Small Business Tips, News, Issues at Montreal Financial

What Happens When You Contribute Excess Amounts to your RRSP

2012-05-22T01:40:55Z

Being able to contribute to an RRSP is one of the great tax saving strategies available to all Individual Canadian Taxpayers who generate “earned income” which is essentially income earned from employment (salaries) or self employment, (Passive income like dividends and interest is ineligible for consideration when calculating how much you can contribute to an RRSP). There are .unfortunately limits to how much you can contribute and Revenue Canada (CRA) actually imposes penalties on overcontributions to your RRSP.

Top 6 Best Television Accountants

2012-05-02T04:34:51Z

Accountants often get a bad rap when portrayed in movies and television. They tend to be boring, devoid of personality, weird or just socially awkward. Alternatively they are scheming and manipulative, and are often the device by which the rich are pushed into penury. They are almost always unsatisfied with their jobs and have secret dreams of pursuing something a little more exciting. This of course is unfair as being an accountant can be both fulfilling and exciting, depending on what you do with it. It also provides some measure of financial stability that makes one's goals and dreams more achievable.

There are some memorable accountant portrayals on television, which we have compiled below:

Tax Advice for Last Minute Filers and Procrastinators

2012-04-20T05:05:05Z

If you have filed your tax return, you are entitled to thumb your nose at those of us who are still trying to get it together. Given that the deadline to file your tax return is imminent, you should probably drop what you are doing right now and make it happen. For the majority of taxpayers, the stress of having to file your taxes far outweighs the actual complexity of completing the tax return itself, particularly when software is available for even the most “numbers challenged” individuals. And for those who really don’t want to do it themselves, there are tax preparation offices everywhere that are just a google search away.

What Happened to Quebec Property Tax Refund?

2012-04-13T04:33:45Z

For Quebec taxpayers who have been trying to locate their RL-4 slips, the slip that your landlord usually provides, or the part on the tax forms or software where you would enter your property taxes (Schedule B), be advised that as of 2011, that this is no longer a specific tax credit. Prior to 2011, both property owners and renters could claim a portion of property taxes paid. This reduced income taxes payable for taxpayers whose total family income was under approximately $50k

However, per Revenue Quebec:

The property tax refund was replaced by the housing component of thesolidarity tax credit. As a result, landlords no longer have to provide their tenants with RL-4 slips, and Part E of Schedule B (which tenants had to complete to claim the refund) has been removed. To claim the solidarity tax credit, complete Schedule D.

Essentially, Revenue Quebec no longer allows for a credit that is based on specific property taxes paid. Rather, with the Solidarity Tax Credit, it determines whether you live in an eligible dwelling i.e. do you rent or own your home and calculates a monthly credit that is based on your total income. (The higher the income, the lower the credit, until it reaches $0). The solidarity tax credit is combined with the QST credit and is paid out to Quebec taxpayers on a monthly basis as long as they don’t exceed the income threshold. Generally speaking, a single taxpayer who owns or rents their home will be eligible for the full amount of solidarity tax credit if their income does not exceed $31,695, which is approximately $900. Net incomes between $31,695 and approximately $46,000 reduce the amount of the tax credit until the amount reaches nil. Keep in mind that, to receive the credit, you must register for direct deposit.

More details on the solidarity tax credit and where to register

6 Strategies to Maintain your Sanity during Busy Season

2012-04-06T02:48:48Z

Accountants across the world right now are mired in tax preparation madness, as they try to deal with the myriad of work that needs to be done before tax filing deadlines. The period between January and April is universally referred to as busy season, a term which inspires dread and tests the mettle of even the most ambitious and hardworking accountants. Of course busy season is not specific to accountants. Retailers experience it during the lead up to Christmas while the hospitality industry tends to be busiest in June and July (Montreal’s grand prix weekend is both a boon and a logistical nightmare for hotels and restaurants). In fact most small business owners have periods when they are swamped, which can be problematic if they are not able to handle it. In the interest of avoiding premature hair loss and ensuring that your business continues its unabated growth, below are some simple, yet fundamental strategies, to help you cope:

What is the Hiring Credit for Small Business?

