Proposed changes to tax system could destroy small business!

 

The Federal Minister of Finance has proposed some significant changes to the Income Tax Act, that could have a dramatic and catastrophic affect on Small Business.

There are 3 proposed changes that could effectively kill the small business as we know it.

1. Income “Sprinkling” - Many small business owners employ and pay family members for working in the business; this has been done since the dawn of time. Although this splitting of income has always been on the radar of CRA, the government now proposes to take it a step further.

IF the changes are approved, CRA will be able to apply a ‘reasonableness test’ to determine if in fact, the family member is actually an employee or the business owner is merely attempting to save on taxes by incurring the payroll costs within the business.

CRA Debt Forgiveness

It's a MYTH!

 

There is a common misconception, when it comes to the Canada Revenue Agency (CRA), that you can settle a debt.

This month, we are playing the role of myth-buster with regard to this, and explaining why CRA debt forgiveness just does not exist.

“The CRA will never make a deal to reduce or eliminate your debt, no matter how it occurred.”

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If You Owe The CRA Money

WATCH OUT!

 

Thousands of small business owners across Canada are faced with the same dilemma every day. You have enough money to pay your rent, your employees, or you can pay CRA the GST you collected on their behalf. So, what do you do?

Obviously, you pay your rent or your employees. But now, you owe CRA, and this process tends to repeat itself. 6 months later, you owe the CRA $35,000 and they start calling.

What do you do? Ignore them, right? WRONG!

The CRA has been granted very powerful tools by the Canadian Government to collect taxes on their behalf, and some of their methods can definitely seem to be extreme.

They will start with some informal letters, you will be advised of the debt owing and asked to pay the balance in full. These letters are computer generated and look like standard form letters, because that is what they are.

Section 160 Assessments, What Are They and How Can You Fight Back?

 

As a small business owner, you have likely heard “put it in your spouse’s name, and you can protect it from CRA”. Well, as usual, advice from your neighbour is not always accurate.

Under Section 160 of the Income Tax Act, the Minister (CRA) can attach liability to another individual that has received a transfer of property when the person transferring the property has an outstanding tax liability.

Note: Section 160 of the Income Tax Act is virtually identical to Section 323 of the Excise Tax Act so the same rules apply to GST/HST liabilities.

So, to make this a little clearer, Jane and Bob are married. Jane owes the CRA $50,000 in taxes and the CRA is getting aggressive. To ‘save the house’, Jane transfers her interest in the home to Bob. Bob now exclusively owns the home.

Using the provisions of Section 160, CRA can assess Bob for the taxes that Jane owes because the transfer was merely a means of avoiding the tax liability.

 

Ledgers in Partnership with the Law Firm HART Legal!

 

Ledgers Accounting is always looking for new ways to provide a one stop shop for our customers. We have helped tens of thousands of clients with their tax issues, but many of our clients also have business law issues.

Often, it is as simple as incorporating a company or having employment agreements created. However, from time to time businesses must either initiate a lawsuit or defend themselves against a claim.

In order for Ledgers to better serve our clients, we have teamed up with an innovative law firm in Canada called HART Legal. They currently have 18 law firms. The law firm is able to provide our clients with legal advice since accountants are not allowed to.

“We are extremely excited to be working with a large accounting firm such as Ledgers. The dedication to their clients made Ledgers a good cultural fit for us.” said Alistair Vigier of HART Legal.

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