It’s the New Year, and with the advent of 2012 the Canadian government has introduced some Canadian Pension Plan changes that may have a significant effect on your life and the way you, “choose to live, work and retire,” in Canada. At our Vancouver bookkeeping and accounting firm we often receive questions from clients about how these changes to the Canada Pension Plan (CPP) in 2012 will affect their personal finances. Do you understand the changes that have occurred and how they affect you and your personal income taxes?

The 2012 CPP changes will affect individuals between the ages of 60 and 70 who work while receiving CPP retirement pensions. The overall summary of the CPP changes for January 2012 is described by Service Canada as:

1. Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65.

2. Your monthly CPP retirement pension amount will decrease by a larger percentage if you take it before age 65.

3. Employees under 65 receiving CPP retirement pensions will now have to make CPP contributions. These contributions will increase CPP retirement benefits.

4. Employees age 65 to 70 receiving CPP retirement pensions can now choose to make CPP contributions. These contributions will increase their CPP retirement benefits.

5. The number of years of low or zero earnings that are automatically dropped from the calculation of your CPP pension will increase

6. You will be able to begin receiving your CPP retirement pension without any work interruption

How will the CPP Changes in 2012 directly affect you?

Individuals who are Employed and/or Self-Employed

Now that you know what CPP changes in 2012 are, it’s crucial that you understand exactly how they are going to affect your personal income taxes. The changes will affect individuals who are between the ages of 60 and 65 and are working and receiving the CPP retirement pension by requiring them to contribute to the CPP. If you are an employee or are self employed, Canada Pension Plan contributions are mandatory until the age of 65.

If you are an individual between the ages of 65 and 70, and are either employed or self-employed, CPP contributions will continue to be deducted from your pensionable earnings until or unless you choose to stop contributing.

Employers

Employers also need to be aware of the CPP changes in 2012 and how they will change their corporate accounting and bookkeeping.  Employers must withhold and remit CPP deductions on pensionable earnings for all employees aged 60 to 65 and they must also withhold CPP deductions on pensionable earnings for all employees aged over 65 to 70 unless they have elected to stop contributing to the CPP.

As an employer, it is your responsibility to know your employees’ ages and birthdays, as well as ensuring that you see proof that your employee is receiving a CPP retirement pension. Under the new regulations you must also check if the employee has previously filed to stop contributing to the CPP with a previous employer.  If your current employee has filed in the past to stop contributing, you must request a copy of the filing for your records.

At our Vancouver accounting and bookkeeping services firm we are constantly on top of new updates to tax requirements in Canada. If you’re not sure if things have changed or what the changes will mean to you, contact our accounting and bookkeeping services office today to ensure that you’re informed. We can help you with all of your personal income tax, corporate tax, as well as your Vancouver accounting and bookkeeping needs.

Are you a U.S citizen living in Canada? You may not be aware of this, but if you are, then you are subject to exactly the same filing requirements that you would be subject to if you were living in the U.S. Many U.S. citizens living in Canada aren’t aware of filing requirements in their home country and this can end up causing big problems. Don’t let yourself be caught uninformed, reading this blog post will help you get a better idea what U.S. Citizens living in Canada need to file, and how you may be able to save some money while you’re at it.

In Canada, filing requirements are based on residency rather than citizenship. That means that if you live in Canada, you pay taxes, but if you’re a Canadian citizen living abroad, you’re not required to.  This isn’t the case in the U.S and that has caused some confusion and difficulty for U.S. citizens who live in Canada. If you’re a U.S. citizen living in Canada then you are required to file two sets of tax returns each year: a Canadian return because you’re living in Canada and a U.S. return because you’re still a U.S. citizen. Fortunately, this doesn’t necessarily mean that you will have to pay U.S taxes in Canada as there are several mechanisms that you can use to make sure that you’re not doubly taxed. Making sure that you know what they are can help save you some money and difficulties.

Earned Income Exclusion

You may be able to exclude up to $85,700 from income for U.S. tax purposes by completing Form 2555 and attaching it to your return. Form 2555 is a special form excluding foreign earned income from taxation in the United States.

Treaty Benefits

If you receive Social Security benefits from the U.S., these benefits are not taxable in the U.S. They are taxable only in Canada. You may claim a 15% deduction on Line 256 of your Canadian tax return.

