Personal Tax Return Checklist

Here at Danielle’s SOS Financial we are committed to providing you with the largest tax refunds you deserve and finding every tax deduction you are eligible for.

To make sure you don’t miss something, and to help you get every deduction and credit you can, we’ve prepared this handy checklist.

Essentials and General Items

  • Current contact information, including SIN numbers, of the entire family
  • Last year’s tax return
  • Last year’s spousal return
  • Last year’s notice of assessments for the entire family
  • Key life events in recent years – marriage, child, new home, etc
  • Child care expenses
  • Investment income T5 slips
  • Medical, dental and other private health care expenses
  • T2202A for tuition and education amounts
  • Public transit passes
  • Details on any matrimonial or child support payments, if applicable
  • Direct Deposit information, if changed from last year
  • TFSA statements and contribution receipts
  • RRSP statements and contribution receipts
  • Confirmation on foreign property holdings
  • Information on any property, stocks or other assets bought and sold
  • T4E for income from Employment insurance
  • Charitable donation receipts
  • Interest paid on student loans
  • Political contributions

Employees

  • T4s, T4As, T4RSPs, T4RIFs and other tax slips
  • T2200 for Home Office eligibility signed by employer
  • Home Office expenses: utilities, mortgage, stationary, other purchases, etc
  • If eligible for motor expenses, details on kms driven for work
  • Professional dues, insurance, union dues (not reimbursed by employer)
  • Moving expenses (not reimbursed by employer)
  • Tools purchases documentation for trades people
  • If commissioned salesperson, documentation for advertising, promotion, meals & entertainment and other expenses
  • New motor vehicle purchase details and other motor vehicle expenses
  • Legal expenses related to employment or child support amounts

Small Business Owners & Sole Proprietors

  • Software backup of bookkeeping records
  • Manual records of sales and expenses if books are not kept in a software
  • Partnership agreement, if applicable, along with profit sharing perentage
  • Vehicle expenses used in business – vehicle cost, mileage, maintenance, etc
  • Key contracts and agreements summary or soft copy of conracts
  • Details on capital assets purchased and sold during the year
  • Home office expenses, similar to employment section above
  • Inventory count records – last year and end of current year, if applicable

Rental Property Owners

  • List of units owned with address and ownership percentage
  • Expenses on each unit, categorized by expense type – such as, mortgage interest, real estate agent fees, utilities, cleaning fees, management fees, property tax, office expenses, etc
  • Copies of all rental agreements
  • Rental income details for each unit
  • Details on capital additions (greater than $500) categorized by unit

Bookkeeping vs. Accounting

Did you know we do both!

–Bookkeeping vs. Accounting–

If you’re a small business owner, you might be wondering if you need to get a bookkeeper or an accountant – or both.

And now that you understand the need for bookkeeping, you’re might be wondering, “How does it differ from accounting?”

Good question.

The words “bookkeeper” and “accountant” are often used interchangeably. However, there are some key differences that determine the main responsibilities of each role.

–Bookkeeping is a Subset of Accounting–

37883981_2140118849644035_5128132333710344192_n.jpgAn accountant, professional bookkeeper, or an employee of the business can do your bookkeeping.

If you’ve just started a business, chances are you’ll be doing the bookkeeping yourself.

This is no bad thing. When launching a new business venture, it’s crucial that you have an intimate grasp of your financial situation. What better way than to do the bookkeeping yourself?

Essentially, bookkeepers take care of the day-to-day financial work.

They keep detailed and accurate financial accounts and use this financial clarity to help make informed business decisions.

–Accountants are Financial Experts–

Accountants are usually qualified, registered members of a statutory association. So they often have titles like CPA (Certified Public Accountant) or CA (Chartered Accountants).

That’s how they can charge the big bucks.

These experts will use the accounts provided by the bookkeeper. They focus on analyzing the transactions to provide financial advice.

They’ll also use the information in the accounts to file tax returns and other reports.

Whereas bookkeepers handle the day-to-day financial tasks, accountants often step in on a quarterly basis to provide advice and make adjustments.

How long do you have to file Adjusted Returns? (Personal & Business)

How long do you have to file a T1 adjustment?

