Canadian Tax Podcast

Canadian Tax Podcast for the week of December 14, 2021. This week we cover: CRA website down (again);US Electric Vehicle subsidy drama;CEWS audits resume;Moneysense tax tips released;Expense vs. Capital improvements for rental suite;US LLC troubles;Capital gain vs business income on investment trades; [INTRO]: “This is the Canadian Tax Podcast, Episode # 028, hosted by me, Cameron Ware. Good morning” [NEWS SECTION] “Happy Tuesday, it is the week of December 14, 2021. We’ll start with the news. ITEM [1] – CRA WEbsite Offline Due to Security threat The CRA has taken down their website after a potential global security threatCRA was not alone in this, as many organizations around the world were vulnerableLog4Shell exploit.There has been no indication that any tax payer information was stolen.It is still early, but as of now there is limited information available.https://www.canada.ca/en/revenue-agency/services/e-services/updates.htmlhttps://www.theverge.com/2021/12/10/22828303/log4j-library-vulnerability-log4shell-zero-day-exploit   [ITEM 2] – Canada makes aggressive stance on the US EV Credit Canada has now made a more aggressive stance, threatening to impose new tariffs.EV Bill has passed through Congress, now on to Senate.The EV tax credit could cause severe harm to Canada’s automotive sector. Trade Minister Mary Ng says the EV credit amounts to a 34% precent tariff on Canadian-produced electric vehicles, and violates the US-Mexico-Canada trade agreement.My guess: targeted tariffs like we did with the aluminum issue when Trump was in. ie. Kentucky Bourbonhttps://globalnews.ca/news/8443831/us-ev-tax-credit-canada-threats-explainer/  [ITEM 3] – CRA Resumes CEWS Post-Payment Audit Program CRA has announced it is resuming its CEWS post-payment audit program as of Fall 2021.Stakeholder email sent out Dec 7th.This is the wage subsidy program used by employers.CRA is going to contact claimants, and request relevant docs to verify revenues and payroll. Link to CRA’s FAQ where they detail specifics about what paperwork is needed. https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/canadian-tax-newshttps://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-frequently-asked-questions.html#q33  [ITEM 4] – Tax Tips for 2021 Season MoneySense has released their tax tips for Canadians in 2021.Decent resource covering personal tax tips.2022 the $400 flat rate home office deduction is still in place. Dividends vs salary in terms of claiming childcare.https://www.moneysense.ca/save/taxes/2021-tax-season-best-tax-tips-canada/ LISTENER QUESTIONS Tax deduction on work done to legalize basement rental.[Question]Usual: It depends.Capital additions vs expense.Trap: Principal residence deduction. Capitalize and take CCA = lose portion of principal residence. Don’t take CCA on rentals.What is the most effective way to receive dividends from US LLC as a Canadian?[Question]Trick question: There isn’t. Double tax.US flow-through, pay US personal tax. Canada says that’s corporate tax, not personal tax, so you don’t get a foreign tax credit. US draws/payments treated as foreign dividend.If you’re Canadian: Don’t own a US LLC.Capital Gain or Income[Question]Usual: active trading vs sitting on asset.Case by case basis. Casual trades here and there, capital gain. Day-trading with options etc, arguably business income.Always irony here: When you make money, everyone wants capital gains (50% taxable). Losses, everyone wants business (deductable against other income.) That will wrap things up for today. Like always, if you have any questions, send them to questions@canadiantaxpodcast.ca, or find us on twitter: https://twitter.com/cdntaxpodcast   This is Canadian Tax Podcast, thanks for listening. 

Canadian Tax Podcast for the week of 23 November 2021. This week we cover: US electric vehicle subsidy;GST filing extension for the E-Commerce Framework (AKA: Netflix Tax reporting);2022 TFSA limits announced;Transferring intangibles from proprietorship to corp;Home office: part-time vs full-time use of space;Informal expense reimbursements; [INTRO]: “This is the Canadian Tax Podcast, Episode # 025, hosted by me, Cameron Ware. Good morning” [NEWS SECTION] “Happy Tuesday, it is the week of November 23, 2021. We’ll start with the news. ITEM [1] – What Canada could do to combat US EV Tax Credit Article We’ve discussed over the last few weeks the new US EV tax creditCBC covered what Canada might do if they deal were to go through, even though US officials have noted Canada’s displeasure with the proposalQuick summary: the US is subsidizing up to $12,500 if consumers buy an electric vehicle. The catch is the subsidy only applies to US-made vehicles. This makes Cdn manufacturers grumpy. One option Cdn govt could use: Cdn mines are a reliable source for the electric batteries. Why does the taxpayer care: Because regardless of the politics involved, tariffs are taxes. Canada applies tariffs somewhere, US does the same, = taxes go uphttps://www.cbc.ca/news/business/electric-car-retaliation-column-don-pittis-1.6255204   [ITEM 2] – Obligations for new Gst/HST rules The CRA announced new rules for GST/HST for digital economy businesses earlier this year.These are the rules for “Foreign suppliers” of digital goods. AKA the “Netflix tax”.Supposed to kick in on July 1.The CRA has deferred the GST return filing requirement for the first calendar year information return.However, suppliers still need to notify/register with CRA if the supplier provides specified services. (Storage/fulfillment warehousing, Digital platform operators)https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy-gsthst/notification-information-reporting.html  [ITEM 3] – TFSA Limit for 2022 ANnounced New TFSA limit was announced for 2022The new limit is $6000, matching previous amounts from 2019-2021If you’re able, definitely max these each year if you can. Tax-free returns are always a good thing.All the other usual limits can be found at the link below. RRSP.https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/pspa/mp-rrsp-dpsp-tfsa-limits-ympe.html LISTENER QUESTIONS Sole proprietor artist wanting to transfer assets[Question]This is like any property transfer. Proprietorship, Sec 85 over to corp.Watch: Passive income trap.Home office deduction in studio apartment[Question]If I’m understanding correctly, listener filed one way, wants to change to “Dedicated” space.Need T2200 if for employment. Or T2125 if self-employed. Pro-rated on basis of sq/ft for business vs. sq/ft for home.How can business partner deduct expenses if they are paid on one card?[Question]One party is purchasing Facebook and Instagram ads, but the expenses are actually 50/50. That will wrap things up for today. Like always, if you have any questions, send them to questions@canadiantaxpodcast.ca, or find us on twitter: https://twitter.com/cdntaxpodcast   This is Canadian Tax Podcast, thanks for listening. 

