taxdetective-Sandusky-Register

Click here:  Automobile Km reimbursement rate rises!!!

When you have a vendor and a customer subledger account you want to offset in whole or in part, the best way to accomplish this using QuickBooks software is to effect a swap of funds between AR and AP is via a clearing account. I usually set up a clearing account as an Other Current Asset type of account, use an Item that links to both the vendor and the customer's transactions and ensure that it's always kept reconciled to a nil balance.

The easiest way to make the swap is to use the forms, a Bill or Bill Credit to clear the vendor's AP account and depending on whether it's an increase or decrease to the customer's AR account, I would use an Invoice or a Credit Memo, clearing the agreed amount with out tax consequences of course, using an Item (use Other Charge Item Type and set up both sides of the Item to point to the same Clearing Account you've just established.

Here's the sequence:
Set up an Other Current Asset called Clearing Account
Set up an Other Charge Item called Clearing Account and open up the purchases side of the Item to link both sides of this Item to the Clearing Account
Open a Bill and choose to make it a Bill Credit or leave it as a Bill, making an entry to the Vendor (v) for the agreed amount, using the Item tab to link the Item to the Account. It's a good idea to document any agreements in writing, print out the email, or get a signature of who agreed to this transfer as it's like a payment.
Open an Invoice or a Credit Memo and enter the same amount using the same Item to link the Customer (c)
Check the register for the Clearing Account, and in fact, use the bank reconciler feature to reconcile the account each time you make such a transfer to ensure that the Clearing Account is always nil.   

Make 2012 the year you learn how to use QuickBooks effectively and efficiently.

If you want to learn best practices on how to master your use of QuickBooks software, I've recorded 20 hours of training, in 2 hour videos for use by bookkeepers, accountants and business owners and their spouses...

Click here to buy individual videos, or save by purchasing the entire set of 10 videos!  To learn how to master the software on your own would probably take at least 100 hours. That's what it took me, just to get familiar with it, and then thousands of hours of experimenting with the best way to get it done.

So you aren't just saving money, you're saving valuable time!             

Interesting list of what's considered fraud...Are the statistics are relevant for you and your business?

If so, what you are doing about internal control to minimize the risk? Two important ways to combat fraud are to design systems that segregate duties and to create a procedure manual everyone must follow.

My videos on Mastering QuickBooks Software and on creating Procedures Manuals can help you get on the right track.

www.taxdetective.ca/shop.html

Did you know that the Indian Act S. 87 trumps other legislation like the Income Tax Act and the Excise Tax Act?  But only if you are a 'status' Indians who carry the right card, and are earning income from property which includes income from sale of goods and services on a reserve.

If you are not a status Indian, if you visit a reserve to purchase goods or services, you should expect to pay GST/HST. There's only one card, and no, a Metis card won't cut it.

If a status Indian sells to another status Indian off reserve, it's a taxable event.

Want to know more?  I've just added a web page on Native Indians with useful links to my TaxLinks Pro.

A TaxLinks Pro subscription, good until Oct 1, 2012 is $30 plus tax  
(I'm not on a reserve nor am I a status Indian)

Are you pondering your 2012 TD1 Federal and Provincial?  Notice the fillable form.

If you are an employee, its that time! You've heard it's better to pay less tax at source and not have as big a refund next April? This is how it's done. The TD1 federal and the TD1 provincial provide you with an opportunity to pay less tax at source during the year so you have more money to pay down debts, and even more important, to put food in the fridge.

If the deductions and credits you claim aren't on the TD1, check out whether the T1213 is right for you. It requires approval from CRA.This form might help you with that cash crunch if you are paying spousal support or have other large expenses or credits that qualify to reduce your taxes.  Watch your April filing to see how many expenses or credits you have that provide for a refund, and make sure to amend again during the year if your situation changes.

Oh yes, make sure you know that any time your marital status changes, the new budget requires you to report the change in status in the next month, you no longer have 90 days to ponder your change, it's much sooner, and hopefully will cause less stress when you don't have to pay back benefits you should not have received like GST/HST credits and Child Tax Credits.

Notice the new for 2012, Family Caregiver Amount (FCA)? This extra amount of $2,000 at 15% federal equates to $300 of tax reduction.  It's worth noticing, but make sure you document your claim before you decide to make a claim, or you could be paying more tax than you planned in April 2013.

The additional amount is for infirmity and you'll find it is added on a five different lines, married, wholly dependent, child, caregiver and infirm, all found on the new TD1, but only on the federal TD1, it's not a provincial credit, at least it isn't in BC. It's not the only credit that's only federal.

There is no definition of infirmity in the Income Tax Act. Infirm is not the same as disabled. Infirmity takes its common meaning from the dictionary.

It's necessary to re-sort your lists every so often in order to assist the data integrity function in the background of QuickBooks software to do what it does best. You can sort some of the lists that are not included on the Master Names List such as your Items or Accounts by choosing to Edit and Re-Sort List, but did you know it's possible to re-sort your names list this way?

How to Re-Sort the Masters Names List in QuickBooks:

1.  Open "Write Cheques"
2. Notice that the Payee field includes all Names
3. Enter Ctrl L to open this master list of all names
4. From the "Edit" menu choose to "Re-Sort List"

After the re-sort is done, do a File > Utilities > Verify data to ensure your data integrity is intact.

If it's not, follow the instructions to do a re-build, then check it again.  If your re-build didn't fix the problem, don't keep doing it, call me for technical assistance.  Did you know that ProAdvisors can contact Intuit for free under their service agreement, but ProAdvisors will charge you for  their time?