If you find yourself in a situation where you have filed your personal tax return and then realize that you need to make a change, there are some steps you need to follow.

First, you need to wait until the notice of assessment on your original return is received before you file a T1 adjustment.  Do not file a second tax return for the same tax year.  This will ensure that CRA has processed the original return and can then process the adjustment without any confusion.

Do not file a second tax return for the same tax year

Once you have received your notice of assessment, file only a T1 adjustment for the changes you want to make.  Do not file a second tax return.  You are not required to submit receipts or slips if you file your T1 adjustment electronically, however, you may need to provide them if asked. If you choose to submit your T1 Adjustment by mail, you are required to send in the receipts or slips to support your adjustment.

You are able to ask for an adjustment to be made to a tax year ending in any of the 10 previous calendar years.  For example in 2016, you can adjust tax returns dating back to 2006.  Once you have sent in your T1 Adjustment, CRA has processing times up to 8 weeks before a Notice of Reassessment is issued.  The reassessment will state any changes made or why changes were not allowed.

How long do you have to file an Amended T2?

If you are a Canadian Controlled Private Company (CCPC), you can amend your corporate tax return within 3 years of the date of the original notice of assessment.  If you are not a CCPC, you can amend a tax return within 4 years of the original notice of assessment date.  An additional 3 year extension is possible for certain situations including;

  • The Corporation needs to carry back a loss or credit from a later tax year;
  • A reassessment of another taxpayer affects the corporation’s taxes;
  • Various non-resident transactions affect the corporation’s taxes

Before filing an Amended T2, wait until the Company has received the Notice of Assessment on the original return filed.  Then, proceed with filing an Amended T2.  These can be filed electronically or by mail.  If the amendment includes a carry back for a loss or a credit to a previous tax year, additional schedules are required to be provided to CRA which include;

  • Schedule 4 – Corporation Loss Continuity Application – if you are carrying back a loss
  • Schedule 21 – Federal and Provincial Foreign Income Tax Credits – if you are asking to carry back foreign tax credits on business income
  • Schedule 31 – Investment Tax Credit – If you are asking to carry back an investment tax credit
  • Schedule 42 – Calculation of Unused Part I Tax Credit – If you are asking to carry back a Part I tax credit

Once CRA has processed the amendment, the Company will receive a Notice of Reassessment.  CRA does not provide a time frame for how long a reassessment will take.


If you have questions please reach out to one of our representatives at 587-754-2910 or click hereto send us an email!

“Sole Proprietorship vs Incorporation” – Planning your business strategy

Should you incorporate your small business? (Sole proprietorship, partnership etc)

Jumping from Sole Proprietorship to Corporation in Canada? We’ll break it down step by step.

Earning side income or owning a small business can be a very rewarding experience, both emotionally and financially. The obvious perks of such a venture are unlimited earning potential and a whole lot more freedom and choice.

In Canada a business can operate as a sole proprietorship or a corporation. Often most small businesses operate initially as sole proprietorships and later incorporate for various reasons discussed below.

Editor’s Note: The same principles discussed in relation to sole proprietorships apply to limited partnerships.


Sole Proprietorship:

Pros

  • Lower Cost of accounting and administration fees
  • Business is filed on a T2125 schedule on your personal income tax return
  • You do not have to reconcile your bank or credit card accounts
  • You do not have to declare your “personal use of company funds”
  • Accounting method is simple and can be done in excel or from loose paperwork alone
  • You do not need an accounting software
  • No accounts payable or accounts receivable taken into account when filing
  • Can have a GST # and can have a Payroll #
  • Great for businesses with “NET” (after write offs) income of $30,000 or less

Cons:

