Gregory, Harriman & Associates

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Websites of Interest - Personal

A great link for finding CRA federal and provincial tax rates, prescribed interest rates, currency exchange rates, meal expense rates and mileage rates per kilometer is http://www.cra-arc.gc.ca/tx/llrts/menu-eng.html.

http://www.fiscalagents.com contains many useful financial tools including: planners/worksheets, retirement planning, savings and investments, mortgage and loans, and net worth assessments.

Universal Child Care Benefit

The Universal Child Care Benefit (UCCB) will provide families $100 per month for each child under 6 years of age. This is paid separately from the Child Tax Benefit and will be taxable to the spouse with the lower net income. If you have children under the age of 6 and you are not receiving this, ensure you fill out Form RC66 which can be found at: http://www.cra-arc.gc.ca/E/pbg/tf/rc66/README.html.

Tax-Free Savings Account (TFSA)

Canadian residents are now able to set up one or more Tax-Free Savings Accounts. TFSA’s are registered savings accounts similar to registered retirement accounts, but unlike RRF’s, contributions to a TFSA will not be deductible. The advantage of TFSA’s is income and gains (and conversely, losses) in respect to investments held within a TFSA are not included in income when any amounts are withdrawn. Every year, $5,000 of TFSA contribution room will be issued and any unused contribution room will be carried forward to future years, with no limit on the number of years that unused contribution room can be carried forward. When withdrawals are made, that amount will be added to the following year’s contribution room.

For example, if an individual only contributed $3,000 in 2009, an amount of $2,000 would be carried forward to 2010 and the contribution room for 2010 would then be $5,000 plus $2,000, or $7,000. If in 2010, $1,000 is withdrawn, but no contributions are made, the contribution room for 2011 would be $5,000, plus $7,000, plus the $1,000 withdrawn, or $13,000.

For certain individuals, the use of a TFSA can provide advantages beyond just the tax savings on investment income. Examples are:

Seniors – the use of TFSA allows for continued investment earnings while not impacting an individual’s taxable income level.

Low income taxpayers – if low income earners are not able to utilize an RRSP deduction, they could earn tax-free income in a TFSA, depending on their situation concerning the GST credit and Child Tax Benefit.

Persons with no earned income – since RRSP’s are not available to these individuals, they could deposit excess funds to a TFSA. If they should start earning income, they could withdraw the TFSA funds tax free and re-contribute them into an RRSP account.

There is no benefit to having dividend-bearing securities or investments providing capital gains in the TFSA as any tax advantage would be lost. Interest bearing accounts, however, are perfect candidates for TFSA’s, since the interest will not be taxed in a TFSA.

Interest on money borrowed to put into a TFSA is not tax-deductible. It is also important to check the fees charged by the financial institution before opening a TFSA.

Excess contributions will be subject to a tax of one percent per month.

TIPS Line

CRA has an enhanced version of the TIPS website titled “My Account” which can be set up at http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/myccnt/menu-eng.html This site allows you to determine your RRSP deduction limit, as well as view your installment balance, current year’s tax assessment, change your address, telephone number, Home Buyers Plan information and much more. Before you can access the services under “My Account” for the first time, you have to register for a Government of Canada epass. As part of the registration process, you will be required to provide some personal information, create an epass User ID and Password, and select and answer three questions. After you have completed this part of the process, your CRA Activation Code will be mailed to you in approximately five business days (15 days if outside Canada and the U.S.). To complete your registration, return to the CRA “My Account” Web site and enter your CRA Activation Code to access your personal tax and benefit information. To access the CRA’s “My Account” at any time in the future, you simply need to return to the CRA’s “My Account” Web site and log in using your epass User ID and Password.

Seniors

An individual whose 2011 net income exceeds $67,668 will have their Old Age Security payment clawed back.

Individuals will begin to lose their income tax age credit if their net income exceeds $32,506. If their net income exceeds $75,480, they cannot claim the age credit. However, they may be able to transfer all or part of their age amount to their spouse or common-law partner or to claim all or part of his or her age amount.