If you want to know more about using QuickBooks effectively, one cost effective way to learn more is to purchase my ten, two hours videos created for the Institute of Professional Bookkeepers. 

20 hours of training, is probably equivalent to about 100 hours of your time if you had to figure out how to use the software by yourself.

Download the videos, you own them. Or purchase the videos on a DVD so you can pass it around the office.  Watch the videos more than once if you need to, or share them with your family and staff to ensure that everyone is using the program effectively and efficiently. 

If your pension from Germany started prior to 2005, inclusion is at 50%, but if it's after 2005, it's higher...

See the chart at the end of this CRA webpage that explains how to include your German pension in your Canadian income tax return:

http://www.cra-arc.gc.ca/tx/nnrsdnts/ntcs/grmny2005-eng.html

German Consulate provides a list of who consults on German pensions (not necessarily licenced to file tax returns and even though called an accountant may not be one)

http://www.taxmentor.ca/av/2011-0400781E5.pdf

Looking for a qualified accountant in Canada who knows German tax and speaks German of course...
If you know someone please pass along these links as I need someone who can file returns, not just interpret:

It seems that if you have quite a bit of other income other than the German Pension, you may just want to opt to pay the tax and claim the tax credit in the year you pay the tax. 

I'd like to know the difference between limited and unlimited liability if anyone has the inside edge...

Please leave a comment, or email me, if you know something about this!

 eileen@taxdetective.ca

Real Christmas trees are great but what do you do with them afterwards? Brad Major at CarbonSync has solved the problem.  He rents Christmas trees for the holiday season. Check out his website at www.carbonsync.caor call him at 604.626.7668 or email him at brad@carbonsync.cato order your 7ft Canadian fir tree. Brad drops the tree off at your home or office and picks it up after the holidays.  It’s only $179.99 for all this service. Part of the net proceeds comes to the Burns Bog Conservation Society

This is BIG food for thought.  I don't know who wrote this, but hopefully they are ok with it being passed on...
An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that  socialism worked and that no one would be poor and no one would be rich, a great equalizer. 

The professor then said, "OK, we will have an experiment in this class on socialism". All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A.... (substituting grades for dollars - something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. 

The second test average was a D! No one was happy. 

When the 3rd test rolled around, the average was an F. 

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. 
It could not be any simpler than that. (Please pass this on).  Read the following:

These are possibly the 5 best sentences you'll ever read and all applicable to this experiment:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Can you think of a reason for not sharing this? Neither could I.

Marry an Accountant... Or Buy these Videos (if you can't find an accountant to marry that is)

Marry an Accountant...Or Start a Spousal Makeover (these videos are that powerful, they will turn your spouse into an accountant)

Rotary Auction on Delta Cable this weekend: Are you an auction fan? You'll find the Master QuickBooks Video Series is being auctioned off in the Delta Cable Rotary Auction on December 3, this Saturday coming up, with proceeds to my favorite local not for profit organization, Earthwise Garden.

Life events, transitions, times when things change, click here for a useful list with links to information that might benefit you or someone you know

Did you know there's a CPP Child Rearing Drop Out Provision?

Employers are invited to a free webinar on CPP changes December 7, 2012

Changes to CPP for contributors ages 60-70

Click on the title above or here to: open the video.  This link is for a one hour meeting hosted on GoToMeeting this morning, to review the latest release. We found about 20 new features, some of which could be declared to be things we could get ecstatic about!  The new batch invoicing (as long as you aren't using Multi-currency, at least at the moment, stay tuned for upgrades) and Balance Sheets by Class are just two of the many improvements and new features.

If you like this video, you might also like Mastering QuickBooks Software, 10 videos, 2 hours each, which take you through best practices for using the software from a new company to reporting and security.  Why? Because you need information for making important decisions about your business.

Just posted on the CRA Website!

So who thinks they can persuade their doctor to certify in writing the infirmity for one or more of your dependent relatives?  Who might that be?  Any one of these five categories of dependent for whom you currently claim a personal tax credit on your tax return:
Your Spouse
Your Child (multiple)
Your Eligible Dependent (can't double dip here with child though)
Someone who you claim as Infirm over 18
Someone you claim under the Caregiver Amount

For an explanation of these credits, see RC4064 or the TD1 federal, (you'll have to wait for 2012 form in mid December) which should provides amounts and limits.

Each of these credits will get a $2,000 federal tax credit boost, worth $300 per dependent for 2012, that is, if you can persuade a qualified medical practitioner to certify infirmity.

If you can certify this early in 2012, watch the TD1 form, as you may be able to pay less tax at source, and have the $300 during the year, instead of having to wait until April 2013 for this amount.

Of course Wall Street gets it, they'll even tell you, it's right in this article. It's our tax code and the choices we make about how we arrange our affairs to cope with those rules.  Our tax system is not only so complex, it's designed to shape our choices. The people who draw up the rules will even tell you that's what they are doing. 

Why do you think we in Canada were introduced to a new tax credit this year called the Family Caregiver Amount?  It's designed to bolster up the perception that we're going to care for our family at home. This credit is designed to make sure we're making looking after family members a priority as are most of the other tax credits, designed to guide us because they know something we may not have figured out.  The message is that we can't afford to keep all those boomers in care facilities.  There aren't enough beds.

If I'd known as a teen what I know today about tax, I probably would have made completely different choices about how I arranged my life.

Our education system, at least here in BC, not sure about the rest of Canada, but ours doesn't provide teens with the opportunity to learn about tax.  Not saying that what they learn in school isn't valuable, but it sure isn't practical in terms of life skills if it doesn't include a healthy dose of how tax is going to affect the rest of your teens life.  Remember, tax free day isn't until when? June or something?  A huge chunk of what we earn goes to taxes.  Doesn't that deserve airtime?

