The Federal budget of June 6, 2011, announced a new hiring credit designed to alleviate the burden on small businesses trying to expand their payroll. Those businesses paying $10,000 or less in EI premiums in 2011 will see any additional hiring and accompanying premiums credited back up to $1,000. This means any business with a payroll of around $400,000 or less could add an employee in 2011 and suffer no extra EI premium on the first $1,000.
Of further help is the Canada Revenue Agency (CRA) will automatically credit back the money upon the 2012 T4 tax return being filed. No need to keep track of new employees either, since the credit is based on the increase in the employer's 2011 premiums over those paid for 2010.
About Me
- Cope, Barrett and Co
- Belleville, Picton, Bancroft, Ontario, Canada
- We are a team of professional accountants with knowledge and experience in public practice, manufacturing, education and management. We are committed to excellence and quality in all of our client services. We value the relationship that we build with our clientele.
Wednesday, 16 November 2011
Monday, 14 November 2011
Upcoming Changes to our Canada Pension Plan Beginning 2012 ...
At the beginning of 2012 changes will be made to the Canada Pension Plan which may affect Canadians who are both retired and currently receiving CPP retirement benefits and those who are contemplating retirement in the near future.
While the number of Canadians who could be affected by these changes is in the hundreds of thousands, there are some who don’t need to consider them. Canadians who have already retired and are receiving Canada Pension Plan benefits, but are either already age 70 or older, or have no plans to return to the work force, on either a part-time or full-time basis, can safely ignore these changes.
For most of the rest of us, some choices may have to be made, as follows.
Under current rules, it’s possible to choose to begin receiving CPP retirement benefits at any time between the ages of 60 and 70. However, once benefits start being paid, the recipient, even if he or she returns to the work force on a part-time or full-time basis, cannot contribute again to the Canada Pension Plan. As well, for Canadians less than 65 years of age, it is necessary, in order to begin receiving CPP retirement benefits, to be out of the work force, or to have significantly diminished earnings, for two months before benefits start. Both those rules are about to change.
The simplest change is the fact that it will be possible, as of January 1, 2012, to begin receiving CPP retirement benefits without any interruption in one’s working life. Where an individual chooses to stay in the work force while also receiving CPP benefits, it’s often the case that the choice is made from financial necessity. In such cases, a two-month interruption in earnings can impose a real hardship. That will no longer be the case.
The second change is that those who stay in the work force, or decide after retirement to return to the work force may, beginning January 1, 2012, also return to making CPP contributions. Where an individual who is between the ages of 60 and 65 and receiving CPP retirement benefits returns to the paid work force, he or she will be required to resume making CPP contributions—there is no choice in the matter. Where that individual is between the ages of 65 and 70, he or she will be able to choose whether or not to resume making such contributions. The decision is the employee’s, but the contributions will automatically be deducted from the employee’s pay, beginning January 1, 2012, unless he or she provides the employer with a signed Form CPT30, Election to Stop Contributing to the Canada Pension Plan, by the end of December 2011. That form is now available on the Canada Revenue Agency (CRA) Web site at http://www.cra-arc.gc.ca/E/pbg/tf/cpt30/cpt30-11e.pdf. Once completed and submitted to an employer, the form is effective as of the beginning of the following month, so the CRA Web site includes a reminder that it should not be completed or submitted until after November 30, 2011. As well, an employee who has signed and completed such a form and later has a change of heart can revoke the election, and once again start making CPP contributions, beginning in 2013.
One of the biggest decisions to make with respect to Canada Pension Plan retirement benefits is when to begin claiming and receiving such benefits. A lot of factors go into that decision—whether or not you are still in the workforce and how long you are planning to keep working, what other sources of income (i.e., private pension income, or annuity payments) are available, whether additional income is needed to meet current living costs, even one’s current state of health and family longevity history, etc. One of the biggest factors to consider, however, is the fact that the amount of pension received will depend on when one decides to start receiving it. And, the changes which are taking effect between 2011 and 2016 will make this a greater factor than it has been previously.
