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Home Office Expenses, Can You Claim Them? and What Can You Claim?

NOTE: This article concerns home office expenses for a business, not an employee working from home.

 

Owning a small business can have several perks, one of them being the ability to claim the cost of operating from a home office. In effect, some of your living expenses can become a deductible cost for your business.

There are of course a couple of conditions. To be able to claim home office expenses, you must meet ONE of the two following conditions:

1. It is your principle place of business;
or
2. You use the space only to earn business income, and you use it on a regular and ongoing basis to meet clients, customers or patients.

Point #2 is a very sticky one; the space must be a distinct and separate area of your home and cannot be used for any other purpose. In other words, using the kitchen table twice a week for processing paperwork does not entitle you to claim home office expenses.

Continue reading “Home Office Expenses, Can You Claim Them? and What Can You Claim?”

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Is Your Business Ready for Year-End?

The end of the year does not have to bring woes to your business, in fact, it should represent a time to reflect on the successes (and failures) of the previous year and a time to look forward to the upcoming year, your business plans and goals.

When thinking about year-end, the obvious comes to mind; T4’s, taxes , reconciliation’s and financial statements.

You should however consider the less obvious; that is, your business plan.

When looking at your business plan, ask yourself a couple of very specific questions:

  1. Did we reach our goals for the current year?
  2. Why or Why Not?
  3. What are our goals for the coming year?
  4. How will we achieve these goals?

These are very basic questions, but asking them of yourself and your staff can provide insight and build a team atmosphere around your business objectives.

Continue reading “Is Your Business Ready for Year-End?”

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CRA and Lifestyle Audits, Could You Survive One?

Back in the November 2015 Newsletter, we briefly mentioned the CRA ‘Lifestyle’ Audit.

Recently, the Globe and Mail wrote that the CRA is introducing these Lifestyle Audits as part of the probe into the Vancouver Real Estate Market, suggesting that people are living far beyond their means so they must have undisclosed (or illegal) income.

So this month, we decided to further detail this type of Audit and we pose the question to you:

“Could You Survive a Lifestyle Audit if CRA Came Calling?

Continue reading “CRA and Lifestyle Audits, Could You Survive One?”

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Do You Have CRA Tax Problems? We have a Solution!

Far too many small business owners have been there – GST is due or payroll taxes are to be remitted, but the employees need to be paid and the rent is due.

What do you do?

Unfortunately, most business owners, when faced with this predicament do the obvious – pay the rent and employees, CRA can wait.

When this cycle manages to repeat a few times, now you are in a big pickle.

The interest and penalties that CRA charges can seem to be insurmountable, and if your business is already struggling, how are you going to find thousands of extra dollars to meet your obligations to CRA?

If you have found yourself in this situation, you know how aggressive and demanding CRA can be.

The primary reason CRA gets so aggressive with GST and Payroll taxes is that these monies are ‘Trust Funds’ – they belong to CRA the moment that they are collected by the business.

How far will CRA go to collect the taxes?  Well, they are very powerful and have strong collection tools such as:

  • The ability to seize your bank accounts
  • Seizure of Assets
  • Garnishment of Accounts Receivable
  • Lien on Personal Assets*
  • Seizure of Personal Assets*

In respect to the last two, this can happen when they exercise their rights and claim Director’s liability exists – director’s liability only arises where the director has not exercised due diligence and the amounts are otherwise unrecoverable from the corporation.

What do you do if you find yourself in this predicament?  Don’t panic, call us!

We are pleased to announce our new Strategic Partners, Tax Solutions Canada. (TSC)

A member of the Farber Financial Group, the TSC team is comprised of a wide range of professionals with diverse expertise in tax, negotiating with CRA, administering CRA applications and finance, and they routinely resolve serious and complicated tax problems for their clients.

Who can they help?

Ledgers clients with the following types of tax issues:

  • Large tax debt that they cannot pay
  • Undeclared Income
  • Overdeclared Expenses
  • Charity Scams (Tax Shelters)
  • CRA Audits & Investigations
  • Requirement to Pay Orders
  • Past Due Tax Returns
  • Arbitrary / Notional Assessments
  • Significant Penalties & Interest
  • Director’s Liability
  • CRA Threats & Demands
  • Wage Garnishments / Frozen Bank Accounts, Property liens and other enforcement actions

Once you have enlisted the services of TSC, they will take over all communications with CRA, negotiate Payment Plans, Remove or reduce enforcement actions, and get you current with your tax obligations.

If you are experiencing tax problems, take the first step to resolution – Call Your Local Ledgers office and request a Free Consultation with Tax Solutions Canada.

or email us, corptax@ledgers.com

 

 

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CRA’s Annual Office Audit Letter Campaign

We have recently been informed that it is time for the Canada Revenue Agency’s annual fishing trip! CRA will soon be conducting its seventh annual Office Audit Letter Campaign.

Starting shortly, the CRA will send approximately 30,000 “intent-to-audit” letters to selected groups of individual taxpayers and business owners who claim consecutive business or rental losses or who are employees claiming employment expenses on line 229 of their tax return.  (Form T777)

The objective for CRA is to encourage recipients of the letter to take a second look at their tax returns and to determine if they have in fact made an error or oversight.

If errors or oversights are identified, CRA would then like the taxpayer to make the necessary corrections through ‘My Account’ on the CRA Website or by submitting form T1-ADJ for the relevant year(s).

CRA says the objective of these campaigns is to help small business owners and individual taxpayers to better understand their obligations and responsibilities when it comes to the Income Tax Act.

CRA also goes on to state that it helps them to better utilize their resources (auditors) by having the taxpayer effectively audit themselves.

If this seems a little deceptive or misleading to you – you are right!

IF you receive one of these letters, DO NOT RESPOND TO CRA without first consulting a Tax Professional or a Tax Lawyer!

Anything you disclose to CRA in this manner can be held against you and used to further their objectives (collect more tax) in the future

Remember your rights as a taxpayer:

The 2007 Taxpayer Bill of Rights includes 15 fundamentals that are supposed to be guaranteed to each taxpayer:

  •  to receive entitlements and to pay no more and no less than what is required by law
  • to service in both official languages
  • to privacy and confidentiality
  • to a formal review and subsequent appeal
  • to be treated professionally, courteously and fairly
  • to complete, accurate, clear and timely information
  • as an individual, not to pay income tax amounts in dispute before you have had an impartial review
  • to have the law applied consistently
  • to lodge a service complaint and to be provided with an explanation of the CRA’s findings
  • to have the costs of compliance taken into account when administering tax legislation
  • to expect the CRA to be accountable
  • to relief from penalties and interest under tax legislation because of extraordinary circumstances
  • to expect the CRA to publish its service standards and report annually
  • to expect the CRA to warn you about questionable tax schemes in a timely manner
  • to be represented by a person of your choice

This campaign is a scare tactic, nothing more.

It does however, let you know that CRA is watching and they are targeting selected industries and individuals that are generally less than fully compliant.

Questions? Comments?