We don't shares with teens how to complete a TD1 and why, so they can ask their employers to reduce the tax taken at source when they first start to work.

I doubt we talk about the long term dangers of the underground economy and how the choice to work for cash can influence a person's ability to ever even get a mortgage to own a home. Just ask any banker, and they'll tell you sad stories about people who only report $30,000 as income and now want a mortgage. The banks want nothing to do with them.

Why? Qualifying for a home in Vancouver, not on $30,000 income, unless there is a stash of cash for a huge down payment.  And the potential of questions by CRA...where did the money come from for you to afford that address?  Think they aren't watching? Hah.  CRA has a program that compares addresses and last names for who lives with who to find rental suites. It's only a short step from there.

Why do only commerce students and accounting students study tax?  Tax influences how all of us make choices, the least we should do is to expose our teens to how the system works, let them use their imaginations to find ways to use the system to their advantage.  After all, if you want to give them a leg up, studying tax code, that's what the folks on Wall Street did.

This announcement precedes more technical documentation to follow. 

It will be interesting to see if this is something I'd pursue given my age and income and aversion to risk.

Does the title make you want to buy the book?

Please tell me what you think. eileen@taxdetective.ca

My book is going to be published soon, and we need a short, sexy, two or three word at most, title:

Does this make you want to buy?

Intimate Details

Your Guide to Taking Control of Personal Finances

If spouses are involuntarily separated as one is in a care home for example, reversing spousal CPP split to the spouse in the care home when that was advantageous could increase the GIS by about $200 a month. 

Watch to make sure that not splitting the CPP doesn't increase the tax beyond what you'd expect, about 10%, in my example, their tax went up $500, in exchange for $4,800 of GIS...and definitely watch out for the potential for OAS repayment on line 422 of your tax return. 

If you want to try out your numbers, use TurboTax Online for free, just use SIN # 000000000 to run a trial return for both spouses for free.  You don't pay unless you file.

Take out your OAS before using this calculator (click above on the title to access the calculator and calculate for single instead of married if involuntarily separated)

Also complete
SC ISP-1811 Statutory Declaration - Separation of Spouses/Partners
NCC001 Statement for OAS and CPP Involuntary Separation
Applications for GIS for prior years
3025 (2009)
3026 (2010)

You can call for forms, 1-800-277-9914 or find the forms online and some are even fill-able online to print and send, saves on handwriting the information.

Click on Home page, select Forms from other on the right side,
then find the Forms page link to search for forms.
If you just search on the main website, none of the forms come up.

Alternatively: Click here for the direct link to the Service Canada Forms and type those form numbers in the search box.

Not only that, but if you hire a caregiver, or have a home office, those could void it too! That is, if you haven't put a rider about non family living in your home, or business use of your home...

Thanks John, for the great administrative reminder...

Work sharing initiative with EI topping up employees who work a reduced work week, interesting idea... extended to October 2012

Why would you send back the documents to the client before the return is even completed its re-assessment process instead of forwarding them to the next section for review?

I'm not amused.

CRA has a form, T1ADJ, for adjusting, line by line your requests for any changes to your tax return.  This form can be generated in the tax software we use, by creating an original return, taking a Snapshot, and then populating the form.  The software generates a form that ensures that every line that changed is recorded for easy cross checking with the re-assessment notice.

Heaven help you if you want to adjust two taxpayers whose adjustments rely on each other's adjustments to be processed at the same time.

You want to adjust someone's return, or let's say you want to adjust more than one person's return...and what happens on the one return affects what's eligible to be claimed on the other person's return.  Let's use an example, where because one spouse has been admitted into a care facility, you are asking for the pension split to be reversed.  This reversal results in a spousal transfer of unused credits from one spouse to the other, which is new.  So, you submit not only a cover letter with the two adjustment forms for the two taxpayers, but you also submit a Schedule 2 for spousal transfers.  And you wait. 

What happens at CRA's processing centre is that the two returns are separated and go off to two different places to be processed, not at the same time.  Let's say that the spouse who is supposed to get the credits that result from this adjustment, doesn't qualify for those credits yet, because the first spouse hasn't had their return adjusted.  The processing staff pumps out a re-assessment, ignoring the request for the spousal transfer, not checking to see if the other spouse's return has been processed yet, and your taxpayer gets an invoice to pay way more than what you said would be owing.  The clients pay, mostly because they spend all day at the care home and have no time to deal with paperwork, and don't even check to see if what you said they would owe is what was assessed.

It's only a fluke that they happen to give you back the NOA's and you check them against what you submitted, and find, to your horror that none of the spousal transfers occurred, and that the client has overpaid $2,000.

There does not appear to be a quality control assurance process at CRA to ensure that what you request to be amended is actually amended.

Moral of the story, check every re-assessment, as it seems there is no guarantees that what you requested is what was amended.

If you are self-employed, these links are useful. Last year I presented a workshop on completion of T2125 and haven't had time to go back to visit that materials.

If you are looking for a speaker for your business group, this presentation might be just what you're looking for.

If it is, contact me to book a workshop in the spring.

I recently attended an www.ipbc.ca online workshop on tax for truckers. The presenter, Robert Scheper, THR Consulting Group Ltd., explained the disparity in expense claims between self-employed truckers, and truckers who work as employees, whether for their own company or someone else. It was very interesting.  He's written a book "Making your Miles Count: taxes, taxes, taxes.

There is another challenge Robert did not mention in the workshop, and it's one that's become interesting for contractors in the IT industry who contract themselves out under their own corporation, much like truckers do as owner/operators.  They may not meet the criteria to claim the small business deduction, and they may not be able to claim other business expenses, because they are considered a personal services business if they don't have at least five full time employees, plus other criteria, which you'll find in my Personal Services Business webpage.

