taxdetective-Sandusky-Register

I believe it's important to reflect on where we've been...

Every so often, usually about this time of year, I ponder the thresholds and rates as well as the maximum contributions for CPP and EI and wonder how many Canadians actually contribute the maximum for CPP.

I'm sure someone knows the statistics on that?

EI premiums and maximums:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/ei/cnt-chrt-pf-eng.html

CPP premiums and maximums:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/cpp-rpc/cnt-chrt-pf-eng.html

Note to self-employed...

If you are self-employed and earn $51,100 in 2013, you'll be required to remit $4,712.40 for CPP contributions in 2012, up $99 from 2012.



 

Re-posting this blog as a reminder to complete Box 85 to save time and money!

http://taxdetective.blogspot.ca/2012/06/box-85-on-t4-should-be-mandatory-and.html

There's a reference to articles written for Intuit ProAdvisor Newsletter in the working paper series (five hours on reporting and reconciliation for year ends)

Here's a link to lots more resources if you're at the stage of watching the 5 part working paper series and if not, make this page a favorite to visit later when you get there.

http://www.taxdetective.ca/working_papers_ipbc_2012.html

If you have no idea what the bundle is all about, over the past 2 years, I've created and produced a series of videos to learn how to master QuickBooks and augmented it with the working paper series, plus written and produced other videos and products to aid in accounting for your business.

These products were written for bookkeepers and accountants, or small business owners who want organize their paperwork from the current chaotic mess that it is today.

Visit www.taxdetective.ca to shop.

Finance released their rates for 2013 for vehicles recently:

http://www.fin.gc.ca/n12/12-178-eng.asp

In my TaxLinks Pro Portal on vehicle rules because there are different rules for claiming expenses by employees, shareholders and self-employed persons, combined with different rules for different vehicles, this makes for a real mess of rules!

If you aren't sure about which rules apply to your situation, this page may provide some clarity, or scare you enough to seek professional help:

www.taxdetective.ca/vehicles.html

If a subscription to TaxLinks Pro Portal interests you, that's where I post my research and topical links so I can find them again. I sell a subscription that I've chosen to renew each October 1. It's $30, no matter when you sign up, and it's a great way to enhance your tax reading for PD points if you're a CGA looking for non verifiable hours. 

...2.5 days to go to accumulate enough points for 2012...

www.taxdetective.ca/shop.html

If you're in business for yourself, there are reconciliations, and not just bank reconciliations!

If you're re-assessed for prior period GST/HST, or income tax, or PST, it's necessary to go back and reconcile those periods, and to make adjustments to those years expenses or income depending on the adjustments required by the assessing agency, be it CRA or Provincial tax auditors, or WCB for that matter.

Those adjustments may affect the income for that period. That may require a tax adjustment for that period as well.

There's a free spreadsheet you can download from my website to help with reconciliation between what was recorded by the agency (what you filed, or what they adjusted it to) and what's on your books.

Until they agree, you aren't finished accounting. I know this is time consuming and you probably can't believe you can't just ignore this step, but hey, there's a reason we went to school for years at night, and why we get paid for our expertise.

Reconcile it yourself, hire a bookkeeper to do the reconciliation and insist they do it, or your accountant will need to figure it out when you bring in your books.

Here's the free spreadsheet:

http://www.taxdetective.ca/catalog/item/8328953/8674760.htm

To obtain news like this directly from the Employer's Advisers in BC contact the PG office 1-888-608-8882 or email mkilcul1@eao-bc.org to request the newsletter if you're an employer or have clients who are employers.

For more information on how employers' advisers assist employers with WCB issues check out
http://www.labour.gov.bc.ca/eao/

Purchasers of the "bundle" of 44 products produced between March 2011 and October 2012 are entitled to a free hour workshop on best practices for using QuickBooks.

Today's session touched on something I'd never thought to include which is how to report without cents!

Great questions, and we covered some really fun stuff about construction renovations today.  Next session is January 7th 2013 at 11:30 am PST.

If you purchase the bundle before January 5th, you'll be invited to attend when you purchase.

If you purchased in the past and want to attend, let me know and I'll send you an invitation.

www.taxdetective.ca/bundle.html

For last nights workshop participants at the CGA Fraser Valley Computer User Group...some follow up notes:

Find the wording for the qualified medical practitioner (could be mental or physical infirmity) in the Family Caregiver Amount link

I've posted about infirmity a few times in the past year and each link has different wording and information that may strike a chord or provide the language you need to ask a QP to write a letter certifying infirmity:

http://taxdetective.blogspot.ca/2012/02/what-does-infirm-mean.html
http://taxdetective.blogspot.ca/2011/10/beat-rush-certify-infirmity-for-2011.html
http://taxdetective.blogspot.ca/2011/12/its-that-time-complete-your-td1-for.html

This link takes you to Examples of impairments for those videos with Gumby I talked about, remember that disability isn't infirmity... but this will help with the definitions of disability.

Click on the Examples, and then click on each type, and a video will come up,
for example, click on Walking or Dressing... and each of the 8 examples has a video

These are a great tool for you to use with families or their doctors, as the videos are cute, short, and pack a powerful message:

http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/dsblts/qlfd-prcts/menu-eng.html

I wish you all a Merry Christmas!

CGA's if you're not sure you have enough points for 2012, or you're planning your PD for next year, consider purchasing my bundle of products for only $290.00.  There's a link to purchase the mastering QuickBooks software bundle, go direct to www.taxdetective.ca/bundle.html

There are 44 items, videos, spreadsheets, sample data files, etc. included in this bundle. Basically it's everything I've recorded from March 2011 to October 2012 for IPBC webinars for bookkeepers. Then, for free, you can also download sample data files from my website that were created while recording the webinars.