Before the changes, a CPP retirement pension was increased by 0.5% for each month after age 65 that the recipient delayed receiving it. Similarly, the amount receivable was decreased by 0.5% for each month before the age of 65 that recipient accelerated receiving it. For those who defer receipt, the monthly percentage increase will go from 0.6% in 2011 to 0.7% in 2013. That doesn’t sound like much, but it means that, by 2013, someone who defers receipt of their CPP pension until age 70, will receive a monthly pension amount which is 42% higher than it would have been if the same person had chosen to begin receiving that pension at age 65. The consequences are similar for those who choose to begin receiving CPP “early”. The reduction percentage will rise from 0.5% to 0.6% between 2012 and 2016. In practical terms, that means that someone who begins receiving their CPP pension in 2016 at the age of 60 will receive benefits that are 36% lower than they would have been if they had waited until age 65.
There is, of course, no right or wrong answer to the question of when it’s best to begin receiving CPP benefits, and certainly no “one size fits all” answer. In some cases, financial need may compel a person to begin receiving benefits at the earliest possible opportunity, regardless of the effect such a claim may have on the amount of those benefits. Others, who don’t necessarily need a CPP cheque to pay basic living expenses may nonetheless decide that they are willing to accept a lesser amount in order to have earlier access to those benefits and to use them to carry out —travel plans, for instance—which may not be as easy to accomplish later in life. Still others may decide to start using private retirement savings, like an RRSP, or begin receiving an employer-sponsored pension, while deferring receipt of CPP as long as possible. Whether any of these is the best course of action depends entirely on the individual’s circumstances (especially his or her financial circumstances) and their current and planned retirement lifestyle.
While the number of Canadians who could be affected by these changes is in the hundreds of thousands, there are some who don’t need to consider them. Canadians who have already retired and are receiving Canada Pension Plan benefits, but are either already age 70 or older, or have no plans to return to the work force, on either a part-time or full-time basis, can safely ignore these changes.
For most of the rest of us, some choices may have to be made, as follows.
Under current rules, it’s possible to choose to begin receiving CPP retirement benefits at any time between the ages of 60 and 70. However, once benefits start being paid, the recipient, even if he or she returns to the work force on a part-time or full-time basis, cannot contribute again to the Canada Pension Plan. As well, for Canadians less than 65 years of age, it is necessary, in order to begin receiving CPP retirement benefits, to be out of the work force, or to have significantly diminished earnings, for two months before benefits start. Both those rules are about to change.
The simplest change is the fact that it will be possible, as of January 1, 2012, to begin receiving CPP retirement benefits without any interruption in one’s working life. Where an individual chooses to stay in the work force while also receiving CPP benefits, it’s often the case that the choice is made from financial necessity. In such cases, a two-month interruption in earnings can impose a real hardship. That will no longer be the case.
The second change is that those who stay in the work force, or decide after retirement to return to the work force may, beginning January 1, 2012, also return to making CPP contributions. Where an individual who is between the ages of 60 and 65 and receiving CPP retirement benefits returns to the paid work force, he or she will be required to resume making CPP contributions—there is no choice in the matter. Where that individual is between the ages of 65 and 70, he or she will be able to choose whether or not to resume making such contributions. The decision is the employee’s, but the contributions will automatically be deducted from the employee’s pay, beginning January 1, 2012, unless he or she provides the employer with a signed Form CPT30, Election to Stop Contributing to the Canada Pension Plan, by the end of December 2011. That form is now available on the Canada Revenue Agency (CRA) Web site at http://www.cra-arc.gc.ca/E/pbg/tf/cpt30/cpt30-11e.pdf. Once completed and submitted to an employer, the form is effective as of the beginning of the following month, so the CRA Web site includes a reminder that it should not be completed or submitted until after November 30, 2011. As well, an employee who has signed and completed such a form and later has a change of heart can revoke the election, and once again start making CPP contributions, beginning in 2013.
One of the biggest decisions to make with respect to Canada Pension Plan retirement benefits is when to begin claiming and receiving such benefits. A lot of factors go into that decision—whether or not you are still in the workforce and how long you are planning to keep working, what other sources of income (i.e., private pension income, or annuity payments) are available, whether additional income is needed to meet current living costs, even one’s current state of health and family longevity history, etc. One of the biggest factors to consider, however, is the fact that the amount of pension received will depend on when one decides to start receiving it. And, the changes which are taking effect between 2011 and 2016 will make this a greater factor than it has been previously.