I found an hour tonight to research and create a list of links from the CRA website to explain the differences.  Basically, an employee is able to claim a flat rate reimbursement for certain expenses, whether or not they spent the money.  As an incorporated employee, you would deduct those expenses prior to issuing a T4 for net earnings. How much less you'd pay tax on, would depend on how frugal you are.If you live on peanut butter and jelly sandwiches, it sounds like there could be a distinct advantage to incorporating. I'm not recommending anything here, just saying do the math, and be wary of other rules, like the Personal Services Business rules. 

If your corporation is just a wall between you and the company you work for, the personal services business rules may apply. If that's the case, your company can't deduct anything you wouldn't deduct if you were an employee who had a contract directly, and everything else the company paid for would end up on your T4 as a benefit, plus anything you left in the company as retained earnings would end up being taxed at the highest corporate tax rate. On the Canadian Tax Foundation LinkedIn Group we've been having a discussion about PSB's and their impact.  You won't find anything on the CRA website unless you know what to look under, as PSB's don't get a direct mention.  I've put a link to my other webpage on that topic on this trucking page.

Other considerations: WCB may deem that it is the company that hires your company that has to pay the premiums for WCB. Plus, as a corporate employee, you don't qualify for EI, and the new self-employed EI rules allow for self-employed persons to pay in and claim EI benefits.

If you like to read about tax, or you're concerned you won't meet your non-verifiable hours of PD by the end of the year, you'll find lots more links pages like this one under my TaxLinks Portal subscription, which has an annual expiry date of September 30, and sells for $30 plus tax.   

Click here to buy a subscription now to start reading more about tax!

Did you attend more than 2 conventions this year?  Here's the link to the rules.

The ground just shifted under your feet... Check out the transitional rules in the e-Alert from McCarthy Tetrault

And... for more on NPO's, visit my NPO website page found under my Complimentary Links at www.taxdetective.ca.  This page includes a report from the panel discussion I hosted for my CGA Chapter (right at the top). The discussion was about NPO compliance with various laws, not just payroll, and sales tax, but Income Tax too.  Just because you're an NPO, doesn't mean you don't have to report and in some cases, on more than one form.

Did you know that NPO's may be required to file a T2 to prove they aren't profitable and that they may be required to prove they aren't profitable by filing a T2 every year?  That's in addition to their other reporting.

If you are self-employed,

you'll be paying $178.20 more for CPP contributions

...of course, that's only if you're earning contributing the maximum because you earn $50,100 in 2012.

Good luck with that.

Earlier this week, several senior staff in a meeting at Surrey Tax Office informed those in attendance they don't feel they should have to 'mother' taxpayers about how to calculate instalments if they are new at being self-employed.

Something snapped. I've been working on individuals tax compliance for over 25 years now, and it's galling, it's pathetic, it's insulting that this particular calculation isn't highlighted. Those of us in public practice can tell you, taxpayers get trapped into a sense of complacency in their first two years of business that costs them the rest of their financial future happiness. I'm really tired of the attitude that someone just came right out and said it, only made me more determined to do something.

Then there's the BC Education curriculum, and in the tax arena, they include an extremely basic payroll, T4 and T1 calculation for a simple, employed, single individual, but only if teacher's have time and inclination. That's it.  There are 7 mentions about tax in the entire curriculum, and only 3 related directly to income tax.

Doesn't anyone realize that our self-assessing system is so complex there is no way, that without help and 'mothering' there's no way taxpayers can figure out how to comply anymore?  Even I need my hand held to figure out some things, because folks, tax is complicated and it's not getting any easier any time soon.  So how do you prepare your children for the world we live in?  We need to teach them about how taxation works, and not just the basics of being employed, because that simply is NOT enough.

Do you want your children to learn about tax?  If you do, I've put together a Student WorkBook, with case studies, and videos to explain how to use TurboTax (TurboTax online is free, create up to 20 sample files) to learn how about tax.  I've put resource links to reading about each case, and some Questions and Solutions to cement the learning. 

This is just the beginning.  Like I said, something snapped.

More on the saga of German pensions..

Annual report for Canada reports that between income taxes, other taxes, EI premiums and other income, our revenue / inflows were $237,091 Million.

In spite of that income, there's a shortfall in income of $33,372 Million for 2011, year ended March 31, 2011.  The money had to come from somewhere.  Canada had to borrow because of that shortfall, our deficit grew by the same amount, $33,372 Million, during the period from April 1, 2010 to March 31, 2011.

See Table 4 which shows the major categories of expenses for Canada, what makes up the $270,463 Million we spent? Transfers to seniors for OAS and GIS, EI payments, children, funding for health and social programs, fiscal arrangements (not sure what this is...) cities, crown corporations, national defence, and the cost of borrowing.

We have an accumulated deficit at the end of March, 2011. What we've borrowed net of assets we hold of $550,327 Billion.  The carrying cost on this debt is around $30 Million per year.  That's about 5.8% of total debt.

The population of Canada in 2011 is approximately 33 Million.  That means our deficit grew by $1,011 for every person in Canada. 

Makes me wonder, if...
... we all paid our taxes and added a thousand dollars, would the deficit actually disappear or would our politicians find a way to spend more than we make?

... everyone who was supposed to pay taxes actually did pay their taxes?

