Announced December 15, 2020, due to COVID, Finance and the CRA have an administrative policy for employees working at home to claim a flat $400 Office in Home deduction ($2 day to a maximum of $400) without an employer T2200 form. The employee must have worked from home more than 50% over a period of at least 4 consecutive weeks in 2020 due to COVID-19. Employees who think they have a larger claim can still use the detailed method but will require an employer signed T2200 form.

ANDERSONBRONSCH TEAM
ROMANOVSKY & ASSOCIATES LLP
CHARTERED PROFESSIONAL ACCOUNTANTS

Keith M.J. Anderson* BCom, CPA, CA-IT, CITP

Chartered Professional Accountant and Chartered Accountant (Canada)
CA-Designated Information Technology Specialist (Canada)
Certified Information Technology Professional (US)
* Professional Corporation

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
This information is provided for general information purposes only. As legislation changes frequently, certain information may be out of date periodically. The complexity of the Law and the varied circumstances of each taxpayer dictates that the information provided may not be suitable in all circumstances. Readers must not rely on any information provided without first obtaining direct and competent professional advice. The information provided is not intended to replace or serve as substitute for any audit, advisory, tax or other professional advice, consultation or service. Therefore, the information is provided “as is” without warranties of any kind, express or implied, including accuracy, timeliness and completeness. In no event shall and associated parties to this information be liable for any direct, indirect, incidental, special, exemplary, punitive, consequential or other damages whatsoever.

The post TaxTrends Newsletter Issue 59 appeared first on AndersonBronsch Team, CPA.

It may seem to be a great idea to have a small corporation that you use to earn your income:

1. You may be a current employee, but your co-workers have all ceased being employees and instead incorporated their earnings and are deducting lots of expenses. You may be tempted to incorporate to pay less tax.
3. You may be in an industry that prefers to hire independent contractors who are incorporated instead of employees. You may be forced to incorporate to find work.
5. You may even think that you are truly an “independent contractor” as you have no previous dealings with your customer. But the facts and circumstances of the relationship with your customer may indicate that you are an employee “in fact” and you blindly proceed with your corporation not being aware of the risks.

Basically, a PSB is an “incorporated employee”. If, in the eyes of CRA, you meet the test of being an “employee” rather than an “independent contractor”, then you are caught by the rules.

CRA has issued a policy document outlining their position on “employee vs. independent contractor”. Rather than provide with a link, do a Google search for “CRA Employee or Self-employed?” and that will direct you to the document.

The Courts have introduced several generalized tests which can be summarized as follows:

1. Control. The ability, authority, or right of a payer to exercise control over a worker concerning the manner in which the work is done and what work will be done.
3. Tools and Equipment. Does the worker provide his own tools and equipment to accomplish the work?
4. Financial Risk. Does the worker assume a degree of financial risk?
6. Opportunity for Profit. Does the worker have a risk of both profit and loss?

If CRA and ultimately the Courts determine you are an “employee”, then your corporation is deemed a PSB. Once that happens, the financial consequences are as follows:

1. There is no Small Business Deduction for the corporation. Instead of the first $500,000 of business income being taxed at the low rate, the corporation pays a higher tax rate which would approach 50%.
2. There is no deduction for standard business expenses other than a salary paid to (not just accrued) the owner. All other expenses are denied and added to taxable income.
4. If you pay yourself dividends instead of salaries from the corporation, then there is a likelihood of double taxation. Full corporate tax on all the revenue with no deduction for any expenses and the dividend already paid to you will stand with no reversal.
6. Penalties and interest on unpaid taxes.
8. CRA would normally go back 3 tax years and apply the above rules to each year.

The above, in a worst-case scenario, may result in almost ALL of your gross revenue will become taxes with nothing left for you to take home. This burden may easily bankrupt some taxpayers. As a result, we recommend that you consider the risks and speak with us if you have questions or want an analysis of your situation. In our practice, we always consider these risks for our clients. However, circumstances may change that we may not be aware of and therefore it may be worth having a conversation with us.

