Personal tax filings done, small business filings on the way!!

Most Canadians who are required to file an annual return, by whatever method, must do so on or before April 30. A filing extension is, however, provided for self-employed Canadians and their spouses, who are required to file on or before June 15, 2013. As that date falls on a Saturday this year, the actual filing deadline will be extended to Monday June 17, 2013. It’s important to note, however, the payment deadline for 2012 income taxes is still April 30, 2012, even for those who are not required to file until June 15.

By the end of that day on April 30, all income taxes owed for the 2012 tax year by any individual Canadian must be paid in full. Where payment is not made, or a payment made is less that the amount owed, interest will be levied on any amount outstanding beginning on May 1, 2013. Interest charged by the CRA on outstanding tax amounts is higher than commercial rates—the current interest rate levied (from April 1 to June 30) is 5%. As well, where interest is payable, such interest is compounded daily, meaning that each day, interest is charged on interest which was levied the day before.

It’s not uncommon for those who sit down to prepare a tax return for the year to discover that there is, unexpectedly, an amount owing, and that they don’t have the cash flow or savings needed to pay that amount by April 30. Many such taxpayers then put off filing, reasoning, perhaps, that if they can’t pay their taxes, there’s no point in filing. That is, however, the wrong conclusion. Where a return is not filed on time, an immediate late filing penalty equal to 5% of taxes owed is imposed, in addition to any interest charges levied. While it’s not possible to avoid those interest charges, filing the return on time will at least ensure that there’s no late filing penalty imposed.

Where a return must be filed without payment of taxes owed, or with payment of less than the full amount, the best course of action is to include a letter with the return explaining that the amount owed cannot be paid on filing and indicating when payment might be made.  It won't change the interest or penalties but may help slow collection processes.

At Cope, Barrett & co, we are here to help.  There are times that very extenuating circumstances arise and at that point CRA will consider a request for fairness to reduce penalties and interest.  We have been successful a number of times when making this request, but I do stress the circumstances were completely out of the ordinary and quite drastic.  Call, email or visit today to see if we can help!  jfbarrett@copebarrett.ca   www.copebarrett.ca

WSIB MANDATORY COVERAGE 2013!

Are you ready for WSIB MANDATORY COVERAGE under the new Bill 119?

As you probably know, there are major changes occurring January 1, 2013 with respect to Bill 119 – WSIB coverage for construction industry.

All workers, including independent operators and corporate owners must be registered and will be subject to WSIB.  There is exemption for one corporate owner if they do NO construction related work - no supervision, never on a job site not even to deliver a screwdriver!  The exempted owner is required to register as such with WSIB to qualify.

This comes into effect January 1, 2013 and all penalties, interest etc will apply for non-compliance effective then.  They allow one year grace before any prosecution occurs – and

that will be done through the Provincial Court systems!

So in short – no worker on a job site EVER, without first getting a clearance certificate for that worker.  NO exceptions.

Those workers who are presently independent operators will now be required to register as such with WSIB before January 2013.

Coming Clean with CRA - Voluntary Disclosure Program

While it’s obviously preferable, when it comes to taxes, to file on time and to make sure the information provided to the Canada Revenue Agency (CRA) is complete and accurate (as each taxpayer certifies on the last page of his or her return), things don’t always happen that way. Taxpayers who are in financial difficulty and unable to pay their taxes may simply put off filing. More commonly, a taxpayer may discover, after filing a return for the year (or previous years), that an information slip was overlooked and a portion of income consequently not reported. Or, the taxpayer may receive an amended T4 after filing his or her return, necessitating a change in the return filed and, sometimes, an increase in tax payable. And, of course, some Canadians just put off doing what everyone agrees is an unpleasant task, and eventually can find themselves several years in arrears with respect to filing. The dilemma which arises, of course, is whether to come clean with the tax authorities, or “lie low” and hope the failure to file or error or omission is never discovered.

Where a failure to report income, or to file, or the erroneous claiming of a deduction or credit which is discovered by the taxpayer relates to a previous taxation year, the CRA provides taxpayers with another option, in the form of the Agency’s Voluntary Disclosures Program. As the name implies, the Program allows taxpayers to voluntarily disclose to the CRA any past errors or omissions or failures to file when required. Where the requirements of the program are met, the CRA is authorized to cancel (or “waive”) any penalties which might otherwise be assessed against the taxpayer. It’s important to note that only penalties may be forgiven, and that the taxpayer will, notwithstanding any voluntary disclosure, continue to be “on the hook” for any outstanding taxes, plus interest charges.