Persons eligible for the $2,000 pension income credit will be able to transfer up to 50% of pension income to a resident spouse/common-law partner in 2009 and subsequent years. This will require a joint election which must be made each year. Both persons must agree to the allocation.

Registered Education Savings Plan (RESP)

The $4,000 annual RESP contribution limit has been eliminated and a lifetime RESP contribution limit has been increased to $50,000 from $42,000. The maximum annual RESP contribution qualifying for the 20% Canada Education Savings Grant has been increased to $2,500 from $2,000, resulting in an increase of $500 in government contributions. These changes apply to contributions made after 2006.

Registered Disability Savings Plan

This is a plan that will allow funds to be invested tax-free until withdrawal. It is intended to help parents and others to save for the long-term financial security of a child with a disability and is similar in structure to the Registered Education Savings Plan. Contributions to an RDSP will be eligible for the Canada Disability Savings Grant. For more information, you can visit the following websites: http://www.cra-arc.gc.ca/gncy/bdgt/2007/rdsp-eng.html, http://rdsp.wordpress.com/.

If you are a Canadian resident under age 60 and are eligible for the Disability Tax Credit (Disability Amount), you are eligible for an RDSP. Earnings accumulate tax-free, until you take money out of your RDSP. The Government provides matching grants of up to 300%, depending on the beneficiary’s family income and the amount contributed. The maximum is $3,500 each year.

There are proposed changes, as of July 1, 2011, for deaths occurring after March 3, 2010. The rollover rules for the existing RRSP will be extended to allow a rollover to the RDSP of the deceased individual’s financially dependent infirm child or grandchild. This will also apply to RRIF’s and certain RPP’s.

RRSP’s and Mortgages

The 2008 Federal Budget increased the conversion age for 2008 and subsequent years for RPPs, RRSPs and DPSPs to 71 years of age from 69 years of age, giving more time to use up available contribution room.

The RRSP limit for 2011 is $22,450.

Home Buyer’s Plan (HBP)

The Home Buyer’s Plan is a program allowing you to withdraw up to $25,000 from your RRSP to buy or build a qualifying home. You must be considered a first-time homebuyer and intend to occupy the qualifying home within a year after buying or building it. Withdrawals that meet all of the plan’s conditions will not be included in your income and your RRSP issuer will not withhold tax on these withdrawals. This is available to both you and your spouse, providing up to $50,000 of tax free dollars. The amount withdrawn must be paid back to your RRSP within a period of no more than 15 years.

Lifelong Learning Plan (LLP)

Guide RC4112 discusses the Lifelong Learning Plan (LLP) which permits a person to withdraw up to $10,000 in a calendar year (maximum $20,000 over four years) from their RRSP to finance full-time training or education for you or your spouse.

Websites of Interest - Farm

Farm Credit Corporation has an Internet based product which generates reports on the average land value for a given area based on the type of land. Farm Values Online can be accessed by accessing http://www.fcc-fac.ca and clicking on “Products and Services” and then click on “Property” and then select “Farmland Values Online”. Select “Login” from the homepage and submit the required information.

Market values for farm equipment can be found at http://www.ironsearch.com.

http://www.fiscalagents.com contains many useful financial tools including: planners/worksheets, retirement planning, savings and investments, mortgage and loans, and net worth assessments.

Public Transit Tax Credit

An individual may deduct a credit for amounts paid for public transit passes in respect to transit for the use of the individual, spouse or a child of the individual. This is applicable to monthly transit passes and weekly passes where an individual purchases at least four consecutive weekly passes.

Post-Secondary Students

Post-secondary students are eligible to claim a federal education amount of $400 per month for full-time students and $120 per month for part-time students. Also, two part-time slips could count for the higher full-time status. A textbook credit can also be claimed of $65 per month for full-time students and $20 per month for part-time students. The provincial education amount is $628 per month for a full time student and $188 per month for a part time student.

