Should I DIY My Bookkeeping?

At some point in their business set up, every small business owner asks if they should DIY their bookkeeping.  Each business operation is different as is their owner.  In the end you need to decide what is right for you, your business, and the economic situation a the time. 

Money

The thought of outlaying funds for something you can very well accomplish on your own is often what drives business owners to completing their own bookkeeping and taxes.  It depends upon how much you value your own time and effort.  It will probably take some time on a weekly basis, or possibly a bit longer on a monthly basis, to keep all your records in order and have the necessary reporting to know if you are financially stable or not.  It will take several days, or a weekend, to complete the tax returns.

If you have a good understanding of accounting principles and have the dedication to keeping your records error free, you should definitely tackle the project on your own.  However, if you have any concerns about filings, the fees you pay an accountant will certainly outweigh the penalties and interest involved in errors. 

While doing your own books will certainly keep you in closer connection with your financials, if you hire a good accountant, they should alert you to any irregularities.  They should also be available for questions or concerns.

Who to Hire

You can be reluctant to hire a bookkeeper if you have had a bad experience in the past.  Not everyone who calls themselves a bookkeeper is really good at it.  Ask around for recommendations on Bookkeeping Services and interview them to see if it is a good fit.  If you already use an accountant, see if they have any suggestions.  Proper bookkeeping should save you money and/or make your business more profitable. 

Time and Money

Of course, hiring a bookkeeper, even part time, will cost some money.  If you are already having cash flow problems, this could be an issue.  However, when the burden of tracking all the numbers is off your plate, you may be able to devote time to growing the business.

Timing is another issue.  You will have more hours to look at daily operation and you won’t have to catch up all at once. 

If you are struggling with keeping all the numbers up to date and making sense, or if you dread the hours it will take to do the quarterly reporting, annual taxes, and financial statements, finding a reliable and professional bookkeeper is a real option. 

On the other hand, if you want to maintain strict control over all aspects of the business, then you need to find a way to carve out the time to make the entries and see that everything balances.  At the end of it all, you need to make the decision that makes the most economic sense for you and your business.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Reasons Why an Accountant Can Save You Money

You have had such a great idea and it really paid off.  You have started your own small business and people love it.  Unfortunately, you now need to deal with all the details, like bookkeeping and tax preparation.

Tax law is complicated and few entrepreneurs understand the documentation they need to keep, what is allowable and what is not.  It is important to take advantage of any deductions and credits, but you are busy working on the business and it becomes difficult to do everything.

The best solution is to hire an accountant.  He or she will be able to help you organize your records to give you the best advantage with the CRA.

Experience

When you hire an accountant or an accounting firm, you are paying for their expertise.  They understand the complexities of the tax system and know where and how to save you money by minimizing the tax and maximizing any refund. 

You may be able to handle matters on your own, but you probably won’t have the time or resources to carefully research all of the deductions and credits allowable.  An accountant deals with small businesses daily and is able to do the best job for your needs.

Efficiency

It will take you far less time to accumulate and send the necessary paperwork to your accountant than it will take you to actually prepare and file tax returns.  That means you would be robbing your business of precious hours that could be better spent growing the enterprise or resolving other issues.  It also means you will have more time to spend with your family or in leisure activities.

Yes, you will be paying the accountant a fee, but part of that money goes toward the efficiency you will gain.

Prioritizing

As a small business owner, it is often difficult to carve out enough time each day to take care of important decisions and even less time for mundane tasks like bookkeeping, even though they are critical to the success of your business. 

Working with an accountant that uses cloud services, makes everything simpler. 

Peace of Mind

Using a qualified accountant gives you the ability to stay composed.  You have the confidence that matters are in professional hands and you can just wait for their resulting report.  This means you can focus on the operation of your company and leave the bookkeeping to those who understand the importance of this task and are working for your benefit. 

Fewer Errors

A small error in tax preparation can mean a significant monetary loss.  Avoiding penalties and interest payment should be a priority.  Using an accountant means they will be on top of all the critical elements involved in your tax preparation.  Their knowledge of the tax laws and regulations will help avoid problems and save you money in the long run. 

The bottom line is that the stakes are high and you need the best professional advice and operation possible. 

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Habits of Successful People That You Can Learn From

Sometimes we all look at successful people and wonder how they got there.  Besides hard work, a strong sense of self seems to be a consistent quality.  Add to that some ambition and generally, you have a recipe for success.  Looking at these individuals, there are some habits they have cultivated that can help anyone flourish 

Goals

Create exact and specific goals.  Have a mental view of where you want to be.  Create the steps to get there.  Write it down and be specific.  Instead of “I will increase my sales calls” try “I will speak with 5 potential buyers this week in order to increase my revenue this month by 25%”.  This may seem overly detailed, but it is precise, detailed, and quantifiable.

At the end of each day, you can also record your achievements.  Even if you didn’t completely reach the goal, you can write down the movements toward your goal.  Journaling is an effective way to improve your outlook as long as you keep all statements positive.  Another technique is to create a vision board.   

Also realize that goals change.  As human beings we also change and evolve.  Be sure you take that into consideration as you move toward your objectives.

It’s Not Work

Work has the connotation of drudgery.  Instead consider productivity.  Start by allocating a specific amount of time to complete a task.  This will keep you focused and result in a satisfying conclusion. 

Keep time available for creative thinking and processing.  Eliminate distractions and interruptions and let yourself be open to possibilities. 

Giving Back

Reserve some time to give back to the community.  Writing a check is great, but giving your time and energy is better.  Former President Jimmy Carter favored Habitat for Humanity, driving nails and putting up walls.  You can choose to be a mentor to a student or volunteer at a food bank.  It depends on your interests and skill set. 

The important thing is to think about someone other than yourself and how you can be of assistance.

