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.

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?

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.

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!

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.

Goods and services tax (GST 5%) is a tax that applies on most supplies of goods and services made in Canada. Examples of goods and services for which GST is not charged and collected include:

• Used residential housing

• Long-term residential accommodation

• Most health, medical, and dental services

• Child-care services

• Most domestic ferry services

• Legal aid services

• Many educational services or tutoring services

• Music lessons

• Most services provided by financial institutions

• Insurance policies

• Most goods and services provided by charities

Certain goods and services provided by non-profit organizations, governments, and other public service bodies.

Companies which provide taxable supplies in Canada, and have total revenues from taxable supplies of $30,000 or more in the last four consecutive calendar quarters must register for GST. When registering for GST, the reporting period should be the same as your fiscal year for income tax purposes. Input Tax Credits (ITC’s) can be claimed on the GST return to recover GST paid or owed on purchases and expenses for the business. When completing the GST return, deduct the total Input tax credits (ITC’s) for the reporting period from the GST collected and the result would be the net GST Refund (or payable ).

For companies with $500,000 or less in annual taxable revenues, there is an option to either have a quarterly reporting period or an annual reporting period. If your reporting period is monthly or quarterly, the filing and remittance deadline is one month after the end of the reporting period. If your reporting period is annual, the filing and remittance deadline is usually three months after the end of the reporting period.

For annual filers, if your net tax for the current or previous quarter is less than $3000, then paying quarterly installments is not necessary. For those who need to make installment payments, the deadline is one month after your fiscal quarter end date.

Effective July 1, 2010, GST 5% is replaced by Harmonized Sales Tax (HST) 12% in the province of British Columbia and HST 13% in the province of Ontario.

Please refer to article on HST in BC for more information.

HST in BC includes certain rebates.

Point-of-sale rebates include:

•         Children’s clothing and footwear

•         Children’s car seats and car booster seats

•         Children’s diapers

•         Books (including audio books)

•         Feminine hygiene products

•         Motor fuel

No action is required for purchasers to take advantage of these point-of-sale rebates, as the retailer would automatically provide the purchaser with the point-of-sale rebate, crediting the B.C. component of the HST (7%) and only collecting the 5% federal component of the HST on that item. In the event that a purchaser does pay the B.C. component of the HST on the purchase of a designated point-of-sale rebate item, or in other words the retailer did not credit the B.C. Component of the HST to the purchases, the purchaser would be entitled to apply to the Canada Revenue Agency, within 4 years of the day that the tax became payable, for a rebate of the B.C. component of the HST paid.

New Housing Rebate

There is a common misconception that we must pay 12% HST on housing. The truth is HST at 12% only applies to a builder’s sales of a newly constructed or substantially renovated residential complex. Sale of housing previously occupied by an individual as a place of residence that is exempt from GST continues to be exempt from HST. Where the new house is purchased for use as a primary place of residence of the purchaser, the purchaser would be entitled to claim a B.C. new housing rebate of 71.43% of the provincial part of the HST, subject to a maximum rebate amount of $26,250.

Place of Supply Rules

HST Place of Supply rules for tangible properties has not changed. HST is applied based on the place at which the consumer has possession of the property or at the place the service is performed. HST Place of Supply rules for intangible personal property has changed to have less reliance on the supplier’s location and greater reliance on where the consumer of the intangible personal property or service is located.

Accounting & Reporting Requirements

Businesses already registered for GST are automatically registered for HST. Registrants will report their HST according to their GST filing frequency. If you are a business owner, you might ask, how does this affect my business’ profitability? All businesses can benefit from reduced paperwork and lower costs by combining the two taxes into one. The idea is that products will go down in price as farmers, manufacturers and other businesses will receive a 12% tax credit for the HST they pay; thus, the cost of making their products will go down. However, the downfall is that revenues can also go down if consumers are feeling the costs are higher with an added HST to pay. Another downfall can be a dip in cash flow as businesses have to spend more initially to pay HST on items they purchase.

Taxable or Non-Taxable? People don’t really know what’s exactly going on with the Harmonized Sales Tax. Here is a table to see what is taxable.

Source: “Harmonized Sales Tax in Canada British Columbia Edition” prepared by BC’s CGAs.

Please read it carefully. If you still have second thoughts regarding HST, please contact Acton Accounting and Bookkeeping.

On the other side, a report in The Vancouver Sun has illustrated that “Recession is now history in BC” according to an increase of good business news.  KPMG announced that “the host of the 2010 Winter games now offers the best business tax climate of 41 countries measured around the world.”

According to various surveys and reports there is evidence of an increase in business and a slight improvement in the economy however, this is insignificant news to the majority of households across BC who are finding it difficult to make ends meet.