Just for fun, let's do some math. Let's say that there was a segment of the population who paid tax on $30,000 and didn't report an additional, let's estimate, $20,000 of income and pay tax on that extra income. Let's say there's 15% of Canadians, or 5 Million who didn't pay $5,000 (the rate would be effectively 25% on the extra income not reported at Federal plus BC tax rates) 

How many people do you know who only report $30,000 a year?  I've met a few over the years. In fact, in 2008, the national average reported income was less than that...http://www.statcan.gc.ca/daily-quotidien/100617/dq100617c-eng.htm

Just sayin'...it costs me way more than that just to live a frugal life, well, maybe I eat out once in a while, but only breakfast, or a burger, never an alcoholic drink, and camping holidays, makes ya wonder...this year the campgrounds filled with fifth wheels, hardly any tents.

Would people who only reported $30,000 have any savings in their RRSP?
How on earth did they manage to save at that income level?
Does any of this add up?
Mortgage or rent $1,500 x 12 = $18,000 / year
Utilities $4,000 / year
Cell phone $1,000 / year
Vehicle costs $8,000 / year (gas $1,400, insurance $1,400, repairs,$1,500 loan payments $3,700)
Groceries $125/week, $6,000 / year per person
I'm already up to $37,000... and this doesn't include education, clothes, cosmetics, entertainment, fitness, arts or medical expenses.

It's no wonder the seniors in my community are out every Monday morning collecting everything they can out of the recycling boxes. Between the two of them, they probably bring in OAS, CPP and GIS, for a total of about $30,000 combined.

It's also no wonder that anyone who is widowed and knows that their widower's GIS will be cut off if they live with someone, or remarry, after one year would want to lie about their living arrangements.

Imagine living on Persons with Disability allowance, in BC, about $10,000 per year.  Choose between food or shelter. Shop at the Thrift Store, and see how you make out.  Oh yes, and someone watches your bank account like a hawk.  The minute you go over their threshold, your benefits are cut off until you get rid of your savings. We're really good at marginalizing those who can't help themselves. Hasn't changed much since we were kids in the playground it seems...

The additional cost to provide a similar GIS for Persons with a Disability, 800,000 persons with a disability (this is about how many are qualified for the DTC in Canada) x $5,000 = $4,000 Million, about 1.5% of our annual spending.

You could argue, there are already hidden costs, most persons with a disability have their medical costs covered because our Medical Services Plan doesn't require premiums to be paid, and their medical care is covered. You'd be right.  But does that make it OK to not allow them to save, or to have to choose between food and shelter?

RDSP uptake isn't what was expected. 

Why aren't people with disabilities opening up an account, even just for the $1,000 a year bond?

No definitions of disability, infirmity, support or documentation to be concerned with. What's not factored into those reports is how much it costs to administer all of these credits, only how much the credits themselves cost us.

What if we got rid of credits and deductions, got rid of the administration, and reduced our tax rates instead?  Wouldn't that be simpler and whole lot fairer?  Of course, if you're the recipient of deduction largesse or credits bring your tax payable to nil , you might not be paying any tax at all, and the thought of a world where you had to pay something might be very stressful.

But, what if we were able to increase the amount paid to compensate for the lack of credits, by increasing the amount paid, I mean what if we paid persons with a disability, for example, the same amount as is considered the basic amount a senior should be able to live with?  Instead of reducing the tax of the person providing support, increase the direct support and stop marginalizing those people by refusing to allow them to have savings.

How many times have you trained a bookkeeper, only to have them leave in a month or six months?  You may have spent thousands of dollars on classroom training already.

Are you ready to stop the expensive bookkeeper training cycle and curb your exorbitant training expenses?  What if you could do that, for only $399?

Did your bookkeeper quit because they discovered they really don't like doing bookkeeping, or maybe  they didn't get the attention and training they needed to feel they were doing a good job.

Maybe there wasn't time, skills or the thousands required to pay for expensive training and even if you had, it wouldn't have done the trick.

Now you don't have to pay for that training over and over and maybe they won't quit because they'll get the training they need and you can recycle the training to everyone in the business, even your kids and spouse could benefit all for the one low price. 

See what this series could do for you Download, save it on your computer, watch the bonus video for free right now

Buy the video series, download and save it to watch as you have the time, 20 hours of top notch training

     

.

Why a fabulous deal? 

These videos are only $399, that's for 20 hours of training on using QuickBooks software,

At $19.95 per hour; you can't get training for $19.95 an hour.  

If you are or have hired a member of www.IPBC.ca then you're in for an even better deal.

The videos are only $199 for IPBC members, that's $9.95 per hour

If you're a bookkeeper, that's about half the cost of a membership for a year to get even more benefits, including free access to my next series on working papers in Jan/Feb 2012.



Why would I say recycled?

Everyone in the business, the owner, their spouse, the manager, the bookkeeper, the accountant, the sales manager, the parts manager (not just the person who took the training and quit) can watch them, over and over if necessary, and they can move around within the video to revisit a topic.

Everyone at home can watch them too, high school kids, university students and CGA students can watch these videos to improve their understanding and their marks in Business Ed courses. It might encourage them to help you out with the business too.

As of June 2011, administrative changes for reporting marital status changes were to be increased from 90 days post separation to by the end of the month following...

CRA conveniently leaves out the administrative changes suggested in the federal budget from their list of budget changes...interesting how that works.

That isn't what's showing on the CRA website yet, but it's probably best to follow those procedures as the budget points out, the repayment of child tax benefits or GST/HST credits can be onerous and why go there?

You can change you rmarital status online in My Account or submit RC65, signed by both parties.

The Annual Report of the federal government was just released along with the Fiscal Reference Tables - 2011

There's another link under this information, which isn't updated yet with 2011 information and once it is, will make interesting reading. 