Uncomfortability

Most successful people push to get out of their comfort zones.  Whether it is public speaking or trying a new sport, attempting something new is helpful to provide perspective.  You won’t be perfect at everything, and in fact you might fail miserably.  However, we can learn as much from what doesn’t work as what is great.

This will definitely be scary and feel totally unnatural.  Once you put aside ego and pride, you may find some real accomplishments. 

Questions

Ask questions; actually, ask great questions.  Curiosity gives rise to solutions.  Focus on a result rather than a cause.  Creating a dynamic conversation with others is a great way to learn new things. 

It can also help to understand who you are and where you really want to go.  Find your own path and formula to get there. 

While these are habits of successful people, they may or may not be your prescription.  Find what makes you happy and how to achieve that goal first. 

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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A Freelance Worker’s Guide to Filing Taxes

Working as a freelancer is very popular.  The money earned is, of course, taxable, no matter how little.  Failure to declare this income will mean a 10% fine on the amount you concealed.  The good news is that the Canadian Revenue Agency (CRA) has provided all the tools you need on their website.  Here is an overview. 

Preliminaries

If you start with the basics, it all becomes considerably simpler at tax time.  First, you need to decide whether you will work under your own, legal name.  If so, then you do not need to register as a business.  However, if you want to work under a company name, you will need to register as a business name and open a separate bank account in that name.

In either event, you will need to keep an ongoing record of all income and expenses.  This could be as simple as an Excel spreadsheet or one of their templates.  There are also a number of good programs available for small business enterprises.   

Keep a folder (either paper or electronic, or both) of all receipts. 

Expenses

The CRA allows the deduction of certain expenses to offset the amount of revenue.  There are actually a lot of items that fall into this category.  Check the website to review, but here are some of the more common ones:

• Supplies and equipment. This will include any new laptop, upgraded equipment like microphone or scanner. You can also include marketing items like online ads or flyers.

• Phone. It would probably be best to have a phone dedicated to the freelancing so that you can track any charges.

• Travel. If you need to travel to see a client, you can deduct the gas cost or train ticket. You can also charge the meals while out of town.

• Professional Associations. This will include charges incurred when attending a conference.

Budget

With every payment you receive, reserve 25% to cover the annual taxes due.  If you do it as an ongoing chore, you won’t be surprised at the end of the year, and you will have the cash reserves to cover any taxes. 

Taxes

You will need to continue to complete a T1 but as a freelancer you will need to add a T2125 to provide the detailed list of income and expenses.  You will need to include your spreadsheet and receipts with the filing. 

You may be subject to Goods and Services Tax (GST), which is federal taxation on Canadian goods and services.  The Harmonized Sales Tax (HST) and Provincial Sales Tax (PST) are provincial levies similar to GST.

However, you also get to claim a credit on all GST/HST that you paid in order to run your business.  Just remember that it is critical that you file regular GST/HST forms and pay those fees. 

If the gross (total amount before deducting expenses) business revenue is less than $30,000 for the tax year, the business is exempt from the GST/HST.  Check the CRA website for more information. 

If you have any concerns, contact the CRA or consult with an accountant about the best choices for you and your freelance business. 

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Estate Freeze Trust Tips

An estate freeze is a tactic available in Canada to fix the current value and taxes of assets of a person but give the future growth to someone else.  This means the original person gets to continue controlling the asset but someone else to benefit (and pay the taxes) at a later date.

This is something that usually involves a small business or a family-owned enterprise.  It lets the original owner to keep control during their lifetime, but after their passing, the asset goes to the named person or persons who are liable for the taxes.  So it basically defers or delays the payment of taxes but the new owners get to reap the benefits of an increase in value.

Reasons for implementing this technique include:

• Reduce and delay tax, including probate fees.

• Using up all lifetime capital gains exemption (LCGE) or you have a spouse or child(ren) who have not used their LCGEs.

• Keep the business in the family or in the hands of a trusted friend or employee.

This is not some form that you can simply download from the internet.  It takes careful planning.  If it is something you are even remotely considering, first contact your accountant and attorney.  It will involve corporate law experts and estate planners.  Your Will must be written to ensure that the freeze is set up when you die.  It could also involve matrimonial issues.

If the estate freeze is not set up properly, it could create an income tax nightmare.

With the complexity of this choice, you will probably have to pay additional fees to your attorney and accountant.  It may be that you need to secure the services of specialists in the field of estate freeze trusts.  Once it is set up, the regular corporate accounting fees may also increase.

Timing is another critical issue.  If the freeze trust will last longer than 21 years, there are other tax and legal implications.  If you consider selling the asset, there could be problems.

If there is a family trust already established, this further complicates the whole issue.

In general, it is a good idea to avoid having a U.S. citizen as the beneficiary in this arrangement.  The United States Internal Revenue Service has very specific regulations surrounding gift taxes and trusts.  If you are determined to include a U.S. citizen, you should add an attorney from across the border into the discussions.

When new shareholders come into the estate freeze, there should be a shareholders agreement put into play.  This would ensure that there are conditions for the sale or transfer of those shares.  It may also include any restrictions that the original owner may impose.  

While this is certainly a complex procedure, it can also be a very effective estate planning tool.  If you have questions or are interested in the prospects of this arrangement, please feel free to contact us.  We will be happy to set up an appointment and discuss the options and possibilities.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Tips for Hiring an Employee or Consultant

The CRA views employees and consultants (or contractors) very differently.  When you are using the services of another person, you need to seriously consider which would be better for your company…to hire the person as an employee or contract as a consultant.

Contractors

For the employer, a contractor is less paperwork.  The contractor is not entitled to any benefit packages, pensions, insurance, or other common benefits.  Payments to the contractor will not involve any income tax withholding or employment insurance (EI).  You also get to assume that the contractor is thoroughly skilled at their job, so you don’t need to worry about offering ongoing education or in-service training.