Before the changes, a CPP retirement pension was increased by 0.5% for each month after age 65 that the recipient delayed receiving it. Similarly, the amount receivable was decreased by 0.5% for each month before the age of 65 that recipient accelerated receiving it. For those who defer receipt, the monthly percentage increase will go from 0.6% in 2011 to 0.7% in 2013. That doesn’t sound like much, but it means that, by 2013, someone who defers receipt of their CPP pension until age 70, will receive a monthly pension amount which is 42% higher than it would have been if the same person had chosen to begin receiving that pension at age 65. The consequences are similar for those who choose to begin receiving CPP “early”. The reduction percentage will rise from 0.5% to 0.6% between 2012 and 2016. In practical terms, that means that someone who begins receiving their CPP pension in 2016 at the age of 60 will receive benefits that are 36% lower than they would have been if they had waited until age 65.
There is, of course, no right or wrong answer to the question of when it’s best to begin receiving CPP benefits, and certainly no “one size fits all” answer. In some cases, financial need may compel a person to begin receiving benefits at the earliest possible opportunity, regardless of the effect such a claim may have on the amount of those benefits. Others, who don’t necessarily need a CPP cheque to pay basic living expenses may nonetheless decide that they are willing to accept a lesser amount in order to have earlier access to those benefits and to use them to carry out —travel plans, for instance—which may not be as easy to accomplish later in life. Still others may decide to start using private retirement savings, like an RRSP, or begin receiving an employer-sponsored pension, while deferring receipt of CPP as long as possible. Whether any of these is the best course of action depends entirely on the individual’s circumstances (especially his or her financial circumstances) and their current and planned retirement lifestyle.
Thursday, 29 September 2011
BEHIND IN FILING YOUR TAXES??? CRA HAS RELIEF PROVISIONS...
Since the 1990s, the taxpayer relief provisions of the various Acts administered by the Canada Revenue Agency (CRA) have enabled it to help taxpayers who, because of circumstances beyond their control, are unable to meet their tax obligations.
The CRA is aware that sometimes taxpayers may face unforeseen circumstances, which prevent them from meeting their tax obligations. These circumstances could be personal misfortunes (sickness, death in the family), natural disasters (fire, floods), service disruptions (postal strike), or an error by the CRA (incorrect information).
The CRA administers various legislations with taxpayer relief provisions that give the Minister of National Revenue discretion to:
The CRA is aware that sometimes taxpayers may face unforeseen circumstances, which prevent them from meeting their tax obligations. These circumstances could be personal misfortunes (sickness, death in the family), natural disasters (fire, floods), service disruptions (postal strike), or an error by the CRA (incorrect information).
The CRA administers various legislations with taxpayer relief provisions that give the Minister of National Revenue discretion to:
- cancel or waive penalties and/or interest;
- accept certain late-filed, amended, or revoked elections (income tax only); and
- issue income tax refunds or reduce the amount payable beyond the normal three-year period (individuals and testamentary trusts only).
Thursday, 22 September 2011
Did you know?
- Debt consolidation can reduce your interest expense, allow you to save more money, and possibly retire years sooner. You may be able to replace your credit card debt or other high interest debt with a Line of Credit or Home Equity Loan. A fun read that provides a debt reduction strategy can be found in the book, The Fireman and The Waitress, by Dessa Kaspardlov.
- If you are a retiring business owner, and worked for your corporation prior to 1996, you may be able to pay yourself a tax free retiring allowance. The Canada Revenue Agency allows for additional RRSP contribution room for years worked prior to 1996.
- Your business can pay your medical expenses if you set up a Health Spending Account. What is usually an out of pocket expense, can become a tax deductible expense for your corporation.
- If you have recently launched a Microfit Project with the Ontario Power Authority, you may be eligible for a refund of the HST you paid for the project.
- If you have been treated poorly by the Canada Revenue Agency (CRA), you can file an RC 193 to voice a complaint. The CRA provides this mechanism to allow taxpayers to file complaints about undue delays, poor or misleading information, staff behavior and mistakes that could have resulted from misunderstandings, omissions or oversights. There are also other appeal procedures, if you disagree with a tax assessment.
