Penalties and interest charges are the most common tools the CRA uses to enforce compliance with the Canadian Income Tax Act. ‘Compliance’ refers to filing the tax and information returns in their entirety and on time. When a taxpayer (a person or a corporation) files late, there are late filing penalties on unpaid balances. There is another serious penalty in the Income Tax Act that is catching some taxpayers by surprise. This penalty arises when a taxpayer fails to report an income amount ... Read More
Vancouver Hair Salons: Business and Tax Tips – Part 2
The following blog post is a continuation on my previous blog post Vancouver Hair Salons: Business and Tax Tips - Part 1. If you'd like to catch up, please take a moment to review it. Hair Salon Industry Analysis In the hair salon industry, image and trends matter. Talented Vancouver hair stylists are a must, but the industry is too competitive. From my experience as a Vancouver Chartered Accountant serving different hair salons, I have found that in order for Vancouver hair salons to ... Read More
Profitability Analyses for B.C. Businesses According to a Chartered Accountant
One of my favorite parts of my university studies in the field of accounting was cost analysis and break-even analysis. When a B.C. business has been operating for a number of years and has been profitable, tax planning is always a priority and I am often not asked to improve the business. However, when a new client is a business that lacks profitability but still operating, tax planning is not the main priority. Instead, the focus shifts to determining if the business can ever be profitable, ... Read More
B.C. Business Income vs. Capital Gains – It’s All About Intention
Mew & Company Chartered Accountants in Vancouver provides businesses with tax advice: One of the most commonly disputed tax issues is whether a gain from a transaction is considered as business income or as a capital gain. The reason for this dispute is due to the tax implications of each type of gain we're talking about. If a gain is considered business income, the entire gain is taxable. If a gain is considered a capital gain, only half of the amount is taxable. Therefore for any gain, ... Read More
Choose Your Professional Vancouver Accountant with Care
When an incorporated business in Vancouver calls asking for professional representation for a CRA audit, the first question I ask myself is “Why is the person who was paid to prepare the tax return not doing the representing?” A very common answer is something like “My wife who is not a professional accountant prepared the tax return. She does not have the knowledge to deal with the CRA.” However, this year, I received an unexpected answer: “My accountant has been charged with fraud." The ... Read More
Vancouver Business Tax Audit – When CRA Comes Knocking
If your Vancouver business receives a letter from the CRA (Canadian Revenue Agency) asking for documentation to support an HST or corporate tax return, it is not a good idea to deal with the matter on your own. Hire a Vancouver chartered accountant to represent you during the business tax audit. First of all, CRA auditors are accountants. When they request information, they basically expect to see accounting information, not a lengthy verbal explanation on why your HST return for this year is ... Read More
Vancouver Corporate Reorganization and Tax Planning
Corporate reorganization involving the exchange of shares is a very powerful and versatile tax planning tool. The simplest and most common corporate reorganization method involves the shareholder of a corporation exchanging all of his/her shares in one class of existing shares, for shares of another authorized class. The primary focus of the share exchange is the “freezing” of the current fair market value of the shares given up by the shareholder, who is referred to as the "transferor". In ... Read More
How Should Vancouver-based Business Owners Go About Paying Themselves?
Tax Tip for Business Owners Here is a good tax tip that greatly benefits young entrepreneurs and businesses trying to survive the effects of the current recession: If you are the owner of an incorporated business, there are two ways to pay yourself – wages and dividends. Why are dividends the better way to pay yourself? Most of us are very comfortable receiving pay because even prior to becoming an entrepreneur, we have had summer jobs where we received a pay cheque and even made RRSP ... Read More
