Tax Planning Strategies for Business Owners

Small family restaurant owners discussing finance calculating bills and expenses of new small business

When running a small business, it is important to plan ahead and understand your tax obligations.

Understanding small business tax planning strategies can help minimize your tax burden.

But numbers can sometimes be confusing, and you want to focus your time and energy on growing your small business.

We at Liu and Associates understand that, and we’re here to help!

Here are some tax planning strategies that will help with your small business:

Keep Accurate Records

Keeping accurate records is an essential part of tax planning for a small business.

Here are some tips to help you keep your records accurate and organized:

  • Choose a Record-Keeping System: Choose a record-keeping system that works for your business, whether it’s a spreadsheet, accounting software, or a combination of both.
  • Track All Income and Expenses: Keep track of all income and expenses related to your business. 
  • Separate Business and Personal Expenses: This can be done by using a separate bank account and credit card for business expenses and keeping track of personal expenses separately.
  • Reconcile Accounts Regularly: This involves comparing your records to bank and credit card statements and making sure that they match.
  • Back Up Your Records: Make sure to back up your records regularly to avoid the risk of losing important information.

By following these tips, you can keep your records accurate and organized, which can help you make informed business decisions and comply with tax laws and regulations.

Take Advantage of Tax Credits and Incentives

There are several tax credits and incentives available to Canadian business owners.

It’s important to note that eligibility requirements and application processes can vary for each of these programs.

Here are some of the most common ones to consider when tax planning for small businesses:

Scientific Research and Experimental Development (SR&ED) Tax Credit

This is a federal tax incentive program that encourages Canadian businesses to conduct research and development activities.

Eligible businesses can claim a tax credit of up to 35% on eligible expenditures.

Capital Cost Allowance (CCA)

This is a tax deduction that allows businesses to write off the cost of assets purchased for their business.

The CCA rate varies depending on the asset, but it can range from 4% to 100% of the cost.

Provincial Tax Credits

Many provinces offer their own tax credits and incentives for businesses. Here are some examples of what is available in Alberta:

  • Alberta Investor Tax Credit (AITC): This program provides a 30% tax credit to investors who invest in eligible Alberta small businesses. The maximum credit per investor is $60,000 per year, and the maximum credit per business is $5 million.
  • Interactive Digital Media Tax Credit (IDMTC): This program provides a tax credit of up to 25% of eligible labor and marketing expenses for companies that develop interactive digital media products in Alberta. The maximum credit is $500,000 per year.
  • Apprenticeship Job Creation Tax Credit (AJCTC): This program provides a tax credit to employers who hire and train eligible apprentices in designated trades. The credit is equal to 10% of the eligible salaries and wages paid to the apprentice, up to a maximum credit of $2,000 per year.

Canada Small Business Financing Program (CSBFP)

This is a federal program that helps small businesses obtain financing by guaranteeing loans made by participating financial institutions.

The program can guarantee up to 85% of the loan amount, up to a maximum of $350,000.

Export Development Canada (EDC)

EDC provides financing and insurance to Canadian exporters. This can help businesses expand their markets and increase their international sales.

Consider Deferring Income and Accelerating Expenses

Man using calculator and calculate bills in home office.

Canadian businesses can defer income and accelerate expenses by taking advantage of various tax planning strategies. Here are some common strategies:

  • Deferring Income: Businesses can defer income by delaying the receipt of revenue until the next fiscal year.
  • Accrued Expenses: Businesses can accelerate expenses by accruing expenses that will be paid in the following year.
  • Prepaid Expenses: Businesses can also accelerate expenses by prepaying expenses that will be incurred in the following year.
  • Depreciation: Businesses can also accelerate expenses by taking advantage of depreciation. By depreciating assets over their useful life, businesses can deduct a portion of the cost of the asset each year, reducing their taxable income.

Use Tax Planning Software

Using tax planning software, such as QuickBooks, can offer several benefits when it comes to tax planning for small businesses.

