QuickBooks Online – Advantages of Cloud Based Accounting

QuickBooks Online (“QBO”) has many features and advantages that many desktop-based programs do not offer.  If you are interested in using the program, our Firm can offer our clients up to 40% off the monthly price.  Please contact our office for further details. 

Some advantages that QuickBooks Online offers over a traditional desktop accounting program are:

·    You can easily access data across multiple platforms (PC or Mac, mobile)

·    There is no need to transfer data files since everyone logs in to the same account to access
live data

·    All data is hosted, backed up and secured by Intuit’s servers (no backups needed)

·    Attaching supporting documents directly to each entry allows for greater collaboration and centralization of information

·    You can automatically create invoices and send them to clients, including delayed customer charges for unbilled time and costs

·    Logins, third-party activity, and list changes can be monitored using the Audit Log

·    Reports can be emailed automatically to anyone (including those who are not using QuickBooks Online) using a scheduled frequency

·    You can further organize data with both Class and Location tracking

·    Bank and credit card transactions are automatically downloaded if you connect your bank or credit card account using online banking credentials

·    Third-party apps sync to QuickBooks Online behind the scenes (i.e., without you having to actually open QuickBooks Online) since the apps sync to Intuit’s always-accessible server

·    Post to multiple Accounts Receivable and Accounts Payable lines in a single journal entry

·    Track inventory using the first in first out (FIFO) method. 

Income Tax Update: Income Sprinkling – Tax on Split Income (TOSI)

On December 13, 2017, the Department of Finance released revised draft legislative proposals on income sprinkling.  The new rules were passed into law on June 21, 2018, with only a few minor modifications to the December proposals, and are effective January 1, 2019.

The government’s objective is to eliminate the tax benefits of income splitting where the recipient of the income (a related family member) has not made a sufficient contribution to the family business.

The TOSI rules will potentially apply to essentially any income amounts, dividends and capital gains that are considered “split income.” This generally includes the following:

  • Dividends and shareholder benefits from a private company;
  • Income received from a partnership or trust where the income was derived from a related business or the rental of property in certain cases;
  • Income on certain debt obligations (e.g., interest); and
  • Income or gains from the disposition of certain property disposed of after 2017.

However, the rules provide a number of exclusions as follows:

  1. Exclusion from TOSI for adult individuals (18 years or older) who contributes labour to a related business on a regular, continuous and substantial basis (Excluded Business). This can be proven on a factual basis or by meeting a threshold if the family member has worked at least 20 hours a week on average in 5 years at any time in the past, any dividends they receive now or in the future from the family business will generally not be subject to TOSI.

 

  1. Exclusion from TOSI for individuals over the age of 24 who have a significant equity investment in a corporation, other than a corporation that carries on a services business or is a professional corporation (Excluded Shares). This means that the individual must hold shares that represent at least 10% of the votes and value of the company (these shares can be separate from the excluded shares of the company). In addition to this requirement, the exclusion only applies to shares of corporations where less than 90% of the business income of the corporation is from the provision of services, and where 90% or more of all the income of the corporation is not derived directly or indirectly from one or more other related businesses of the individual (outside of the corporation). Also, excluded shares also do not include shares of a professional corporation.

 

  1. Exclusion from TOSI for individuals over the age of 24 that meet a reasonable returns test. This reasonable return will consider several factors including the work performed for the business. The other factors include the property contributed by the individual to the business, the risks assumed by the individual in respect of the business, the historical payments that have been made to the person in the past for their contributions, and other relevant factors.

Other relevant factors:

  • Generally, TOSI will not apply to capital gains that qualify for the Lifetime Capital Gains Exemption. This will enable families to continue to plan to use the Lifetime Capital Gains Exemption.
  • Removal of aunts, uncles, nieces, and nephews from the specified individual definition for purposes of TOSI.
  • No application of TOSI to compound income (i.e. income earned from the investment of income previously subject to TOSI).
  • TOSI will not apply to income received by an individual from a related business if the individual’s spouse made the contributions to the business and is at least 65 years old in the year the amounts are received.
  • The beneficiaries of a deceased individual’s estate can avoid the TOSI rules based on the contributions of the deceased individual.
  • The income derived from property acquired because of a marriage breakdown will be exempt from the TOSI rules.