  • Tax rate scales based on net income from 25-45% tax depending on which tax bracket you fall under
    • Ex) After you’ve earned over $90k you’re looking at approximately 40%-50% tax on each additional dollar earned. Our tax system works like this to provide lower tax rates to low income earners and higher rates to higher income earners (in theory).
    • At the end of each year you add up all the business revenue you earned in the year and subtract all the related expenses (note: you can deduct non-direct expenses such as office and vehicle expenses of a business on a pro-rated basis). The net income (earnings less expenses) is then used to determine the amount of tax you owe. For example, if you earned $50,000 and had $30,000 in expenses for a net income of $20,000 you would have a tax bill of approximately $4,000 [($50,000 – $30,000) x 20% tax rate].
  • Restricted to January – December 31 st fiscal reporting period every year
  • Net income is added to other taxable income for the taxpayer
  • No deferral options, and minimal tax planning tools
  • Higher risk of audit by CRA
  • No accounts payable or accounts receivable taken into account when filing
  • By default you do not qualify for EI on self employment earnings
  • In Alberta no qualification for WCB which can limit working opportunities in industries such as trades and construction 
  • Harder to acquire Import/Export accounts & funding
  • Higher lending rates and requirements are not strict

 

Sole proprietorships typically have the following government reporting requirements:

  • Initial business registration (Declaration of a trade name and opening on a “business bank account”  – Cost $45- $150 
  • Annual personal tax returns (T1) – Cost $150 – $1000
  • Payroll remittances and filings (if additional employees exist besides the owner)
  • Sales tax (if registered for GST/HST)

 

Very Limited Liability Protection: 

Under a sole proprietorship the owner is personally responsible for all debts and liabilities and legal costs of the business. These debts may include credit cards, business loans or liabilities arising out of lawsuits. If the small business operating as a sole proprietorship is unable to fulfill these debts a creditor is almost certain to seek restitution through the forced sale of personal assets (house, car, investments) of the owner in court.

 

Incorporation:

Pros:

  • Corporate Tax rate for NET income under $500,000 is a flat 15% in Alberta
    • When NET income exceeds $500,000 – amounts above are taxed at an additional 38.5% tax. This is significantly lower than the 45-50% tax rate on the income equivalent through a sole proprietorship based on personal income tax brackets.
  • Flexible “Fiscal” reporting period (Not restricted to January – December 31st)
    • This gives you maximum flexibility to tax plan (For example place your year end during a “slow” season in your business)
  • Lower risk of audit – with more defined rules for what triggers an investigation
  • Additional options available:
    • Declare Shareholder income as T4 Employment Wages or Dividends
    • Access Income Deferral through use of “Bonuses” 
    • Borrow money against your own company and pay it back over extended periods of time at interest rates as low as 1%
    • Purchase real estate inside the corporation
    • Acquire assets in the business name – which reduces personal liability
  • More readily available options for business lending and better interest rates 
    • For example: Easier to acquire vehicles, leases on equipment and other operating capital to fund advertising, business development or expansion expenses
    • Easier to acquire fleets of vehicle and better rates for financing
  • In Alberta a corporation is required to apply for WCB
  • More favorable rates on business insurance (Errors and omissions, Liability and commercial rates)
  • Easier to set up Import/Export accounts 

 

Cons: 

  • Higher Cost of accounting and administration fees
  • Incorporation Fees range from $500 – $1500 depending on the structure
  • Tax return for a corporation: T2, Financial Statements, Notice to Reader, Engagement Letter (Prices range from $350 – $10,000/year) 
    • May  have increased reporting obligations such as a Review or Audit of year end statements in situations where the business activities require “Bonding” These can only be prepared by a qualified and approved CPA (Thus the higher price ranging from $3000 – $25,000)
  • Higher government regulations compliance requirements: Requires reconciliations be done on all company owned accounts: Bank Statements, Credit card statements, loans & financing accounts 
  • Declaration of shareholder loan – responsibility for declaring money put into the company and money withdrawn from the company by the owners
  • Requires more diligence from shareholders with emphasis on tax planning, budgeting & using ongoing cashflow & projection programs to ensure long term sustainability of the business. 

 

Corporations may be subject, but not limited to the following reporting requirements:

  • Setting up articles of incorporation
  • Annual information return – this is a brief return that details information about shareholders and general information about the corporation (filed with the provincial government for a fee) 
  • Maintaining corporate records, which are separate and distinct from personal records (must be held for 6 years per CRA regulations)
  • Filing an annual corporate income tax return which include detailed financial statements
  • Payroll remittances and filings (if the corporation has employees)
  • Sales tax – if sales of the corporation exceed $30k you must register for GST/HST and track sales tax spent and collected

 

Write offs: 

Typically expenses written off by corporations can similarly be written off by sole proprietorships, however, a corporation allows for additional income splitting in certain situations which may lower overall taxation. For example, suppose a spouse is the shareholder of a corporation that manages the overall operations of the business. If the other spouse helps out the business with administration and other tasks a reasonable salary can be paid which can be written off by the business and taxed at a low personal rate. 