We provide direct links to government agencies, and financial calculators from our website www.copebarrett.ca
Wednesday, 27 July 2011
Barter transactions may have income tax and HST implications!
Do you trade goods or services which you would normally sell in the course of your businessIf a transaction would have tax implications if money changes hands, it will have the same tax implications if it is a barter transaction. These transactions may result in taxable income or tax-deductible expenses. They may be considered dispositions of capital property, eligible capital property, personal-use property, listed personal property, or inventory, each of which has a different tax treatment.
A barter transaction occurs when two people or entities agree to trade goods or services without any money changing hands. When this occurs between people dealing with each other at arm's length, the value of the goods or services is deemed to be the value that would have been obtained for those goods or services in a regular cash transaction.
When a person provides bartered goods or services which would normally be sold by him in the course of his business or profession, the value of those services must be included in income. If the person is a GST registrant, then GST would have to be remitted on the income. The value of the bartered services is included in income when determining if the person has reached the threshold of income where he must become a GST registrant.
When a person receives bartered goods or services which would normally be purchased in the course of his business or profession, the value of those services can be claimed as costs to the business. If the person is a GST registrant, then an input tax credit could be claimed, if the provider of the goods or services is a GST registrant.
Tuesday, 19 July 2011
We manage your record keeping while you manage your business!
Every year, Cope, Barrett & co, Certified General Accountants provide effective and efficient tax and bookkeeping solutions to small businesses across Hastings and Prince-Edward County - but our commitment doesn't stop there. We also offer a wide range of small business bookkeeping services, all delivered by experienced small business accounting, bookkeeping and tax preparation specialists and certified accountants.
Paperwork often gets in the way of managing and expanding your business. With Cope, Barrett & co, Certified General Accountants, you can leave that paperwork to one of our tax accountants... and focus on what's really important. We'll take care of all your small business bookkeeping, accounting and tax needs, such as:
Affordable
Cope, Barrett & co, Certified General Accountants small business bookkeeping and accounting services are very reasonably priced. Contact the office nearest you for an estimate - Bancroft (613-332-2150), Belleville (613-962-2157) or Picton (613-476-2150).
Reliable
For over 100 years, Canadians have trusted Certified General Accountants for income tax preparation and to complete their financial statements.
Convenient
Cope, Barrett & co, Certified General Accountants offices are conveniently located and offer one-stop shopping for all of your small business bookkeeping, accounting and tax needs.
Available Year-round
Our business offices are open to serve your tax and accounting services needs any time of year.
Drop in to discuss your small business bookkeeping and accounting needs, or income tax preparation requirements.
Paperwork often gets in the way of managing and expanding your business. With Cope, Barrett & co, Certified General Accountants, you can leave that paperwork to one of our tax accountants... and focus on what's really important. We'll take care of all your small business bookkeeping, accounting and tax needs, such as:
- Payroll
- GST remittance
- QuickBooks or Simply data entry and reporting
- Financial statements
- Year-end T4, T3, T5 and T5018 reporting and summary
- Small business tax reporting
- Rental income tax reporting
- Farm income tax reporting
- Personal tax returns
Affordable
Cope, Barrett & co, Certified General Accountants small business bookkeeping and accounting services are very reasonably priced. Contact the office nearest you for an estimate - Bancroft (613-332-2150), Belleville (613-962-2157) or Picton (613-476-2150).
Reliable
For over 100 years, Canadians have trusted Certified General Accountants for income tax preparation and to complete their financial statements.
Convenient
Cope, Barrett & co, Certified General Accountants offices are conveniently located and offer one-stop shopping for all of your small business bookkeeping, accounting and tax needs.
Available Year-round
Our business offices are open to serve your tax and accounting services needs any time of year.
Drop in to discuss your small business bookkeeping and accounting needs, or income tax preparation requirements.
Thursday, 14 July 2011
QuickBooks, HST, payroll and recordkeeping support
Often business owners buy and accounting software program and find they don't know how or where to begin. The software may get used a little, but not to the capacity available. As a business owner it is important to have control of your financial information and situation - to monitor cash flow, determine return on investment, pricing of products and so on.