Estate Planning Essentials

Estate Planning is the process of creating a plan to distribute assets –  a plan to take care of the people and things important to you – during your life or upon your death. An Estate Plan should also include contingency arrangements for the possibility that you may not be able to make decisions at some point in your life, for example, because of a severe injury or medical condition.

Why is it important:

·       will help ensure that your dependents and beneficiaries have income and assets for their ongoing needs. The loss of your income means that some planning may be needed to determine how it can be replaced. You likely wish your dependents to maintain normal spending patterns without substantially altering their lifestyle when you are no longer there to contribute.

·       to minimize family disputes. By planning ahead, you can anticipate issues and discuss the reasoning behind your decisions with family members ahead of time. An Estate Plan enables you to convey your wishes about how you wish your affairs to be administered. Including guardians for your children. If you do not convey your wishes, others, such as the government, courts and those you may not trust may be able to make decisions that you would not agree with.

·       helps minimize costs and taxes so that as much property as possible is passed to your heirs, rather than being eroded by administrative fees and taxation.

·       peace of mind in having an estate plan in place. There is a certain satisfaction that comes from putting one’s affairs in order.

What is involved in the estate planning process:

  1. Determine your objectives
  2. Understand your current financial status
  3. Consider strategies and tools
  4. Develop Plan
  5. Implement plan
  6. Keep it current

CHANGES TO THE NON-ACCOUNTABLE ALLOWANCES PAID TO ELECTED MEMBERS, MUNICIPAL OFFICERS, AND MEMBERS OF SCHOOL BOARDS

Beginning 2019 and subsequent tax years, non-accountable allowances paid to elected members, certain municipal officers and members of school boards will be fully included in income.

Prior to 2019, an exemption is available to certain individuals for a non-accountable allowance that is paid to cover expenses connected with carrying out work-related duties. This non-accountable allowance is excluded from income unless it exceeds one-half of the individual’s salary and other remuneration.

Changes for employers

Currently, in order to complete the employee’s T4 slip, an employer must identify both the taxable and exempt share of the allowance when a non-accountable allowance is paid to elected members of legislative assemblies, certain municipal officers and certain other individuals. The amounts are distinguished because only the taxable share is reported in box 14, “Employment income,” and subject to income tax and Canada Pension Plan (CPP) deductions at source.

For 2019 and subsequent tax years, the full amount of the allowance will be included in box 14 and subject to income tax and CPP deductions at source. Generally, amounts paid to elected or appointed officials are not subject to employment insurance premiums.

Government Plans for Increased Canada Pension Plan (CPP) for Businesses and Employees

  • Starting on January 1st, 2019, the Canada Pension Plan (CPP) will gradually be increased.  As a result, pension amounts will increase by between 33% and 50% depending on the earnings of the employee.
  • This will also increase the amounts of CPP disability and survivor benefits.
  • This initiative will be fully implemented by 2025. However, a person will have to contribute to the increase in CPP for 40 years to get the full increase in benefits.  With the new plan, the new maximum retirement pension would be $20,400 annually, for someone with earnings at or above the new upper earnings limit throughout their career.
  • Employees and employers will contribute more on earnings up to the maximum amount of eligible earnings under the CPP. This will be phased in over the first five years. As of 2023, the CPP contribution rate will be one percentage point higher (from 4.95% to 5.95%) for both employers and employees. People who are self-employed pay both shares, so their contribution rate will be two percentage points higher.
  • Beginning in 2024, a contribution rate of 4% for both the employers and employees (eight percentage points for self-employed individuals, who pay both shares) will apply on earnings between the year’s maximum pensionable earnings and the new upper earnings limit, which will be increased in two steps in 2024 and 2025.
  • To offset the higher CPP contributions for low-income workers, they will be able to apply for the new Canada Workers Benefit announced in Budget 2018 that will replace the Working Income Tax Benefit. It is a refundable tax credit intended to provide tax relief for eligible working low-income individuals and families who are already in the workforce and to encourage other Canadians to enter the workforce.