Scholarships, fellowships and bursaries are non-taxable if enrolled in a program that entitles the student to claim the education amount.

Students attending school and moving home for summer employment can claim moving expenses against this income to attempt to retain more education credits.

Personal Income Tax Rate

Combined_-_Federal_and_Alberta_-_2011.pdf

Medical Expenses - Cosmetic Procedures

In the 2010 Federal Budget, any expenses incurred for purely cosmetic procedures performed for enhancing one’s appearance have been deemed ineligible for the medical expense tax credits. These include liposuction, hair replacement procedures, botulinum toxin injections, and teeth whitening. If cosmetic procedures are required for medical or reconstructive purposes, such as corrective laser eye surgery and dental crowns, they will continue to qualify for the tax credit.

Medical Expenses

A travel allowance ($0.515 per km in 2010) can be claimed as a medical expense for trips to receive medical attention. We recommend keeping a log of these kilometers. In order to claim travel expenses, the medical treatment must not be available locally (within 40 kilometers).

If you have to travel more than 80 kilometers for medical treatment, you may also be able to claim meal and accommodation expenses. For meals, you can claim a flat rate of $17/meal/person to a maximum of $51/day/person without receipts. For accommodation expenses, make sure to keep all of your receipts.

Massage therapy is still not allowed as a medical expense in any circumstance as massage therapists do not meet the definition of medical practitioner in Alberta. As well, hot tubs and hardwood flooring are no longer allowable medical expenses as they increase the value of the dwelling.

Federal Political Contributions

If amounts of $400 or greater are donated to a federal political party by a married or common-law couple, the couple should split the donation between them, making half of the donation in each of their names, in order to obtain the maximum tax credit available. The tax credit available on the first $400 is 75% of the contributed amount, while the credit on amounts greater than $400 is 50% or less.

In order for the contributions to be claimed by each individual, there must be two separate donation receipts, each made out to the appropriate taxpayer. Unlike contributions to Alberta political parties, where both names on the receipt allow the taxpayers to split the donation, the federal policy does not allow the split.

Eco-ENERGY-Retrofit Program

The federal government is providing a grant to help homeowners saving money on home energy retrofits. This grant provides up to $5,000 for expenditures aimed at reducing energy consumption and helping keep a cleaner environment. Launched on April 1, 2007, this grant was increased by 25% on March 30, 2009 and has been extended to March 31, 2012 (subject to available funding). In order to qualify, homeowners must first get a pre-retrofit energy evaluation done by a certified evaluator. From the date of the pre-retrofit evaluation, they have 18 months to complete their renovations and have a post-retrofit evaluation done by the evaluator. The post-retrofit evaluation must be completed by March 31, 2012 in order to qualify for the grant.

Examples of what qualifies for this grant are found at http://oee.nrcan.gc.ca/residential/personal/grants.cfm. Depending on the alterations or renovations recommended by the evaluator, homeowners may also be able to qualify for the Home Renovation Tax Credit. You may also go to http://www.ecoaction.gc.ca/ecoenergy-ecoenergie/retrofithomes-renovationmaisons-eng.cfm for more information.

EI Benefits for the Self-Employed

Self-employed people will now have access to the following four special EI benefits: maternity benefits, parental benefits, sickness benefits and compassionate care benefits. They will need to enter into an agreement with Service Canada by registering online with Service Canada, using the “My Service Canada” Account. Unfortunately, they will have to wait twelve months after registering before they will qualify to make a claim for the EI special benefits.

Disability Tax Credit

To qualify for the disability tax credit, a qualified person must certify:

1) That you are blind, all or almost all of the time, even with the use of corrective lenses or medication, and your impairment is prolonged;

2) That you have a severe and prolonged perceiving, thinking and remembering or physical impairment that markedly restricts your ability to perform a basic activity of daily living (which now includes walking which may be certified by a physiotherapist), or

3) That you have life-sustaining therapy to support a vital function.