That is where we can help. We provide training and company setup including opening balances and chart of accounts in your QuickBooks or Simply Accounting software program. We can help with data entry, bank reconciliations, tax compliance reporting such as payroll or HST and keep you on top of your financial reporting.
Often we meet business owners who are in a terrible mess - no bookkeeping has been done, and Canada Revenue is mailing or phoning to demand they file payroll, HST or income tax. We see the end results in late filing penalties, large interest fines etc. It becomes so apparent then that it would have been much less stress and less overall expense to have kept on top of the record keeping from the start.
Call us - let us help get and keep you organized! 613-962-2151
That is where we can help. We provide training and company setup including opening balances and chart of accounts in your QuickBooks or Simply Accounting software program. We can help with data entry, bank reconciliations, tax compliance reporting such as payroll or HST and keep you on top of your financial reporting.
Often we meet business owners who are in a terrible mess - no bookkeeping has been done, and Canada Revenue is mailing or phoning to demand they file payroll, HST or income tax. We see the end results in late filing penalties, large interest fines etc. It becomes so apparent then that it would have been much less stress and less overall expense to have kept on top of the record keeping from the start.
Call us - let us help get and keep you organized! 613-962-2151
Monday, 27 June 2011
Do you want more time to enjoy the 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. Belleville, Picton and Bancroft
Thursday, 23 June 2011
Moving expenses & income tax - what's deductible and when
While interest rates remain low, an increase in those rates and, therefore, in the cost of carrying a mortgage is clearly on the horizon. In addition, changes made by the federal government to mortgage lending rules for Canada Mortgage and Housing Corporation (CMHC) insured mortgages which took effect earlier this year had the effect of making it more difficult for first-time buyers, especially, to get into the real estate market. One of those changes reduced the maximum allowable amortization period for mortgages from 35 years to 30 years, meaning an increase in the required monthly payment, even if interest rates are unchanged. That change, combined with the anticipated increase in mortgage interest rates, made for a busy late winter and early spring real estate season, as first time home buyers took advantage of the opportunity to get into the market in advance of the changes. Even without these changes, spring and summer are, in any year, typically the busiest season for real estate sales and, consequently, the time when most moves take place. For any number of reasons, therefore, a lot of people will be moving this summer.
Whatever the time of year and motivation behind the purchase or sale and purchase, selling one’s home and moving qualifies as one of life’s more stressful experiences. Nonetheless, it’s an experience which most families will go through at least once. In addition to the upheaval of leaving behind a home, a school and a neighbourhood, the financial outlay associated with moving can be considerable. While our tax system can’t do anything to help with the non-financial costs and general stress of moving, it does, in some circumstances, minimize the financial hit by providing a deduction from income for moving expenses incurred.
It’s important to know that not all moves will qualify for such tax relief. The tax rules provide that, where a taxpayer moves to be at least 40 kilometres closer to his or her place of work (for example, a taxpayer who moves from Toronto to take a job in Vancouver or Regina or Ottawa), most moving costs will be deductible from employment or business income earned at the new location. The 40-kilometre distance is measured using the shortest route normally available to the travelling public, which in most cases would mean the distance by road. And, moving to be closer to work doesn’t have to mean moving to a new company: a job transfer to another city while continuing to work for the same employer will qualify, assuming the 40-kilometre criterion is met. A deduction is also available where someone who is unemployed moves to start a new job, again assuming that all other required criteria are met.
The list of expenses which may be deducted is fairly comprehensive, but not all moving related costs are deductible. Under the Canada Revenue Agency’s (CRA) administrative policies, as outlined in their Form T1-M, Moving Expenses Deduction, the following are considered eligible moving expenses:
traveling expenses, including vehicle expenses, meals and accommodation, to move the taxpayer and members of his or her family to their new residence (note that not all members of the household have to travel together or at the same time);
transportation and storage costs (such as packing, hauling, in-transit storage, and insurance) for household effects, including items such as boats and trailers;
costs for up to 15 days for meals and temporary accommodation near either the old or the new residence for the members of the household;
lease cancellation charges (but not rent) on the old residence;
legal fees incurred for the purchase of the new residence, together with any taxes paid for the transfer or registration of title to the new residence (but excluding GST or HST and property taxes);
the cost of selling the old residence, including advertising, notarial, or legal fees, real estate commissions, and any mortgage penalties paid when a mortgage is paid off before maturity; and
the cost of changing an address on legal documents, replacing driving licences and non-commercial vehicle permits (except insurance), and utility hook-ups and disconnections.