 

Increased Liability Protection:

A corporation allows for an owner/shareholder to separate him or herself from the legal responsibilities of the business. If the corporation is unable to pay debts or liabilities the creditor or plaintiff may only seek assets owned by the corporation and not the shareholder. There are certain situations in which a shareholder may be personally liability, such as providing personal guarantees for corporate debts, remitting sales tax and payroll remittances, so talking with a knowledgeable lawyer is always a good idea.

 

Justification and advice on cost comparison vs value: 

Often I see small business owners of both sole proprietorships and corporations attempting to skimp out on paying professional fees. Having run my own small accounting business myself, and having provided tax planning services in an accounting firm, I understand the value of these services is often difficult to quantify or justify, especially considering the cost of professional fees. However, I’ve also seen situations where personal and corporate bank accounts have been frozen by the CRA for non-compliance, or an unexpected tax bill cripples cash flow because these issues were neglected. There can be tax minimizing opportunities lost (such as tax deferral, income splitting and other deductions) by business owners when they fail to engage a competent accountant. Paying a competent professional can ensure a business handles these issues before they become massive problems.

 

Tax Strategy: 

The corporate small business tax rate in Ontario is 15% on the first $500,000 of income. Sweet sassy molassy, that’s way lower than the personal tax rates above. Why doesn’t everyone just incorporate? I know, right? Well, hold on there that rate is for income earned in the corporation and it must stay there until paid out to the owner via salary or dividends. This is where tax planning comes into play and can drastically affect your take home pay if you’re earning some decent money.

Here’s an example of a business earning $100,000 in income under the sole proprietorship VS corporation.

Sole Proprietorship:

  • NET Income: $100,000
  • Taxes Payable: $26,600

Corporation:

  • NET Income: $100,000
  • Taxes Payable: $15,500

Now recall that for a corporation we have to pay a salary out to the owner in order for him or her to access the profits. If the owner wanted $70,000 in salary and wanted to leave $30,000 in the business for future investment it would look like this:

Sole Proprietorship Corporation
Net Income $100,000 $30,000 (reduced by $70k salary)
Business Taxes Payable $26,600 $4,650
Employment Income $70,000
Employment Taxes Payable $15,000
Total Taxes Payable $26,600 $19,650

By incorporating and paying a $70k salary the business owner would save close to $7k in taxes. If the business owner would live off a salary less than the net income of the corporation we can see considerable tax deferral and capital appreciation by leaving the funds in the corporation and investing. The Canadian corporate tax rate has decreased substantially over the last few decades to encourage business spending.

______________________________________________________________________

Final Decision: Incorporation: Is it right for you?

There are a lot of other considerations when thinking about incorporating a business. While the administrative and compliance responsibilities and costs are much greater under a corporate structure the benefits include liability mitigation of the owner, tax savings and estate planning. It probably doesn’t make sense for a small business with minimal operating risk and net income under $30k to incorporate as a low tax rate is already enjoyed. As a business grows so too do the tax liabilities and operational risk, which may indicate it’s time to prep those articles of incorporation. When a business reaches net income above $30k it may be a good time to discuss if it’s time for incorporation. Each business owner should consult with a lawyer and accountant to determine if the increased costs are offset by the benefits.

 

Should you incorporate your small business?

When a business is started, it can be structured as a proprietorship, partnership, or corporation.

Proprietorship

sole proprietorship is one person operating a business, without forming a corporation.  The income of the business is then taxed in the hands of the owner (the proprietor), at personal income tax rates.  The income is considered income from self-employment, and is included on the personal income tax return of the owner.