The disability tax credit is now available for individuals with severe Type I diabetes. Because of the requirement to utilize an intensive insulin management system, you may qualify as you require “life sustaining therapy”. However, at this point in time, it must markedly restrict your daily living, meaning even though you use medication, you are still unable to work, go to school, play sports etc. CRA is still in the process of updating this and may soon come out with more guidelines that may allow greater access to the claim for affected individuals.

Various homecare services (meal preparation, laundry) paid by a senior citizen could qualify as attendant care expenses and be eligible as medical expenses if the taxpayer is entitled to the disability tax credit. Such expenses may not be claimed in excess of $10,000.

Children’s Fitness Tax Credit

This tax credit will allow parents to claim a maximum of $500 per year for eligible fees paid for each child who is under 16 at any time during the year. The program would have to last a minimum of one session a week for eight weeks, except for camps where kids get a full week of exercise.

For children who qualify for the disability tax credit, parents can claim up to $500 per year in eligible fitness expenses paid for the child who is under 18 years of age at the beginning of the year. If at least $100 in eligible fitness expenses has been paid for the child, an additional amount of $500 can be added to the eligible fitness expenses actually incurred.

Child Tax Credit calculator

You can get an estimate of your Child Tax Benefit by going to the online calculator on the CRA website – http://www.cra-arc.gc.ca/bnfts/clcltr/cctb_clcltr-eng.html.

Charitable Giving

Taxation advantages to charitable giving are limited to a tax credit in the amount of 15% of the first $200 of donations for the year and 29% for donations above that level. The maximum amount of donations you can claim in a year is 75% of your net income. The Alberta charitable tax credit is 50-cents for every dollar donated over the $200 threshold.

In the year of death and the year before (including bequests and legacies), the annual limit is 100% of net income for the year. This allows for effective tax planning to be utilized through the use of charitable gifts through your Will. Careful planning with an informed tax adviser can ensure that your philanthropic goals are met and the tax benefits are available to you and your estate.

You are now able to donate shares or stocks versus cash. Gifts in kind are valued at their fair market value however, at the time of donation you must recognize any capital gain that would result had you sold the property for that price. Individuals or corporations who donate securities listed on prescribed stock exchanges, mutual funds and segregated funds of life insurance companies to charities do not have to include any portion of the resulting gain in their income.

Changes to CPP effective January 2011

Effective January 2011, if you are 65 and start receiving CPP, your monthly CPP retirement pension amount will increase by a larger percentage. This increase will occur gradually from 2011 to 2013.

Effective January 2012, if you are under 65 and start receiving CPP, your monthly CPP retirement pension amount will decrease by a larger percentage. This decrease will occur gradually from 2012 to 2016.

Starting in 2012:
• you will not need to stop working in order to receive your CPP pension;
• if you are under 65, working, and receiving your CPP pension, you and your employer will have to make CPP contributions. These contributions will be added to your CPP benefits through a new Post Retirement Benefit in 2013; and
• if you are over 65, working and receiving your CPP pension, you can choose to make CPP contributions. Your employer will also have to make CPP contributions. These contributions will allow you to continue building your CPP Post Retirement Benefit, even if you are already receiving the maximum amount of CPP retirement pension.

In 2012, and then again in 2014, the number of years of low or zero earnings that are automatically dropped from the calculation of the CPP retirement pension will increase.

You will not be affected by these changes if you started receiving a CPP retirement pension before December 31, 2010 and you remain out of the work force.