It sometimes happens that a move to the new home has to take place before the old residence is sold. In such circumstances, the taxpayer is entitled to deduct up to $5,000 in costs incurred for the maintenance of that residence while it is vacant and efforts are being made to sell it. Specifically, costs including interest, property taxes, insurance premiums, and heat and utilities expenses paid to maintain the old residence while efforts were being made to sell it may be deducted. If any family members are still living at the old residence, or it is being rented, no deduction is available.
It may seem from the foregoing that virtually all moving-related costs will be deductible—however, there are some costs for which the CRA will not permit a deduction to be claimed, as follows:
expenses for work done to make the old residence more saleable;
any loss incurred on the sale of the old residence;
expenses for job-hunting or house-hunting trips to another city (for example, costs to travel to job interviews or meet with real estate agents);
expenses incurred to clean or repair a rental residence to meet the landlord’s standards;
costs to replace such personal-use items as drapery and carpets; and
mail-forwarding costs.
To claim a deduction for any eligible costs incurred, supporting receipts must be obtained. While the receipts do not have to be filed with the return on which the related deduction is claimed, they must be kept in case the CRA wants to review them.
Anyone who has ever moved knows that there are an endless number of details to be dealt with. In some cases, the administrative burden of claiming moving-related expenses can be minimized by choosing to claim a standardized amount for certain types of expenses. Specifically, the CRA allows taxpayers to claim a fixed amount, without the need for detailed receipts, for travel and meal expenses related to a move. Using that standardized, or flat rate method, taxpayers may claim up to $17 per meal, to a maximum of $51 per day, for each person in the household. Those amounts were unchanged from 2009 to 2010, the latest year for which figures are available.
Similarly, the taxpayer can claim a set per-kilometre amount for kilometres driven in connection with the move. The per kilometre amount ranges from 46.0 cents forSaskatchewanto 60.5 cents for theYukon Territory. These rates were in effect for the 2010 taxation year—the CRA will be posting the rates for 2011 on its Web site early in 2012, in time for the tax-filing season. The per-kilometre rates allowed by the CRA for travel during 2010 are actually, in some cases, lower than those allowed for 2009. It is in all cases the province or territory in which the travel begins which determines the applicable rate.
Any moving-related expenses can be deducted from employment or self-employment income (but not investment income or employment insurance benefits) earned at the new location. Where a move takes place late in the year, it is possible, especially where the move is a long distance one, that such expenses will exceed income earned at the new location during the calendar year. In such cases, it’s possible to carry forward the excess expenses, and deduct them from income earned in subsequent years.
Generally, these rules apply to moves made from one location to another withinCanada. While it’s possible to deduct expenses arising from moves fromCanadato another country, from another country toCanada, or between two locations outside ofCanada, the rules governing deductions in such situations are far more restrictive.
The rules governing the deduction of moving expenses are outlined in some detail on the CRA’s T1-M form. That form was updated and reissued by the CRA late in 2010, and the current version of the form can be found on the CRA Web site at http://www.cra-arc.gc.ca/E/pbg/tf/t1-m/t1-m-10e.pdf. Additional information on the tax treatment of moving costs is available on the same Web site at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/219/menu-eng.html.
Any questions not answered by the form or on the Web site can be directed to the CRA’s individual enquiries line at 1-800-959-8281.
--------------------------------------------------------------------------------
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.
Whatever the time of year and motivation behind the purchase or sale and purchase, selling one’s home and moving qualifies as one of life’s more stressful experiences. Nonetheless, it’s an experience which most families will go through at least once. In addition to the upheaval of leaving behind a home, a school and a neighbourhood, the financial outlay associated with moving can be considerable. While our tax system can’t do anything to help with the non-financial costs and general stress of moving, it does, in some circumstances, minimize the financial hit by providing a deduction from income for moving expenses incurred.