People tell me they are now watching the video for the third time, because they are so content rich. They have QuickBooks open on one monitor, and the video on another, or on a laptop beside where they are working, so they can pause and re-wind and work through what I'm showing them with QuickBooks open and the same file I"m showing on the video open so they can poke around and explore the forms, registers, reports, etc. to see for themselves how it works. They tell me they are gaining confidence, and one guy reported he passed the Certified ProAdvisor exam with 83.33% on the first try after watching the ten videos.

Last night the crew at the CGA Fraser Valley Computer User Group got a kick out of what one anonymous customer had to say about how these videos had affected him...

"I've watched other videos, read a few books, about QuickBooks, but yours are totally different. After watching yours, I feel that I am now controlling QuickBooks...before that I was controlled by QuickBooks...I am free now. I am the master, not him" 

I wanted to know why QuickBooks is a him and not a her...so I asked my husband. He says it's because machines are often considered to be feminine and the software that controls them is masculine. What do you think?

With 20 hours on Mastering QuickBooks, another 5 hours on Working Papers using QuickBooks report writer and a plethora of other self-study topics like Units of Measure, Time and Billing, Adjusting Time & Billing, you'll be positioned to claim 30 or more hours of non verifiable PD.

But there's something else that could provide you with even more hours, there's a link to my TaxLinks Pro Portal, for hundreds of hours of reading on topical links by subject. For example, vehicles, CCA, home office, personal services business... those are just a few of my research projects for writing articles where I've kept the links to my research. My computer tech guy suggested I should bundle those links and sell them as a valuable product in it's own right. Repeat customers tell me they love those links.

Order the DVD for an extra $20 if you don't have about an hour to download all 44 products. I'm told the 2 hour videos in the 10 part series take about 7 minutes each with a high speed download. And someone introduced me to www.speedbit.com yesterday, so maybe it will be even faster with this free tool. (no guarantees, and please read the caveats before loading free software)

Here's what it says on the CGA BC website about what qualifies as non verifiable hours:

Q: What types of activities qualify as non-verifiable technical reading hours?
A: The following types of activities can be claimed under non-verifiable hours:

• Self-study or technical reading of published materials relevant to your development as an accountant or related to your industry
• Reading Outlook magazine or CGA-Canada Magazine
• Technical research and reading that may be required of you for your job
• DVD, CD, or audiocassette study and self-study courses that do not provide a certificate of completion or assessment process

When submitting a claim for a non-verifiable technical reading activity, include a brief description of the activity, titles of publications and hours spent.

I received this email this morning and asked TJ if I could share this with you.

 

Notes:
Just today someone else called me and told me that I've completely changed how they do books.  They used to panic when they got a pile of receipts from a client.  They didn't know where to start.  My videos helped them to overcome that fear with a plan for how to tackle a pile of paper. Isn't that cool?


BTW, if you didn't know about me and my videos, you'll find more information here:

In 1986, in London Drugs computer department, Ladner store, on one of those carousels, I met Quicken software. On the front cover of the box, I was promised this software would help me reconcile my bank account. There was nothing else out there that reconciled your bank. I was hooked. Still am and still download and reconcile my accounts at least once a week.

Why was I so enamored? I'd spent about a year, in 1983, manually reconciling the bank accounts of Century 21, the Canadian franchise company for the first five years of it's existence. It would take me a whole day, sometimes two, to reconcile one month's cheques and deposits. The stack of cheques alone was 8 inches tall, for one month. I was looking for how come the general ledger was out of balance before we computerized everything. The books were still manual at that point.

In 1986, my first client in my accounting practice had investments, so I opened the investment module and started entering transactions to figure out the gains and losses. Ran smack in to stopped and superficial losses.

Over the years, as each new client came for a visit, I would open a Quicken file, and record in it their accounts, their assets, their debts, and produce a draft of their net worth. Every so often a client would call, ecstatic because their banker had high praise for how organized they were because they knew what they owned and owed. It happened again, just last month.

My motivation wasn't the same as my clients. I wanted to make sure I caught all of the taxable transactions and sometimes that included proceeds for other assets, sometimes at a gain, and it also caught when they inherited, and co-mingled the inheritances with a spouse, and tried to split the resulting income. It helped me to determine whether there was a gain or a stopped loss when an investment disappeared off the broker statement, and re-appeared on the RSP or TFSA statement, but the funds went somewhere else. Why? Because the T5008 doesn't record deemed dispositions of investments to your RSP and there very well could be a capital gain that resulted.
It helped me when they called, asking me what they should do if ... because we could easily take a copy and do a what-if scenario, using Quicken and the tax software to calculate the cash flow and the tax consequences of their proposed actions.

How do you remember what everyone owns and owes? How do you quickly get up to speed, remembering the nuances of each client's financial situation when they call asking for your assistance? For me, this software has been an enormous help.

I haven't kept track of how much I've made from using Quicken, but it wouldn't surprise me if it was more than from QuickBooks. On a consistent basis, over 27 years, I have an electronic trail of investments, accounts, assets, liabilities for each client. Sometimes they've asked for a copy so they could download their transactions and start to keep a more accurate record of their day to day spending, but mostly, it's just been an annual update, taking the pulse if you will for how are they doing. I remember times when we've stopped to ponder and celebrate reaching a milestone, a net worth of 500,000 or one or two million. I remember splitting apart assets for a separation, and merging them for a second marriage. Quicken provided a convenient method of keeping track.

Now maybe you find that too invasive, but the clients I have value that I care enough to keep track. That's part of why they hire me. They want my advice and they know that I have a system of keeping track so that when they asked a question, I already had the background. I had already calculated their ACB (see my post on 27 reasons to calculate ACB if you haven't already read that, or visit it again for a refresher)...

I hope you'll consider attending the January series. I know it's a shock that it isn't free, but, I guarantee that if you adopt Quicken as a tool in your arsenal of record keeping tools, you'll make money using Quicken in your practice. You'll make much more than the cost of this workshop and you'll have peace of mind knowing you aren't forgetting something you should know about your client's financial position if you prepare their taxes.

