Another Tax Season Bites the Dust? Are You Thinking About 2011 Yet?

So another tax year is behind us and I for one am glad. Long days at my computer while still juggling the rest of our life is always good for a few sleepless nights.

For those of you who have filed and already put the dreaded tax man out of your mind, I write today to caution you against waiting until April 30, 2012 before you start preparing for next years taxes.

The first thing I do every year after finishing our own personal taxes is to file all of our current year in an envelope and shred our return that is older than six years. The next thing I do is to create a folder for the current tax year to place in my filing cabinet. Then when new receipts come in, I have a place that I can put them right away. Which reminds me...I forgot about a tax donation receipt that was emailed to me on Thursday :) It happens though, we receive many pieces of paper and in the shuffle of day to day, without a plan, then can easily be misplaced.

I have gotten a bit of feedback from some of our clients on articles I posted on Twitter the past few days. The articles basically stated that if you got a refund on your taxes, you weren't properly prepared for tax season. Getting a refund back means that you let the government hold on to your money all year round interest free. As one of our clients said "that lump of dough from the Gov feels so good at the time!" While that may be true, I would rather have control of my money than have it sitting with the government all year. My advice if you have no idea how to prevent this scenario from happening is to get with a tax professional who can take a look at all you have going on and help you create a strategy. If you had money you had to pay to the government, I would also sit with someone and come up with a plan to avoid a huge tax shock at the end of next year.

What I am trying to say is that just because the 2010 tax year has come to a close, don't let next year sneak up on you. Be prepared and do a few things so that there is no stress when it comes to your taxes in 2012. Let me be the one with the sleepless nights, while you already have a pretty good idea of where you will stand.

Have an amazing day!

Elections Canada and Your Taxes

Do you wish to provide information to Elections Canada? A simple enough statement at the start of all of our tax forms, but have you considered what this actually means. It's not a bad thing. In fact, I say yes every year because I enjoy the benefits of doing so.

If you check yes you are asking the CRA to give your name, address, date of birth and citizenship status to Elections Canada so that your information is kept up to date. If this is the first time you have submitted taxes and you are not in the Register, then Elections Canada will add you.

I love to vote and I enjoy the fact that if I move or make any other changes, I will most likely contact CRA and they will pass that information on to Elections Canada for me. I have a busy life and one less phone call is more freedom with my time.

If you should choose to check no then the CRA will not give your information to Elections Canada. You don't lose any of your civic rights to vote, but you will now have to contact both CRA and Elections Canada if any of your information changes. This could create some headache for you on voting day if you have recently moved or changed your name.

Elections Canada stands by confidentiality regulations and will not release your information for any reason other than electoral purposes.

This is a personal choice and I am not trying to sway you one way or another. Obviously I have an opinion, but I just want you to think about it more consciously when you are completing your taxes. Make a choice, don't just check a box without understanding it's implications.

Have a wonderful day!

I Owe For Taxes, I Can't Pay...Now What??

The answer for the question of what to do when you owe the government and can not pay is often to hide the paperwork under another pile of paperwork and hope it goes away. The truth is that you are just putting off the inevitable and you know it.

We have discussed this topic before regarding GST, but I thought it pertinent to bring it up today as the tax deadline is swiftly approaching and many of you may be struggling with what to do.

Here is the right answer for what to do when you owe the government on your personal income tax...file on time! The CRA imposes an automatic 5% penalty on what you owe for filing late. Either way if your payment is late you will be paying interest, but if you file on time you can avoid the 5% penalty.

The other thing that I think most Canadians don't know about the CRA is that they are more than willing to work out payment options with you and the more proactive you are, the better they are to deal with.

So if your tax planning fell short and you are in the position of owing the CRA some money, be sure to file your taxes before the May 2 deadline and then give them a call to work out some payment arrangements. Trust me, you'll sleep better at night not having that hidden paperwork troubling you.

Have an amazing day!

What's in a Name? Demystifying Corp, Inc, Ltd, etc.

We had a great reader question yesterday about what the different endings to a companies name are used for and mean.

There are many different legal elements (that's what the ending of the corporations name is called) that can be used when naming a business for today we will look at the most common three: Corp., Inc., and Ltd.

I will first say that a Professional Corporation is specifically for a person with a professional designation such as a lawyer, physician, accountant, etc. So if you don't fall under that category, you don't need to worry about the Professional Corporation.

All corporations names usually consist of three parts. The first element is the distinctive one, this is usually your name. For our business it is "No Bull". The second element is the descriptive one that says what you do. Our business is "Bookkeeping & Small Business Consulting." The final element and the one we are discussing is the legal element. For us, we use "Inc."

I found this to be an interesting question, because the truth is that I didn't really know the answer. So when in doubt, I do some digging and find an expert. I first called a few Alberta Registry agents since they are the ones you go to when you register your corporation. There answer was that there was absolutely no difference between the endings most commonly used (Inc., Ltd., Corp.,). One agent advised that if you were planning on doing business in the USA, she would recommend using Inc. as that is their most commonly used ending.