Here are a few key advantages:

  • Accuracy: Tax planning software is designed to help minimize errors and ensure that tax returns are accurate.
  • Time savings: Tax planning software can help save time by automating calculations, minimizing data entry errors, and streamlining the tax preparation process
  • Cost savings: By using tax planning software, businesses can often save money on accounting and tax preparation fees.
  • Customization: Many tax planning software programs can be customized to meet the specific needs of businesses or individuals.

It’s important to choose a reputable software provider and consult with a tax professional to ensure that the software is being used properly and in compliance with tax laws and regulations.

Seek Professional Advice

As a Canadian business owner, seeking professional tax advice can provide numerous benefits. Here are some reasons why:

  • Compliance with Tax Laws: A tax professional can help ensure that your business is complying with all relevant tax laws, regulations, and filing requirements.
  • Minimizing Tax Liability: A tax professional can help identify deductions, credits, and other tax breaks that can help reduce your business’s tax liability. They can also advise on tax planning strategies that can help minimize tax liabilities in the future.
  • Avoiding Audit Risk: A tax professional can help minimize the risk of an audit by ensuring that your tax returns are accurate and compliant with tax laws and regulations.
  • Business Structuring: Tax professionals can also advise on the best business structure for your business to help minimize tax liabilities. This can include incorporation, partnerships, or sole proprietorships.
  • Tax Disputes: If your business is involved in a tax dispute with the CRA, a tax professional can represent your business and provide expert advice on how to resolve the dispute.

Overall, seeking professional tax advice can help your business comply with tax laws, minimize tax liabilities, reduce audit risk, and make informed business decisions.

A tax professional can provide valuable guidance and help ensure that your business’s tax affairs are in order.

Tax Planning for Small Businesses

With tax law constantly changing, a trusted financial advisor like Liu & Associates is vital to directing your specific course.

Let us help you understand how tax planning strategies can help you achieve your financial goals.

Contact us today to get started!

The CEWS Subsidy + Tax Audits: How to Prepare For an Audit

The Canada Emergency Wage Subsidy (CEWS) was introduced by the Canadian government in March of 2020 to help employers who were adversely impacted by COVID-19.

This subsidy covers up to 75% of a business’s employees’ eligible earnings and encourages employers to retain their workers despite a drop in revenue due to closures.

However, the CRA will audit employers who received the CEWS subsidy to ensure that they did not receive more money than they were eligible for.

The process can be arduous and require a copious amount of documentation.

Although claiming the CEWS does not guarantee that your business will be audited, it is best to prepare so the process goes smoothly.

To help you to better understand what to expect when it comes to a CEWS audit and how to best prepare, check out the guide below:

CEWS Repayments and Audits

In April of 2020, an amendment was made to Canada’s Income Tax Act to include the CEWS along with some new tax rules.

These new rules allow the Minister power to determine if an employer was overpaid and issue a notice of repayment if necessary.

Those who received the CEWS may have to repay the subsidy if they canceled their application, made a calculation error in the application, or if the application was reduced or denied. 

In order to determine if any of these situations have occurred, the CRA is at liberty to perform an audit. This process can result in the CRA requesting access to your company’s details such as corporate and financial records.

What Is the CRA Looking For When It Comes to the CEWS?

For the most part, when it comes to a CEWS audit, the CRA is looking to review the following documentation and information:

  • Corporate Records: These records include any documents related to the CEWS claim as well as any changes related to the type and status of the business since 2019.
  • Revenues for 2019 and 2020: The CRA will seek information regarding the business’s revenue prior to the pandemic such as sales reports and qualifying revenue for the CEWS.
  • Payroll Information: The CRA also wants to see payroll journals, timesheets, employment contracts, and proofs of payments to employees.

The CRA may also request additional information related to other subsidies and other government programs that could impact the application for the CEWS.

How Can I Prepare for an Audit?

Man hand pick up Stack overload document report paper with colorful paperclip, business and paperless concept.

