More small businesses are now on cloud account software. Many business owners are performing the bookkeeping functions on their own and just as many business owners hire a bookkeeping firm who specializes in cloud software to do the bookkeeping. Now, AI is getting involved to limit human coding errors that still exist with cloud software. As for me, the external accountant, I have noticed considerable improvement with both, the software and the users maximizing the software full ... Read More
Why a Real General Ledger is the First Line of Defense During a CRA Tax Audit
Many mature businesses have endured this at least once during their life time – a CRA tax audit. Most businesses survive an audit with no issue. This happens when the business has an adequate set of financial records that is easy for the CRA auditor to examine. So what makes up an adequate set of financial records. First of all, the CRA audit has changed from twenty years ago. In the past, an actual person came to the business premise to examine the books and records. Hence if the ... Read More
Vancouver Sale of Rental Property and the Principal Residence Exemption
While at dinner recently, a friend of mine, Carla, informed me that she sold her rental property and was curious about the amount of tax that she would owe on the gain. Upon further questioning, I uncovered that, in the past, my friend had lived in this rental property (a condo) for many years. She purchased a second condo a few years back and moved into it. She had then rented out the first condo—the one she just sold. From her line of questioning, I realized that, other than the tax ... Read More
Vancouver Tax Considerations for Buying a Business in British Columbia
If you are in the initial stage of negotiating the purchase of an incorporated business in British Columbia (B.C.), this is a good time to consider the method you choose to go about the acquisition. There are two methods to acquire a business: you either buy the desired assets of the company, or you buy the shares of the company. Each method has different business tax consequences for the seller and the purchaser, so knowledge of the different tax treatments can provide the purchaser with room ... 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
The Quick Method for B.C. Consultants and Other Professionals – Why It Makes Sense
In British Columbia, a service business with total sales of $200,000 or less, inclusive of HST, qualifies to use the Quick Method of remitting HST to Canada Revenue Agency (CRA). In general, the Quick Method allows a business that provides taxable services to collect the 12% HST as required under the Excise Tax Act but remit a lower rate to CRA. The trade off is that the business is not entitled to claim Input Tax Credit (ITC) on its expenses when remitting the HST collected. However, the ... Read More
Traits of Successful Vancouver Business Owners
As a tax advisor to small businesses in the Greater Vancouver area, I have worked with many different personalities over the past 15 years. However, a handful of my clients, over the last 10 years, have grown so rapidly that I am in awe when we meet for the year end work. This is because their successes are not necessarily due to the unique industry in which their business operates. This blog post outlines my observations of the decisions these businesses have made consistently over the year in ... Read More
How Vancouverites Can Avoid a Tax Audit
Whether you are an individual taxpayer or a corporate taxpayer, a call from the Canada Revenue Agency (CRA) will surge your anxiety. Most calls from the CRA are benign. Usually, they're calling to inquire about an outstanding return or a figure your professional accountant has put in the wrong box. But according to CRA, for the 2007 and 2008 fiscal years, 87,000 small and medium enterprises were audited. CRA uses a computer system to assess taxpayers, assigning them a risk factor of high, ... 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