If you want further information on the changes, you can go to the Services Canada website at http://www.servicecanada.gc.ca

CPP Issues

Maximum Canada Pension Plan pensionable earnings for 2011: $48,300
Exemption: $3,500
Maximum contributory earnings:
$44,800 × 4.95% = $2,217.60 × 2 (self-employed individuals) = $4,435.20 ($4,326.30 in 2010)

If you are considering accessing your CPP retirement pension, here are some of the points you should be aware of:

CPP retirement pension on income earned during the years you have been together can be split up to 50% with your spouse (or common-law partner) once your application has been approved. If only one person has contributed to CPP, the pension can be split into equal payments and the pension is then taxed in the hands of the recipients. Advantages of splitting include shifting income to a lower tax bracket spouse and reducing or eliminating the “claw back” of Old Age Security;

Due to the number of drop off years that you are granted for the calculation of the monthly benefit, it is possible to have zero or minimal contributions to the CPP program for a year without an impact to your monthly pension. Given the large cost of CPP to self-employed individuals (shown above), the opportunity for significant savings exists in the right situation. For an estimate on the amount of your CPP pension and earnings history, please contact Canada Pension at 1-800-277-9914. From this information, we can assist you in making your CPP decision going forward until retirement.

GST

Effective January 1, 2008, if you are an annual GST filer and your net Goods and Services Tax payable in a fiscal year is $3,000 or more, you are required to make equal quarterly installment payments in the following fiscal year. For more details, please visit our website, http://www.gh-a.com

The due date on the GST return is the date the GST returns have to be received by CRA, not the “to be mailed by” date. In order to meet these filing deadlines, please allow us to assist you by having your paperwork into our office by the middle of the month following the end of the GST reporting period. This will ensure that the return will be filed as required to avoid the assessment of interest or penalty charges.

Farm Safety Net Programs

AgriInvest

This is a savings account for producers to replace the top 15% of the farm margins previously covered by the CAIS program. This will be similar to the former NISA program.

AgriStability

This is a margin based program that addresses declines of more than 15% in a producer’s average margin from past years. The application of this program will require the same information that was provided on the CAIS supplementary schedules.

AgriStability Fee

All participants will receive annual notices of what their fee will be. The notice will indicate the due date for this fee. Failure to pay this fee will make the participant ineligible to participate in AgriStability for that program year. This fee is in addition to the $55 administration fee that is deducted from any benefits that a participant may receive.

Overpayments

If there is still an outstanding overpayment the producer can choose to:
1. Do nothing – any future AgriStability and/or government agriculture payments will be applied to the overpayment until it is fully paid.
2. Repay the overpayment – this becomes a tax deductible expense to the producer at the time of repayment
3. Convert to a loan – this becomes a tax deductible expense to the producer at the time of conversion to a loan.

More information can be found at http://www.agric.gov.ab.ca/afsc.

Carbon Credits

If your farming practices fall within the required guidelines, you can apply for carbon credits (credits recognized by the Government of Canada for 1 tonne of CO2 equivalent reduced, removed, or sequestrated from the atmosphere and stored). Best farming practices include soil sequestration, manure management and fossil fuel reductions. A good starting point is http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/cl11618. From there, there are several links to other sites regarding specific queries.

As the trading of carbon credits is in its infancy, we recommend that any contract made with a private aggregator be short term. In time, regulations, verification systems, and fair market prices will prevail, ensuring that fair value is received for carbon credits.

Canadian Farm Business Advisory Services (CFBAS)

As part of the Agricultural Policy Framework, the CFBAS is designed to help farmers plan for the future. The program is entered into by submitting an application form, which can be obtained from our office, or by downloading it from the following link: http://www.agr.gc.ca/renewal

Initially, you will discuss with an advisor by phone, the various options available in your particular situation. For the initial phase, you will be entitled to five days worth of consulting valued at $2,500 with a financial consultant chosen by you, for the price of $100 out of your pocket. The next phase would be Business Planning Services, which are specialized consulting services (succession planning, expansion plans, marketing and diversification). For these services the government will provide matching dollars to a maximum of $8,000 per farmer. For more information, you may call 1-866-452-5558.

Personal Use of Business Vehicles

When a company-owned vehicle is used by an employee for personal use, a taxable benefit should be calculated ($0.24 per km in 2010; $0.24 per km in 2009) and added to the employment income reported on the personal tax return. This benefit can be reduced if the following conditions are met:

• The business use of the vehicle is 50% or more of the total kilometers driven.
• The personal use of the vehicle is less than 1,667 km per month, or 20,000 km in total during the year.