Just because the CRA is audited CEWS applications and payments doesn’t mean your business is guaranteed to experience one.

However, preparing for an audit can be a stressful task, so we suggest you take the time to prepare in the following manner:

Document Everything

As soon as you prepare your CEWS claim, keep track of everything. Because the CEWS was pushed out in a hurry, it’s possible that the rules surrounding it may be modified at any time.

Keep copies of all the documentation you referred to when completing the CEWS application as well as a hard copy of the instructions provided to you by the CRA at the time you filed for the subsidy.

Keep Aside Confidential Information

The CRA does not have the authority to access documents that are protected by client privilege.

This means that any sensitive and private information regarding your clients is off the table when it comes to a CRA audit. For example, if you are a lawyer this would include any communication between you and your client, the client’s case file, etc.

Because these documents are private and not required during an audit, ensure they are stored separately to avoid any mistakes.

Have One Point of Contact With the CRA

To ensure the audit process goes smoothly without inconsistencies or misinformation, appoint one person from your business to communicate with the CRA.

Additionally, all exchanges with the CRA should be in writing since the process can take a year or more to complete. 

How Long Do I Have to Provide the Necessary Information?

Gathering the required documentation can be complex and extensive with the CRA not giving you much time to do so. In fact, the CRA generally requires the necessary information within 10 business days.

While you can request an extension, the CRA is merely looking for information you already have. If you have it prepared and organized, meeting this deadline is completely realistic.

Failure to comply with the CRA during the audit process can result in a “gross negligence penalty” that could amount to 50% of the difference between the amount of CEWS you claimed and the amount of CEWS you were entitled to.

Conclusion

If you have received an audit letter in relation to the CEWS subsidy, it’s important to consult an expert accountant to ensure the proper organization of documentation.

For more information on CEWS audits, don’t hesitate to contact our team of professionals at Liu & Associates.

Writing a Business Plan: Do I Need an Accountant?

Are you starting a small business?

Have you thought about hiring an accountant?

Probably not, since you are likely focusing your time and energy on the growth of your business – but accountants are trained to do a lot more than payroll and taxes.

A professional accountant can help you develop your small business from writing a business plan to the official formation of your company.

While you don’t need to hire a full-time accountant to help you out, a couple of hours can make the difference in getting your small business off the ground.

Creating the Business Plan

An accountant will be able to help you write a business plan based on realistic information. You don’t want to risk a failed business plan based on optimistic assumptions and not current market conditions.

While optimism and risk tolerance can be beneficial to starting a business, an accountant can help you to balance the plan.

Experienced and expert accountants can use their knowledge to ensure your business plan is financially cohesive and realistic.

Forecasting Your Costs

When you create a business plan, you will be expected to forecast the various costs involved in starting and building your business. For first time business owners, this can be both daunting and confusing.

Accountants, however, can help you understand these costs by walking you through the numbers to create an accurate forecast for your business.

Determining Your Business Structure

When you start a small business, you can choose to incorporate it or run it as a sole proprietor. Both business structures have their own pros and cons, and are better suited to specific situations.

If you’re not sure about which way to go with your small business, an accountant can help you make the right choice by laying out the legal and tax advantages of incorporating your business – as well as the risks and pitfalls.

It’s a very important decision no small business owner would make lightly.

Registering Your Business

Do you know which programs you need to register with when starting a small business?

An accountant can help you out by making sure that your business is registered properly. For example, you may be required to register for GST/HST, payroll and your province’s WorkSafe entity.

Some business structures are not required to register for as many programs as others. Talk to an accountant about which programs are necessary for your small business.

Hiring an Accountant After Starting a Business

If you missed out on hiring an accountant to help you set up your small business, it’s not too late to benefit from their help!

In addition to the ways an accountant can help you get your small business off the ground, they can also help with many other aspects of your small business including:

  • Bookkeeping
  • Payroll
  • Taxes
  • Government Audits

So, even if your business is up and running, an accountant is a valuable asset when it comes to guiding and growing your business – as well as giving you back your time.

