also property taxes and home insurance. Also indicate the total area of your home and the area used for your work-space
  • If you are a commissioned sales-person, details supporting advertising expenses, promotion, meals and entertainment
  • Motor vehicle expenses

Deductions Motor Vehicles

  • Total kilometers driven and kilometers driven just for work
  • Details of total expenses incurred for gas, maintenance and repairs, insurance, license and registration, loan interest and lease payments
  • New vehicle, purchase invoice/agreement

Unincorporated Businesses

  • Total sales revenue for the year
  • Total expenses listed by category for the year
  • Capital assets acquired (eg. computers and peripherals, furniture and equipment)
  • Home office expenses include details of rent paid or if you own your home, details of repairs and maintenance, utilities, property taxes, insurance, mortgage interest
  • Motor vehicle expenses

Unincorporated Businesses

  • Total sales revenue for the year
  • Total expenses listed by category for the year
  • Capital assets acquired (eg. computers and peripherals, furniture and equipment)
  • Home office expenses include details of rent paid or if you own your home, details of repairs and maintenance, utilities, property taxes, insurance, mortgage interest
  • Motor vehicle expenses

Download (PDF, 30KB)

2015 INCOME TAX

2015 INCOME TAX

 

Filing Past Due Tax Returns

Past Tax Returns

Filing Past Due Tax Returns

 Filing Past Due Tax Returns

Filing taxes can be an overwhelming task with numerous things to consider. If you have fallen behind on your returns it is very important to file the past due tax returns and update your records with the Canada Revenue Agency (CRA). By filing taxes you become eligible for government credits such as GST/HST tax credit, Ontario Trillium Tax Credit (OTB), and Child Tax Benefits tax credit.

Failure to file tax returns on time can result in penalties and interest. Even if you are not able to pay the tax balance owing, you should still file your return to reduce the penalties and take advantage of the tax credits you qualify for.

If you are expecting a refund from the CRA it is even more critical to file your tax returns on time because the CRA does not pay interest until 30 days after the due date. Also the CRA can deny your income tax refund if you wait more than three years (CRA discretion to issue the refund if the return is filed within 0 years).

I have zero income should I still file a tax return? 

Even if you are not required to file a tax return, it might be beneficial to file a tax return because you could qualify for government credits. It is very important to file taxes every year even if you have zero income. Eligibility for certain benefits such as the GST/HST credit or the Child Tax Benefits is directly related to your income tax returns.

If I file past due returns, can I still receive the GST/HST tax credit? 

Yes, you will receive the GST/HST tax credit along with other credits you qualify for. You can retroactively qualify for the GST and OTB tax credits.

What is the late filing penalty? 

The late filing penalty is based on taxes owing for a particular year. For an example if you owe tax for 2014 and do not file your return for 2014 on time the CRA will charge you a 5% penalty on the balance owing. In additional the CRA will charge a 1% penalty on the balance owing for each full month your return is late, to a maximum of 12 months.

If the CRA charged a late-filing penalty on your return for 2011, 2012, or 2013 your late-filing penalty for 2014 may be 10% of your 2014 balance owing, plus 2% of your 2014 balance owing for each full month your return is late, to a maximum of 20 months.

Even if you cannot pay your full balance owing on or before April 30, 2015, you can avoid the late-filing penalty by filing your return on time.

Who should I contact if I have to file back taxes for multiple years? 

Contact our firm for all your income tax needs. We specialize in filings back taxes and reducing penalties and interest. We have several different strategies that we use to reduce penalties and interest, including the Voluntary Disclosure Program. We can  help you comply with the CRA reporting obligations and minimize your overall tax bill. Contact our firm and book an appointment with our accountant Mr. Sarb Cheema.

Income Splitting Family Tax Cut

 

Mississauga Accountant

Save Taxes

How the Family Tax Cut actually work?

The Canadian tax system taxes individuals and families based on there marginal tax rate. The more money you make the more tax you pay. As a result, when one person in a family has all the income, they end-up paying more tax than if the income was split amongst the couple. As an example, if the husband has $100,000 taxable income and the wife has zero taxable income, they would end up paying more tax than if they each had $50,000 taxable income. This is where the Income Splitting Family Tax Cut comes in and transfers part of the income to the lower income spouse.

The Family Tax Cut allows a spouse to transfer up to $50,000 of taxable income to a spouse in a lower income tax bracket, providing tax relief up to a maximum of $2,000. To qualify for this tax credit the both partners have to complete their tax return at the same time. This credit is effective for the 2014 tax year and subsequent tax years after.

Who can apply for the income splitting Family Tax Cut in 2014? 

  • You are a resident of Canada on December 31, 2014
  • You have an eligible spouse or common-law partner for 2014 and they have not claimed the Family Tax Cut;
  • You have a child who is under 18 at the end of 2014, who ordinarily lives with you throughout the year
  • You were not confined to a prison or similar institution for a period of at least 90 days during the year;
  • Neither you nor your eligible spouse became bankrupt in the year;
  • Neither you nor your eligible spouse elected to split eligible pension income in the year; and
  • Both you and your eligible spouse file an income tax and benefit return for the year.

 Can the credit be split?

The Family Tax Cut can not be split and has to be claimed by one spouse.

 How to apply?

The credit can be claimed on your T1 personal income tax return on Schedule 1-A and enter the calculated amount on line 423 of the Schedule 1.

Cheema CPA Professional Corporation
Contact Cheema Chartered Professional Accountants for your 2014 personal & corporate tax needs. We optimize every tax return and will automatically consider your family for the income splitting family tax cut credit. Book an appointment now using our web-app:

Personal Income Tax Returns–> We have expertise in preparing taxes for:

Individuals Executives Pension Income-Splitting
Families Employee Expenses Late filed returns
Self Employed Investment Income Investment portfolios
Rental Properties Capital Gains/Losses Non-Resident

Corporate Tax Returns–> We have expertise in preparing taxes for:

Corporation Tax Returns Accounting and Bookkeeping Late Filed Returns
Corporation Tax Planning Financial Statements  Sales Tax Returns (HST/GST/QST/PST)
Notice To Reader Reports Payroll filings (T4, T5) CRA Audit & Appeals
Have a Question?
Ask your tax questions on our online questions forum.

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.