It is required that a logbook or some other form of support be kept of work-related kilometers to verify your tax claim. Logbooks are available at our office should you require one.

There is an online tool that can help you calculate the taxable benefit on personal use of a company-owned vehicle at http://www.cra.gc.ca/autobenefits-calculator.

Hiring Credit for Small Business (HCSB) NEW

A one-time hiring credit for small business was created in the 2011 federal budget to help stimulate new employment and support small businesses. Intended to provide relief to small businesses from the employer’s share of employment insurance (EI) premiums paid in 2011, this credit will pay up to a maximum of $1,000.00. This credit is based on the increase in an employer’s EI premiums paid in 2011 over those paid in 2010. In order to be eligible for this credit, the employer’s share of EI must have been paid to a payroll account. Individuals who have chosen to pay EI premiums on their self-employed earnings are not eligible for the HCSB.

For more information on this one-time credit, you can access the website through the following link:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/hwpyrllwrks/stps/hrng/hcsb-eng.html

Harmonized Sales Tax (HST)

The Harmonized Sales Tax (HST) is the combination of the GST and PST into a single value added sales tax in British Columbia, Ontario, Nova Scotia, New Brunswick, and Newfoundland and Labrador.

If you do business with companies or persons residing in other Canadian provinces, you may now have to charge HST on your supply of services. I have attached a link to a CRA IT bulletin that provides the place of supply rules for determining whether a supply is made in a province that charges HST.

http://www.cra-arc.gc.ca/E/pub/gm/b-103/b-103-e.pdf

There are some exceptions to the rules, and they can be quite complicated. If your company has transactions with out-of-province clients, we will be glad to help you understand your company’s situation and how HST will impact it.

GST

Effective January 1, 2008, if your corporation is an annual GST filer and your net Goods and Services Tax payable in a fiscal year is $3,000 or more, you are required to make equal quarterly installment payments in the following fiscal year. For more details, please visit our website, http://www.gh-a.com

Employee Benefits

Gifts and awards

Under the Income Tax Act, any gift or award given to an employee is a taxable benefit, whether it is cash, near-cash or non-cash. If a non-cash gift or award is given, the fair market value of the gift or award must be included in the employee’s income. CPP contributions will also need to be deducted from the benefit. If the taxable benefit is paid in cash, EI deductions will also need to be taken. However, non-cash and near-cash benefits are not insurable, so no EI will need to be deducted. CRA has adopted an administrative policy to provide certain exceptions to the rule.

The administrative policy adopted January 1, 2010, of allowing two non-cash gifts up to $500 and two non-cash awards up to $500 has now been replaced by the following new policy.

Effective January 1, 2011, an unlimited number of non-cash gifts and awards may be given tax-free during the year to an arm’s length employee to a maximum of $500 in total value. In addition to the $500 gifts and awards limit, long service awards up to $500 can be given to employees with at least five years of service. Any amounts over and above the $500 gifts and awards limit and $500 long service award limit are taxable and must have CPP deducted, but no EI.

Gifts must be for special occasions such as religious holidays, a birthday, a wedding, or the birth of a child.

CRA differentiates between awards and rewards. Awards must be for employment-related accomplishments such as outstanding service, employees’ suggestions, or meeting or exceeding safety standards. Rewards for performance-related reasons such as performing well in their job, exceeding production standards, completing a project ahead of schedule or under budget, putting in extra time to complete a project, or covering for a sick manager/colleague are not included and are considered a taxable benefit.

Note: Any gifts or awards given to non-arm’s length employees are not exempted under the Administrative Policy and are considered taxable benefits.

Social events

An employer-provided party or other social event that is available to all employees will not result in a taxable benefit as long as the cost per employee is not more than $100. If the cost of the event, including ancillary charges such as transportation costs, is more than $100 per person, the entire amount is a taxable benefit.

