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Is It Time for Your Business to Work with an Accountant?

Many business owners have a good grasp on managing the finances of their company. That being said, there are countless reasons why you will need the help of a CPA specializing in accounting and tax planning for businesses. Let’s take a quick look at a few key examples.

Business Structure & Planning

There’s no aspect of a company’s structure that does not in some way require tax planning and accounting strategy. Even if you’ve been operating your company for many years, it’s wise to seek advice from a CPA on a routine basis. However, it’s especially important when undergoing significant developments. Are you in the early stages of founding your company or a subsidiary? Do you need to prepare detailed reports for investors? Are you changing legal status, such as from a partnership to a corporation? Speaking with a CPA specializing in entrepreneurial accounting and tax planning is essential to keeping your operations in good order.

Tax Law Changes

A major part of any CPA’s job is to be as informed as possible as to ongoing developments in tax policy. When you build a strong relationship with a business tax accountant, they will be able to optimize your tax planning strategies accordingly. Just like any type of legislation, tax law is subject to change, and the last thing that any business owner wants is to be left out of the loop. This can lead to missed opportunities for tax savings, issues with compliance, and other unpleasant consequences. The Department of Finance’s recent tax law changes pertaining to entrepreneurs, which we’ve discussed here and here, are perfect examples.

Audits & Compliance

The advent of an audit can create stress for any business owner, and the same can be said for potential mistakes in GST and HST compliance. When it comes to audits, it’s important to remember that companies are selected based on a complex set of factors. While it’s not possible to usefully predict the likelihood that you will be audited, you can plan for it and navigate it most effectively by working closely with an experienced business accountant. They can also help you to ensure that you are aboveboard when it comes to GST and HST compliance. This is your best bet for avoiding penalties and fines.

Cook & Company is Calgary’s finest team of corporate and entrepreneurial tax accountants. If you’re a hard-working business owner hoping to minimize the strain of tax expenses on your company, we can help. Contact us at [email protected] or 403.398.2486 to schedule a free consultation today.

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Making Business Taxes Work for You

Keeping business taxes in order while maximizing the viability of your company is one of the most important challenges of the business world. As you know, a key part of maintaining this balance is simply knowing what deductions to take advantage of. Here are a few to think about.

Capital Cost Allowance

If your business acquires and uses a piece of property, the CRA may allow you to claim a capital cost allowance and recalculate your taxable income. This can help you contend with the expenses involved in maintaining that property, including legal, accounting, and maintenance fees. It may be furniture, buildings, equipment, or other eligible items, often known as depreciable capital assets. How it’s calculated depends on the type of property and several other factors. It’s important to note that deductions are calculated annually in the long term. You cannot claim the deduction all at once for the tax year in which the property was purchased.

SR&ED Tax Incentives

Through the SR&ED Tax Incentive Program, corporations have access to federal and provincial tax benefits that are designed to encourage scientific research and experimental development in Canada. These incentives allows a corporation to claim both tax deductions based on expenditures on SR&ED and investment tax credits, which can reduce the amount of Part I taxes owed. In order to qualify, the corporation must fall under various categories of basic scientific research, applied research, experimental development, and other types of work as designated by the program. Be aware that certain provincial considerations may apply.

Employee Gifts

Employers can claim tax deductions on certain gifts given to employees. Not only this, but the eligible gift will not be considered taxable income for the recipient. It must, of course, fall under the CRA’s criteria to qualify. For instance, the value of the gift must not exceed $500 in fair market value, although there is no limit to the number of qualifying deductible gifts that the employee can receive per year. Be aware that cash bonuses, performance-related awards, or anything easily converted into cash are not deductible. Gifted stocks are also not deductible, but within a corporation these will only be taxed when they are sold.

Navigating corporate taxes doesn’t have to be overwhelming or nerve-racking. You also don’t have to work with an unaffordable firm to get results. Our team offers the expertise of a big firm with the personal touch of a small one. Call 403.398.2486 to get the value you deserve today!

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Revisions to the New Income Sprinkling Rules

For many Canadian businesses owners, income sprinkling has been an important topic in recent news regarding tax law. Our previous article on the recent tax changes briefly mentioned the revisions to rules regarding income sprinkling, but this week we’d like to give you a closer look.

Initial Changes

As mentioned in our recent article, income sprinkling is a method used by business owners to distribute company dividends or income to family members in a way that secures a lower personal tax rate. This practice is already regulated by the Tax on Split Income (TSOI), often referred to as “kiddie tax”, which applies the highest marginal tax rate of 33% to split income gained by family members under 18. The changes proposed in July of 2017 aimed to extend the scope of the TSOI to family members aged 18 to 24, also requiring assessment of their contribution of labour or capital to determine the legitimacy of the earned income.

The Revisions

In response to mounting concerns, the Department of Finance has made several revisions to the proposed changes that simplify their contents, offer exemptions, and loosen criteria for reasonable involvement in the business. Family members over 24, for instance, may be exempt if they own at least 10% of the corporation. Income received by the spouses of certain shareholders above 64 may also be exempt. The Department has also modified proposed restrictions to the Lifetime Capital Gains Exemption that could have applied the income sprinkling taxes to capital gains earned by family members after the death of the shareholder.

What It Means for You

It’s key to note that the new revisions have been drafted to accommodate the circumstances and concerns of certain small businesses and their related families. For owners of high-income businesses and corporations, however, the new income sprinkling rules will have a particularly pronounced effect. In addition to this, certain aspects of the new rules retain a complicated nature that may be disorienting for some high-earning business owners. It’s as important as ever to consult with your corporate accountant to find the best adjustments for you. An extensive CIBC pamphlet on the revisions can be found here.

Remember that the new tax changes are proposed to go into effect for taxation years starting after 2018. Have you teamed up with the right corporate CPA to maximize the strength of your company? Don’t hesitate to get in touch with Cook & Company by calling 403.398.2486 today.