ANDERSONBRONSCH TEAM
ROMANOVSKY & ASSOCIATES LLP
CHARTERED PROFESSIONAL ACCOUNTANTS

Keith M.J. Anderson* BCom, CPA, CA-IT, CITP

Chartered Professional Accountant and Chartered Accountant (Canada)
CA-Designated Information Technology Specialist (Canada)
Certified Information Technology Professional (US)
* Professional Corporation

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
This information is provided for general information purposes only. As legislation changes frequently, certain information may be out of date periodically. The complexity of the Law and the varied circumstances of each taxpayer dictates that the information provided may not be suitable in all circumstances. Readers must not rely on any information provided without first obtaining direct and competent professional advice. The information provided is not intended to replace or serve as substitute for any audit, advisory, tax or other professional advice, consultation or service. Therefore, the information is provided “as is” without warranties of any kind, express or implied, including accuracy, timeliness and completeness. In no event shall and associated parties to this information be liable for any direct, indirect, incidental, special, exemplary, punitive, consequential or other damages whatsoever.

The post TaxTrends Newsletter Issue 57 appeared first on AndersonBronsch Team, CPA.

3 Questions to ask yourself:

1. Are you a US Citizen already? (you may not know it – but you could be).
2. Do you have a US Green Card or Expired Green Card? (work or may have worked in the US).
3. Do you spend, on a 3 year weighted average basis, more than 183 days per year in the US? (Snowbirds can easily meet this test)

If you answer perhaps “yes” to any of the 3 questions, then you may have a substantial US tax problem.

Unlike other taxing countries which tax residents of that country on their world income, the US taxes its “citizens” and “residents” on their world income. In addition to annual US income tax return obligations, there are numerous information returns (disclosure forms that do not directly generate tax but that the IRS uses to track tax evaders, etc.) that need to be filed annually if you are caught by the US rules. In addition, there are some periodic filings that can result in Estate Tax issues (if you die your Executor can have these filing problems) and Gift Tax issues (transferring property to someone else).

While you may not actually owe US tax (because you are resident in another country – Canada for example – and your income is fully taxed in Canada), the neglect to file the annual US tax return, the annual information returns, and failure to file and pay Estate and Gift Tax can result in punitive penalties ($10,000 USD per information return per year as an example).

Are you a US Citizen?

Given that Canada is geographically close to the US, many Canadians may actually be US Citizens but not know it. Common situations include if you were born in the US but moved to Canada when you were too young to know it. There are also less common situations for example:

• You were born in Canada to two US citizens or,
• You were born in Canada to one US citizen and that US citizen resided in the US for certain periods of time (this varies depending on the date of birth of the child and the related US legislation in force at that time – there are many complex considerations)In the above examples, it does not matter that the you do not have a US passport, SSN, US birth certificate, etc. If your birth fits the facts, then you are automatically a US citizen and therefore responsible for US tax filings.

In addition, US Citizens living abroad who also own a significant percentage (10% or more) of non-US corporations in which more than 50% of the shares of that corporation are owned by US taxpayers (who each own at least 10% of the shares) have an enormous tax problem which is beyond the scope of this article. In essence, the US wants to ultimately receive taxes from these US Citizens on accumulated profits (retained earnings) earned by these related non-US corporations though a complex mechanism. This provision may well result in excessive amount of taxes owing to the US which may or may not be creditable on taxes owing in Canada. In other words, there is a high degree of probability of double taxation. See the following link on this GILTI Tax:

https://www.dmcl.ca/gilti-or-not-gilti-us-shareholders-of-canadian-corporations-subject-to-new-us-tax/

Do You have a US Green Card, Expired or Active?

Green card holders, including those with expired Green Cards who moved to Canada, may be treated as a US resident and again subject to all the US filing requirements. Unless you “Terminate” the Green Card, the filing requirements are still in force!

Spending Too Much Time in the US

Through a complex calculation, if you spend a lot of time (more than 183 days per year on a 3 year weighted average basis), then you are considered a US “resident” (even though you may also be resident in Canada!) and again are subject to all the US filing requirements. Canadian Snowbirds can often meet this test and be subject to US filing problems!

What Can You Do if You are Affected?

The failure to deal with any US filing obligations are punitive with severe financial penalties that do not go away even if you die (your Estate/Executor can be on the hook!). In addition, the likelihood of being “caught” increases each year as Canada and the US have cross-border information sharing requirements including between the CRA and IRS and even involving financial institutions (banks, etc.) who are also responsible for reporting to the CRA/IRS when there are special circumstances.