Employer-provided computers

Generally, no taxable benefit will result where an employer provides a home computer to an employee where it can be shown that the computer primarily benefits the employer and the provision of such computers is available to all employees or classes of employees.

Corporate Income Tax Rates

Corporate_Income_Tax_Rates_2011.pdf

Bonuses

In certain corporate situations, bonus payables are set up. These bonuses must be paid within 179 days of the year end date of your corporation, along with the CPP and tax remittances, and must be clearly documented in the company’s minute book. To ensure the corporation receives the deduction, the source deduction must be paid to CRA. Please refer to the Bonus Payable letter provided to you by our firm.

Automobiles - Deductions and Benefits

Deductions – 2010

Maximum cost for capital cost allowance purposes* – $30,000 plus taxes

Maximum deductible monthly lease payment – $800 plus taxes

Maximum deductible monthly interest cost on auto loans – $300

Maximum deductible allowances paid to employee:

For the first 5,000 km’s – $0.52
For each additional km – $0.46

A higher per km rate may be used if the vehicle doesn’t meet the definition of a vehicle (see below definition*). The amount must be reasonable

*Extended cabs are excluded from this limit if they are used 50% or more (crew cab/4 doors 90% or more) for the transportation of goods, equipment or passengers in the course of earning or producing income.

2011 Federal Budget

Personal tax measures

Children’s Arts Tax Credit – effective 2011, this non-refundable tax credit of up to $500 is similar to the Fitness Tax Credit, as the child must be under 16 at the beginning of the year and enrolled in an eligible program of artistic, cultural, recreational or development activities. The eligible program must be weekly and last a minimum of eight consecutive weeks, or run a minimum of five consecutive days (ie. camp).

Volunteer Firefighter Tax Credit – effective 2011, this non-refundable tax credit of $3,000 will be available for volunteer firefighters who perform over 200 hours of firefighting services for one or more fire departments.

Family Caregiver Tax Credit – effective 2012, this non-refundable tax credit of $2,000 will be available to caregivers of dependants with a mental or physical infirmity. These dependants will include spouses, common-law partners and minor children. This credit will be in addition to an existing dependency-related credit. The resulting effect will be an increase in the dependant’s net income at which the amount will be fully phased out.

Medical Expense Tax Credit for other dependants – effective 2011, the $10,000 threshold for eligible medical expenses for a dependant relative will be removed. This measure recognizes the effect of the extraordinary medical expenses on a caregiver’s ability to pay their taxes.

Child Tax Credit – effective 2011, the rule limiting the Child Tax Credit to one parent per household will be repealed. Now, eligible parents sharing a common domicile can claim the CTC in respect of their children.

Tuition Tax Credit – effective 2011, fees paid to an educational institution, professional association, provincial ministry or other similar institution to take an examination that is required to obtain a professional status, or to be certified or licensed to practice a professional or trade in Canada will be eligible for the Tuition Tax Credit.

Education Tax Measures – Study Abroad – effective 2011, the minimum course-duration requirement for a Canadian student studying abroad has been reduced from 13 consecutive weeks to 3 consecutive weeks. Now students enrolled at a foreign educational institution can claim the tuition, education and textbook credits, as well as have access to the Educational Assistance Payments from their Registered Education Savings Plans.

RESP’s – Transfer of Assets Among Siblings – effective 2011, transfers between individual RESPs for siblings will be allowed without tax penalties or repayment of CESGs. The only condition that CRA has set on this is that the beneficiary of the plan receiving an asset transfer was not 21 year old when the plan was opened.

RDSPs – Shortened Life Expectance – subject to specific limits and conditions, RDSP beneficiaries who have shortened life expectancies of five years or less will be able to withdraw more of the RDSP savings through annual withdrawals without triggering the 10-year repayment rule. If this situation should apply to you, you may contact our office for the details of the conditions and limits and how they will apply to you.

RRSPs – Anti-Avoidance Rules – new rules have been introduced (similar to the anti-avoidance rules for Tax-Free Savings Accounts):

• the advantage rules;
• the prohibited investment rules; and
• the non-qualified investment rules.