Advantages of proprietorship:

bullet Setting up a business in the form of a proprietorship is relatively simple and the costs are low.
bullet If the business loses money, the losses can be written off against other income of the proprietor.
bullet Proprietorships are less regulated than corporations.  The administration of a proprietorship is less costly than that of a corporation.  However, proprietorships are regulated by the provincial/territorial governments, and the proprietorship may have to be registered.
bullet The proprietor is in control of all decision making, and receives all profits of the business.

Disadvantages of a proprietorship:

bullet The biggest disadvantage of a proprietorship is unlimited liability.  The proprietor is liable for all debts and other liabilities of the business.  If the business is sued, all the business and personal assets of the owner are at risk.
bullet If the business is profitable, it will usually be paying higher taxes than if it was incorporated as a Canadian Controlled Private Corporation (CCPC).  The lowest personal income tax rate paid by a proprietorship would range from 19% to 26% (in 2015), depending on the province/territory.  This rate increases with income.  Taxable income over $138,586 (federally, in 2015) is taxed at the highest marginal rates, which range from 39% to 54.8%, depending on the province/territory.  See the Marginal Tax Rates page.
bullet A proprietorship has a lack of permanence – if the owner dies, the net business assets pass to the heirs, but valuable leases and contracts may not.

Partnership

partnership is also an unincorporated business.  It is similar to a proprietorship, except two or more entities are partners in the business.  For partners who are individuals, the income from the partnership is taxed at personal income tax rates, and a percentage of the income is included on the personal income tax return of each owner.

Advantages of partnership:

bullet The setup costs of a partnership are relatively low.
bullet A partnership is less regulated than a corporation.  A partnership agreement should be drawn up to outline the terms of the partnership, what happens in the event of a dissolution, and what happens in the event of disagreements among partners.  In the absence of an agreement, or if certain provisions are not addressed in the agreement, provincial or territorial laws will determine some or all of the terms of the partnership.
bullet Business losses can be written off against other income of the partners.
bullet Broader base of experience, knowledge and skills to draw from.

Disadvantages of a partnership:

bullet The biggest disadvantage of a partnership is unlimited liability.  The partners are jointly liable for all debts and other liabilities of the business.  If the business is sued, all the business and personal assets of the partners are at risk.  An exception to this is a Limited Partnership.  Limited Partners, who contribute capital but do not participate in the management of the business, will have their liability limited to the amount of capital that they have contributed.  The partners who participate in the management of the business are called General Partners, and will still have unlimited liability.
bullet Decisions must be made jointly.
bullet If the business is profitable, it will usually be paying higher taxes than if it was incorporated as a Canadian controlled private corporation (CCPC).  See this same topic above under proprietorships.
bullet The death or retirement of a partner will not end the partner’s liability for debts and obligations of the partnership that were incurred prior to the death or retirement.  Also, if a partner retires and does not make the retirement publicly known, he/she could still be held liable for obligations incurred by the partnership after the retirement.

Corporation

corporation is a separate legal entity, which is formed by application to either the federal government, or one of the provincial/territorial governments.  The corporation issues shares to the owners, or shareholders.  The funding of the corporation can be done through the issue of shares, or by borrowing.  Instead of investing a large amount in shares, shareholders can lend money to the corporation, and invest only a minimal amount in the shares.  This way, when the corporation has available cash, the shareholder loans can be repaid without attracting personal income tax.

Being a separate legal entity, a corporation pays corporate income tax, which is calculated completely separately from the owners’ personal income tax.  If the corporation pays wages to the shareholders, income tax and Canada Pension Plan contributions, and sometimes Employment Insurance premiums, must be deducted and remitted to Canada Revenue Agency.