Ready to Get Started?

Our professional accountants at Liu & Associates are ready to help you get your small business started!

Contact us today to find out how we can help you write your business plan as well as guide you on the path to growing your small business into a huge success.

You can learn more about our business accounting services here.

When Do I Have to Submit My Corporate Taxes?

It’s a common questions among new business owners: How soon after my business’ year end do I have to file my corporate taxes? Read on for Liu and Associates breakdown of Canadian corporate tax filing deadlines.

Canadian Corporate Tax Returns

The basic rule when it comes to filing your Canadian corporate tax return is that you must submit your return no later than six months after the end of your business’ tax year. This means that each business’s T2 return date will differ depending on their fiscal year end.

Example
If your business’ year end is September 30, your Canadian corporate tax return would be due by March 30.

What Happens If My Year End Lands in the Middle of the Month?

If your year end falls on say, September 16, your due date would be March 16. The six month rule applies just the same.

My Filing Deadline Falls on a Saturday – Now What?!

If your filing deadline falls on a Saturday, Sunday or public holiday, as long as you send your claim on the first business day after the filing deadline you’ll be safe from any penalties!

Note: If you’re hoping to receive a tax refund, you must file your return no later than three years after the end of a tax year.

Alberta Provincial Corporate Tax Returns

Alberta based businesses have to file a separate provincial corporate tax return because Alberta administers their own corporate tax collection. For more information, visit the Treasury Board and Finance website. While filing deadlines are similar to CRA requirements, it’s good to familiarize yourself with both systems to avoid any fines or penalties.

Don’t Leave It Up To Chance

If you are confused or have questions about your corporate tax filings, don’t wait to ask! The experts at Liu & Associates LLP offer corporate tax services to ensure everything is done right and on time. Call us today!

Top Three Things to Ask your Accountant When Setting Up a Business

If you are starting your own company, an accountant is an invaluable resource. Depending on how you set up and run your business, it can save you money and time when tax season rolls around. Read on for three important questions to bring up with your accountant to ensure you are setting your company up for success!  

1. what Structure is Best for my Company?

Depending on your start-ups circumstances and projected profitability, your accountant can recommend the best business structure. Whether you go with a sole trader, partnership or limited company, your accountant can advise you of any potential benefits or drawbacks to each structure.

Common Types of Business Structures

2. What Records do I Need to Keep?

Keeping up to date business records is sure to make your life easier when it comes to tax time or even worse – an audit. Some of the most common things you’ll need to keep track of include:

  • Business expenses
  • Bank & credit card statements
  • Tax filings
  • Payroll
  • Income
  • Invoices
  • Purchase orders
  • Inventory

Other common questions surrounding this topic usually include where should you store these records, and how long do you have to keep them for. Your accountant can give you answers to all these questions are more, as well as offer some tips on how to streamline your record keeping. Here at Liu & Associates, we offer bookkeeping services that can keep this kind of stuff off your plate entirely!

3. Do I Need to Register for a GST/HST Number?

If you provide a taxable property or service in Canada and you no longer qualify as a small supplier, you will need to register for a GST/HST number.

What Qualifies as a Small Supplier?

If you have sales under $30,000 in the current calendar quarter, as well as the last four calendar quarters, your business has small supplier status. This means that you do not have to collect and pay GST/HST. Once you exceed $30,000 in a single quarter, you lose small supplier status and must begin to collect and pay GST/HST.

Regardless of your business’ income, you can voluntarily register for a GST/HST number. A GST number will allow you to claim input tax credits. Your accountant can explain when the best time to register for a GST/HST number is depending on your business’ situation.

Contact an Accountant Today!

Regardless of what stage of business planning you are in, the expert team at Liu & Associates can help! Give us a call to book a consultation with one of our accountants today.