I also spoke with a couple of agents from Revenue Canada and their response was that it mostly came down to an issue of terminology and interpretation from business associates and clients. The ending of the business name doesn't necessarily change the status or liability.

So basically what I have discovered is that Corp., Inc., Ltd., etc. are just the adjectives that describes a corporation and in most scenarios you can pick the one that suites your name and your business the best. If you have any doubt or confusion, I would advise that you contact a lawyer or accountant that specializes in incorporating companies, but even after a few calls to some of our associates, we were getting the same answers from them.

Hope that helps Wendy and thanks for the great question. We always welcome questions from our readers. Those are some of our favorite posts.

Have an amazing day!

Tax Return Mistakes

I had a friend who used to take all of his t-slips and put them in an envelope and he would send them off to Revenue Canada for them to file his taxes. Sounds like a pretty convenient way to do your taxes, however he could have been missing out on some major tax breaks.

When it comes to filing your taxes, how much corrective work does the CRA actually do?

Most of us feel that once we have sent off our tax return and get back our notice of assessment, that our taxes are finished for yet another year. We would in fact be wrong. Starting in June of each year, the CRA goes back and starts reviewing our tax returns. If we have missed filing a T-slip, there was an amendment to a T-slip or any other modifications are made, the government will adjust our returns to accommodate the changes. This could mean that you will are required to pay back money that you received back.

One thing that the government will not be looking at is any credits or deductions that you may have missed. Forgot about a $500 donation? Too bad, they aren't going to know and adjust your return. Another thing they will not do is optimize between you and your partner. This could be a potential savings that you would miss out on entirely.

My advice would be to find a place in your home office to store all of your tax paperwork. This way you can be sure of capturing all those expenses you receive receipts for during the year. I also always do my husbands taxes and mine together. Some years it has no effect, but especially now that we have children it can have a huge impact. If you are not sure of what to look for when it comes to optimizing between spouses, contact a tax preparer that can assist you.

My final word of caution is don't receive a return and expect that to be the end of it. The government reserves the right to ask for some or all of it back for the next six years. Be prepared for that day in case it comes.

Have a great day!

Something about the CRA that all Canadians Should Know

A client notified us this week that she received an email from the CRA notifying her of her tax refund. Thankfully she immediately forwarded the email on to us and asked for our advice.

One thing that all Canadians should know about the Canada Revenue Agency is that they will NEVER contact you via email.

My recommendation on what to do next after receiving such an email is to forward it on to the RCMP's antifraud cantre at info@antifraudcentre.ca.

One thing I have also learned lately after dealing with some fraud on my credit card is to never give your information out over the phone if you have been contacted. Thankfully I followed that advice and stopped a scam.

If the CRA contacts you over the phone, they tend not to ask verifying questions. If you are being asked questions to give your SIN or other personal information and feel wary about the situation, ask them for their name and employee number and information to call them back. Trust your instincts. If you think to yourself "they should already know this information", trust that feeling.

It is important that you protect your personal information. Just because you think the CRA has contacted you, doesn't mean that they have. The CRA will generally contact you via snail mail prior to any contact via phone. You should have an idea why they are calling you before they do.

Do what you can to protect yourself from fraud. I don't want to live in a world where I have to suspect the intentions of each person that contacts me, but we all need to have a bit of caution and not give up our information just because we think the government or another institution we trust is contacting us. Do your due diligence. Even if it takes a few extra minutes, it is definitely worth the time you will save yourself if you fall victim to a scam.

Have a wonderful day!

When Should I Consider Incorporating?

This is a question we get asked quite often. Yesterday, in fact, one of our clients approached us asking this very thing. "When should I consider incorporating?"

While you are a sole proprietorship, the business is you and you are the business as far as the government is concerned. You both share your nine digit SIN number as identification. When you incorporate the business becomes a separate entity and gets its own nine digit BN for identification from the government. One of the advantages of incorporating is that you are distancing yourself from the company to a certain degree. The reason I said to a certain degree is that shareholders are generally liable up to the amount they have invested shares into the company. However, if you are a shareholder who is also a director of a company, you may be found liable for personal debts of the company depending on the circumstance. Most small businesses that incorporate the owner is the director and the shareholder so their liability may not be minimized as much as you may have been lead to believe.

On the flip side, incorporations do cost the most to set up and maintain. Your books must be kept in line with the standards that Revenue Canada sets up for any corporation including the large ones. There are a lot of complicated rules and regulations for incorporations that many small business owners miss in their excitement to incorporate and with out receiving professional advice, many get into trouble with CRA.

There is no definitive answer on when is a good time to incorporate. As your business becomes more profitable there are many reasons that you would consider incorporating so that you can take advantage of the small business deduction, the capital gains deduction or a lower tax rate than on your personal taxes.

If this all seems very overwhelming and even if you just want to get the facts straight, I would highly recommend seeking out a professional to guide you and answer your questions.

Have an amazing day!