It's the Tax Expenditure Reports under the tab of that name on the sidebar that I find interesting. At the moment it only shows up to 2010.

But, as you can see from the 2010 report, this document can be an excellent commentary on our tax system, why we have the credits, when they were instituted is often mentioned, and what's important to know about each credit.

Given the relative newcomers to our Parliament in the last election, I'm sure this report will be very useful for them to learn how our political choices influence our tax system. Sometimes you can get a pretty good sense of the mood of the bureaucrats toward the social programming benefits of our personal tax credit system from this report.

Good news this a.m. on the involuntary separation front.  My client, whose spouse is in extended care appeared on my doorstep, Service Canada envelope in hand. Inside, a letter with an explanation and an election form for 2009 income tax year, to remove pension income splitting for GIS, ALW or ALWS Calculation purposes, and the forms says this decision won't affect CRA's assessment of income taxes. 

Because of a change in my client's personal situation, the client is in an extended care facility as of March 2011, and calculation of GIS for July 2010 to June 2011 is based on 2009 income, an election can be made to exclude the split pension income transferred to the client by the spouse in 2009. 

At first glance, I thought, why aren't they sending a form for 2010, then I checked the client's file. We had reversed out the pension split for 2010 because of the cost of care calculation. If you've amended someone's return to take out the pension splitting for a prior year, you'll want to read this.  Be careful, you may not want to reverse your decision to un-do the split as that could still cost you. Just because the feds have figured out that they should be fair and reverse out the income inclusion doesn't mean that the provincial social workers who calculate the cost of care will be as forgiving.

I do want to see if this form is on the Service Canada website though, and to see what it says on their website....hmmm the cover letter says you can download forms from their website, so maybe I'll find another form there.

I call Service Canada 1-800-277-9914 (you may have more luck than I did getting through) for information or go to their website servicecanada.gc.ca for more information.  I finally get through, just as my client arrives, the dog barks and the person answering the phone hangs up on me even while I'm telling her via speaker phone that it's my client and we have questions.

I can't find anything about this election or a copy of the form on the website, but if you find it, please forward a link to me eileen@taxdetective.ca

On the involuntary separation front...

Credit splitting on divorce or separation doesn't talk about involuntary separation...
http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/credit.shtml

Funny, how life events doesn't include involuntary separation either... this isn't the first time I've run across this challenge, there was a time when it was a race by the families of each of the seniors as to who filed their returns first to get the GST/HST credit as only one is allowed even if you live on opposite sides of the country:
http://www.servicecanada.gc.ca/eng/lifeevents/index.shtml

Ahhh right at the bottom, contact Service Canada, but not told why or how there will be an impact...
http://www.servicecanada.gc.ca/eng/isp/pub/cppoas/lifeevent/index.shtml... now if only I could get through on the phone again, sigh.

Bank's can't sell insurance online that they were prohibited from selling in their branches...

If you own bank shares, dividends might be taking a dip...

http://www.fin.gc.ca/n11/11-096-eng.asp

…empty board seats…job postings for honest managers in 2012?
Safeguarding Charitable Assets through Good Governance

If the individual

Hmmm who knew?  These corporations enjoy the same 'qualified donee' status as registered charities, meaning they can issue official receipts for gifts, and receive funds from registered charities.

CRA is going to making a list publicly available and requiring books and records to support official donation receipting, so watch for the new listing on the CRA website in 2012.

You'll find more on the Chariteis and Giving web pages next year.

Low-Cost Housing Corporations for the Aged

This credit is a one time credit, so if you don't take advantage by the end of 2011, it's gone.

One time credit is based on increase in employers EI premiums for 2011 over those paid for 2010.

Who knew? and... if you don't claim it by January 1, 2015, it's really gone.

If you are in business, self-employed, corporate, partnership, or you manage a trust, and you hire consultants, paying 'fees for services', you'll want to be watching the new reporting requirements on the re-designed T4A form with more than just a little interest. 

Your business could be the recipient of T4A's that you'll need to reconcile with your income to ensure that you are reporting what's been claimed on the slips too. 

I can see it's only a matter of time before CRA may require you to provide a listing of your sales by customer on a desk audit basis, to verify that you've included these amounts in your income.

There's a comment in the 2011 Federal Budget about Box 48 and how that box is to be used which leads one to believe that if you're in business, and you, for example, hire a coach, or a computer technical person who works for themselves, and invoices you, that you're going to have to provide a T4A. 

Now it doesn't say if this is on a cash or an accrual basis, but it's definitely there.  It does specifically say this won't be when you hire someone personally, and they use a hairdresser to do your hair as an example.

No idea if they intend to enforce it for 2011 as What's new for payroll stresses they are undertaking a review of what should be included in this new Box 48 and currently there are no penalties for not complying. 

You'll want to think twice...

The budget announces new very tough anti-avoidance rules that allow RRSP's to access their RRSP without including amounts in income.

RRSP and RRIF strips explained

You might want to beat the rush. Visit your doctor now to document claims for the new $2,000 family caregiver amount (FCA) as you'll be able to claim it on your 2012 tax return in April 2013. 

Here's the proposed legislation released October 2011.  You'll want to review all of the changes to the Income Tax Act S. 118, and not just for the $2,000 credit, there's other changes too.  The plain english version is found in the Budget summaries on the CRA website.

If you're a doctor, expect visitors. Not only will you be requested to complete a T2201 certifying disaiblity, but now you'll have to vet infirmity as well. Infirmity doesn't have the same definition as disability. Infirmity isn't defined, it takes it's common ordinary meaning from the dictionary.

