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!

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.

 

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

The Mystery of TD1 Forms Solved!

Written by:  Gwyneth James MBA CPA, CGA  Senior Partner

It’s your first day on the job and you’ve been handed a pile of paperwork to complete and sign plus the employee policy manual to read and a Health & Safety video to watch. In the midst of the chaos, you probably don’t understand – or care – what the significance of the TD1 forms are. But they are important and can cause big problems if they aren’t completed properly.

There’s even a penalty levied by CRA on employees who do not provide their employer with a completed TD1 form within seven days – $25 per day, minimum $100, maximum $2,500!

One of the purposes of the TD1 form is to inform the payroll department about the personal tax credits you usually claim on your tax return. If you are able to claim credits beyond the basic personal amount (examples are Family Caregiver Amount, eligible dependant, or disability tax credit), this form will allow your employer to deduct less tax at source. You will have more money in your hands throughout the year instead of having to wait for a refund the following spring.

Another purpose of the TD1 form is to instruct your employer to deduct additional tax each pay. This is useful if you have rental or investment income or are running a small business on the side. It will reduce the amount you have to pay in the spring when all your sources of income are added together, possibly pushing you into a higher tax bracket.

If you are working more than one job, be aware you can only claim the personal tax credits on one form. For the other employers, you will sign the TD1 form with a zero for the tax credits so every dollar you earn has tax withheld.

TD1 forms are in effect with your employer until you provide new ones, so be sure to complete an updated set if your tax situation changes.

Should You Or Shouldn’t You? Equipment Financing Options

Written by:  Suzanne Cody CPA, CGA  Senior Partner

When you need equipment you don’t necessarily have to buy it, you have options. You could lease it instead. Leasing is often a good alternative to applying for a loan. Equipment financing is designed specifically for the purchase of business equipment. There are three main options for financing your acquisition:

  • Purchase Financing
  • Operating Lease
  • Capital Lease

Once you have made the decision to lease, there are leasing options to consider. A question often asked by people is how will financing options affect them. Depending on which option you choose, there can be a great impact to your bottom line. It will affect both your financial statements and your tax return. There are a number of considerations that should affect this decision such as:

  • What financing options are available
  • Which option best suits your cash flow situation
  • Which option best suits your tax situation
  • Which option will be of the lowest overall cost after tax and discount rates are considered
  • What your lending institution’s perception of the effects to your financial statements will be

You might even be able to turn your old equipment into cash by entering into a lease back arrangement.  Remember you should consider the overall needs of your business. Making short-term purchases without long-term planning can be costly and not provide you with the desired or best results.

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

Advocacy & Bill 148

Written by:  Gwyneth James MBA CPA, CGA  Senior Partner

The Peterborough Chamber of Commerce is a non-profit, membership-driven association that advocates on behalf of the Peterborough business community. Members of Chambers across Ontario, including yours truly, loudly and firmly stated their displeasure with one aspect of their government’s Bill 148 which introduced several updates to the Employment Standards Act.

That aspect was the public holiday pay formula – the method used by employers to compensate employees for time off (or worked) on statutory holidays. The new method looked only at the employee’s prior pay period and paid an average of the amount of that paycheque divided by the numbers of days worked in that period. That presented a huge issue for employers of part-time and casual employees because that individual now could receive as much as a full day’s pay for the holiday if they only worked one day in that prior pay period. Payroll costs for some businesses were skyrocketing and that had not been the government’s intention.

Several meetings, conference calls, letters and emails later, the Minister of Labour determined that this part of Bill 148 needed further review. It was announced that the method used to calculate statutory (or public) holiday pay would be rolled back to the old method for the period July 1 to December 31, 2018.

This means that the Victoria Day holiday was calculated using the new method, but Canada Day and subsequent statutory holidays will use the pre-2018 method of an average of pay over the previous four work weeks divided by 20.

Advocacy does work and it is ongoing by business organizations like the Chamber. Whether you add your voice through membership or not, submissions to the Ministry of Labour are encouraged to ensure that when the review period is completed, the method used to pay employees for statutory holidays is fair to all employees and employers.

For more information, please refer to this bulletin posted by the Ministry of Labour:  Click here 

Business Owners Register Now!

In partnership with the Chartered Professional Accountants of Canada’s (CPA Canada) financial literacy program, we are very pleased to be presenting a special clinic to help improve the financial literacy of the Peterborough business community.  We will be hosting a 60-minute session titled Understanding Financial Statements.   

This is a basic session explaining the terms and concepts of financial statements. By taking this session, participants will be able to assess how their business is doing, why a balance sheet is needed, and learn more about their cash flow.

This program is free and open to the public.

Space is limited and registration is required. Please register by Friday January 12, 2018 by email, or by phone 705-876-6011.

Session Details: Understanding Financial Statements

Presented By:  Sheila Thompson, CPA

Where: Canterbury Gardens, 1414 Sherbrooke Street, Peterborough (click here for map)

When: Tuesday January 16, 2018 from 4pm to 5:30pm

For more information: Please contact our office 
info@codyandjames.ca
705-876-6011

We look forward to seeing you there!

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