You have the ability to use them or not.  So, if your business is in a slump (seasonal or otherwise), you can simply discontinue the consultant’s services.  The downside of that is when your business picks up again, they may or may not be available to work for you.  You would then need to find and orient another consultant.

While you only pay them for the time or work produced, they can take on other clients, including your competitors.  They may also decline a project or take time off (like vacation or sick leave) without your permission.  A lot of it depends on the contract you negotiate.

Employees

For an employee, there is a defined relationship called “boss/worker” that lets the employer have control over the individuals work.  The employer is also responsible for complying with all legislation dealing with minimum wages, holidays, leave status, etc.  The employer is also responsible to deduct for taxes and other items.

Employees fall into two basic categories.  Indefinite is when the individual has a specific start date and goes on until either the employer or employee terminates.  Fixed Term is when the individual has both a start date and end date, like for seasonal employees.  Either Indefinite or Fixed Term can be part time or full time.

Problems

A serious situation can develop if you have an individual that you think is a contractor but is later determined to be an employee.  In that case you, as the employer, will need to deal with any unpaid taxes, CPP, EI, and possibly penalties and interest.  For the individual, they would be liable for any business expenses they claimed but are no longer entitled to. 

Status

The CRA has some criteria to decide if the person is an employee or not. 

• Control – For an employee status, the employer decides the salary and where and how the work is done. A contractor gets to choose the hours they will work and planning on how it will be completed.

• Tools – It depends on who owns the “tools”. For someone in a repair or construction line of work, this is pretty obvious. However, for an office employee that could mean who owns the computer/laptop, phone and other devices.

• Finances – If you are responsible for your own operating costs and take responsibility to have anything repaired, you are a contractor.

• Integration – If you have multiple clients, this is a pretty good indication that you are a consultant/contractor. If you only have a single client, the area is rather grey.

Whether you hire a person as an employee or contractor, or want to be an employee or consultant, depends on the way you want to conduct your business and how you want to deal with the financial aspects and benefits.  If you have any concerns, just contact us to set up a consultation.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Why Cloud Accounting Should Be a Priority for Every Small Business

Fiscal responsibility should be the primary concern for all small businesses.  However, too often the excitement of a new idea and adventure takes over and suddenly the small business owner feels overwhelmed.

From the outset, every new business owner should take control of the financial reporting.  Many operations are turning to cloud accounting as a solution and there are a number of good reasons to do so.

Access and Multiple Users

Keeping books manually is a recipe for disaster.  Keeping them all on a single computer is almost as bad.  That means only one person has access and it must be on that particular unit. 

Cloud accounting offers the flexibility for you to handle bookkeeping and accounting matters anywhere at any time as long as you have a device that has internet connection and real time data.  That means you can have multiple users.  So, someone can be issuing invoices or you can order a report without waiting for the computer to be free.  It also means the convenience of sharing the information immediately with your accountant or financial consultant.

Updates

Cloud accounting software updates automatically without hampering current activities.  So, not only is there no downtime, but you are assured of always working with the latest version. 

Cost Effective

Understanding small business needs, cloud accounting packages can be structured so that you only pay for what you need.  Then as your business expands and you need more features, they are easily added.  Using a cloud means that you won’t need fancy hardware, or an IT consultant.  This is an easy money saver.

Security

If you are worried about hacks or breaches, you should realize that cloud storage is one of the safest places to store your confidential information.  Providers use the latest in protection.  In fact, if one of your computers gets infected, you have the benefit of simply moving to another device.  Your business continues as usual.  When you have cleared the problem with the initial computer, you are fully ready to use that device again.

Data Backup

While everyone is aware of the importance of backing up your systems, too often it is simply omitted from the to-do list.  Using cloud accounting assures that periodic backups are performed as well as access to the data if it becomes necessary to retrieve it. 

In addition cloud servers are equipped with strong anti-viral programs.  They have an IT staff to monitor the safety all day every day.  With the most up-to-date electronic surveillance programs and equipment, you are assured that your data will be secure. 

Conclusion

Cloud accounting is essentially an online accounting service.  Instead of installing a bookkeeping or accounting program onto a desktop in your office, you can manage all of your financials from any device and by anyone you authorize to do so.  It is secure from outside interference and all updates and backups are automatic. 

If it is something you have thought about but not yet acted on, consult with a reputable accounting firm that promotes cloud accounting and see how it can benefit you and your small business.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Ways to Advertise Your Small Business for Free

For the small business owner, budgets are tight.  However, it is imperative that the new enterprise get the word out about their service, products, and availability.  Seldom is there any room to hire a slick advertising company.  While it may mean a little extra investment in time, it will be worth the effort to take advantage of some of the free services. 

Search Engines

Google – This is a result of a Google search where your listing will appear in Google My Business.  It will reflect your location, hours of operation and directions.  You need to claim the listing and then you can customize it with additional content.  With downloading photos and other pertinent data, you can appear as sophisticated as your big-time competitors. 

Bing – You may as well cover as many search engines as possible.  Claim your spot on Bing Places for Business.  This is Bing’s version of Google My Business.  In fact, once you have a Google listing, you can simply import it into Bing. 

Others – You can also list on Apple Maps.  While DuckDuckGo does not offer a business listing, it does draw on Apple Maps, so you can get hits that way too. 

Social Media

Facebook – Establish a Page.  Then you can post frequently especially if something new is happening.  Facebook offers “call to action” buttons that can help.  If you want to invest some money, you can take out one of their ads.

Instagram – This is not ideal for directing hits to your site, but it is perfect for visuals.  Post photos and videos.  If you are selling custom products like furniture, clothing, or food, it is likely that a lot of people will seek you out.  Obviously the shots need to be good quality. 