Foreign Tax Deduction or Credit

By claiming a foreign tax credit on your U.S. return for taxes you are required to pay to Canada, you can also help to avoid paying double taxes. To claim the credit, you must complete Form 1116 and attach it to your U.S. tax return. You’re also able to claim the Canadian taxes you paid as an itemized deduction.

As a Vancouver Accounting and Bookkeeping firm, we are experts on issues surrounding taxes for U.S. Citizens living in Canada. While this information will help to keep you informed about your own tax filing requirements, it doesn’t mean that we recommend filing yourself. If you’re a U.S. citizen living in Canada we find that filing two sets of returns can be a frustrating (and sometimes difficult) process. Why not contact us and learn how we can help you file your U.S taxes in Canada and save yourself a headache?

At Acton Accounting and Bookkeeping, we’re constantly trying to find ways to simplify our clients’ business and financial tracking needs. As a Vancouver accounting and bookkeeping services firm a pain point we hear a lot about from our clients is that they would really like to be able to monitor all of their finances in one place, without the need to learn new or complicated accounting software. Many of our customers feel more comfortable tracking their financial activities by themselves but aren’t interested in adjusting to a new software program. Fortunately, we’ve come up with a solution that will help streamline your business tracking efforts: our Generic Business Tracking spreadsheet available for purchase and download on our website.

This comprehensive spreadsheet has worksheets for all of your tracking needs including:

Cash Disbursements
Cash disbursements paid from your company’s bank account and credit card are easy to track with the Chequing-Cash Purchases worksheet and the Credit Card Purchases Worksheet.

Sales Tracking
Monitoring and measure company sales information is simplified with the Sales Tracking Worksheet included in the Generic Business Tracking Spreadsheet.

Payroll
Most companies need to keep track of their company’s employee pay expenses. By downloading our Payroll worksheet this becomes a much easier task for bookkeepers, HR administrators and your accounting department.

Income Summary
Want to take a quick look at your business income statement? Check out the Income Summary Worksheet included in the Generic Business Tracking Spreadsheet for a snapshot of how your business is doing in terms of income.

We’re always looking for ways to help you improve your accounting and bookkeeping processes. These worksheets are just one of the many ways that we can help you improve your financial monitoring and tracking. If you’d like to hear more about our Vancouver accounting services and how we can help you, please contact our accounting services office today.

Starting a new business? Is your business growing or expanding? If you are considering making the move to become a corporation, there are some important issues to consider.

Operating as a sole proprietorship or partnership has many advantages compared to a corporation. They’re simple and much cheaper to set up, require less paperwork, and have fewer regulations.

However, if you chose to incorporate, investors are generally more comfortable working with corporations since sole proprietors are subject to unlimited liability. This means that if the business is sued, all the business and personal assets of the owner are at risk.

The tax implications are a crucial factor when deciding whether to incorporate. Here are 5 important tax issues to consider:

1. Business losses can be written off against other income of the sole proprietors and partners.
2. A small profitable corporation pays a lower tax rate than an unincorporated business and the owners only pay taxes for income they received.
3. Owners of a corporation receive a capital gains exemption on the sale of the business.
4. Corporations can write off private health service plans that they provide for employees.
5. More paperwork. Corporate tax returns are filed separately from the owners’ personal tax returns.

Before making your decision, be sure to seek professional advice and contact our team at Acton Accounting & Bookkeeping.

So the HST has been defeated in British Columbia. What does this mean for your business?

The provincial government has created an action plan to reinstate the old tax system of 7% PST and 5% GST. The plan intends to make the change back a smooth and effective process for everyone. It’s expected to take at least 18 months to switch back, with progress updates provided quarterly by the Province.

Those who are eligible for the BC HST credit will continue to receive it until the provincial governments action plan has been completed. If you operate in the film industry, unfortunately the savings brought by HST are now gone.

Businesses will be required to assess, collect, report and remit PST and other related taxes to the provincial government. They are also responsible for changing over their electronic and manual systems and processes. In order to help smoothen the change, the provincial government will be providing information and training on the tax application, collection, compliance and reporting rules related to the PST.