If you sign up before December 31 for all four sessions, you'll receive the recordings free of charge after the last session.

The Income Tax Act and the Excise Tax Act (that's where GST/HST is found) are not the same. They may cross reference each other though.

In the case of reasonability of an allowance this is an interesting question for which I don't have the answer yet.

Is 40 cents a reasonable km reimbursement? In a world where 52 cents is the rate posted by CRA, is 40 cents too low?

Here's the GST/HST Policy #113 R with some background on how GST/HST views reimbursements that are considered taxable and tax free

http://www.cra-arc.gc.ca/E/pub/gl/p-113r/p-113r-e.html

Let me know what you think.  Have you done the math with your own vehicle?  What is it costing you to run a normal vehicle? Not a huge monster truck, we know those cost more, just because there's more rubber on the road

A regular vehicle. What's it costing you per km? And where are you in Canada?

Purchase the series, all three videos at 10% off the individual prices

Find out more at Bookkeeping for Inventory Parts (November 2012 IPBC webinar series)

Q: Are we going to be able to send questions after? It is going to take a bit of time for this to sink in.
A: Ask away.

Q: You are doing a great job. It is definitely not you, it's the topic:) I have found I have to record the change in inventory when I am posting entries to a T2125. I find that is how I can have the T2125 Income Statement match what is in QuickBooks.
A: My system of posting the Opening Balance and the Ending Balance and offsetting the difference to Purchases account works, as long as when you adjust Qty/Value of Items, you record the adjustment again on the Income Statement, before adjustment of COGS and after to arrive at COGS.

Q: Can you explain the posting of the ending balance to purchases in QuickBooks?
A: See above, and download the spreadsheet, it's in my >Links>Complimentary Links> Sample Data files along with the *QBB files to study

Q: Thank you, I think I finally got it!
A: I'm so glad, this isn't an easy concept, when the change in inventory isn't just one number on the Income Statement, part of it is buried in the increase in Inventory because purchases were added, but may or may not have all been sold, and inventory was adjusted for a variety of reasons we covered in the workshop today.

Q: Will this company file (including the transactions you input today) be available for download on your website?
A: Yes, again, go to >Links>Complimentary Products>Sample Data

Q: Are we able to get the PowerPoint? Is this webinar available in the member area?
A: No to both. The PowerPoint is just a few slides and those are my talking points/notes, not available for distribution. No, BUT, you can purchase the videos in my shopping cart under Master QuickBooks Software - See the Inventory Series, November 2012

Q: Great workshop series - thank you!
A: No thank you for being a great audience!

If you really intend to complete T2125's, I'd recommend first of all, that you've read the Income Tax Act.  You can find a free copy on the Justice Minister's web site, www.justice.gc.ca or at www.canlii.org or you can buy a copy with annotations and indexes to help you find stuff from either Carswell Thompson or CCH. An annotated copy costs about $125 and they update them several times per year.

Then I'd recommend you read the CCH Preparing Your Income Tax Returns latest edition every year to get what you can't get from the law, which is an interpretation. That book costs about $100

Then, I'd recommend you read the CRA website from cover to cover - start with the Site Map. That's free but very frustrating as the topics are sort of dealt with like you are cross dressing, you'll find bits of information all over the place without the connectivity to really figure it out without years of pouring over the IT Bulletins, the IT News and IC's. plus the Income Tax Act, but I already said that above.

And then, after all that, here's a 30 hour course you might appreciate...that delves into the fine points of the form completion offered by someone who does a great job of delving into detail.

Evelyn Jacks course on Proprietorships

and oh yes, then you still have to figure out how to make the tax software work, and check your work to make sure you didn't create one too many T2125's and enter everything twice, or even three times or the vehicles on one schedule that links to one T2125, and the home office on another, and the assets on a third, and the operations on a fourth...

Just kidding you think? I had to fix someone's return for several years back because of exactly this prior preparer error.

If you aren't at this level, and just want to learn how to prepare a basic tax return, there's always my Student WorkBook with videos and case studies to get you started. It's under the My Projects tab on my website.

Start now! Please don't wait until next April though, because even that takes a few hours to work your way thru.

Can't you just add up the receipts, plunk the numbers on the form and call it good? Who needs to keep proper records? It doesn't really matter, and even though it is the law that you're supposed to keep records, not just keep receipts...

The topic, of accrual accounting for self-employed taxpayers surfaced over the weekend during my presentation on T2125 Self-employment for the Surrey Langley North Delta CGA Chapter. Someone said that if they had to do accrual accounting for their self-employed clients, they wouldn't be able to do as many returns as they do now and that client's wouldn't be willing to pay for the increased cost.

In the moment I let it go. I should have responded that they'd make more money with fewer clients. Let the clients who don't see your value go, and spend that time on the ones who do. So I thought I'd say it now and add some more thoughts that occured after the event.

Before tax season even hits, consider the following thoughts carefully and then increase your rates, announce your intention to provide first class service and watch what happens.

Here's the start of my great reasons to do accrual accounting list.

Accrual means recording sales on the date the sale is finalized, and recording the cash receipt, even if its on the same day, as a separate transaction, dated the date the funds are received, using Accounts Receivable to clear the transactions through a customer . The date they are deposited might again be a different date, that's why it's so handy to have an Undeposited Funds account automated in QuickBooks.

Accrual also means recording purchases on the date on the purchase document and recording the payment, even if it's on the same day, as a separate transaction, clearing the Accounts Payable using the Vendor name.