Twitter – This is popular for freelancers and consultants.  

YouTube – If you are a good on-screen personality, you can get a lot of action from how-to presentations or discussions when you declare yourself an influencer.

There are other sites like Pinterest, LinkedIn, and Reddit.  See what best fits your personality and product line.  Start with one media site and set up some regular posts to get your business name out there.  Then you can expand to others if you want.

Blogs

Make the most of your website by posting short articles or stories.  Your blog will have the greatest value to attract customers if you use search engine optimization (SEO).  This takes a bit of practice, but basically it is using keywords (words that will most likely send a user to your site) and coding them properly.  When a user searches, he or she will find your article, leading to a hit on your site and a potential buyer.  Trade some value by becoming a guest blogger on another site and inviting them to guest blog on yours. 

WordPress is the primary vehicle to get to your SEO coding goal.  Yoast SEO plugin will give you some instructions.

Ask other business owners how they manage their accounts and see if you can pick up some tips and tricks.  Other good sources are your legal and accounting advisors to see if they have worked with other small businesses in similar circumstances.  Learn as much as you can and then take the plunge.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Tools To Help You Manage And Market Your Small Business

As a small business owner or entrepreneur, you have your hands full with accounting, administration and general issues.  You keep hearing that you need to expand marketing but you find it hard to allocate the time or financial resources.  Here are some things to consider that are free or very low cost.

Google Tools

Google offers you a number of free programs that can help you get more viewers to your site.  Analytics gives you data on how users are accessing your pages and where the viewers are coming from.  This gives you a perspective from which you can adjust any pages and post blogs. 

Trends gives you a heads up on current subject matter and catchphrases so that you can incorporate them into your posts.  The theory is that it will give your business attention in the midst of the active buzz.

My Business is another tool that provides visibility and easy access to your hours, maps, and AdWords. 

Social Media

This can be a two-edged sword.  Use it judiciously.  It is important to keep up Instagram and Twitter posts, but being too clever can explode back into silly memes.  It is still important to keep the posts going so that you are kept in the forefront of your customers.

Email

Although it seems somewhat “old school,” it is still an effective tool especially in announcing special pricing or promotions.  There are some inexpensive tools like MailChimp that helps with automation and response data to help you adjust your program.

Blog

Not just hawking your wares, like an ad, but providing valuable information like comparisons of product types (i.e. latex paint versus oil based, etc.) will increase readership.  Regular posts are seen by the public as reliable.  If writing is not in the skill set of your company, there are a number of freelancers who will be happy to help.

Logo

If you are trying to develop a unique logo or your current one needs some updating, look at Spaces.  This is a free program that helps you design your own branding from hundreds of fonts, frames and icons.

Video Ads

As long as it is a short and concise ad, consumers seem to respond favorably when it comes time to purchase.  Using an app like VideoBoost and a good camera that will produce an HD image, you can come up with some effective material.

Advisors

Don’t overlook the human element in all of this.  Engage your customers in friendly conversation and see if you can find out what attracted them to your site, store or service.  Check out your competitors and see what their marketing efforts look like.  Remember to look at those competitors who are not as successful as you to find out what doesn’t work.  Find a friend or relative who is in the demographic you are trying to attract and see what they say about how they shop and their preferences in marketing. 

There are a lot of free or low cost alternatives that can move your business from scraping by to booming.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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How Hiring an Accountant Can Save You Money

Small businesses, especially those just starting up, are always looking for ways to save money.  Most start out by saving a bit by handling the financials on their own.  Frequently it starts with a simple spreadsheet and then migrates to a software package.  There are some drawbacks to self accounting.

Time – Time is always a premium when you are a business owner.  The hours you spend on the books means less time for marketing, planning, and customer service.  

Errors – For accountants, dealing with taxes and financial issues is their only business concern.  For the small business manager, there are daily distractions.  Here are some of the common mistakes when an owner deals with accounting without professional help.

• Missing HST/GST registration or collection

• Not taking all deductions available

• Failing to account for depreciation

• Missing province-specific benefits

• Causing the CRA to question entries and trigger an audit

Keeping Organized – The tax and other accounting functions require a lot of back up materials.  It also means handling these matters at least weekly and sometimes more frequently.  If all the documents are not easily accessible, there is a considerable waste of energy.

On the other hand, the fee you will pay to an accountant will get you these benefits: 

Knowledge Base – An accountant has the education and experience to easily deal with the basics of cash flow management, taxes, and other critical functions.

Keeping Tabs – An accountant uses a system to help you with bookkeeping and general record keeping.  This means you have the ability to review where your money is coming and how it is being spent.  It also helps you see what services or products are doing well and which may need a boost or to be dropped.  These trends are frequently something an accountant can notify you about so that you can create the appropriate strategies for spending.

Taxes – An accounting firm is able to help you keep on top of all the due dates for remittances.  They are also experts at knowing how to complete the tax forms to the best interest of your company.  Accountants keep up to date on all the regulations and nuances of the law.  Penalties can add up quickly.

Advice – The accountant is a valuable resource for information and counsel when you are trying to make business decisions.  They are able to discuss profitability and can guide you in the best direction for your company.  They are able to help revise your business plan and suggest strategies to increase your returns on investments.

Reliable – As a third party, they have an objective viewpoint on your operations and are happy to help find ways to increase your profits.  They are also able to guide you toward reasonable targets.

Connections – If you are looking for investors or are considering applying for a loan, the accountant may have ideas of individuals or companies who are most likely to consider investing in your type of business.  They will also help you gather all the financial records and prepare the reports necessary for you to complete the business plan.  They may even let you do a dry run of your presentation and help with suggestions.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Ways To Spring Clean Your Small Business

After a long and dreary winter, spring comes along and you feel invigorated.  You probably spend more time outdoors puttering in the yard, or putting on the golf course.  As a small business owner, this is also a good time to assess your business and give it some sprucing up.