The CRA imposes four conditions which must be met before a disclosure will qualify under the program. They are as follows.

• The disclosure must be truly voluntary in nature – that is, it must be initiated by the taxpayer and, in particular, must not be the result of the taxpayer’s knowledge of enforcement action about to be taken by the CRA. In other words, a taxpayer who “voluntarily” discloses past transgressions after finding out that he or she is about to be audited will not qualify under the Program.
• Any disclosure made by the taxpayer must be “complete”, as that term is understood by the CRA. The taxpayer is expected to provide full and accurate reporting of all previously inaccurate, incomplete or unreported information. It’s not possible to make selective disclosure of, for instance, one tax year but not others. As well, the CRA will request documentation to verify the amounts to be disclosed. If that documentation shows that the initial disclosure contained significant errors or omissions, the disclosure will not qualify under the VDP. In such a case, the disclosed information will be processed by the CRA and the Agency will be able to apply interest and penalties to the entire outstanding amount.
• The voluntary disclosure by the taxpayer must involve at least one penalty. Since the point of the VDP is to forgive penalties while collecting outstanding taxes and interest, there would be no point to seeking penalty relief where no penalties are involved. In such cases, the relevant information should simply be disclosed to the CRA, which will process it and assess any taxes and interest owed.
• Finally, the taxpayer’s disclosure must generally include information which is at least one year past due. In other words, a disclosure could not normally be made in respect of a 2011 income tax return (which was due April 30, 2012) until May of 2013. The CRA will, in some circumstances, accept a disclosure of information which is less than one year past due, but such disclosure cannot be used by the taxpayer simply to avoid penalties. For instance, a taxpayer who fails to get his return in and his taxes paid by April 30 cannot make a “voluntary disclosure” a few days or weeks later simply in order to avoid the late-filing penalty which would otherwise be assessed.

Finally, a taxpayer who is considering making a voluntary disclosure (and whose situation meets the four criteria required by the CRA, as outlined above) can “test the waters”, to a degree, before deciding to make full disclosure. The CRA will accept a “no-name” disclosure from a taxpayer and will discuss the taxpayer’s situation with him or her on a hypothetical basis, providing the taxpayer with information on how an actual disclosure would be handled. The CRA’s policy with respect to such no-name disclosures requires the taxpayer who makes a no-name disclosure to provide identifying information within 90 calendar days from the effective date of disclosure, in order to “complete” the disclosure. During the 90-day period, the taxpayer is protected from prosecution and from the application of penalties. However if, at the end of the 90 day period the identity of the taxpayer remains unknown, the voluntary disclosure file will be closed without further contact from the CRA, and no extension of the 90-day period will be allowed to identify the taxpayer.

No one really likes paying taxes, and paying back taxes, plus interest, is even more unpalatable. However, for taxpayers who find themselves in a position where an investigation or audit by the CRA into their affairs would likely result in the payment of taxes, plus interest, plus penalties, or even a prosecution, the Voluntary Disclosure Program offers a way to “come clean” without the risk or prosecution, and without the often onerous penalties which can be levied by the tax authorities.

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The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

TIME TO ENJOY YOUR SUMMER!

If you have too much work and not enough play, we can do the work for you.

At Cope, Barrett and company, Certified General Accountants, we do your bookkeeping, data entry, HST reporting, financial statements and tax returns.

Summer is short, enjoy it while it lasts

Let us take the heat, while you enjoy a cool one.

Call us today at 613-476-2150

Cope Barrett and company Certified General Accountants

Your one- stop business solution.  Your County Accountants! 

Get a tax break for summer child care costs (July 2012)

As July arrives and the school year has ended, families that do not have a stay-at-home parent have to make plans for keeping the kids busy and supervised over the school summer vacation. There is no shortage of options—at this time of year, advertisements for summer camps and summer activities abound—but nearly all the available options have one thing in common, and that’s a price tag. Some choices, like day camps provided by the local recreation authority can be relatively inexpensive, while the cost of others, like summer-long residential camps or elite-level sports or arts camps, can run into the thousands of dollars.

Whatever the cost, all parents would welcome some assistance with meeting those costs.