Now for the reasons why you'd want to do this for sales/payments received

1. To ensure that the customer actually paid
2. To ensure the payment was recorded against the right invoice
3. To ensure that the sale was recorded on the right date for revenue recognition purposes
4. To ensure the sale was recorded on the right date for GST/HST recognition purposes
5. To ensure that all receipts have invoices - if all you have is a pile of invoices, and one goes missing, how will you know if you don't also record the deposits and cross -check that all invoices and all payments are recorded
6. To provide a historical record of how long it took the customer to pay you, because maybe next time, you'll ask for a retainer up front if you know this customer is really slow at paying, or you'll turn them down if they never paid you at all.

Now that's just on the sales side. On the purchases/payments paid side...

1. To ensure that you've recorded all the purchases, it's necessary to record the payments because that way, you can see if there's a purchase missing - it's called 'exception reporting' where you record all the payments that should have receipts, and then record the receipts, and if there's either a receipt with no payment, or a payment with no receipt, you've got an exception that needs investigating.
2. To ensure that all payments were made because if you can't prove you paid something, you have to add it back in 2 years - S. 78 of the Income Tax Act - unpaid amounts
3. To ensure you only pay something once, and not more than once (that's why all purchases should be recorded in AP and all payments should be recorded to clear AP, no matter how they are paid)
4. To ensure you record all expenses, even if they are reimbursed, and that you invoice all reimbursements, adding appropriate GST/HST or PST now that it's coming back..
5. To provide a historical record by vendor of what you purchased and when in a sub-ledger
6. To provide proof of payment in order to claim an ITC on the purchase

There are lots more reasons, like tracking assets, personal use of vehicles, business use of home, year over year for comparative purposes, but I'm sure you get my drift.

The last reason is all encompassing - it's about success.

When your client's business grows because they have confidence, it very well could be that they can grow because their finances are under control, it's because you put the right controls in place from day one. Great habits, proven methods of control.

The best part, it will help your clients (and you) sleep at night, knowing the receivables are being collected, the payables aren't being paid twice, and the finances are under control.

So if you lack confidence, or you don't believe in yourself or in your clients, go ahead, add up receipts with a tape and tell yourself it's fine to not worry about your client's financial health and future well-being.

If you do believe your clients business's will grow and so will yours because their business
grows, start every client out on the right foot, by doing it properly from the beginning. Otherwise, when there's a question about the tax records, you'll have to do it over anyway because you'll never be able to figure it out from the tapes, which will have faded and may not even be legible any longer.

Doing it the old fashioned way, you'll have instant answers when your client calls to ask for a document, because you did it right the first time and filed it so it could be found, in alphabetical order. And if that doesn't make you look good, I don't know what will.

If you want to know more about how to keep really great records that will give you the confidence to succeed, check out my YouTube Channel for a 49 minute video.

http://www.youtube.com/TaxDetective/

Not only should CRA group together topics of a similar vein so that various taxpayer groups can compare and contrast the rules as set out in my post the other day...

Here's some other thoughts as I get ready to meet CRA this morning.
Use the structure of the Income Tax Act as the basis for setting up the structure of the CRA website.
It wasn't until I sat down after failing the IT 2 course and Ed Kroft told me that to pass the course, I'd better read the Act... that I really got what it was all about. It was the Table of Contents at the beginning that nailed it.  It was the Index at the end where all the concepts were linked to Sections that filled in the gaps. It was reading the actual words of the sections and getting that this piece of work was a giant algebraic formula in prose.

The secret is to go back to the structure of the Act and not to try to create your own structure. Then, it's necessary to reference the real thing as well. It's all well and good to have Interpretations by experts, but there is no substitute for reading the sections. Now that we have the Internet with 2 free sources of the ITA, www.justice.gc.ca and www.canlii.org who both keep it current, there's no excuse to not do so.

And, there's no reason on earth to require that every teacher in the country log into the education portion of the website with repeat use of their personal information in order to view the educational section. Whose dumb idea was that? And only having an out of date Ontario example? Come on.

We need current examples of all the forms, we need to see what a tax return should look like for an extended family, for a self-employed person, for someone with employment expenses, all those audit demand letters on employment expenses, rental expenses, self-employment that you're sending out, do you ever once consider that people have no clue how to complete the forms and that they are doing the best they can with a horrible amount of requirement for detail that they can't imagine will ever be looked at?  They need examples to follow.  Yes, its always possible that they might actually figure out that they haven't been claiming what they should have claimed, or will try to claim more, but maybe they'd actually get that their claims are ridiculous if they saw a sample.

And we need Box 85 on the T4 to be mandatory, it's no different than union dues.

Plus we need clarity about claiming medical expenses in so far as the wording of what qualified medical practitioners wording will be acceptable for most of the 150 medical expenses, and now for the Infirmity designation for the Family CareGiver Amount. How on earth are QPs supposed to know what to write that would be satisfactory? Are they supposed to be able to read the Income Tax Act in order to complete a letter that will satisfy CRA? That's just ridiculous and it needs to stop.  Someone's cruel childhood game translated into adulthood needs to stop.  I'm not going to tell you what to say, you have to guess is about how QPs are being treated.  Then, when they don't say what's necessary they are subjected to multi-page requests for details instead of being asked if they could write what is required. I find the whole thing tiring just contemplating the millions or billions wasted on this process and all for what? A political game of tax credits.

Yesterday, the Surrey Langley North Delta chapter of CGA hosted an event on T2125. The links for this presentation are passworded and the people who attended have the password. Thanks for the positive feedback on your forms!

I've added the YouTube link for the 49 minute video on my channel about internal controls on payables using QuickBooks software; and there's now link to download and SAVE AS the *QBB file and the Profile T1 2011 data file as shown in yesterday's workshop. I've also posted the Home Office page link.

If you're considering public practice, you must be registered as a CGA at some level of public practice (there are multiple levels). You definitely can't be a retired CGA if you plan to do anything more than data entry and checking the work. Why? Because as a retired CGA you don't need to keep current. It's that simple.