Electronic Presence

This is a good time to freshen your website.  Replace photos and have some new copy written; use a different font or color combination.  Be sure everything is in working order and your potential customers are not receiving messages like “Page Not Found”. 

If you are not on social media accounts, you should be.  Especially if you have introduced new products or service, it is a good time to post photos.  Even if nothing has changed, post something positive about your customer service; show smiling faces and a relaxed atmosphere.

How long has it been since you looked at your email list.  It may need some culling.  Offer discounts or specials for loyal clients.  Make your company sound exciting and fresh.

Goals and Plans

Take a look at your business plan.  In fact, if you have it, dust off the original plan you started with.  It is likely things have changed over a year or few but remembering why you started your business and what made you happy can go a long way toward looking at the future.  Revisit your long-term goals. 

Budgets are never fun to do, but think about a zero budget, where you start from scratch.  It will help you decide where your priorities lie and where you can trim some expenses.  It might mean rearranging staff or prompt you into letting underperformers find new employment.

Analyses

Many companies use Google Analytics or similar programs.  This might be the time to see how your customers are finding you and where they are searching on your website.  It can spawn ideas for improvements or new product lines.

Find out how satisfied your customers are with a survey.  If you tag on an incentive, like a percentage discount with their next order, you are more likely to engage their interest and actually receive a response.

Speak with your employees and really listen to what they are saying.  You could learn some very interesting things.

Consult with your accountant, attorney, mentor, and other business advisors.  They can be valuable partners in your search for information about how to improve your company, its worth, and your dreams.

If you're looking for an accountant in Brampton or Mississauga, Contact our team at CapexCPA today for more information.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Ways to Pay ZERO Taxes in Retirement

Contemplating retirement is exciting and scary at the same time.  While you are looking at ways to spend your new found time, you are also looking at ways to maximize your financial status.  Paying less, or even zero, taxes is certainly one way to conserve your hard earned savings.

The Right Mix – You should be considering the best combination of taxable, partially taxable, and non-taxed incomes.  The ultimate goal should be a taxable income less than $46,000 to stay in the lowest tax bracket.  In fact, if you keep it under $37,000 for a married couple and under $25,000 for a single person, you qualify for Guaranteed Income Supplement (GIS) and that is totally tax free. 

Expenses – By keeping your expenses in control, you will need to draw on your retirements accounts less and that can certainly keep you in a lower tax bracket.  Many people contemplating retirement downsize to a smaller house or even a condo.  Without a mortgage, you will have more discretionary income.  It also plans for the future with less yard work to do or hire.  You can also consider a more fuel efficient and newer vehicle that will take less maintenance.  While you are still working, look at your budget and see what you can eliminate that will help reduce your annual living expenses, especially after you stop working.

Systematic Withdrawal – Deferred capital gains offer the lowest tax rate in any income bracket.  Using equity investments that are tax beneficial, you can defer the capital gains now and pay the tax years in the future.  Selling specific holdings each month is called SWP or a systematic withdrawal plan.  If these are recent purchases, the SWP is tax free because you are only reclaiming your own money.  If you have invested wisely and you have grown your investment, your withdrawals could be mostly those capital gains, which are the lowest tax rate.

Clawback – The Canada Pension Plan (CPP) and Old Age Security (OAS) are both retirement pensions provided by the government.  However, if your net income exceeds the threshold, your payments are reduced on every dollar.  If you will be affected by this reduction, withdraw your RRSPs before you are 65.  However, this is only beneficial if the RRSP withdrawals will be at a low tax rate.

Planning for retirement can become complex.  It is always best to consult with a tax advisor well in advance of when you plan to leave work behind.  There are a number of other measures you can take to reduce or eliminate taxes and still live comfortably.

If you're looking for an accountant in Brampton or Mississauga, Contact our team at CapexCPA today for more information.

Click on the link below to book a meeting.

https://calendly.com/capexcpa/phone-call-with-jag 

- The Capex Team

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Did you Know There’s a Tax Write Off for Zero Emission Vehicles?

It would be wonderful to own one of the new electric cars that everyone’s talking about.  They are great for air quality and sales would surely boost the economy. However, their expense is well beyond this year's budget.  Fortunately for Canadians, the CRA understands this dilemma and are offering a sweet deal. 

The Government offers a write off for zero emission vehicles that are purchased or leased.  This is offered to businesses, those who are self-employed, and local governments as a motivation to reduce pollution caused by transportation vehicles.

The incentive is a 100% write off, up to $55,000, for eligible vehicles. That means if you pay $80,000 for your new Tesla, you can write off $55,000 for tax purposes. So you only really pay  $30,000, which is extremely reasonable for any vehicle today.

Zero Emission Vehicles

A zero emissions vehicle, sometimes called a carbon negative vehicle, is one that has the potential to produce no exhaust emissions, atmospheric pollutants. They must be able to operate without the use of a conventional internal combustion engine, although they may certainly be manufactured with a standard engine. Zero emissions vehicles include: 

•      Battery-electric

•      Plug-in hybrid electric

•      Hydrogen Fuel Cell 

The batter capacity must be at least 7kWh.  Of course those fully electric or hydrogen-powered are eligible. This incorporates light, medium, and heavy duty vehicles. They are perfect for short, predictable routes.  More vehicle options appear on the market all the time, so you will have a good choice for your needs.

