(Originally posted on August 8, 2016)

 

CRA and Lifestyle Audits, Could You Survive One?

 

Back in the November 2015 Article, 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?

(Originally posted on July 7, 2016)

 

Ledgers is Opening a New Location in Edmonton, AB

 

Ledgers Canada is pleased to announce the awarding of a new franchise in Edmonton. Our newest Network Member Oksana Stefanov is the proud owner.

Oksana Stefanov will be up and running by the end of July, please visit their website at http://edmontonw.ledgers.com for full contact information.

(Originally posted on June 6, 2016)

 

The Most Valuable Asset Your Business has – Your Accountant!

 

Whether your business is just starting out or you have been operating for 20 years, your accountant is one of the most important members of your team.

A good accountant can assist you in making business decisions, developing business plans and tax planning. They can work with you to obtain financing, control labour costs, monitor your gross margin and protect you from government related (tax) issues; all improving your bottom line.

Choosing the right accountant can, however, be a difficult task as anyone can use the term ‘accountant’.

CRA has many times rendered rulings against business owners for having ‘inexperienced’ and ‘unqualified’ accountants and bookkeepers. In fact, one recent case saw a Tax Court of Canada Justice State:

“Mr. A. as the business owner, did not exercise diligence in hiring his spouse to perform the accounting and bookkeeping tasks of the business, therefore, we find Mr. A. liable for the taxes, interest, and penalties as assessed”

This may be an extreme case, but the point is:

The business owner is almost always liable and accountable for the financial affairs of the business.

With so many choices, how do you go about choosing an accounting professional that best meets the needs for your business?

(Originally posted on May 6, 2016)

 

Salary vs. Dividends, What is Best for You?

 

Before we can explore the benefits of receiving Salary or Dividends, it is important to first understand what exactly dividends are;

Generally speaking, Dividends are amounts paid to the Shareholders (owners) of a Corporation from the Retained Earnings of that Corporation.

Retained Earnings are simply the accumulated Profits a Corporation has earned over a period of time; therefore, a Corporation can only pay Dividends to the Shareholders if there are Retained Earnings (Profits less Income Taxes).

You may have heard that Dividends you receive are ‘tax-free’, but such is not the case. Dividends for the most part receive specialized treatment by CRA because the Corporation has already paid tax on the Profits it has earned and the Dividends are then being paid from After-Tax dollars. And, depending on your personal tax situation, tax bracket and other factors, a significant amount of dividends could be received before you notice an increase in your personal tax burden, making them seem to be ‘tax-free’.

When you receive Dividends, you also receive an amount called a ‘Dividend Tax Credit’ on your information slip (T3 or T5). This Credit is to recognize that the Corporation has already paid some tax on these amounts.

To make things a little more confusing though, there are 2 types of Dividends you could receive, “Eligible” and “In-Eligible”; simply put, Eligible Dividends receive a higher tax credit for recipients because the Corporation paying the Dividends has paid income tax on these amounts at the highest tax rate already. In-Eligible Dividends therefore, receive a lower tax credit.

Most small business owners will only ever receive the ‘in-eligible’ type of dividends.

So, if Dividends could be relatively tax-free, why would you want to receive a salary instead of dividends?

(Originally posted on April 4, 2016)

 

The Firm of the Future

 

Firstly, let us ask you a question “Are you a ‘typical’ small business owner?"

In our daily interactions with small business owners, we see a great deal of common themes, the most being on how small business owners approach the accounting and tax reporting requirements of running their business.

Does the following represent your current accounting systems?

  • You have a ‘bookkeeper’, sometimes your spouse or a friend of the family that helps you with the day-to-day transactions.
  • You have a payroll service provider such as ADP or Ceridian to assist you with paying your employees and ensuring CRA gets their payroll taxes.
  • At the end of the year, all of your records and your accounting system backup (if you are using software) go into a big box and it is all dropped off at your ‘Accountants’ office
  • Then, after waiting patiently, you get your financial statements and tax returns several months later. (and a big bill!)


So, let us ask you another question, “Do you take your car to 4 different mechanics to get your tires changed?”