If you are self-employed or on contract, and prepare any tax returns or do any summarization or analysis leading to or completion of compliance work, even if you don't sign off on T1s, T2s, T3s, T3 Supp, T4s, T5s, T5018s, GST/HST, PST, WCB reporting, etc and charge for doing so, registration is required. You'd be much better off getting hired as an employee instead. If you volunteer, it's necessary to check in with CGA BC first as well. Contact the CGA BC office next week as that isn't my area of expertise.

What do I do? I am a social media maven it seems, much to my surprise, as I was just having fun exploring the medium when my friend Merge @mergespeaks shone a very bright light on what I was doing at a CGA conference on social media in Whistler several years ago now. I present workshops, live online, usually for IPBC, but also for private clients looking for online training. I do some live in person events, and consult and coach business owners, accountants and bookkeepers on mastering the use of software, specifically QuickBooks, Quicken, and Profile software. I love to research tax topics to write articles for publications and to share with fellow CGAs and other groups I participate in via LinkedIn and a CGA's Only tax study group. I have a short, exclusive tax client list, enough work to keep me and my clients happy. I love my life.

Link to CRA FAQ on Mandatory e-Filing

If you are a tax preparer, it's necessary to update your status for next year,

and if you've never registered before, better start early as it's a process that takes time!

Click here if you've never registered to e-File

Anything more than data entry and checking that the numbers entered are correct and reconcile to the documentation or to third party information available is considered public practice and CGA's in BC must register and purchase insurance.

But can just the simple act of data entry be cause for concern? Do you have to care about what you enter? Or can you turn a blind eye? See the questions and answers below.

Q#1 If Mary Smith, CGA (a mythical character in earlier posts) calculates the GST/HST return, summarizes the payroll data entry to prepare the PD7A, or prepares a report to calculate the WCB premiums, will she be required to be registered in public practice and purchase insurance by the Code of Ethics for CGA BC?

Answer #1 YES, Mary will be required to register and obtain insurance. Services including summarizing, analysis, advice, counsel or interpretation are considered to be in the practice of public accounting by definition in the CGA BC Code, as is the preparation of tax returns or any other statutory filing.  Payroll, GST/HST and WCB are all statutory filings.

Q: Could Mary get around this by just preparing reports and have the owner sign them?

Answer #2 NO, she can't say she didn't do the work because that would not be telling the truth.

Click here for a link to the CGA BC website for information about public practice registration requirements

Q: For just entering data can CRA invoke 'Civil Penalties'?

Answer #3 YES and this applies to bookkeepers and accountants, and to business owners too! If you haven't ever made time to read why and how this penalty applies, I recommend clicking on this link:

CRA: Third-Party Civil Penalties

See #32 and #33 Clerical or Secretarial Services - these do not include bookkeeping services, such as recording business accounts or transactions and can lead to penalties
See #57 Exemption for Employees - which doesn't include employees of the tax return preparer..
See #72 Disclaimers don't absolve the preparer
See #65/66 Withdrawal where false or suspicious statements
See #67 False statements in prior years must be rectified to extent false statement affects return of current year
See 18 examples of false statements, culpable conduct, tantamount to intentional conduct, indifference and wilful, reckless or wanton disregard of the law

The topic of Monday's meeting with CRA (November 26th, 2012) at the Vancouver Marriott Pinnacle will be:

How can CRA address these priority themes to make it easier for SMB to fulfill their tax obligations?

1. Information availability and clarity
2. Reporting obligations - current process and possible changes and enhancements
3. Usage of existing online services
4. Exploration of potential online services
5. Duplication of information requirements across federal departments and across different levels of government

Here's my concerns, just about #1: information availability and clarity:

1) Information availability and clarity could be improved significantly if information on  major topical themes wasn't scattered all over the CRA website in an attempt to accommodate specific readers, much to the confusion of anyone searching for information. There are times when searching for information that one ends up in the wrong section but it's the right heading, but for the wrong taxpayer, and this leads to all kinds of additional confusion.

The only saving grace is that when you find yourself reading about a topic, you can glance up at the top of the page to find the string of locations that have led you to this particular page.  I will find myself in Corporate or Payroll when I was looking for something under Self-Employed because of the overlap in rules and the mis-directions that can occur while utilizing the search engine in the software. There's no linkage to all the possible variations of which taxpayers might also have specific rules that would be similar, or different. 

The current website layout by taxpayer type isn't working very well at all.  Unless there is an attempt made to also have topical themes and cross link to those themes, people will end up at the wrong information.

The current search engine doesn't find commonly used tax words such as personal services business, or it finds totally irrelevant information in the hidden backgrounder financial and statistical analysis instead of finding useful information for a taxpayer on a topic.

For example, the deductability of meals is found under employees, salaried, commission, transportation employees, northern residents, travel, railway employees, moving, medical, conventions, truckers, self-employed, corporate, charities. I'm sure there's more. There's references to meals in various technical documents, but there's no compilation of where all the sources are in one place, and no reconciliation of when the rules apply, to whom they apply and why they don't apply in all cases. It's no wonder people get confused by the meals rules. And add to that, there's times when it's 100%, and times when it's $50 (conventions). I didn't add that there's meals that can be taxable employee benefits...and a policy shift in taxable benefits found in a newsletter in 2009...
http://www.taxdetective.ca/newsletters/newsletter/1482040/65541.htm

I've attempted to compile all of that information to determine when the rules apply, to whom they apply, and why there is a difference between the various stakeholders and how their meals are treated for tax purposes.

Here is an example. This article was a question about taking a trip over to Nanaimo from Vancouver to visit a business location owned by someone with multiple locations, who called me when she bought a coffee at the airport on the way home to ask if she should keep the receipt.
http://www.taxdetective.ca/articles/article/1482041/89556.htm

There are other themes that have similar issues with conflicting information, to name a few key ones; artists and writers, employers and employees versus self-employed, payroll, joint ventures and partnerships, vehicles, capital cost allowance (this one is bizarre as the rules are scattered all over the place), current vs capital, inventory vs capital, repairs vs capital, shareholder loans, shareholder benefits, work in progress elections, client gifts, barter.  Then there's the whole topic of GST/HST and the impending switch back to PST. Another area that always concerns me is keeping records. Why is that CRA segregates out electronic records as a separate topic from keeping records when they should be combined? There are keeping records rules all over the place. 