If you need more arguments for the purchase, think about these advantages for fleet purchases: 

•      Lower cost of ownership due to the high fuel economy and low operating cost

•      Reduced maintenance

◦       Most don't need oil changes

◦       Less frequent brake service

◦       Routine tire pressure and fluid level checks are necessary

•      Fuel price stability

•      Quiet operation

•      Backup power

•      Apps to help the driver locate local recharging stations.

Experts predict that with less air pollutants like smog and soot, we can expect lower impact from fewer asthma attacks, lost work hours, and premature deaths. Pulmonary problems have been found to disproportionately affect communities of lower-income levels and those living in urban environments.

Electric vehicles will also reduce the need for petroleum, reducing the reliance on other nations to control economic advantages. They also feel the reduced climate damage will impact agriculture as well as the environment in general. As more electricity is generated through renewable sources like solar and wind power, the benefits simply increase further.

Save up to $55K!

All of this together means a great deal when you purchase an electric car.  You will save up to $55,000 right of the top, reduce maintenance costs, and help the environment.  By helping to affect better air quality, you will reduce pulmonary issues and reduce lost work and school days and positively affect the quality of life of thousands of people.

For more information about the tax benefits, contact the Canada Revenue Agency at 1-800-959-5525.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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3 Ways to Reduce Taxes

Pretty much everyone wants to find legitimate ways to reduce their tax burden.  The rules change every year and it can seem confusing.  Here are a few ways you can consider to reduce your Canadian tax assessment .

Investments

• RRSP – Contributions to a Registered Retirement Savings Plan means that you won’t be paying any tax on that money during the year you contribute to the investment.  So, putting the maximum amount of money into this plan each year is a good idea.  In addition, any tax on gains are not taxable until withdrawal, which is mandatory at age 71.

• TFSA – Tax Free Savings Accounts are another good investment.  The contributions are made with money you have already paid tax on and any interest, dividends, and capital gains are all tax free.  In fact, they are tax free forever, along with any withdrawals you make.  Some people are withdrawing money from their TFSA account and giving it to their children who are 18 or older and these children are then funnelling the money into their own TFSAs.  All of that investment income is tax free and the kids are inheriting the money before their parents die. 

Open a Business

• Start – If you have been considering turning your hobby into a money maker, that is an excellent idea.  Deductions can include the business use of your vehicle, space dedicated to your home office, salaries (even paid to a spouse or child), and supplies needed to manufacture or operate the concern. 

• Incorporation – If you are already running your own business or are a freelancer, you might want to consider incorporating.  For 2019 the small business tax deduction rate was only 9% after the federal tax abatement.  So, if the corporation made the money (rather than the individual) the tax rate is lower.  There are also benefits of individual pension plans that are tax deductible.  Just consult with a lawyer or financial adviser first.  There is a fee to incorporate plus you will need financial statements and the corporation will need to file its own tax return.  All of that may cost more than it is worth, not to mention the extra time and effort it will take.

Family Tactics

• Income Splitting – This is a maneuver that works when there is a significant difference in the spouses’ incomes.  This needs some professional advice and planning.  Speak with a financial advisor before making any decisions. 

• Investing – If the incomes are unequal, another idea might be to pay all the expenses from the higher salary and simply invest all the income from the lower salary.

• Loans – If you have the inclination to loan your child some money, you can set up a CRA-approved interest rate on that loan.  The child must pay at least that interest rate each year and the loaned amount is taxed to them.  If they don’t earn any income, it is taxed at the lowest rate.  Again, check with a financial person to be sure this is handled properly and legally.

The short answer to saving money on your taxes is to consult with an accountant to see which tactics might work best for you under your circumstances.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Canadian Income Tax Rules for Employee Gifts

As a kindly employer, from time to time, you may want to give an employee a gift or reward.  The CRA has rules for this. 

First you need to have some definitions.

• Gift – This must be for a specific occasion.  Examples would be for a birthday, wedding, or religious holiday.

• Award – This is recognition for a significant achievement.  That can be something like exceeding standards, not just model performance.  It is usually limited to only a few people and often is through a nominating process.

• Reward – If it is given for performance related activities, like coming in under budget or ahead of schedule or just doing what they were hired to do but doing it exceptionally well, this is considered a reward and it taxable income.

• Cash – This is fairly obvious.  It is extra money.

• Near-Cash – This is something like a gift card or stock.  It is something that can be used like money or converted to cash.

• Non-Cash – This can be something of a small value like a coffee mug or t-shirt.  It can also be something like a grocery store voucher.  Instead of giving your employee a turkey or ham, you give them a store voucher to a specific store and that voucher is exchanged for just the product listed without a substitute and without change if the product costs less than the voucher value.  It can also be tickets to a specific event, like a baseball game played only on that date.

Taxation

If the gift is cash, it is taxable.  Therefore, it needs the appropriate deductions like CCP, income tax and EI benefits.  Non cash and near cash items are not subject to EI deductions 

As the employer, you may give your employee an unlimited number of non-cash items as long as they do not exceed a total value of $500 per year.  This does not include items like mugs, plaques, etc.  If the awards amount to $650 over the year, there is a tax due.  To calculate the value you need to include GST/HST and PST to determine the fair market value. 

Length of Service Awards

You can reward your employees for their service to the company every five years on the anniversary of their employment.  So, the employee must have worked for you at least five years and then it needs to be at least five years since the last award.  These can be up to $500 non-cash and are tax free.  This service award can be in addition to other awards you have given through the year.  However, if the non-cash value of the service award is less than the $500 maximum, you are not allowed to make up the difference in the other $500 non-cash awards available through the year.

As you can tell, there are a lot of details and intricacies in rewarding your employees.  It is advisable to review all the CRA rules and regulations and possibly consult with a human resources representative or your accountant.