Advantages of incorporation:

bullet One of the biggest advantages of incorporating a business is limited liability.  This means that the liability of the shareholders is usually limited to the amount that they have invested in their shares in the corporation.  However, many incorporated small businesses are not able to get bank loans without the personal guarantee of the shareholders, so this eliminates part of the advantage of limited liability.  The personal assets of the shareholders are protected from lawsuits against the corporation.  However, shareholders who are directors of the corporation can be held legally liable for some debts of the corporation (such as GST/HST and payroll taxes) in certain circumstances.
bullet Another major advantage for a profitable small business is the income tax advantage.  A Canadian controlled private corporation, or CCPC, pays a much lower rate of federal tax (small business rate) on the first $500,000 (in 2017) of active business income than would be paid by an unincorporated business, due to the small business deduction.  Active business income generally does not include investment income or rental income, which is taxed at regular corporate tax rates.  The combined federal + provincial small business tax rate varies from approximately 10.5% to 18.5% in 2017 for the first $500,000, depending on the province, and from 26% to 31% for income over the threshold.  The threshold amount subject to the lower small business rate also varies between provinces.  Keep in mind that this tax advantage is mainly a deferral of taxes until the profits are paid out to the shareholder.  If all the profits are paid out to the shareholder as they are earned, leaving the corporation with little or no taxable income, then they will be taxed entirely as income of the shareholder, at personal income tax rates.
bullet Another tax advantage of incorporation is the $800,000+ capital gains deduction on the sale of shares of a qualifying small business corporation.  One of the qualifications is that the corporation must be a CCPC with active business income.
bullet Private Health Service Plans can be used to provide tax-free benefits to employees.  This deduction is also available to sole proprietors and partners, but the treatment for corporations is more favorable than that for unincorporated businesses.

Disadvantages of incorporation:

bullet Incorporation is the business structure with the highest setup and administrative costs.
bullet Incorporation is the most complicated business structure.  It is very important to take extreme care in setting up classes of shares, deciding who will be shareholders (spouses, children) and how much control they will have (control is determined by % of voting shares owned).  Professional advice can avoid serious problems.
bullet Business losses cannot be written off against other income of the owners (shareholders).
bullet More administrative work is required for a corporation.  This includes annual reports filed with the corporate registry, and corporate tax returns which are filed separately from the owners’ personal tax returns.

Generally, the higher the net income of your small business, the more advantageous it is to incorporate instead of remaining as a proprietorship.

No matter what the type of business structure, spouses and children can be employed by the business, thus effectively splitting income.  However, amounts expenses must be reasonable amounts based on services provided, and must actually be paid to the spouse and/or children.

Each type of business entity has its advantages and disadvantages.  It is wise to seek professional advice to assist in your decision-making, and in the setting up of your business structure.  It is also very important to get your accounting records set up and organized properly at the start of your business.

*Info from Taxtips – See full article here

Edmonton Police Strategic plan 2020-2022

Greetings Friends and Colleagues,

The Community Relations team at the Edmonton Police Service is committed to staying connected with you and sharing EPS news in a timely fashion. We are very excited to share our new Strategic Plan for 2020-2022 with you, which lays out our new vision, mission, and goals and captures the new direction EPS is undertaking.

As our new goals outline, EPS wants to:

  • Balance Support and Enforcement so that the right people enter the criminal justice system
  • Partner and Advocate to amplify the work being done to keep Edmonton communities safe
  • Innovate and Advance to use our resources in an agile manner
  • Grow Diverse Talent so we can serve our communities better

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The Vision 2020 restructuring that you may have heard about realigns our current resources to streamline and achieve the new vision mission and goals.

We, along with the Strategic Social Development Division within EPS, will continue to connect with community partners over the coming months to ensure our measures of success resonate for the communities we seek to serve and support, and to ensure we are achieving our goals collectively.

If you have any questions about the new Strategic Plan, please don’t hesitate to contact us! We hope that you will accompany EPS on this journey of becoming a forward-thinking police service that strengthens public trust through addressing crime, harm and disorder.

Wishing you all good health and safety,

The EPS Community Relations Team

View the Full Strategic Plan Here!

Beverly Inter-agency “Help for Beverly residents during COVID-19”

Good afternoon everyone,

I want to provide the following link to a great set of resources specifically provided for residents of Beverly by the Beverly Inter-agency (Including City of Edmonton, Hope Mission, Beverly Business Association, Edmonton Public Library and more)

Public link to the Google Doc (view only access):
bit.ly/yeg-beverly-covid19

Click below on the link to directly download the PDF!

Help for Beverly residents during COVID-19 – Apr 22 2020

 

We are very pleased, proud and excited to be part of such a resourceful and resilient community!