Your December To Do List!

Written by Gwyneth James MBA CPA, CGA  Senior Partner

Okay, I know…accounting is the farthest thing from your mind right now, but hear me out. There are just a few items that you need to take care of while you sip your glass of egg nog.

  • If you have a business, don’t forget to take an odometer reading on December 31st.
  • If your business is incorporated, this month is the time to pay yourself a little extra – either as a bonus or as a dividend – to ensure it is added to your T4 or T5 for 2018.
  • As an individual, December is donation time if you want to shore up that tax credit for 2018.
  • Another item that is based on the calendar year is your TFSA contribution, but that rolls over if it’s unused so don’t worry. And you have until March 1st to contribute to your RRSP.
  • If you have non-registered investments that you’d like to realize a gain or loss on, make sure you sell that stock or mutual fund before December 27th.

That’s it! See, not that hard.

Happy Holidays!

Giving Employees Holiday Bonuses

Written by:  Gwyneth James MBA, CPA, CGA

Ho Ho Holiday Bonuses! Don’t give out bonuses to your employees before reading this!

At this time of year, you may be wondering about the rules for giving your employees bonuses and gifts for Christmas or year-end.  The CRA has specific rules about giving employees gifts and bonuses that determine if they are taxable benefits to the employees.  A taxable benefit means that the employer must include the amount in the employee’s income and may have to deduct income tax, CPP or EI on the employee’s paystub.  The type of gift you are giving will determine if it is a taxable benefit to your employee or not and which deductions you will need to withhold.

This is the breakdown of the different types of gifts you can give your employees:

  • Cash Bonuses – If you are giving your employees a cash bonus on their pay cheque this is a taxable benefit to the employee.  You will need to deduct income tax, CPP and EI premiums on their paystub.
  • Gift Cards & Gift Certificates – If you want to give your employee a gift card or a gift certificate instead of cash the CRA still considers this a taxable benefit to the employee. You will need to deduct income tax and CPP on their paystub, but not EI premiums.
  • Non-Cash Gifts – Non-cash gifts can be given to an employee for a special occasion with a total fair market value (not the employer’s cost) of up to $500 annually, including HST, and it is not a taxable benefit to the employee. If the value of the gift or gifts is over $500, any amounts over $500 are a taxable benefit to the employee. An example of a non-cash gift would be tickets to an event for a specific date and time. Items of a trivial value like t-shirts, mugs, coffee or plaques do not have to be included in this calculation.

All of these gifts are deductible as expenses in your business’ bookkeeping.

Have a wonderful holiday season and a prosperous new year!

Love Local Expo

Once again this year, we’ll be participating, as an exhibitor a the Peterborough Chamber of Commerce Love Local Expo.  This year, the expo will be on Wednesday October 3rd from 12pm to 7pm at the Envinrude Centre.

Hope to see you there!

Joining Forces with a National Accounting Organization!

Media Release – September 5, 2018

Business partners Suzanne Cody and Gwyneth James are pleased to announce that they have joined Porter Hétu International, a Canadian-based organization of accounting firms. Cody & James CPAs, a local firm that provides full-service accounting for small to medium-sized businesses, will now be able to provide assurance engagements (reviews and audits) through their new association with Porter Hétu International.

Suzanne and Gwyneth are very excited about the new direction of their firm, although they will remain true to their client base by continuing to offer a full suite of accounting services — everything from financial statements, corporate and personal tax returns, bookkeeping, and payroll — in their personable, approachable manner and in a language the clients can easily understand.

Porter Hétu International (PHI, porterhetu.com) was founded in 1988 and currently has 50 member CPAs. Its Mission is to provide a platform that facilitates and fosters the growth of members’ personal and professional lives. With nation-wide and international association, PHI is an alliance that enables local, in-person relationships that are backed by the strength and depth usually only available in large firms.

Cody & James CPAs has roots in the community stretching back 25 years. Gwyneth purchased the firm in 2009 and Suzanne joined in 2013. Its Mission is to enhance economic development and success throughout the Kawarthas by providing entrepreneurs, professionals, employees, retirees the information and advice they need to make great financial decisions. With a staff of 11, Cody & James CPAs is able to provide accounting services across a broad range of industries and to ensure all business clients have both an account manager and a backup contact.

Have You Set Up Your Shares?

Written by:  Suzanne Cody CPA, CGA  Senior Partner

Have you set up your shares? One of the most important things you need to do when creating a new corporation, in addition to preparing Articles of Incorporation, is to set up share classes.

Do you really own your corporation? Unless it is restricted by its articles, a corporation has the same role in carrying on a business as a person. A corporation is a separate legal entity from anyone else, even yourself. Ownership of a corporation is established through its issued shares, which entitle one or more persons to the rights needed to run the company.

Issuing and paying for and these shares is important but quite often initially overlooked. The main repercussion of not having shares issued and on the books is that the corporation could be deemed not to exist. This could have serious tax consequences to the individual(s) involved with the formation of the corporation.