If you have trouble managing your accounts or need professional assistance, don’t hesitate to get in touch with us at CapexCPA contact us or call 416 903 4040.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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7 Things that Qualify for Business Expenses

The Canadian Revenue Agency (CRA) allows businesses to deduct expenses from their tax returns.  Basically to claim that deduction it needs to be reasonable and lead to at least the expectation of a profit.  So, it has to have a specific purpose that will lead to sales or other revenue. 

Some of the more common allowable expenses include:

• Fees for professional services like accounting, attorneys, consultants, and advertising.  Within the range includes fees for cloud computing and internet provider services and related fees as long as they are business related.  You can also claim business software and applications. 

• Fees related to conferences and conventions, as well as travel and entertainment.  That would include meals.  Other professionally related and allowable expenses include membership dues and subscriptions to periodicals as long as they are business related.

• Expenses relating to the operation of your office that will include office supplies, postage, couriers, rent and lease payments, insurance, licenses, utilities, telephone costs, and repair and maintenance expenses.

• Salaries, and this includes family members.  Just remember that the expenses need to be reasonable, so the CRA will check to see if the amounts paid to family members are in line with what would be paid to any other non-relative employee.

• Taxes include business taxes and property taxes.

• If you have receivables that you are unable to collect, this is another allowable expense.  It also includes any fees you need to pay to a collection agency in an attempt to recover those losses.

• Promotional items can also be claimed.  That includes those t-shirts and mugs and even business cards.  You can also claim the amounts used to sponsor charitable events as long as your name is specifically mentioned as a contributor.  If you are offering a seminar or presentation, include those expenses.  Just be cautious.  Not everything is 100% deductible.  There are rules about how your business is promoted as well as some restrictions on food and beverages.

There are also some business expenses that are relegated specifically to the home-based business.  Just use discretion and be sure you are calculating accurately.  As an example, you can deduct a portion of your mortgage or utility expenses, but they must be in proportion to the amount of space in your home dedicated to the business.  So, you can’t deduct your entire mortgage payment if you are only using a quarter of a spare room. 

There are also employee-related expenses that can be included like employment insurance and qualified pension plan contributions. 

If you have any reservations about what may or may not be allowed, consult with a professional tax advisor.  It is preferable to having the CRA conduct an audit.  Also be sure to keep each receipt.  While you don’t need to submit them to the CRA with your return, if there is any question, you will have the documentation on hand and ready to prove its legitimacy.  Keep those receipts in an orderly fashion and for a minimum of six years.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Why Cloud Accounting is Easier

Cloud accounting is simply the use of a software system that is not maintained (hosted) on an in-house computer.  Instead, the servers can be anywhere and all of your team can have access to the software and information necessary to do business.  There are a number of accounting programs on the market that will allow you to incorporate cloud storage.  Each software has similar and different components and you need to select the right combination for your business and your employees.

Cloud accounting is far more flexible.  Employees are not tied to a desk or specific computer, or even a computer at all.  With a solid internet connection the accounting functions can be handled from any device. 

Studies are showing that cloud accounting is more accurate with fewer errors than in manual accounting methods. 

Safety – Using cloud technology means there are no hard drives or computers to put your sensitive information at risk.  Since it is not on the premises you won’t need to worry about a fire or water damage destroying all your information.  Also cloud storage is backed up routinely to servers in multiple locations giving you better security than in your offices.

Growth Opportunities – As your company expands, the software can expand with you.  Most programs allow for business growth and the need for more storage or advanced features. 

Multiple Users – Because you are able to give various people access to your financial data, group effort is easier.  This will allow job sharing or splitting but with all the information still in a central location.  It also gives your accountant, financial advisor, partners, or investors up-to-date information without printing or even face-to-face meetings.  Remote access makes it all possible.

Immediacy – Instead of accumulating all the paper and then making all the entries at the end of the day or week, especially when you are tired, the transactions are immediately recorded.  As the business owner that gives you a better perspective of slow paying customers or cash flow issues.  You can have a financial report at any time.  If you deal with companies or individuals in another country, cloud accounting can also deal with exchange rates and different currencies. 

Consolidating Actions – All your transactions are held in a single software application.  That means you don’t need to invest money, and time, in separate systems for payroll, inventory, and invoicing. 

Taxes – There are variations in some of the programs to let you know where you are in taxes owed to the CRA or how much has been paid into a specific tax allocation.  It also makes it simpler to complete the tax forms each year.

Analysis – Many of the available programs will let you customize the reports you need.  In addition to the basics of a balance sheet and receivables, you can design a report specific to a task or situation.  This helps the owner understand the exact position of the company and make better decisions. 

Cloud accounting is becoming the norm rather than the exception.  It can be integrated seamlessly into your current operations and help prepare you for the future.  As programs are improved, you are better situated for growth opportunities.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Employment Standards Act to support the COVID-19 Putting Workers First initiative.

 Ontario has passed Bill 284 that amends the Employment Standards Act to support the COVID-19 Putting Workers First initiative. 

Under this new standard employers must pay employees for up to three days of work (to a maximum of $200 per day) for any time lost due to COVID-19.  This is retroactive to include the period April 19, 2021 through September 25, 2021.  Employers may be reimbursed through the Workplace Safety and Insurance Board (WSIB).  Here are some of the particulars.

Employee Qualifications

•      Unable to work because they were/are affected by COVID-19 and are under investigation, supervision, or treatment.  This includes the vaccine inoculations and any side effects that may have ensued.

•      Directed to stay home because of COVID-19 symptoms

•      Self-isolating due to COVID-19

•      Caring for a COVID-19 patient

The employer cannot require a medical certificate but can require reasonable evidence.