Many believe that it was not the HST itself that caused such an uproar, but the way it was introduced. So keep a close eye on this issue; it’s possible that a new hybrid version of the HST will be developed to provide the best sales tax solution for BC.

To find out more about how this change will affect you and your business, contact our team at Acton Accounting & Bookkeeping

Warren E. Buffett, who is ranked as 2011’s third wealthiest person in the world, recently stirred up a heated debate on whether rich Americans should pay more in taxes. His column in the New York Times titled ‘Stop Coddling The Super Rich’ suggests an immediate raise in taxes for those making an excess of $1 million, and an additional increase for those making $10 million or more. This concept opposes the US’s current theory that the rich should be taxed less since it’s believed that when their money is reinvested, more jobs and wealth are created for everyone else.

And what about the rich here in Canada? Currently our highest tax bracket is at an income of $128,800 and over. Here are our Federal tax rates for 2011:

• 15% on the first $41,544 of taxable income;
• 22% on the next $41,544 of taxable income (on the portion of taxable income between $41,544 and $83,088);
• 26% on the next $45,712 of taxable income (on the portion of taxable income between $83,088 and $128,800);
• 29% of taxable income over $128,800.

Do you think our current tax brackets are fair? Would you argue that the rich should pay more taxes? A poll by CBC News currently shows that 91% of Canadians believe they should. We welcome you to contact us and pick our brains!

Also, make sure to take the time to learn about tax credits you may be eligible to claim in your personal tax return. These include charitable donations, payments made to union or professions boards, and payments made towards transit or tuition. See our complete list or contact our professional accountants and bookkeepers to learn more.

With summer a mix of more rain than shine here in Vancouver, BC, there are no doubt many business owners looking to get out of the city for awhile. It’s common knowledge that travel expenses incurred while on a business trip can be expensed back to your company, but what about when your on vacation with your spouse or family?

A travel expense is what you incur to earn business or professional income while you are away. Now this doesn’t mean that you necessarily have to make your entire trip about business. It simply means that if you dedicate an hour or two each day of your vacation to business related activities, then you are essentially on a business trip.

This can be as simple as setting up a meeting each morning with a vendor or contact in the area that you may potentially work with in the future. After this one meeting, you are then free the rest of the day to enjoy true vacation activities like relaxing at the beach or sightseeing.

So, what does the CRA consider deductible travel expenses?

• public transportation fares;
• hotel accommodations; and
• meals

In most cases, meals and beverages can be claimed for up to 50% of the expense cost.

It’s very important that if you plan to claim your travel expenses that you keep every single receipt from your trip. We recommend bringing a small accordion file or even just a resealable bag to store your receipts in. Be sure to also keep a detailed account of who you met with each day and what your meeting was about.

If you have any questions about claiming travel expenses, we invite you to give us a call!

Acton Accounting and Bookkeeping’s tax accountants are highly experienced at helping small businesses save more while accurately filling out their corporate taxes. We can give you the information you need to make your next vacation even more affordable!

The Harmonized Sales Tax (HST) has been a touchy subject in British Columbia ever since it was introduced in July 2010. Since then, the public has launched multiple campaigns against the HST, citing that a 12% sales tax is just too much for consumers to pay. In fact, under the HST, families pay an average of $350 MORE in sales tax than they paid under the PST plus GST system.

With so much negative feedback regarding the HST, the provincial government has nevertheless agreed to hold a referendum on the matter this June. A “Yes” vote would mean returning to the old system of PST plus GST at 12% sales tax. A “No” vote would mean keeping the HST, but lowering it down to 10% by July 2014.

As it turns out, the Province has indeed been listening to the complaints of British Columbians and a law will be passed governing the HST following a “No” vote this summer. This means the tax would go down to 6% by July 1, 2012 and down to 5% on July 1, 2014. The result would be a 10% HST. This is much lower than both the current 12% sales tax and the two-tax system of PST plus GST.  It is estimated that under a 10% HST, B.C. families will pay on average $120 less tax than under the PST. This tax comparison chart from HST in BC shows what this change could bring:

In addition, the government will be issuing one-time transition cheques to help offset the costs of HST before the first rate reduction in 2012. Both families with children under 18 years old and low- and modest-income seniors will receive cheques of $175 by the end of 2011. Furthermore, the government will increase the general corporate income tax rate to 12 percent on Jan 1, 2012 on big businesses, which is a temporary measure until the fiscal situation allows for further reductions.