2012-03-20T16:00:34Z

Recently, a client received a notice from the CRA indicating that he had received a credit of $265. The explanation was simply that it was a hiring credit. Upon further research, we determined that the credit was a result of the provision in the 2011 budget that gave a credit to small business for hiring additional employees.

To be eligible for the credit, small businesses are not required to prepare any additional reporting. The small business hiring credit is simply calculated based on the increase in employment insurance (EI) premiums paid in 2011 over 2010. The maximum amount that any business is eligible to receive is $1,000.

Since the calculation is based on amounts reported on your T4 slips for 2010 and 2011, you are only eligible if the slips have been filed for these calendar years.

It appears that the amount of the credit is 100% of the excess of 2011 EI premiums over the 2010 EI premiums, up to aforementioned limit of $1,000.

The credit will not actually be paid out immediately, but applied to your payroll account.

New businesses (like my client) will receive the credit. Their 2010 EI premiums will be calculated at $0.

Note that since the EI credit should reduce your payroll expense, it will reduce your business expense and by extension, increase profits. The journal entry is as follows:

Dr. Payroll (EI) Liability

Cr. Payroll Expense

Once you receive your payroll statement from Revenue Canada indicating the amount of the credit, you may reduce the payroll liability owing to them by the same amount. You cannot, however, estimate the amount of the credit before you have received notification from Revenue Canada.

Tax Return Checklist for Individuals and Unincorporated Business Owners

2012-03-15T01:34:25Z

The deadline to file our tax returns is quickly approaching, resulting in slight feelings of panic for some individuals and small business owners. As someone who provides tax services for a living, I have found that (like with many things) the stress is far more manageable when you know exactly what you have to do (rather than a vague idea that documents need to be located and forms need to be filled in). One of the best ways to mitigate this stress is to prepare a checklist. If you are looking for a comprehensive tax checklist , David at The Tax Issue has prepared an excellent one and I recommend that you check it out.

The checklist below has some of the more common income, deductions and credits that the majority of taxpayers are likely to have:

How to Register a Small Business in Quebec

2012-03-02T21:33:32Z

Many budding business owners are interested in setting up a small business or becoming self employed, either on a full time or part time basis, but are not really sure where to start. The process of registering a business in Quebec, depending on your circumstances, can actually be quite simple or it can be a little more involved. Below we look at the questions that you need answer to determine your business registration obligations:

10 Corporate Income Tax Facts for Small Businesses

2012-02-24T23:50:55Z

There are essentially two types of tax returns for small businesses and the self employed. If you are an unincorporated sole proprietor or a partnership, you are required to fill out the statement of business activities (T2125) on your personal tax return also referred to as the T1. If you are incorporated, then you are required to complete a corporate income tax return referred to as a T2. (The corporate tax return is in addition to the personal tax return). Although the accounting for unincorporated and incorporated entities is almost the same, except with respect to the equity sections, preparing the T2 is more complex and is generally best outsourced to a qualified accountant. Regardless, it is good to have an understanding of some of the important considerations when preparing a corporate income tax return.

Accounting and Tax Treatment of Computer Hardware and other Fixed Assets

2012-02-17T04:14:55Z

Investment in capital items such as computers, furniture, equipment and cars can cause confusion for small business owners. Since these are purchases that affect the cash flow of the business, it seems that they should be accounted for as expenses just as you would reflect office supplies or rent. There are however special rules for any acquisitions that qualify as “fixed assets”.

A fixed asset, simply speaking, is an acquisition that provides a long term economic benefit to the business. In other words, any business purchases that has a useful life that extends beyond one year, will usually qualify as a fixed asset.

From an accounting perspective, fixed assets as their category implies, are reflected as assets on the Balance Sheet. This means that they when they are initially entered into your accounting system, they will have no immediate impact on your bottom line. It is only with the passage of time that a portion of these costs become an expense, which requires an assessment regarding the useful life of the asset. For example you might purchase some computer hardware that you expect to use for about 3 years after which you will need to replace it. At the end of the 3 years, however, it may still have some value (you may be able to sell it) which is referred to as salvage value. This too needs to be evaluated. Once these factors are determined (since you are not psychic, they do not have to be exact – just reasonable) you have enough information to calculate your depreciation expense. The depreciation expense is the amount by which you reduce your fixed asset value on an annual basis.