These new rules will apply to transactions occurring and investments acquired after March 22, 2011. There are two exceptions to this effective date. Swap transactions started before July 2011 will not be affected by the advantage rules. Also, any swap transactions that are done in order to comply with the new rules regarding a prohibited investment or an investment that will give rise to an advantage will be permitted until the end of 2012. The other exception is concerning the income generated on prohibited investments. If this exception applies to your RRSP investments, please call our office to discuss the issue.

Individual Pension Plans (IPP) – There are two new tax measures introduced in Budget 2011:
• once a plan member reaches 72 years of age, annual minimum amounts must be withdrawn from IPPs (similar to RRIFs); and
• restrictions on past service contributions.

Tax on Split Income – effective March 22, 2011, capital gains realized by a minor from a disposition of shares of a corporation to a person who has a non arms length relationship with the minor, if there had been taxable dividends on the shares would be subject to the tax on split income. The capital gains will not benefit from the capital gains inclusion rates nor will they qualify for the lifetime capital gains exemption, but will be treated as dividends.

Mineral Exploration Tax Credit – has been extended to include flow-through share agreements entered into on or before March 31, 2012

Corporate tax measures

Corporate tax rates – the $500,000 small business income limit will remain the same for a CCPC, and the general corporate rate for 2011 will be 16.5% and for 2012 – 15.0%.

Stop-loss rules on the redemption of a share – effective March 22, 2011 current stop-loss rules have been extended to include certain share redemptions that were previously excluded. There will continue to be an exception to the stop-loss rules with respect to deemed dividends on redemption of private company shares held by private companies.

Corporate tax deferral using partnerships – there were a number of new proposals introduced to eliminate the tax-deferral on income earned through a partnership. These proposals will apply to corporate partners with more than 10% income allocation entitlement from a partnership in a year. The new rules involve a one-time tax cost which can be spread of five years, estimates of stub period accruals as well as more complicated rules for partnerships with multiples tiers. For more information on this tax measure, please contact our office.

Hiring credit for small business – there will be a temporary Hiring Credit for Small Business to provide a one-time credit of up to $1,000 against a small firm’s increase in its 2011 Employment Insurance (EI) premiums over those paid in 2010.

2011 Summer newsletter

Summer_2011_newsletter.pdf

2010 Christmas Newsletter

Christmas_2010_newsletter.pdf

Mileage Logbooks

On June 28, 2010, the federal government announced that proprietorships could use a simplified logbook for motor vehicle expense once they have established a base year (maintain a full logbook for one complete year). The simplified logbook covers a three month period and can be used to extrapolate the business use for the entire year (as long as the usage is within 10% of the prior year). You can visit
http://www.cra-arc.gc.ca/nwsrm/rlss/2010/m06/nr100628-eng.html for further details.

2010 Summer newsletter

2010_Summer_newsletter.pdf

60 Day Cut-Off

In order to determine taxable income and corporate taxes payable, which are due 90 days after your fiscal year end, we require all corporate clients to provide their complete records and financial data, including QuickBooks, Simply or any other electronic data, on or before the 60th day following their respective fiscal year-ends.

This policy will ensure our office has 30 days to determine taxable income and corporate taxes payable for all clients to meet this deadline. We will not be able to guarantee the accuracy of the taxable income and corporate taxes payable if complete information is not received within 60 days.

We wish to remind our clients that Canada Revenue Agency and Alberta Finance will assess interest and penalties to corporations with outstanding tax balances 180 days and 90 days, respectively, subsequent to their year-end deadline.

Furthermore, in order to complete and file corporate tax returns within the required time period, being 180 days subsequent to their respective year-end, clients are now required to provide their complete records and financial data, including QuickBooks, Simply or any other electronic data, on or before the 120th day following their respective fiscal year-end. This will ensure sufficient time for our office to complete preparation of the year-end file and corporate tax returns.

Gregory, Harriman & Associates Professional Accountants