If you are affected, serious consideration should be made to Renouncing your US Citizenship or taking steps to eliminating your Residency Status in the US. Renunciation and Residency are very complex situations and are therefore costly undertakings. There are only a handful of qualified professionals in Alberta who we feel confident are competent enough to deal with the myriad of issues involved.

We would be happy to discuss your concerns and refer you to qualified professionals if you have a US Tax Problem. In addition, you can visit the below website for more information:

https://moodystax.com/renouncing-your-u-s-citizenship-is-divorcing-uncle-sam-right-for-you/

ANDERSONBRONSCH TEAM
ROMANOVSKY & ASSOCIATES LLP
CHARTERED PROFESSIONAL ACCOUNTANTS

Keith M.J. Anderson* BCom, CPA, CA-IT, CITP

Chartered Professional Accountant and Chartered Accountant (Canada)
CA-Designated Information Technology Specialist (Canada)
Certified Information Technology Professional (US)
* Professional Corporation

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
This information is provided for general information purposes only. As legislation changes frequently, certain information may be out of date periodically. The complexity of the Law and the varied circumstances of each taxpayer dictates that the information provided may not be suitable in all circumstances. Readers must not rely on any information provided without first obtaining direct and competent professional advice. The information provided is not intended to replace or serve as substitute for any audit, advisory, tax or other professional advice, consultation or service. Therefore, the information is provided “as is” without warranties of any kind, express or implied, including accuracy, timeliness and completeness. In no event shall and associated parties to this information be liable for any direct, indirect, incidental, special, exemplary, punitive, consequential or other damages whatsoever.

The post TaxTrends Newsletter Issue 56 appeared first on AndersonBronsch Team, CPA.

One of the growing more common estate planning points is to “gift” property to adult children/grandchildren/etc. before death so that the property is no longer part of the estate and therefore is not part of the Will. “Gifts” of property (investments, real property, etc.) create a deemed disposition whereby the transferor recognizes a deemed disposition at fair value (which may create a taxable gain) and the transferee receives the property at a cost equal to that fair value (“proceeds” = fair value). However, if a property is transferred at less than fair value (say a “sale” at 50% of the fair value) the transferor is still deemed to have disposed of it a fair value, but the transferee will now receive the property at the cost equal to only the 50% of fair value in my example. In essence, this would create a double taxation situation in that the transferor pays tax at the fair value but the transferee has a cost basis for a future sale at 50% of the fair value. This problem becomes acute when the property in question is real property – say a lake house. Often these types of transfers are intended as “gifts” but for legal purposes the transaction is recorded at proceeds of $1 (because legal contracts require some “consideration” to be paid to be enforceable). The intention is that the transfer is a “gift” but since there are “proceeds”, the transaction may be interpreted as a “sale” at less than fair value. This would normally result in the transferor paying tax at the fair value but the transferee receiving a cost of the $1 consideration – which is the worst type of result. CRA would likely administratively accept this type of transaction as a “gifting” transaction which avoids the double tax problem. But just to be safe, it would be preferable that any legal documents reflect the intention of the “gift” and any nominal consideration is just for legal enforcement. As all property transfers are complex, It is critical to speak with us before any such large transfer of property to ensure that all the tax issues are properly dealt with.

ANDERSONBRONSCH TEAM
ROMANOVSKY & ASSOCIATES LLP
CHARTERED PROFESSIONAL ACCOUNTANTS

Keith M.J. Anderson* BCom, CPA, CA-IT, CITP

Chartered Professional Accountant and Chartered Accountant (Canada)
CA-Designated Information Technology Specialist (Canada)
Certified Information Technology Professional (US)
* Professional Corporation

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
This information is provided for general information purposes only. As legislation changes frequently, certain information may be out of date periodically. The complexity of the Law and the varied circumstances of each taxpayer dictates that the information provided may not be suitable in all circumstances. Readers must not rely on any information provided without first obtaining direct and competent professional advice. The information provided is not intended to replace or serve as substitute for any audit, advisory, tax or other professional advice, consultation or service. Therefore, the information is provided “as is” without warranties of any kind, express or implied, including accuracy, timeliness and completeness. In no event shall and associated parties to this information be liable for any direct, indirect, incidental, special, exemplary, punitive, consequential or other damages whatsoever.

The post TaxTrends Newsletter Issue 55 appeared first on AndersonBronsch Team, CPA.