It’s important to know that not all moves will qualify for such tax relief. The tax rules provide that, where a taxpayer moves to be at least 40 kilometres closer to his or her place of work (for example, a taxpayer who moves from Toronto to take a job in Vancouver or Regina or Ottawa), most moving costs will be deductible from employment or business income earned at the new location. The 40-kilometre distance is measured using the shortest route normally available to the travelling public, which in most cases would mean the distance by road. And, moving to be closer to work doesn’t have to mean moving to a new company: a job transfer to another city while continuing to work for the same employer will qualify, assuming the 40-kilometre criterion is met. A deduction is also available where someone who is unemployed moves to start a new job, again assuming that all other required criteria are met.
The list of expenses which may be deducted is fairly comprehensive, but not all moving related costs are deductible. Under the Canada Revenue Agency’s (CRA) administrative policies, as outlined in their Form T1-M, Moving Expenses Deduction, the following are considered eligible moving expenses:
traveling expenses, including vehicle expenses, meals and accommodation, to move the taxpayer and members of his or her family to their new residence (note that not all members of the household have to travel together or at the same time);
transportation and storage costs (such as packing, hauling, in-transit storage, and insurance) for household effects, including items such as boats and trailers;
costs for up to 15 days for meals and temporary accommodation near either the old or the new residence for the members of the household;
lease cancellation charges (but not rent) on the old residence;
legal fees incurred for the purchase of the new residence, together with any taxes paid for the transfer or registration of title to the new residence (but excluding GST or HST and property taxes);
the cost of selling the old residence, including advertising, notarial, or legal fees, real estate commissions, and any mortgage penalties paid when a mortgage is paid off before maturity; and
the cost of changing an address on legal documents, replacing driving licences and non-commercial vehicle permits (except insurance), and utility hook-ups and disconnections.
It sometimes happens that a move to the new home has to take place before the old residence is sold. In such circumstances, the taxpayer is entitled to deduct up to $5,000 in costs incurred for the maintenance of that residence while it is vacant and efforts are being made to sell it. Specifically, costs including interest, property taxes, insurance premiums, and heat and utilities expenses paid to maintain the old residence while efforts were being made to sell it may be deducted. If any family members are still living at the old residence, or it is being rented, no deduction is available.
It may seem from the foregoing that virtually all moving-related costs will be deductible—however, there are some costs for which the CRA will not permit a deduction to be claimed, as follows:
expenses for work done to make the old residence more saleable;
any loss incurred on the sale of the old residence;
expenses for job-hunting or house-hunting trips to another city (for example, costs to travel to job interviews or meet with real estate agents);
expenses incurred to clean or repair a rental residence to meet the landlord’s standards;
costs to replace such personal-use items as drapery and carpets; and
mail-forwarding costs.
To claim a deduction for any eligible costs incurred, supporting receipts must be obtained. While the receipts do not have to be filed with the return on which the related deduction is claimed, they must be kept in case the CRA wants to review them.
Anyone who has ever moved knows that there are an endless number of details to be dealt with. In some cases, the administrative burden of claiming moving-related expenses can be minimized by choosing to claim a standardized amount for certain types of expenses. Specifically, the CRA allows taxpayers to claim a fixed amount, without the need for detailed receipts, for travel and meal expenses related to a move. Using that standardized, or flat rate method, taxpayers may claim up to $17 per meal, to a maximum of $51 per day, for each person in the household. Those amounts were unchanged from 2009 to 2010, the latest year for which figures are available.
Similarly, the taxpayer can claim a set per-kilometre amount for kilometres driven in connection with the move. The per kilometre amount ranges from 46.0 cents forSaskatchewanto 60.5 cents for theYukon Territory. These rates were in effect for the 2010 taxation year—the CRA will be posting the rates for 2011 on its Web site early in 2012, in time for the tax-filing season. The per-kilometre rates allowed by the CRA for travel during 2010 are actually, in some cases, lower than those allowed for 2009. It is in all cases the province or territory in which the travel begins which determines the applicable rate.