Another hot button for me is personal services business.  It isn't searchable as a string of words, yet everyone is talking about all of the audits in this area, especially for professionals hired by gov't who are required to incorporate and then attacked because they didn't know these rules didn't allow their income to be active business income and now, they also aren't eligible to claim the CCPC general rate reduction.

You'd have to know to search for the definition of ABI (Active Business Income) under Corporations and even then it's really not identified as such.  Same goes for Specified Investment Business. People ought to know how to find the rules, using words that are commonly used in tax update classrooms around the country.  There isn't clarity about when you have a corporation and are it's sole shareholder, that you very likely aren't self-employed by your corporation and that you could be subject to these punitive rules.  

One more, not small business, but not small either.  Death and Taxes.  Why is it that it isn't until the end of the process, in fine print on the TX19, that the requirement to produce financial statements accounting for the entire estate from date of death until final disbursements to obtain a clearance certificate is found?

What could possibly go wrong?

Mary decides to start with three files in her first month, just to get her feet wet. How hard can this be?

Neighbour #1 - Sally is a "Business Coach". She has a home office set up in a corner of her basement by the back door. That's where she meets clients, when she's not meeting them at the local coffee shop. Her business seems to be part time, weekends, nights, when she finds the odd client. She's always looking for exchanges, to barter for services in return for her coaching. Her house is looking really smart, a new paint job, new roof and gutters, new doors and windows, driveway, gardening design. She seems to be good at getting what she wants from her clients. Last year she did her own tax return, estimating her sales at $10,000 and filling in the expenses blanks on the T2125, but she can't find any of her documentation for how she arrived at those numbers. She wants to do a better job and is a little worried about the letter she just received from CRA informing her she's going to be audited soon.

Mary discovers that Sally has investment accounts, with several brokers, and she's given them carte blanche to trade on her behalf. From what she can see, one of the accounts has been completely drained by excessive trading. The other, she's not sure is still active. Sally says it's none of Mary's business, and that she is only asking her to help with the business, not with her personal finances.

Mary also discovers that Sally's mother, who lives with her, has a notice of re-assessment for not claiming all of her RIF income on the last three years' tax returns. There's this 20% of income not reported penalty that Sally wants Mary to get rid of.

How do her records look?
Sally's records aren't very complete. When Mary attempts to sort out sales, purchases, deposits, payments, banking records, nothing adds up and there are gaps. Invoices appear to be statements of account; deposits don't equal paperwork. Deposit slips don't agree with what was deposited to the bank on those dates, and Sally only has some of her banking records. She can't find all her monthly statements for her accounts.

Neighbour #2 - Bob & Sue have a gardening design business. They create beautiful gardens, pathways, waterfalls. Their home office is beautiful. They seem to work full time, every day, and even on weekends their rig and trailer are out on jobs. Mary sees Bob out working when she's walking on Sunday's with her walk group.

It seems their clients are mostly homeowners. Mary discovers it's largely a cash business as everyone wants a cash deal because they don't want to pay HST. Bob tells Sue to pay the HST out of the total sale. Sue wants to keep the records using QuickBooks.  She gets Mary to help her set up a data file and enters purchases, sales and deposits to clear receivables, and payments to clear purchases, but Sue is resisting recording all of their banking information in the books, so the bank is just a clearing account for what are supposed to be business transactions. There's no way to reconcile to the money.

How do their records look?
Records were being kept manually, but have now been put into QuickBooks. Only sales and expenses, no reconciliation to the bank. Mary discovers no matches are made between customer sales and cost of sales. She can't understand why Sue isn't willing to put jobs on to the purchase documents, even though the supply companies have the delivery address on the purchase documents. She's sure it would help them to determine which jobs are profitable and which aren't so they could manage their business to make more.

Then Mary discovers why. Bob & Sue are not recording all revenue.  She looks for the address of the job that Bob did on a Sunday. The cost is there, but there's no invoice to that customer on the records. Mary confronts Bob and Sue and Bob blurts out that they don't record Sunday jobs. In fact, they don't record Friday, Saturday or Sunday jobs, at least the revenue, because then they'd have to pay too much tax.

Neighbour #3 Fred & Jane own shares in their construction repair corporation. The corporation does house repairs, they have been in the community for 35 years, and know everyone. Mary quickly figures out the Corporation hasn't filed tax returns since incorporation, six years ago. What's troubling Mary is that the vehicles they own, all five of them, are all owned by the corporation, even the ones that the kids and Jane drive. Mary's sure that those vehicles are never used for work.

Fred handles preparing the family T1's including a Schedule T2125 for self-employed income, one number for income only, no expenses, based on how much he thinks he was paid last year and how much he paid Jane by way of a cheque each month for $2,000 to cover house expenses. He pays tax based on that amount. The reason they are coming to see Mary is that Jane opened Fred's mail and found a demand to pay a 1% per month penalty on RSP overcontributions because Fred, over a year ago, put $30,000 of extra cash into an RSP when he didn't have that much limit.

They have an office in a local strip mall. Fred works the business full time, Jane is a nurse, and really doesn't get involved but Fred says she works for him, and Jane says she doesn't.  Fred puts $30,000 on each of their T2125's and Jane rolls her eyes when he says he does that.  Jane insists she has nothing to do with it.

It's mostly a cash business, sometimes deposits are cash, directly into personal accounts, or they use cash to pay the Visa. Everyone in the family, Jane, their three kids all seem to pay for everything with cash. Lots of toys, sporting events, major shopping at Costco every week. House is nicely renovated, thinking about selling and renovating again.