Until 2007, the only tax “break” which could be claimed to help offset such costs was the general child care expense deduction. In that year, however, the federal government introduced the Children’s Fitness Tax Credit. While the child care deduction is available (within set parameters) for most child care arrangements, the Children’s Fitness Tax Credit may be claimed only for activities or camps which involve a minimum degree of physical activity. Specifically, when claiming the credit, parents are entitled to claim a non-refundable credit equal to 15% of the first $500 in qualifying costs per child per year. So, in other words, a camp which would have cost parents $500 per child will instead have a net cost of $425 ($500 minus 15%, or $75.), after the credit is claimed on the parent’s tax return for the year.

Parents whose children’s interests run to less active pursuits, like art, music, theatre, or writing may have felt, with some justification, that such activities were getting short shrift from our tax system. Perhaps in response to the perceived inequity, the federal government introduced the Children’s Arts Tax Credit. Very similar in structure to the Children’s Fitness Tax Credit, this credit provides a non-refundable 15% tax credit on up to $500 in eligible expenses per child per year. Claiming either credit requires a minimum expenditure of $100 per child per year on qualifying activities.

Given the enormous range of activities available for children, it’s not surprising that the federal government has found it necessary to provide detailed rules on what types of activities will and won’t qualify for the two credits. And, while the possibility of a tax benefit should never drive the decision on which program or activity a child should be enrolled in, the availability of the credit might tip the balance between similar programs, or might make a program, camp, or activity that seemed financially out of reach more feasible.
In assessing whether a particular camp or program might qualify for either of the two credits, the first thing to note is that both credits are available only in respect of fees paid for children who are under the age of 16 at the beginning of the year. In other words, the last year for which the credit can be claimed is the year in which the child turns 16, assuming that all other criteria are met. Those criteria are as follows:

• the program must last for a minimum of 8 weeks, with at least one session per week or, in the case of children’s camps, must run for 5 consecutive days;
• the program or activity must be supervised;
• the program or activity must be suitable for children; and
• more than 50% of activities offered must include a significant amount of qualifying activities or, in the case of a program, camp, or membership in which participants can choose from a variety of activities, more than 50% of those activities must include a significant amount of eligible activities or more than 50% of the available program time must be devoted to eligible activities.

It’s clear from the foregoing that the concept of “eligible activities” looms large in the determination of whether a particular cost may be claimed under either of the credits. For both credits, the rules provide a specific definition of eligible activities, as follows:

For purposes of the Children’s Fitness Tax Credit, eligible activities are limited to those that require a significant amount of physical activity that contributes to cardiorespiratory endurance, plus one or more of: muscular strength, muscular endurance, flexibility, and/or balance.
Information provided on the Canada Revenue Agency (CRA) Web site indicates that “physical activity includes strenuous games like hockey or soccer, activities such as golf lessons, horse-back riding, sailing and bowling as well as others that require a similar level of physical activity.”
Similar rules are provided for the purpose of defining eligibility for the Children’s Arts Tax Credit. Those rules are quite broad and extend to activities like academic tutoring or the development of interpersonal skills. To be eligible for the credit, such activities must:

• contribute to the development of creative skills or expertise in an artistic or cultural discipline, including the literary arts, visual arts, performing arts, music, media, languages, customs, and heritage;
• provide a substantial focus on wilderness and the natural environment;
• help children develop and use particular intellectual skills;
• include structured interaction among children where supervisors teach or help children develop interpersonal skills; or
• provide enrichment or tutoring in academic subjects. 

Often, particularly in the case of residential camps or sports or arts camps, charges are levied for such costs as accommodation, travel, or food, or parents must incur costs to outfit the child with required equipment to use at camps. Costs paid by parents for non-activity related charges, like food, travel, and accommodation do not qualify for either of the credits and must be subtracted from the total fee paid. As well, the cost of equipment purchased by parents from third-party suppliers is not a qualifying cost for purposes of the credits.

Qualifying child care expenses are claimed as a deduction from income, rather than a credit, meaning that the entire amount of qualifying expenses is effectively not taxed as income in the hands of the parents. There are limits imposed on the maximum weekly cost of a residential camp (ranging from $100 to $250), as well as restrictions on the total amount of child care expenses which may be deducted in a year. However, the overall annual limits, which range from $4,000 to $10,000, depending on the age and health of the child, with an overall cap of two-thirds of the parent’s income for the year, are much higher than the allowable amount for the Children’s Fitness or Arts Tax Credit. It’s not, however, possible to double or triple dip when it comes to expenses related to children’s activities. Expenses which are claimed under any of the three possible categories (child care expenses, Children’s Fitness Tax Credit, and Children’s Arts Tax Credit) can be claimed only once, even if they might, by definition, qualify under more than one provision.