Any moving-related expenses can be deducted from employment or self-employment income (but not investment income or employment insurance benefits) earned at the new location. Where a move takes place late in the year, it is possible, especially where the move is a long distance one, that such expenses will exceed income earned at the new location during the calendar year. In such cases, it’s possible to carry forward the excess expenses, and deduct them from income earned in subsequent years.
Generally, these rules apply to moves made from one location to another withinCanada. While it’s possible to deduct expenses arising from moves fromCanadato another country, from another country toCanada, or between two locations outside ofCanada, the rules governing deductions in such situations are far more restrictive.
The rules governing the deduction of moving expenses are outlined in some detail on the CRA’s T1-M form. That form was updated and reissued by the CRA late in 2010, and the current version of the form can be found on the CRA Web site at http://www.cra-arc.gc.ca/E/pbg/tf/t1-m/t1-m-10e.pdf. Additional information on the tax treatment of moving costs is available on the same Web site at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/219/menu-eng.html.
Any questions not answered by the form or on the Web site can be directed to the CRA’s individual enquiries line at 1-800-959-8281.
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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.
Tuesday, 21 June 2011
June 2011 Newsletter
Are you too busy to get organized?
At Cope, Barrett & co. Certified General Accountants we help business owners get organized and stay organized.
Our professional firm offers business solutions, financial statements, book keeping and tax planning, so that you can make sound decisions, and be prepared for the future. Let us help you get there.
Call us today to book your consultation. We are your one stop business solution.
- Get your Small Business or Corporate tax return in- when and how?
The filing deadline for the self-employed and their spouses is by June 15, 2011 and May 2, 2011 is when the interest on any amount owing will begin to build. If you need help to organize your business information or general information about what you can claim as business expense feel free to contact us! The deadline for incorporated business is 6 months after the year end date, but interest on amounts owing starts 3 months after year end.
Budget 2011- Conservative Budget Proposals include:
• Children’s Arts Tax Credit – The budget proposes a new non-refundable $500 tax credit, beginning in 2011, for enrolling a child under age 16 in a supervised program associated with children’s artistic, cultural, recreational or developmental activities. Either parent can claim the credit for each child. The credit would result in a maximum federal tax savings of $75 per child. An enhanced credit may be claimed for children under age 18 who are eligible for the Disability Tax Credit.
• Tuition Tax Credit for Examination Fees – The budget proposes to amend the tuition tax credit to recognize eligible examination and ancillary fees paid in 2011 and subsequent years to obtain an eligible professional status.
Cope, Barrett & Co is now on Twitter (@copebarrettco) and Facebook. We provide interesting business articles and updates on financial advice. Follow us today!
Thursday, 31 March 2011
Get your return in: When and How?
By the end of February or March, tax payers will usually have received all of the information needed to prepare their 2010 income tax returns. Issuers of T4s (for employment income) and T5s (for investment income, including interest and dividends) must send such information slips to employees, shareholders, and account holders by the end of February. Self employed tax payers, who must calculate their own business income for the year, will certainly be in a position to do so by the end of February. Finally, retiress who receive pension income, either from a former employee or from the Canada Pension Plan or Old Age Security program, will have received T4A information skips fro the pension plan administrator or the government of Canada documenting that income for 2010.
The filing deadline for individual taxpayers (other than the self employed and their spouses, who must file by June 15, 2011) is April 30, 2011. This year, however, taxpayers have a little extra breathing room. Since the April 30, 2011 filing deadline falls on a Saturday, a return will be considered by the Canada Revenue Agency (CRA) to be filed on time if it is received, or postmarked, on the next business day. For 2011, that day would be Monday, May 2nd. A similar extension applies to payments owed to the CRA.
The filing deadline for individual taxpayers (other than the self employed and their spouses, who must file by June 15, 2011) is April 30, 2011. This year, however, taxpayers have a little extra breathing room. Since the April 30, 2011 filing deadline falls on a Saturday, a return will be considered by the Canada Revenue Agency (CRA) to be filed on time if it is received, or postmarked, on the next business day. For 2011, that day would be Monday, May 2nd. A similar extension applies to payments owed to the CRA.
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