Corporate Bankruptcy — What You Should Know

an-accontant-in-a-suit-straightening-their-tie

When a business can no longer pay its debts, the business owner’s may start to consider bankruptcy. Before you make any decisions, be sure to talk to a trusted advisor to see if there are any alternative solutions to your problem. Filing for bankruptcy should always be your last resort. Read on to learn a bit more about corporate bankruptcy, and how Liu & Associates can help.

Small Businesses

If your business is a sole proprietorship or a partnership, a corporate bankruptcy will essentially be a personal bankruptcy. This is because the assets of the business can not be held separately from your personal assets.

Sole Proprietorship

If you have a sole proprietorship and you file for bankruptcy, the business will be seen as a separate venture from the day the bankruptcy goes into effect. If you’d like to start another business, you’ll have to get a new business number and set up new accounts with the CRA.

Partnership

If you are part of a partnership with only two people and you file for bankruptcy, the original partnership will cease to exist. If there are more than two people in the partnership, business continues but some sort of deal must be reached to handle the bankruptcy.

Incorporated Businesses

If an incorporated business files for bankruptcy, it is considered to be an independent legal entity. Therefore, a business owner’s personal assets will be kept separate in most circumstances. When a corporation files for bankruptcy, it can no longer exist. The only way a corporation can keep running is if it pays all its debts when in the process of declaring bankruptcy.

How To Declare Corporate Bankruptcy

If you’ve talked to a licensed trustee, considered your options, and still feel that declaring bankruptcy is the best option, here are a few of the steps you’ll need to take:

  • Talk to your licensed trustee and fill out the proper paperwork. Your trustee will file these forms on your behalf.
  • Once the paperwork has gone through, your trustee will begin to sell any property, investments or assets.  
  • All institutions with which you carry a debt will be notified about the bankruptcy by your trustee.
  • You may need to meet with creditors to determine how they could receive payment for the debt owed to them.
  • The Office of the Superintendent of Bankruptcy Canada (OSB) may bring you in for questioning regarding your excessive business debt.
  • There will be some sessions with a debt counsellor to hopefully prevent future debt problems.  
  • Your trustee will create a summary of the actions your took during the bankruptcy and submit this to the OSB.
  • There may be a hearing to make your bankruptcy official.
  • Lastly, your debt that qualifies under your bankruptcy will be wiped away and legally discharged.

Liu & Associates Can Help

Business bankruptcies are complicated. If you are contemplating bankruptcy, or are looking for a licensed trustee, contact Liu & Associates. Our team is ready to help you get back on your feet.

3 Most Common Small Business Bookkeeping Mistakes and How to Avoid Them

Bookkeeping is a fundamental part of your small business; unfortunately, mistakes are inevitable and happen to the best of us. So how do you save yourself from becoming a bookkeeping disaster? Read on to learn Liu & Associate’s three most common bookkeeping mistakes, and how to avoid falling victim to them yourself.

1. Forgetting to Track Small, Reimbursable Expenses

Many small business owners will pay for business expenses with their personal credit card, and then forget to submit the expenses to the company for reimbursement. All transactions, no matter now small and insignificant they may seem, need to be tracked properly. By staying on top of small transactions, it becomes easier to manage the bigger ones.

How to Avoid This Mistake?

Get a process in place from the very beginning. While it may seem unnecessary when your company is only one or two people, it’ll set the groundwork for when your company grows and the number of transactions increases.

2. Not Properly Classifying Employees

There are different rules and regulations come tax time for employees and non-employees. Many small business owners aren’t sure whether a consultant, contractor or freelancer are considered an employee or not. Misreporting employees results in reporting your business to the CRA inaccurately, and can cause you grief during an audit.

How to Avoid This Mistake?

Reach out to an accountant or advisor to learn what tax implications there are for each type of employee and non-employee, so you can accurately classify your workers.

3. Falling Behind on Entries & Reconciliation

One of the most fundamental aspects of bookkeeping is reconciling the books and bank statements each month. Reconciliation is a simple process – simply compare your books with your bank statement and make sure there are no discrepancies! If expenses aren’t being tracked, you’ll start to notice your books aren’t balancing, which means your reports are not up to date. Without current information, it’s next to impossible to make informed business decisions.

