Tax Time Observations
Hello All,
Given my immersion in tax season, and since this is at its core a financial newsletter (despite my occasional meanderings), I thought it might be useful to address some common questions and issues:
If you are married or in a common law relationship, you must reflect this status on your tax return. This does not change how you report your income and deductions/credits on your tax return as for the most part your tax return is separate from that of your partner. It does however impact some credits and benefits such as the GST credit, child benefits and who can claim childcare expenses. On the plus side, if your spouse does not earn income you can claim them as a dependent and you can combine donations and medical expenses and apply them to spouse where you will receive the maximum benefit.
If you purchased a home in 2022, make sure to claim the $10k first time home buyers credit, if eligible. If you bought the home with a spouse then you either can split it or one spouse can claim the full amount.
Evaluate your medical expenses for the year by looking looking at the list of allowable expenses to see what is eligible as it may cover more expenses than you think. Tax software will calculate the claim, if any, and optimize it with a spouse.
If you are self employed, claim expenses to which you are entitled and be mindful of expenses that are specifically not allowed.
Although you do not have to send in slips and receipts when you efile your tax return, keep them on hand in case of audit (for at least 7 years). With donations, make sure you are claiming the correct amount and that you have an official donation slip (and not just a receipt).
If you make a mistake on your tax return, wait for the notice of assessment as often CRA (or RQ) will correct the mistake. If they do not, you can file an amended return after you have received the notice.
If you sold your house, you must complete a tax form even though there is no capital gain or loss on the sale (assuming the property was used as your primary home and there wasn’t a rental component). If there was a portion of the house that you rented, you must calculate this and report a capital gain or loss on sale.
Gains or income earned in your TFSA and RRSP portfolios are not taxable and do not have to be reported on your tax return. However, activity on other investment portfolios do have to be reported including dividends, interest, foreign income and gains/losses on sales.
This is a smattering of questions I have received. If you aren’t sure about the tax treatment of something, the CRA website provides a lot of detailed information. Additionally, there often articles that specifically address grey areas which you can find with a well worded search query. Calling CRA with any doubts that you might have is also useful (just be prepared to wait).
Blog Post
I have a number of tax related posts on my blog. Below are a couple that are useful at this time of year:
16 Common Financial and Tax Mistakes That Affect Your Small Business’ Bottom Line
Starting a business is hard work. In addition to creating your core product or service , you also need to have a working knowledge of numerous other facets of business. In the early stages hiring
Tax Deductions vs Tax Credits and 5 Tax Deductions to Help Reduce Your Tax Bill
Most taxpayers use the terms tax deduction and tax credit interchangeably. Since they are not accountants, this is perfectly fine unless you are particular about precision and strive for a greater
Small Business Articles/Tips
Tech Tools For Your Business: Ostensibly for CPAs, this list has a number of available apps and software to help you automate and is useful for any business owner.
A Freelancer’s Guide to Saving: Being self employed requires significantly more financial discipline. This article from WealthSimple gives some guidance on how to create a savings strategy.
Tax Stuff:
Provincial Budgets 2023: Most provinces released their annual budgets in the past month or so. EY has a useful summary for each of them with a focus on business and tax changes. The federal budget is due to be released next week, which I will cover in my next newsletter.
New and Common Tax Credits for 2022: Including the home buyers tax credit, digital subscription and moving expenses.
Get on Your Accountant’s Good Side: A great overview and what and what not to do when interacting with your accountant, especially during tax season.
QuickBooks Tip: “Miscellaneous” Expenses
Often, business owners or admin won’t know how to classify a transaction and will simply allocate it to “miscellaneous” or general/admin expenses. This is not a good practice for a couple of reasons:
If you are audited, CRA will zero in on these expenses as they might deem them to be non business related
It doesn’t give you any meaningful insight
It still has to be classified properly on the tax return.
If you can’t find an existing account/category for the expense, it is ok to create one in the chart of accounts especially if it is recurring. Alternatively, it is useful to ask your accountant or do a search for the best classification of the expense.
Small Business Books:
Use savings code “special” to save 20% on any (or all) book(s) when you purchase directly from the website.
AN EASY TO UNDERSTAND TAX GUIDE FOR CANADIAN SMALL BUSINESS OWNERS
CA$19.98
Everything Canadian Business Owners Need to Know about Dividends and How to Pay Themselves
CA$17.87
A Comprehensive Guide to Working with QuickBooks Online
CA$24.99
Everything You Need to Know About Starting Your Sole Proprietorship
CA$14.99
The Essentials For Starting Your Small Business Corporation
CA$29.99
Use savings code “special” to save 20% on any (or all) book(s) when you purchase from the website.
Please note that all books on my website are in PDF format.
If you prefer a print version, all books are also available at Amazon . Note that print versions purchased on Amazon include a complimentary PDF - you just need to email me and include proof of purchase.
Free Resources:
Business 2023 Tax Deadline Calendar
Starting A Corporation Checklist
Start Your Business Checklist
Dividend Declarations Checklist
Small Business Tax Return Checklist
QBO Set Up Checklist.
Small Business Calculators
Previous newsletters
Consulting Services
If you are looking for specific guidance on accounting, finance or tax relating to your small business and/or personal situation, I provide one on one consulting services. Additional details can be found here and here.
Note that I no longer provide ongoing accounting or tax preparation services.
Reviews/Feedback
I would love to hear your comments on my current blog posts, topic ideas for new blogs, book feedback or anything else that you want to talk to me about. You can use my feedback form or email me directly at ronika@montrealfinancial.ca.
For anyone who has purchased my books through Amazon or directly and found them useful, I would be very grateful for a review on Amazon (to leave a review you only need to have an account with Amazon even if you did not purchase the book from there).
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Wishing everyone a lovely weekend.
Ronika