It may seem a bit daunting but with some sound legal advice, setting up shares for a new corporation doesn’t need to be complicated. Legally, at a minimum, a small, non-reporting (not listed on the stock market) corporation has to have a single share class issued. This class is referred to as Common Voting Shares. We’ll call them Class ‘A’ shares. These shares give their owners the rights to receive dividends, vote at shareholders meetings, and to receive any property left in the corporation when it is dissolved. It is quite common to have a single shareholder, giving that person complete control over the corporation.

Common Shares can be issued as a single class or with multiple classes. But, if you only need one class of shares to set up your corporation, why would you want to issue more?

There may be additional people that you want to have owing shares in your corporation but you may not want them to have the right to vote. This is the perfect scenario to set up Class ‘B’ shares. Theses shares would be perfect for encouraging your employees to become more vested in your corporation or to provide your spouse or children with some ownership without being able to exercise control. These types of shares are referred to as Non-Voting Common Shares. They provide the ability to pay dividends and have a place in line should your corporation be dissolved. There are tax guidelines surrounding the payment of dividends to family members (referred to as ‘income sprinkling’). Before paying out dividends it would be wise to consult your accountant.

Do you need to raise capital? That’s what Preferred Shares can be used for. Setting up Class ‘C’ Preferred shares provides the vehicle for an investor to contribute funds to your corporation via a share purchase. They can have rights attached to them to permit dividends to be paid at a set amount. They are structured to offer their shareholders an advantage over shareholders that hold Common Shares These shareholders are first in line after any creditors to be reimbursed if the corporation is dissolved. These shares, like Common shares, can be either voting or non-voting.

Finally, to provide you with future flexibility, it would be a good idea to keep some of your shares from each class unissued. These shares would remain in your Treasury and make it easier to permit new shareholders to join the corporation later on. For example, if there are two shareholders and only two shares issued, you will not have any to sell to anyone else.

 

Peterborough Chamber of Commerce Business Excellence Awards

We are so very honoured and excited to announce that we have been nominated as a finalist for the Peterborough Chamber of Commerce Business Excellence Awards in the category of Professional Services.  We are very proud to be part of and contribute to the vibrant and supportive business community in our region.  Being recognized as a leader in our business community is humbling but also a testament to our commitment to supporting local businesses and helping them succeed.

 

Home Buyer’s Plan and Lifelong Learning Plan

Written by:  Gwyneth James MBA CPA, CGA  Senior Partner

You’ve been moving around and renting for the past five years or more, but now want to buy a home.  Unfortunately, the only savings you have are in RRSPs.  Don’t cash them in!  The Home Buyer’s Plan (HBP) allows you to “borrow” up to $25,000 of your own savings.  Fill out Area 1 of Form T1036 and take it to your financial advisor.

OR you have decided to return to school full-time.  The Lifelong Learning Plan (LLP) allows you to “borrow” from your RRSPs up to $10,000 a year to a maximum of $20,000.  Fill out Area 1 of Form RC96 and take it to your financial advisor.

These withdrawals will not be taxable and will not have tax withheld, but they must be repaid by making an RRSP contribution and flagging it as an HBP or LLP repayment on Schedule 7 of your tax return.

  1. For the HBP, payments start the 2nd year after you withdrew under the plan.  You have 15 years to pay it all back.
  2. For the LLP, payments starts the year after you cease being a full-time student (to a maximum of four years).  You have 10 years to pay it back.

Any year you miss all or part of the repayment, the balance of the amount that you were supposed to pay is added to your taxable income as if you withdrew from your RRSP.  In some cases, for example a year of very low income, this is an effective tax saving strategy.

There are some restrictions that are beyond the scope of this article related to, for example, RRSP contributions in the 3 months before you withdraw under either plan, the definition of a “first-time homebuyer”, and the type of residence or post-secondary education that qualifies.  Be sure to read up on these or consult an expert.

3 Things You Need To Do When Starting Up A Corporation

Written by:  Suzanne Cody CPA, CGA

As busy as you are when you are just getting things going, it is important to be mindful of Tax issues. There is a great deal of juggling going on with so many puzzle pieces to put together when setting up a newly formed corporation. If you want to avoid starting out on the wrong foot, handling basic tax matters should be in your crosshairs.

You may have started your business to earn a little extra income in addition to your day job like many others have done and now you have a full-time venture on your hands. You have made the decision to incorporate and now need to transfer your existing business to it. You should consider filing an election with the CRA to roll the assets and liabilities into the corporation to avoid unwanted personal tax liabilities. This will require you knowing the value of your current operations.

Get a new business number from the CRA. Upon incorporation you will need to request a business number for the corporation. You will also need to register for a GST account assuming your sales are over $30,000. Depending on whether you plan to have employees and how you plan to compensate yourself, you may also need to register for a payroll account.

You must choose your year-end date within the first twelve months of incorporating. This date does not need to coincide with the anniversary of your incorporation date not with the end of the calendar year. The ideal year-end should be based on your business cycles. For instance, if you are a retail store, you would want to choose a date occurring just after the end of your busy season. This would mean that there would be less inventory to be counted, not as many transactions in progress, and more time for administration work required to close your books.

If you would like further information, please call the office at 705-876-6011 or I can be contacted directly at

1-888-511-2791
info@codyandjames.ca