How to Avoid This Mistake?

Set aside a block of time each week to reconcile your accounts. If you catch mistakes the same month they were made, it makes correcting them a lot easier because they are likely to be more fresh in your mind.

Looking for Bookkeeping Help?

The easiest way to avoid making any bookkeeping mistakes is to let a professional handle your accounts! Liu & Associates offers flexible and comprehensive small business bookkeeping services that will make your business accounting a breeze. If you’d like to learn more about our small business accounting solutions, give our team a call today!

5 Small Business Bookkeeping Tips

Edmonton Bookkeeping TipsAs a small business owner, we know that you have a lot on your plate. Accounting may seem like a tedious task that is easy to push aside, but if you don’t keep a tight ship when it comes to your books it can make your life extremely difficult come tax time.

Read on to learn Liu & Associate’s five small business bookkeeping tips that will keep your life smooth and simple – even during tax season.

 
1. Find a Trusted Advisor

Having someone you can go to for sound advice is invaluable as a small business owner. Your advisor can make sure you are handling your finances properly, answer any questions and help you fix any mistakes that might have been made.

Have a small budget? Don’t worry! There are a ton of flexible options out there to make sure you get the advice you need at a price you can afford.

2. Plan for Major Expenses

Set aside some time and map out any major expenses that you foresee happening in the next three to five years. That way, you can plan accordingly and make sure you have the finances in place beforehand. This will save you from scrambling for a loan when these expenses become unavoidable. Be sure to acknowledge your busy and slow seasons, as this will affect how much money you have available to spend.

3. Track your Expenses

Write. Everything. Down. It doesn’t matter if you chose to carry around a notebook, make a note on your phone or write it on a napkin. Keeping track of every business expense ensures that you don’t miss out on any tax write-offs. An easy way to keep track of business expenses is to have one credit card that you use solely for business purposes. This ensures you have a digital copy of all business charges, and removes the stress of having to remember to write down a charge every time you use cash.

4. Keep an Eye on Your Accounts Receivables

When things get busy, it’s easy to forget to stay on top of your accounts receivables. Without receivables, income dwindles! Make sure you have a process (i.e. a monthly report), that lists any past due payments. You’ll also need to have a process for how to handle these accounts. It may be an email, a phone call or sending a second invoice; whatever it is it will ensure you are getting the monthly payments you are owed!

5. Schedule a Time Each Week to Review Your Books

Give yourself some time to sit down and go over your finances. Doing this quick overview once a week will allow you to ensure that everything is in order, and catch any mistakes in their early stages. It doesn’t need to be a big time-drain – 30 minutes/week is generally plenty!

BONUS TIP: Bring in the Experts

Liu & Associates offers flexible and comprehensive small business bookkeeping services that allow you to focus on what really matters – running your business. If you’d like to learn more about how our small business accounting solutions can help, give our team a call today!

What’s Best For Business Owners: Salary or Dividends?

Two Edmonton business owners

If you have chosen to set up your small business as a Canadian corporation, you have a couple of options when it comes time to pay yourself and any other company shareholders. You can choose to pay yourself a salary, receive dividends, or a opt for a combination of both. There’s no simple answer, so join Liu & Associates as we discuss the pros and cons of each option.

Business Salary

If you’re paying yourself a salary, the payments become an expense of the business. You’ll receive a personal income, and get a T4 at the end of the tax year.

The Pros

    • You’ll be paying into the Canada Pension Plan (CPP). The more you contribute to CPP, the more you’ll eventually receive once you hit retirement.
    • Your salary reduces the corporation’s taxable income, which reduces how much tax your business will owe each year.
    • When applying for a mortgage, banks like to see steady income. You’re likely to get a better rate if you have a salaried income vs a dividend one.
    • With your personal income, you’ll be able to take advantage of other investment opportunities such as a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA).