Calculation of the Leave Benefit

The employer must pay the lesser of:

•      Payment of $200 to the employee

•      Wages the employee would have earned

•      If the employee regularly receives commissions or tips, the greater of:

◦       Employee’s hourly rate for the number of hours the employee would have worked that day

◦       The minimum rate usually earned for the number of hours the employee would have worked that day

In any event, there is a cap of $200 that the employer would be obligated to pay.

There are a couple of exceptions:

•      If the employee is currently entitled to three or more days of paid sick leave, the employee is not entitled to an extra three days

•      If the employee is entitled to less than three days of sick leave, this Bill 284 will cover the difference

•      If the paid leave falls during what would have been overtime, shift premium, or a public holiday, the employee only receives his or her regular rate

•      These three days are applicable before any unpaid leave days 

Reimbursement for Employers

So there is no undue hardship for the employer, they can apply for reimbursement from the WSIB.

•      Completed WSIB application

•      Statement that:

◦       Confirms payment

◦       Dates of the leave

◦       Date of payment

◦       Amount of payment

◦       Confirms that the employer was not otherwise required to make the payment

•      Record of the payment

•      Information about any claims filed with the WSIB about the employee

•      Any other information they may require

The employer has 120 days after making payment to apply for the reimbursement. 

Government forms can be confusing so be sure to double check all the information on the application and appropriate documentation.  While the deadline is now September 25, it may be extended since COVID-19 is still impacting the economy.

If all of this is disorienting, don't hesitate to contact your accountant for clarification.  New regulations can be difficult to understand and the forms unclear at times.  A good accountant can help with advice and suggestions about the best options for your company.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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4 Important Tax Tips for Small Businesses

As a small business owner you are probably acutely aware that it is tax time again.   There are some  items to keep in the forefront of your to do list.

Deadlines

The deadline to file is June 15, except that if you owe money, it needs to be paid by April 30.  So, unless you have a good handle on what your liability will be, or if you will expect a refund, plan on having the taxes completed by April 30. 

Covid Related

CRA initiated CEWS to help Canadian employers who had a drop in income but continued to pay employees.  It was intended to keep employment steady and to help businesses operate as normally as possible.  CEWS is a taxable item.  Be sure to include it on the T1 or T2. 

TWS – The Temporary Wage Subsidy was a three-month window where eligible employers could reduce the CRA deductions for each eligible employee.  If you did not claim this subsidy, but were eligible, you will get that amount as a credit or refund on your taxes, after all the calculations are done. 

CEBA – The Canada Emergency Business Account was a no-interest loan that was designed to keep small businesses alive during the brunt of Covid.  If you pay back the loan before the end of 2022, a third (up to $20,000) will be forgiven.  This is something that you won't need to deal with at this point. 

CECRA and CERS – These were measures to help small businesses pay their overhead costs, specifically rent.  The Canada Emergency Commercial Rent Assistance should not affect your taxes, except that your operating costs may have been reduced.  The Canada Emergency Rent Subsidy is taxable and must be included on your return.

Split Income

Hiring a family member do handle some of the work for your company can help on your personal taxes.  Just be sure that the work is legitimate and the wages are reasonable.

Advanced Planning

If you meet the criteria, you may not as yet be required to charge GST/HST.  As your sales exceed $30,000, you will need to charge this amount to your customers.  So, as you look at two quarters and whatever part of the third you are in, and it looks like four consecutive quarters will come close to the threshold, register and start charging the GST/HST.  It is much better than realizing too late and having to pay the equivalent out of your own business pocket.

There are a number of fine accounting systems that will help you calculate your taxes, but a better option is to acquire the services of a good accounting firm that has specialized working with small and medium sized businesses.  They can be on top of all the tax laws and alert you to some of the advantages you are missing on your own.  Staying ahead of the game is always so much easier than lagging behind.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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Why Hire an Accountant for your Start Up

This is the year!  You have a wonderful idea and you are going to go into business for yourself.  Start your own operation.  This will be a year of excitement and challenges.  The only problem is whether you should ask for help from a mentor or hire professionals to guide you on your way to success.

Research shows that established business owners are more likely to rely on accountants, lawyers, etc.  Part of the reason is probably that an ongoing concern has extra money to spend on these services but a new business is on a tight purse string.

If this all sounds like you, here are some reasons why you might want to consider hiring an accountant.

More than Taxes

An accountant does not only handle tax preparation.  If you engage their services as a resource, they can offer perspective on the economy as a whole and frequently on your segment of the business world.  They can help muddle through when times are tough and show you how to expand during booms.

Focus

It is your job as an entrepreneur to focus on the business you want to establish.  If you get swallowed up in daily details like keeping the books and endless paperwork you won't have the time to truly get your business off the ground, let alone on the road to success.  Accountants can take on many mundane tasks or show you how to automate the process so that you can truly pay attention to what is happening with sales and clients.

Balance

Everyone needs downtime.  Not just for sanity but to rejuvenate.  Taking time for yourself or your family in hobbies or avocations means you become a more well-rounded person and able to deal with the stresses of your job.  It also means you come back to the business refreshed with new ideas for expansion or progress.  An accountant can take on the mundane tasks that most people hate and free up your time for something enjoyable.

Guidance

New businesses often overlook the value of a professional accountant and the connections in the community and elsewhere.  Accountants look at financials from a wide variety of operations and have a perspective on the general economy.  They also can advise about avoiding pitfalls others have missed and sharing this information can be invaluable to you.  They also will have working relationships with financiers and investors.  They understand the documentation necessary and will help you with your presentation.

Relationships

As a business owner, you need to establish your place in the industry or community.  Showing a solid business relationship with other professionals will enhance your reputation.  As you develop your own ongoing relationships with other companies and owners, you will take your place as a successful person.

If you are in a quandary, don’t hesitate to contact us at Capex. We have Professional CPA’s in Mississauga who are happy to sit down and consult with you so that you make the best decisions possible for your business.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

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