5 ways to spend your tax refunds...

The average income tax refund last year was $1,500, according to the Canada Revenue Agency, and it's likely many of those lucky recipients are hard pressed to remember where it went.
If you're one of the three in four Canadians to get one this year here are five ways to make your tax refund — or any windfall for that matter - the seed that blossoms:
Pay down debt
Imagine an investment that is guaranteed to return thirty per cent, compounding annually, with no risk and no tax consequences. That's basically what you're getting if you pay down the balance owing on retail credit cards like those offered by The Bay, which can charge as much as 29.9 percent. Any investor would drool at that sort of return yet thousands of consumers carry balances at those rates.
Even basic credit cards like Visa and MasterCard charge rates on balances in the upper teens.
Putting your tax refund against debt, even consumer loans nearing ten per cent, can prevent a lifetime of financial stagnation. You won't have much to show for it right away but you'll thank yourself down the road.
Paying down low interest car loans, secured lines of credit or mortgages may be less fruitful but there are more effective ways to invest your tax refund.
Open up a TFSA
At the start of 2012 over eight million Tax Free Savings Accounts had been opened up since the Federal government introduced them four years ago.
The TFSA provides a unique opportunity for savers to grow their money tax free. All gains made from a long list of eligible investment stay in your pocket and not the government's.
For many Canadians on a tight budget finding extra cash to start a TFSA is elusive but it only takes a few hundred dollars to get the ball rolling. Afterward a hundred here and a hundred there can turn into significant savings.
Even if you're one of the eight million plus TFSA holders it wouldn't hurt to top it up. The total contribution limit will increase by $5,000 (plus inflation) each year in addition to the current $20,000 maximum built up over the past four years.
Make an early RRSP contribution
While you're topping up your savings consider putting your tax return in a Registered Retirement Savings Plan. An RRSP contribution allows the investor to deduct the full contribution amount from his or her taxable income.
It's the contribution that keeps on giving. By contributing your tax return to an RRSP you avoid the last-minute rush before next year's March deadline and get an early start building next year's tax refund.
It's important to know that while contributions are tax deductable, the contributions and any gains from investments in an RRSP are fully taxed when they are withdrawn - but that usually occurs in retirement when the plan holder is in a lower tax bracket.
Buy more of what you like
If you're a prudent investor you probably hold a few good stocks in your TFSA or RRSP that pay dividends, or you feel are poised to rise when the broader markets turn up.
Good stocks are good stocks and the more you own, the better. Using your tax return to buy more can bulk up your holdings.
Even better, good stocks that are down from your original purchase price provide an opportunity to buy more at a better price — lowering your average cost per share and your break-even point.
Roll the dice
Why do investment advisors go on and on about diversification? Because a diversified portfolio opens up a wide range of growth opportunities while spreading out overall risk.
Diversification most commonly applies to sectors and geographic regions, but it should also apply to risk itself.
A well diversified portfolio includes low-return potential/low-risk investments at one end of the risk spectrum and high-return potential/high risk investments at the other end. As a result, losses at the high-risk end will be cushioned by the low risk investments, and gains will pull up the low risk investments.
If you have a good low-risk anchor you owe it to yourself to take on more risk at the opposite end — and that's where you can have some fun with your tax refund.
Do your homework and shop for a high risk stock with strong growth potential. A great starting point is the TSX Venture Exchange, which is packed full of what are considered penny stocks - small companies that trade on low volume.
Good examples are start-up resource firms sitting on huge reserves that are poised to either strike it rich or get bought up at a premium from bigger resource companies.
http://www.copebarrett.ca/

Tax deduction often missed...the First Time Home Buyer Tax Credit

A qualifying home must be registered in your and/or your spouse's or common-law partner's name in accordance with the applicable land registration system, and must be located in Canada. It includes existing homes and homes under construction.
The following are considered qualifying homes:

• single-family houses;
• semi-detached houses;
• townhouses;
• mobile homes;
• condominium units; and
• apartments in duplexes, triplexes, fourplexes, or apartment buildings.

Note
To qualify you must be a First Time homebuyer only. 

You can claim an amount of $5,000 for the purchase of a qualifying home made in 2011, if both of the following apply:

• You or your spouse or common-law partner acquired a qualifying home.
• You did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).

questions?  Contact us today!