Do you, your corporation, or any other legal entity you own or have a beneficial ownership in ‐ own residential real property in BC (rented, occupied yourself, or vacant)? If so, you have an important designation to make by March 31, 2019!

The BC Speculation and Vacancy Tax (SVT) is intended to target foreign and domestic home owners who do not pay income tax in BC. The SVT rate is 0.5% of assessed value which increases to 2% for 2019 for properties in certain areas. The BC government will then introduce a refundable credit to offset the SVT to those who do not otherwise qualify for the up‐front exemption, but still pay taxes in BC.

Speculation and Vacancy Tax — Current Rules

Taxpayers who own property in certain geographic regions of British Columbia may be subject to the SVT as follows.

For 2018:

0.5% of the property’s assessed value for all properties subject to the tax.

For 2019 and subsequent years:

• 0.5% for B.C. residents, Canadian citizens and permanent residents other than individuals whose “unreported income” (which includes their spouse’s unreported income) exceeds the individual’s “reported income” (which includes their spouse’s reported income) subject to income taxes in Canada in the preceding taxation year; and
• 2% for all other property owners that are not eligible for the 0.5% rate.

The SVT is levied on all registered owners in a calendar year unless the owner declares an exemption by March 31 of the following calendar year. Where there are two or more registered owners on title to the property, the rules stipulate that every owner must make the declaration.

To be exempt for 2018, registered owners must declare an exemption online or by phone by March 31, 2019 or they may face a tax liability, even if they would otherwise be entitled to an exemption.

Exemptions Are Available

B.C. property owners that are liable for the SVT may be eligible for one or more of the various exemptions available. Specifically, the rules include exemptions for principal residences, certain tenanted properties and properties under construction or renovation, amongst other types of property.

Principal residence exemption

There is a principal residence exemption available for B.C. residents that are eligible for the lower 0.5% rate and that reside in the property for a longer period in a calendar year than any other place.

Tenanted residential property exemption

Residential property that is rented to a tenant may also qualify for an exemption from the SVT. This exemption is generally available to certain publicly held entities, B.C. residents, Canadian citizens, permanent residents and certain foreign owners that meet certain strict conditions. To qualify for the exemption for 2018, the property must be rented to a tenant for at least three months in the calendar year. For 2019 and subsequent years, the property must be rented for at least six months in the calendar year. Each rental period must not be less than 30 days (i.e., to eliminate any type of short‐term arrangements). The tenant must be an individual who generally resides in the property, and may have an arm’s length or non‐arm’s length relationship with the registered owner, provided specific conditions are met.

Exemptions for residential property under construction or renovation

There are also exemptions under the SVT rules for development property at various stages of the development cycle, from the permitting phase through to completion. These exemptions may be available even if the property is vacant (and cannot be occupied for at least 90 days in the year), including vacant heritage property and new inventory property. For phased developments, all phases must be owned by the same person or a “related person” within the meaning of the federal tax rules.

For those that do NOT qualify for the exemption or have missed the filing deadline, the SVT applies and the first payment is due July 2, 2019.

ANDERSONBRONSCH TEAM
ROMANOVSKY & ASSOCIATES LLP
CHARTERED PROFESSIONAL ACCOUNTANTS

Keith M.J. Anderson* BCom, CPA, CA-IT, CITP

Chartered Professional Accountant and Chartered Accountant (Canada)
CA-Designated Information Technology Specialist (Canada)
Certified Information Technology Professional (US)
* Professional Corporation

Web: www.AlbertaCPA.com
Email: keith@albertacpa.com
Phone: 780 447 5830
Fax: 780 451 6291
Cell: 780 906 2223

Disclaimer:
This information is provided for general information purposes only. As legislation changes frequently, certain information may be out of date periodically. The complexity of the Law and the varied circumstances of each taxpayer dictates that the information provided may not be suitable in all circumstances. Readers must not rely on any information provided without first obtaining direct and competent professional advice. The information provided is not intended to replace or serve as substitute for any audit, advisory, tax or other professional advice, consultation or service. Therefore, the information is provided “as is” without warranties of any kind, express or implied, including accuracy, timeliness and completeness. In no event shall and associated parties to this information be liable for any direct, indirect, incidental, special, exemplary, punitive, consequential or other damages whatsoever.

The post TaxTrends Newsletter Issue 54 appeared first on AndersonBronsch Team, CPA.