If doctor's charge a reasonable amount for the certification, the amount can be recorded as a medical expense, so expectt to provide a receipt for the charge, and include it in income, (of course). There are over 150 medical expenses, most of which now require certification in writing in order to be claimed by your patients.  Only four of these expenses require the disability tax credit, most are common ordinary expenses claimed by ordinary people, who may have an infirmity, either mental or physical, and doctors may now be called upon to certify this infirmity. 

Oh yes, as as of 2010, if it was for cosmetic reasons, they can't write it off, so doctors and dentists may be required to provide additional proof that procedures were not for cosmetic purposes.

There are five possible bumps for dependants you support. What's it worth? $2,000 x 15% federal tax rate is $300 per person, then multiply $300 x the number of dependants who are 'infirm'.

Best to review your 2010 tax return now to see if you'll benefit. What do you have to do? Get your doctor to agree that dependants you support and claim on on your federal tax Schedule 1 are infirm:

1. Line 303: Spouse
2. Line 305: Eligible dependant
3. Line 367: Child under 18 at end of year
4. Line 306: Infirm dependant age 18 or older
5. Line 315: Caregiver amount

And, once you qualify, you may want to adjust your tax at source by completing a new TD1 federal and provincial/territorial to provide payroll with proof you don't need as much tax taken at source.

CRA explains in their explanation of the Budget 2011, that it will likely be necessary to obtain a signed statement from a medical doctor that provides the:

• Nature of the infirmity
• Commencement of the infirmity
• Duration of the dependant's impairment

"For children under 18, indicate that the child, by reason of mental or physical infirmity, is and likely to be, for a long-continued period of indefinite duration, dependant on others for significantly more assistance in attending to his or her personal needs and care when compared to children of the same age"

Now, if your doctor doesn't want to use that wording, it's going to be tougher to get the credit. If you are a doctor and feel offended by the wording, your clients aren't going to be very happy if you refuse to provide them with the necessary documentation.

If you're claiming for an infirm child and you are also eligible to claim for the same child as an eligible dependant, there's no double dipping on the $2,000, you'll only get one claim for $2,000 for each child.

You're allowed to reimburse km's tax free if the rate is reasonable, and CRA posts what that rate is on their website. But do you think I could find it with the search engine just now?  I tried all sorts of combinations, none of which brought up anything about reimbursement of km's tax free.

I had to resort to my own notes and TaxLinks for vehicles once again.  Here's what I was searching for:

Automobile allowance rates  (not a breath about tax free km's anywhere to be seen... but that's what we all call it)

And I noticed this article is posted there from 2006..

Just in case you were wondering about the complexities of vehicles and tax...

Driving my life away...

CGA Canada's remarks to House of Commons Standing Committee on Finance on its Pre-budget Consultations 2011

Key recommendation:

What's new 2011 more budget enactment, including personal tax credits like children's art's credit, and moves to damn up partnerships who use corporations to defer tax...

Finance has released Notice of Ways and Means for more of Budget 2011 today...

If you are hiring new employees, there's a special reduction in EI expenses you'll want to know about.

The caregiver credit is introduced, and with it, qualified medical practitioners are going to be asked for yet another letter, for infirmity for spouses this time.. you'll want to check this out if you care for anyone. 

Free Tax Information pages provide examples of the kind of links you'll find on many more tax topics

Recently I used pages from the TaxLinks collection to make a submission to CGA Canada to utilize for their presentation to the Minister of Finance.  I wanted to explain for example, how the rules about vehicles, home office and CCA are found in so many different places on the CRA website that it's impossible to figure out which are the right rules to use for an individual, a partnership, or a corporation or trust n any given story.

Renew or Subscribe to TaxLinks Portal now!

This is a collection of topical links generated by my research into a variety of tax topics for articles, client queries and presentations on tax to a variety of organizations including CGA Chapters for PD, CGA Financial Controllers Group, CGA Computer User Groups, CGA firm's partner's meetings plus various community family support groups and libraries.

There's a revised claim review manual setting out instructions for CRA reviewers on how to review a claim.

CRM Manual explanatory notes about changes and a link can be found here

Imagine the heart ache for everyone who knows this fellow...
CRA fines bookkeeper for taking over $100,000 from employer.

This is one of the prime reasons small business's need internal controls.

Not everyone that works for your business is as honest as you'd think.The business owner has to protect themselves by setting up internal controls.  Rules about who does what, for example would have prevented this bookkeeper from taking these funds. 

The rule is simple, it's called segregation of duties and what's required is a procedure to ensure the person who reconciles the bank shouldn't be the one signing cheques. 

To learn how to build internal controls into your business books, check out my video series on Mastering QuickBooks Software!

I'm finding this really interesting. This woman, who is really smart by my estimation, wants to do bookkeeping. She's learning QuickBooks software because business owners are using it.  She's taking all kinds of courses on how it's supposed to work, but she's not getting it. There are so many ways to do things that she's hung up on all the different choices.  So we've started with stories about her clients, one at a time, or stories about what she's found after doing about 50 different types of clients, what isn't being done properly by other accountants or bookkeepers when she takes the books over.

Today, it was about fixed assets and how to record the purchase, and when the asset is sold, how to record the asset sale in the books and on the tax return.

I've been recording key parts of the conversation and those conversations are for sale on my website.  If fixed asset / capital asset recording has always stymied you, it's no surprise.  I spent ten years doing extensive work on capital asset dispositions and acquistions, as the group of companies I worked for at the time, 30 companies in the group, about 10 operating, and 20 holding companies, re-organized, refinanced, and then sold or disposed of every single asset in the group, including 750 units in the fleet.

As a result, I know a thing or two about capital assets.  If you're looking for simple ways to handle the recording and reconciliation of assets using QuickBooks software, this 23 minute conversation might completely change your outlook on this complex area of accounting.