The referendum ballots will be mailed out in June and must be returned to Elections B.C. or a Services B.C. office by 4:30pm on Friday, July 22, 2011.

Acton Accounting and Bookkeeping can guide you through the muddy waters of the HST changes and help you make an informed decision regarding the referendum. For more information on how a 10% HST will affect your family or a 12% HST will affect your business, we invite you to give us a call!

You may have heard about Tax Free Savings Accounts (TFSA) for individuals, which are a form of registered savings accounts. Introduced in January 2009, it’s a flexible, general-purpose savings vehicle that Canadians can use to earn tax-free investment income.

According to a CIBC World Markets report, the TFSA market could mushroom to $115 billion by 2013, with cumulative tax savings of nearly $2 billion. Here are some defining features of the TFSA (via http://www.tfsa.gc.ca/):

• Canadian residents age 18 or older can contribute up to $5,000 annually to a TFSA.

• Investment income earned in a TFSA is tax-free.

• Withdrawals from a TFSA are tax-free.

• Unused TFSA contribution room is carried forward and accumulates in future years.

• Full amount of withdrawals can be put back into the TFSA in future years. Re-contributing in the same year may result in an over-contribution amount which would be subject to a penalty tax.

• Choose from a wide range of investment options such as mutual funds, Guaranteed Investment Certificates (GICs) and bonds.

• Contributions are not tax-deductible.

• Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security, the Guaranteed Income Supplement, and the Canada Child Tax Benefit.

• Funds can be given to a spouse or common-law partner for them to invest in their TFSA.

• TFSA assets can generally be transferred to a spouse or common-law partner upon death.

Linda McQuaig explains that “While the annual contribution limits make the program appear modest, the sheltered amounts can grow very large over time. So, by the age of 40, an investor could have $220,000 in the account. But that’s only the beginning. Had the money had been well invested, that $220,000 could have grown to $500,000.”

The particularly useful thing about TFSA’s is that it can be accessed multiple times during your lifetime, which means that it can serve as a great emergency fund while still earning you interest on your investments.

Consensus appears to be that TFSA’s are particularly good for low income Canadians or seniors over the age of 71 because there is no cut off period unlike an RRSP. Nonetheless, Canadians at all income levels could benefit from investing in a TFSA, especially with the high potential for lucrative returns over their lifetime.

If you would like to learn more about how Tax Free Savings Accounts can benefit you and your family, feel free tocontact Acton Accounting and Bookkeeping and we’ll be happy to answer your questions.

British Columbia Provincial Service Tax (PST) was charged on most new and used products and many services. As of February 21, 2007, registration and collection of PST was optional for those who had gross sales of qualifying goods and services in the past twelve months of $10,000 or less. As at July 1, 2010, PST 7% no longer exists as it is now replaced by the Harmonized Sales Tax (HST) 12%.

Some items which were exempt from PST in BC included:

• Clothing patterns, and yarn or fabrics purchased for the purpose of making ore repairing clothing

• Food products

• Clothing and footwear for children 14 and under

• Abrasives used in a business

• Books, newspapers, and magazines

• Insulation

• Smoke alarms

• Specified energy conservation materials

• Bicycles

• Many medications sold on the prescription of a physician, dentist, or veterinarian

• Equipment rental

• Work-related safety equipment

• General safety equipment

A taxable service in BC was any service provided to install, assemble, dismantle, repair, adjust, restore, recondition, refinish or maintain tangible personal property; such as repairs or maintenance of automobiles, furniture, computers, televisions, watches, business equipment, software, gas, and electricity.

You must register for a PST account if you:

• Regularly sold taxable goods

• Leased Taxable goods as a lessor

• Provided legal services

• Sold parking rights within the Greater Vancouver transportation services region

• Provided taxable services

• Provided telecommunication services

• Sold propane

Reporting periods for PSTwas set at the time of registration based on what was reported as the estimated monthly PST collectable. PST return was to be filed and remitted by the 23rd of the month following the reporting period end date.

Contact Acton Accounting and Bookkeeping if you have any questions or need more information.