Fred hires other local repair people. He pays everyone cash and they could be immigrants, but Fred makes no attempt to document working visa/SIN # or business licence, some time sheets, no invoices for cash payments. He says that's not his business to ask, he's just helping them feed their families. Fred's company isn't registered for Payroll, WCB either.

How do the records look?
Fred says Jane does the books (not really) all she does is sort out the paper he brings home into piles and has started a Simply Accounting file, but after the first month, when the bank didn't balance, she quit using it. She does produce invoices for Fred, on occasion, and they look really nice, as she's using Word. She sometimes prints a copy for Fred, but says it's too expensive to print an extra copy, and laughs saying they are a paperless office. Jane's ability to grasp how Windows Folders work, and where to save her work is not happening. Fred keeps business purchases and vehicle expenses in a binder by the day in plastic sleeves, stapled together in the middle of the pile. Deposits are handwritten in tiny print, often don't add to what the bank says was deposited, and none of the deposits agree with the copies of invoices that Mary does find, names, amounts, dates, nothing is matching.

Today, Jane says she's leaving Fred and wants Mary to get the books fixed up so she can sue him for child support and spousal support.  She wants to keep the house and kick Fred out. She's tired of the way things are, and worried about the questions Mary is asking. She wants to know if she could be implicated in what Fred's doing and how to protect herself. She says that Fred's friend who is an accountant that he golfs with prepared their tax returns, and Fred just puts the last page in front of her and says sign here, and I'll pay what you owe.  Except that this year, Fred didn't pay it, and he keeps saying he will and he hasn't.  She says she owes CRA about $10,000 for last year and she's not doing much nursing any more, as she'd like to retire.

Over the next week, click here to learn what Mary learns as she struggles to support her neighbours.

Will Mary be able to help? Where can Mary turn for help?

A:

Was it worth it? Did you learn something about Inventory Parts set up? Or do you have staff that need training on Inventory Parts?

If so, you can own the first video in the three part series today for $49.95 today!

IPBC members get 50% off

Access the discount via www.ipbc.ca and sign up for my Forum...to find the link to my Partner page.

...Or wait until all three weeks on Inventory Parts are recorded and purchase all three at a 10% discount.

Q: Is the Inventory Centre new for 2013?
A: Yes I believe so.

Q: Is the Inventory Centre available in Pro or only Premier?
A: Only Premier, Pro has inventory, but not full capability, for example it doesn't have Units of Measure.

Q:Why did you enter COST when entering a New Item?
A:Because today's current cost is what I want to base my Sale Price on. Weighted Average Cost and COST are not the same thing.  The first is the average of all historical costs net of any reductions in that WAC each time there's a sale.

Q:Would you use Groups in Inventory?
A: Sorry, didn't get to Groups, but there is a sample group in the data file. I will do a Group sale next week. Remind me if I forget. It's really simple, all it does it allow you to invoice for a bunch of stuff together as a set while still continuing to have individual items.  Usually you would use a group to put together a group of items for a special sale, and then you would dismantle them after the sale, for example, a Christmas or Easter basket.

Q:How would you enter inter-store transfers?
A:Because we have the store set up as the top Item level, we would transfer out of one sub-item and into the same sub-item under the other top Item level for the other location. We could use the Adjust QTY/Value window or a Bill as in a Nil Bill.

Q:Discussion about COGS sub-items request
A:We will cover the COGS breakout for GAAP in the final session under reporting

Q:How can you receive Units of 10 and then sell 1 Unit?
A:Set up Units of Measure and try it. See the sample file for inches and feet

Q:What if you purchased your inventory at a discounted rate but wanted to sell it for regular cost? Can you over-ride the calculation for the selling price?
A: First of all, you can put anything you like in the COST window in the Item - and you can update that COST box in the Add/Edit Multiple Units as it doesn't affect accounting, it purely affects the calculation of the markup for your pricing moving forward.  You can also adjust your preference for how much your markup is going forward and you can also edit your marked up prices any time you want

Q:My website is www.taxdetective.ca

Q:Will changing the default markup preference retroactively change prices or only for new items?
A: Try it, I think you'll find it will only change new Items, you'll have to use the Add/Edit Multi-Item window to edit your prices if you change your prices

Q:Are you providing the data file to play with?
A; Yes, its found under >Links>Complimentary Products>Sample data files

Q:Why would labour be included in the inventory entry for assembly?
A: If you wanted to do Cost Accounting, this is how you'd do it. You don't have to if you don't want to track your full costs, but this does allow for that.

Q: Is it possible to get a printout of your PowerPoint slides?
A: No it isn't. Sorry, I don't release those, my work product is not for release or for sale.

If you wish to discuss your particular situation or challenge with inventory, it's possible to hire me for an online private session on your particular situation. If you want to discuss the specifics of your business, that would require a privacy release by the business owner in addition to the standard engagement letter.

The video will be posted up for sale in a few minutes in my online shopping cart. You'll own the video and can watch the recording as many times as you like, at least until the technology changes and it's no longer possible to play the video or the software is upgraded as is usually the case every year.

Almost every person that purchases my videos adds another story to what can go wrong while trying to download videos. Yesterday a customer decided to edit the name of the file before downloading it and of course, nothing happened. Once we figured that out, the videos loaded in about a minute or two at most. Remember there's 44 files in the bundle, so this will take you about an hour to SAVE AS and check the bundle.

There's a number of reasons I put a 60 day limit on availability of my products. I want to make sure you've loaded the product and opened it to ensure it's working. I don't want people thinking they can come back three years from now demanding copies because their computer crashed. I may be retired, my systems may no longer access this software or technology, or I might even be dead. I'm not a huge conglomerate with the ability to act from beyond.  Sorry, if I'm gone, I'm just that, gone.