I'm building an inventory of stories like this one, each between 20 minutes and an hour, to showcase different challenges users might face in the design and structure of their use of the software.

Check out the list so far, and if you have a challenging story, contact me with the story.  We can have a similar conversation and we can if you like, record the conversation, for your use only, and yes, fees apply.

Story telling project

New for 2011:  not just men with hammers will have to report based on T4A's

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/rtrns/t4a/nw-cds-eng.html

Watch for more details

Register now for “Shake Out BC”  @ www.shakeoutbc.ca

When I signed up there were 230,000 people signed up already.

Put a note on your calendar now so you remember on the day!

CRA provides for taxpayer relief, a special program you have to know to apply for if your situation warrants it. This used to be called fairness, or administrative relief. 

Voluntary Disclosures is another program under the programs and services banner on the CRA website.

Just last month, in August 2011, the procedures for requesting relief from penalties, or fairness to collect refunds for beyond 3 years changed. 

There is an interesting new form, RC4288 that sets out the terms and conditions for a request, providing instructions and examples of supporting documentation required. 

It isn't mandatory to use the new form, but it seems like it might be useful to make sure you've adequately addressed all the possible questions that might be raised and pin point exactly what you are asking for in an efficient manner.  I'm impressed.

If you are in business, and are faced with catching up and keeping current with record keeping, I have a solution for you. In March, 2011, I presented a series of ten sessions online for a live audience over two weeks.  The host was the Institute of Professional Bookkeepers of Canada. 

In BC, if you haven't been looking at your cash register tapes, you might wonder if you bought certain products, why there's a 5% tax and a 12% tax on your cash register tape.

That's because there's a reduction called a "point-of-sale rebate" (click for more details) for certain limited types of items, a primary one being books and motor fuel.  Children's clothing and feminine hygiene products qualify too.

The store is allowed to either charge the full amount and then credit you back, or just charge the net 5%.

This morning I had someone email me that their mom had a cash register receipt from Wal-Mart that had both 5% and 12% on it and the store manager didn't want to explain why.  If they had done the math, they would have found tax on the books was not charged at 12%, but rather at 5%.

In 2005 the Minister of Finance decided to add amendments to many of the medical expenses to require 'certification in writing' in order to make a claim for most of the 150 medical expenses.  Now that's easy when it's a prescription for a medication that pharmacist fills, because pharmacists and doctors have figured out each other's writing. They have a code by which they communicate in writing.

Not so much between CRA and those doctors, whom CRA has give the title of "Qualified Medical Practitioner".

In mid 2005, I volunteered to advise CRA about disability administration and was invited to Ottawa to meet with a committee of like minded souls.  We met with about several senior administration finance related teams, Benefits Admin being chief among the teams. In early 2006, that and every other committee advising CRA was terminated due to budget constraints, so we approached the Benefits Admin team to ask if we could continue to meet at no cost by teleconference. We met until the end of 2010 until the team leader for that team retired.  During that time the discussion about medical expense certificate in writing was brought up many times.  We wanted to have templates for each 'certified in writing' to communicate correctly what needed to be said, if indeed it should be said at all, and to clarify for non tax professionals when it was appropriate to attempt certification. 

You see, what needs to be communicated, is exactly what the Income Tax Act requires be certified, otherwise you don't have a claim.  Judges in tax courts write about this in their deliberations.  The content, context and purpose of the Income Tax Act is held up to the mirror with it's facts of the case, and the facts must fit the Act or there is no claim. 

But the Medical Expense claims section at CRA who would have no part in this discussion and felt that this was an infringement on their right to interpret what they received.  Maybe they felt it would taint the doctor's communication to know what was actually expected to be received. 

To me, this attitude seemed disrespectful of qualified medical practitioner's ability to understand what is to be communicated and it's expensive.  It is, I believe the cause of much time, time for Finance Rulings officers, Tax Court, Appeals and up to the Supreme Court.

Where doctors and taxpayers don't understand what the requirements are, how can they reasonably be expected to meet those requirements, or to in their own minds decide that their fact pattern doesn't fit the situation and not even begin the process in the first place? 

Here is an example from the Child Care expense claim world.. If mom is 'infirm' a condition which has no definition, but takes it's common ordinary meaning from the dictionary, dad may on T778 claim the child care expenses if mom has no income to claim again, if the doctor were to write a letter that said exactly this and I quote from the Income Tax Act: S. 63(b)(i)(B)(II):

"(II) was in the year, and is likely to be for a long, continuous and indefinite period, incapable of caring for children, because of the person’s mental or physical infirmity,"

Now the doctor could choose to elaborate, but they don't have to, it's enough that they have written and signed this statement.  If they chose to elaborate, but didn't say this exactly, it likely might mean that the claim could be denied if their description of what was going on didn't seem to exactly fit with these words.

I believe we should respect that the 'qualified persons' being asked for certification have enough intelligence to figure out that they can't sign off on the wording if it's not appropriate, but first, we must actually share with them what that wording is. 

For more wording of what's exactly required, the qualified medical practitioner currently must access the Income Tax Act, and it is accessible for free on the Justice Minister's website and S. 118.2 can be found here;
http://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-118.2.html

There are devices and equipment mentioned in this section under the sub-heading (m) and those can be found in Regulation 5700
http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._945/page-121.html#h-292

There are over 150 medical expenses plus devices and equipment, many of which require 'certification in writing'.  Most of the time this certification is required to be by a 'qualified medical practitioner' but there are time when it is required by 'an appropriately qualified person' as in the case of S. 118.2(2)(e) care or care and training at a school, institution or other place.