 

Registering your new business with the government

You may have to register with the government before you start operating your business.

Before you register

Before you register your business, you will need to know:

Choose your business type

To learn about your registration requirements and start the registration process, choose your planned business type:

Get help with business registration

If you need help figuring out the business registration process you can contact the Canada Business Network’s offices in your region or our office at 780-482-3431 ext. 304.

Protect yourself against fraudsters pretending to be the Canada Revenue Agency (CRA)

Know how to recognize a scam

There are many types of fraud, including new ones invented daily.

These scams may insist that this personal information is needed so that the taxpayer can receive a refund or a benefit payment. Cases of fraudulent communication could also involve threatening or coercive language to scare individuals into paying fictitious debt to the CRA. Other communications urge taxpayers to visit a fake CRA website where the taxpayer is then asked to verify their identity by entering personal information. These are scams and taxpayers should never respond to these fraudulent communications or click on any of the links provided.

To identify communications not from the CRA, be aware of these guidelines.

If you receive a call saying you owe money to the CRA, you can contact the CRA directly at this link or check My Account to be sure.

If you have signed up for online mail (available through My Account, My Business Account, and Represent a Client), the CRA will do the following:

  • send a registration confirmation email to the address you provided for online mail service for an individual or a business; and
  • send an email to the address you provided to notify you when new online mail is available to view in the CRA’s secure online services portal.

The CRA will not do the following:

  • send email with a link and ask you to divulge personal or financial information;
  • ask for personal information of any kind by email or text message.
  • request payments by prepaid credit cards.
  • give taxpayer information to another person, unless formal authorization is provided by the taxpayer.
  • leave personal information on an answering machine.
  • When in doubt, ask yourself the following:

    • Did I sign up to receive online mail through My Account, My Business Account, or Represent a Client?
    • Did I provide my email address on my income tax and benefit return to receive mail online?
    • Am I expecting more money from the CRA?
    • Does this sound too good to be true?
    • Is the requester asking for information I would not provide in my tax return?
    • Is the requester asking for information I know the CRA already has on file for me?

    If you do have a debt with the CRA and can’t pay in full, take action right away. For more information, go to When you owe money – collections at the CRA.

    How to protect yourself from identity theft

    • Never provide personal information through the Internet or by email. The CRA does not ask you to provide personal information by email.
    • Be suspicious if you are ever asked to pay taxes or fees to the CRA on lottery or sweepstakes winnings. You do not have to pay taxes or fees on these types of winnings. These requests are scams.
    • Keep your access codes, user ID, passwords, and PINs secret.
    • Keep your address current with all government departments and agencies.
    • Before supporting any charity, use the CRA website at www.cra.gc.ca/charities to find out if the charity is registered and get more information on the way it does business.
    • Be careful before you click on links in any email you receive. Some criminals may be using a technique known as phishing to steal your personal information when you click on the link.
    • Caller ID is a useful function. However, the information displayed can be altered by criminals. Never use only the displayed information to confirm the identity of the caller whether it be an individual, a company or a government entity.
    • Protect your social insurance number. Don’t use it as a piece of ID and never reveal it to anyone unless you are certain the person asking for it is legally entitled to that information. If an organization asks for your social insurance number, ask if it is legally required to collect it, and if not, offer other forms of ID.
    • Pay attention to your billing cycle and ask about any missing account statements or suspicious transactions.
    • Shred unwanted documents or store them in a secure place. Make sure that documents with your name and SIN are secure.
    • Immediately report lost or stolen credit or debit cards.
    • Carry only the ID you need.
    • Do not write down any passwords or carry them with you.
    • Ask a trusted neighbour to pick up your mail when you are away or ask that a hold be placed on delivery.

    Have you been a victim?

    You should report deceptive telemarketing to the Canadian Anti-Fraud Centre online or by calling 1-888-495-8501.