The Cons

  • Your salary is taxable. It’s possible that giving yourself a salary could increase your personal tax burden.
  • You’ll have to do payroll. To keep things above board, you’ll need to set up a payroll account with the CRA and file all the necessary paperwork that comes along with such an account.
  • If your company’s profits vary from year to year, a salary could cause you tax problems down the road if you aren’t able to carry a business loss one year.

Dividends

Dividends are payments to shareholders of a corporation that are paid from the after-tax earnings of the company. Dividends are declared, and cash is transferred directly from the company’s account to a shareholder’s personal account. The business will need to prepare T5s for anyone who has received dividends.

The Pros

  • Dividends are taxed at a lower rate than a salary would be, which can result in paying less personal tax.
  • By not paying into CPP you’re keeping more money in your pocket today.
  • Transferring dividends is a pretty simple process! There’s no need to register for payroll – just declare a dividend and transfer the cash.
  • You can claim dividends anytime.

The Cons

  • By not contributing to CPP for as long, you will be entitled to less when you decide to retire.
  • Because you don’t have a personal income, you aren’t able to take advantage of RRSPs or TFSAs.
  • Dividends can exclude you from certain personal tax deductions.

Chat With An Expert

When it comes to deciding whether to pay yourself or other shareholders with a salary or dividends, it’s best to chat with a professional. Your choice will be impacted by a host of factors, like your current income level, your age, and the company’s projected income. An accounting professional will take all of this into consideration and help you draw up a plan for continued business growth and success.

For expert advice, call the team at Liu & Associates today.

 

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2019 Tax Changes: What To Expect

2019-in-sparkling-numbersAs 2019 comes into full swing, it’s bringing some tax changes with it that will have some big impacts on Canadians and small business owners. With income tax being the top expense for most Canadian families, it’s worth it to be aware of what’s going to change in 2019. Read on as Liu & Associates highlights a few of the major changes you’ll see in 2019 when it comes to your income taxes.

Why Do Tax Rules Change?

Taxes can change for a number of reasons. People often see changes to taxes when a new government comes into power, when a government is trying to win favour with voters, or when a loophole is identified. It’s important to keep your finger on the pulse of the tax landscape so you are aware of the changes and how they might impact you. Worst case scenario, you could face a reassessment or penalty from the CRA if you fail to take into account the new tax rules when filing your next return.

Increase In CPP Premiums

Canada Pension Plan (CPP) premiums will be on the rise for the next five years due to a program enhancement plan. What does this mean for you? You’ll notice more money off your paycheque going to CPP. The good news is that you’ll eventually get to reap the benefits of this extra money in retirement.

Decrease In Employment Insurance Premium

While CPP premiums may be increasing, employment insurance (EI) premiums will going the opposite direction. Employment insurance premiums are being decreased by four cents for every $100 of insurable earnings. This is the second year of decreases to EI premiums.

Decrease In Small Business Tax Rate

Small business owners can rejoice the fact that their tax rate is going down from 10 to nine percent. Similar to EI premiums, this is the second year we’ve seen decreases in the small business tax rate. This reduction makes the combined federal-provincial-territorial average income tax rate for small businesses 12.2 percent, which is the lowest in the G7. Tax savings means more money to reinvest in your company.

Changes To The Working Income Tax Benefit

The Working Income Tax Benefit is a refundable tax credit that helps to give tax relief to low-income individuals and families. At the start of 2019, the program was renamed the Canada Workers Benefit (CWB) and was enhanced in order to put more money in the pockets of low-income workers and encourage them to stay in the workforce. To keep things easy, the CRA will automatically determine if you’re eligible to receive the CWB and assess your tax return as if you’ve already claimed it, even if you hadn’t upon your original filing.

If you need help filing your 2019 tax return, contact the team at Liu & Associates today. Our experts are up to date on all tax system updates and will make sure you get the best return possible.

 

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