Please make sure you not only open the files, but make sure you back them up. I don't have the capacity to be responsible for long term storage of products in order to replace the videos if you lose or destroy them. The next technology is probably already here, and like the 8 track cassette and the vinyl record before it, you may no longer have the device to play the DVD.

If you haven't burned a DVD yet, or had me burn you one and mail it to you, please do that! The bundle fits on ONE DVD if you buy the right kind of DVD. I use Verbatim DVD+R 4.7GB 16x 120 min. You can use Windows Explorer to Burn the files in the folders - it's easy

Please open the videos to check they burned to your DVD afterwards.

I just received a query and thought I'd post the answers because if one person is asking, more probably should be and aren't.

I put my product line on sale and sold a bundle of 44 products. The bundle was priced at $250 and 50% off for IPBC members: $125.00.

If you purchased that bundle, you've received learning products worth $950 retail for under $6.00 per video or other product. That was an awesome deal. I spent the past two years developing my learning products. They are content rich and if you're looking for how to learn to use QuickBooks properly with good internal controls, you're at the right place. It's not just how, it's why and when...

A customer emailed me this weekend to let me know that they watched my 10 videos from March 2011 and passed the Certified QuickBooks ProAdvisor exam (the new one) because of what they learned from my videos... how great is that? I'm impressed, they actually got a slightly higher score than I did last week. In fact I am totally impressed!

If you missed the sale, the bundle price now sells for $290 for everything I created up to October 31, 2012.  That's $6.59 per unit of product. Still an awesome deal. The bundle is delivered to you via download using a service called www.e-junkie.com and I store the products in www.dropbox.com so I am not guaranteeing that this bundle will continue to exist in it's present form for more than 60 days.  I've offered to burn a DVD for $20.

If you haven't loaded your bundle, it's time you did that, or spend the $20 to purchase the DVD.

Buyer Beware:

You have 30 days to Download your products. Products are only available for 60 days from date of purchase. After that time, I do not promise products will continue to be available for replacement should you lose your products or not download them in a timely fashion. Please protect your purchases by backing up your products, or burn a DVD using Windows Explorer or other means.

I can't possibly be responsible for providing you with the videos over and over if your computer crashes, and if your system can't handle the size of the videos you store, I'm not willing to take responsibility, and that's why I promise to re-deliver, but only for 60 days from the date of your purchase. Please don't email me a year from now to complain you can't play something or you can't find the products on your new machine. There's likely nothing I will be able to do about it.

http://www.taxdetective.ca/catalog/item/6427752/9567496.htm

Here are my instructions about how to load the products:

Use Internet Explorer 9, as FireFox and Chrome don't work the same way and haven't worked for some people.

SAVE AS to a folder on your desktop or in your library (there's a Video folder in the Library, so create a folder in the Video Library if that works for you). Not everything is a video, there are Excel spreadsheets and other types of files.

Open each video to make sure it plays in Windows Media Player or an alternative player of your choice.

If you don't have IE 9 or WMP it may be necessary to convert the videos, and it may be that there are free conversion tools out there like FLV but I won't be responsible for conversion, as that isn't my expertise.

Feel free to burn your own DVD once you've copied the .wmv files to your computer.

Please respect copyright, of course, its the same as purchasing software, you can burn a copy but you can't distribute it to other people, you can keep a copy for your own use and to ensure you have a copy when you want to watch it.

It's only possible to play these videos or access the other data files as long as the technology exists that allows for that to happen.  I make no warranties about future technology working with this medium of delivery. Nor do I warranty that software will continue to work the way it did when I recorded these videos.

Yes, these products will take up space because they reside on your hard drive.

These aren't streaming video delivered via the web.  If you don't back them up, you'll lose them, and I may or may not have the video available to replace your product.

It's like going to the video store and purchasing a CD to play a movie.

For about $6.60 each.../ half that if you're a member of IPBC....

Your current CD player is compatible with the movie, you watch it, and if you bought it, as long as you continue to own the technology that plays that medium, you're fine. When that technology is replaced, you can't go back to the movie store to demand they replace your CD with the latest technology.  If only that were possible, someone would get very rich and everyone with an 8 track cassette would be demanding an upgrade.

Yes, at some point you won't be able to play these videos any more,

Please take advantge now,  watch and learn, ask questions, email me, post questions on this blog and if you're an IPBC member, talk to me on my Forum.

This Wednesday's workshop will start with the basics, and a story. The story will be about a retail store, which stocks toys and trains. We'll look at how to set up the Items, how to assemble some of the Items into a Train Set just in time for the Christmas toy sale season.

We'll also look at how to Group Items to record a quick sale of a group of products, but you'll be able to sell the individual Items at the same time.

In next week's session, we'll buy more inventory, and I'll also show you how to record the sales from the cash register till tape if you don't want to record individual sales during the day.

The final session on November 28th will be about reconciliation and reporting for the toy store.

The reason we're starting over is that I tried a top down approach, looking at the big picture, examining all the different types of inventory that there are, and showed you how each would need to be accounted for separately.

If you'd not had any experience with inventory, this would probably have blown you away, and if it did, I apologize. If on the other hand, it gave you an appreciation of the breadth and scope of how much there is to inventory accounting, that's a good thing. Knowing there are various types of inventory and that it's necessary to record the income transactions separately for each type of Inventory asset is a good step in the right direction.  Attempting to reconcile purchases when you've used both Inventory Parts and Non Inventory Parts and mixed it all up together is going to cause your year end accountant no end of headaches.

Not only do retailers account for inventory, so do manufacturers.  They bring in raw materials, add labour, other materials, and create products, which sometimes are partially finished, what we call work in progress and then finally as 'finished goods'. We won't be looking at manufacturing, but we will look at assembly with some labour and packaging, just to give you an idea of how QuickBooks could handle such transactions.

Hope you weren't scared off by the complexity and that you'll come back to start at the beginning again.