    If you suspect you may be the victim of fraud or have been tricked into giving personal or financial information, contact your local police service.

    If the CRA has confirmed that a taxpayer’s information has been compromised, the Agency will act to prevent the fraudulent use of the information involving systems and processes for which the CRA is responsible.

    If your social insurance number (SIN) has been stolen, you should contact Service Canada at 1-800-206-7218. For more information, see Social Insurance Number (Service Canada website).

    You can ask the CRA to disable online access to your information on the CRA login services by contacting them directly. After access to your information is disabled, you may change your mind and want access again. If so, you can contact them directly again and ask that your access be re-activated.

Seniuk and Company is now a QuickBooks Online Platinum ProAdvisor

Advising over 25 Quickbooks online clients, our Firm is fully trained and staffed to assist with Quickbooks online clients.

We have recently received the Quickbooks Platinium Proadvisor Certification.

If you are looking for an accountant to assist you with your Quickbooks Online company, we are here to help and we offer a free consultation.  Contact us directly at clientportal@seniuk.com to discuss your needs.

 

 

Types of business ownership: Determining whether incorporation, partnership or sole proprietorship is right for your business.

When you decide to start your own business, you need to determine what type of business structure best suits your needs. There are three types of business structures:

Sole proprietorship

With this type of business organization, you are the sole owner, and fully responsible for all debts and obligations related to your business. All profits are yours to keep. Because you are personally liable, a creditor can make a claim against your personal assets as well as your business assets in order to satisfy any debts.

Advantages:

  • Easy and inexpensive to register
  • Regulatory burden is generally light
  • You have direct control of decision making
  • Minimal working capital required for start-up
  • Some tax advantages if your business is not doing well (for example, deducting your losses from your personal income, and a lower tax bracket when profits are low)
  • All profits go to you directly

Disadvantages:

  • Unlimited liability (if you have business debts, claims can be made against your personal assets to pay them off)
  • Income is taxable at your personal rate and, if your business is profitable, this could put you in a higher tax bracket
  • Lack of continuity for your business if you are unavailable
  • Can be difficult to raise capital on your own

Partnership

A partnership is a non-incorporated business that is created between two or more people. In a partnership, your financial resources are combined with those of your business partner(s), and put into the business. You and your partner(s) would then share in the profits of the business according to any legal agreement you have drawn up.

In a general partnership, each partner is jointly liable for the debts of the partnership. In a limited partnership, a person can contribute to the business without being involved in its operations. A limited liability partnership is usually only available to a group of professionals, such as lawyers, accountants or doctors.

When establishing a partnership, you should have a partnership agreement in place. This is important because it establishes the terms of the partnership and can help you avoid disputes later on. Hiring a lawyer or other legal professional to help you draw up a partnership agreement will save you time and protect your interests.

Advantages:

  • Fairly easy and inexpensive to form a partnership
  • Start-up costs are shared equally with you and your partner(s)
  • Equal share in the management, profits and assets
  • Tax advantage — if income from the partnership is low or loses money (you and your partner(s) include your shares of the partnership in your individual tax returns)

Disadvantages:

  • There is no legal difference between you and your business
  • Unlimited liability (if you have business debts, personal assets can be used to pay off the debt)
  • Can be difficult to find a suitable partner
  • Possible development of conflict between you and your partner(s)
  • You are held financially responsible for business decisions made by your partner(s); for example, contracts that are broken

Corporation

Another type of business structure is a corporation. Incorporation can be done at the federal or provincial/territorial level. When you incorporate your business, it is considered to be a legal entity that is separate from its shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation. It is always wise to seek legal advice before incorporating.

Advantages:

  • Limited liability
  • Ownership is transferable
  • Continuous existence
  • Separate legal entity
  • Easier to raise capital than it might be with other business structures
  • Possible tax advantage as taxes may be lower for an incorporated business

Disadvantages:

  • A corporation is closely regulated
  • More expensive to set up a corporation than other business forms
  • Extensive corporate records required, including documentation filed annually with the government
  • Possible conflict between shareholders and directors
  • You may be required to prove residency or citizenship of directors