Canadian Tax Podcast for the week of 07 June 2021. This week we cover: TI 2020-086579 CEWS/Shareholder problem;CRA is “outgunned”CRA decreases volume of public company audits;G7 agrees to global minimum tax;Listener question: Taking a contract job vs staying employee;Listener question: Sale of US real estate;Listener question: T1135 and cost basis to use; [INTRO]: “This is the Canadian Tax Podcast, Episode # 013,  hosted by me, Cameron Ware. Good morning”  [NEWS SECTION] “Happy Monday, it is the week of  June 7th, 2021. We’ll start with the news.  [ITEM 1] – CEWS Not Allowed Question was posed to CRA about whether or not certain employee wages qualify for CEWSTI 2020-086579CRA says “it depends” – In other words, no.Stated that if it’s just a retroactive journal entry posted to the shareholder loan (Dr salary, cr SH loan), they aren’t a fan.This is a mess for all sorts of technical reasons.Upload to TI here.  [ITEM 2] – CRA SAYS THEY ARE OUTGUNNED CRA says they are understaffed when it comes to “tax cheats”Debi Daviau says that “Their job is to go after individuals and entities that, in effect, have unlimited resources and can aggressively exploit legal and international grey areas for their own gain”Unlimited resources? CRA was just awarded another $300million in the 2021 budget. Total budget of $5.1 billionMaybe they should stop with the Poor Me routine, and actually do their jobs. Bullying average taxpayers with fishing expeditions and unreasonable paperwork requests (“sham” tactics anyone?) is not a decent way forward.https://www-cbc-ca.cdn.ampproject.org/c/s/www.cbc.ca/amp/1.6017316 [ITEM 3] – Public Company Audits Dropped To listeners of podcast here, this is no surprise.Audits of large companies dropped from 6,281 in 2017, to 4,257.CRA says they are doing focused, targeted audits to bring in “Big Fish”These take longer, but bring in more revenueCounterpoint is that CRA has discovered that when you go after smart, sophisticated entities that have resources, you need to have your stuff squared away first. (Ties to above)Why bother with that, when you can chase small businesses instead…https://nationalpost.com/news/politics/cras-new-audits-on-large-corporations-dropped-significantly-in-years-leading-up-to-covid-19-pandemic ITEM [4] – Global Minimum Corporate Tax G7 has announced agreement on minimum global corporate taxPush to tax multinationals (transfer pricing / Big Tech)Supposed to end race-to-bottom in corp tax world20% tax on profits of at least 10%““The timing remains to be worked out, exactly, but there is broad agreement that these two things go hand in hand,” Yellen told reportersSo, this is not a thing, but gives an idea of the direction that governments are going in the new Biden era.https://www-washingtonpost-com.cdn.ampproject.org/c/s/www.washingtonpost.com/us-policy/2021/06/05/g7-tax-us-yellen/?outputType=amp QUESTIONS Contractor vs Employee offerQuestion$45/hr employee vs $50/hr contract basisIssue 1 is PSB vs actual contractor, but deal with that elsewhereIssue 2 is money. Short answer is you’re now stuck with CPP, lose EI, and have to pay accountants and lawyers, and headache.My experience on this is you need to be making at least 30% more to consider it. (Closer to 50%)Cross-Border US Real EstateQuestionOkay break this down:When you left US to enter Canada 9 yrs ago, FMV is your new basis for Cdn purposesUS purposes is original ACB.You’ve been filing US tax returns for rental property, right? Depreciation and basis additions for US purposes.Under US $250k, no capital gain.Canada-side, maybe gain, also watch gain on forex.T1135 Cost Basis[quote]So the issue here is math being used.Cost Base means what you bought the asset for. Full stop. If over $100k, have to report.It’s not based on profits/cash flow, but the actual cost of the asset.  OUTRO That will wrap things up for today. Like always, if you have any questions, send them to questions@canadiantaxpodcast.ca, or find us on twitter: https://twitter.com/cdntaxpodcast   This is Canadian Tax Podcast, thanks for listening. 

Canadian Tax Podcast for the week of April 19, 2021. This week we cover: Revenue Quebec filing extension;Federal Budget Day;CRA Filing deadline unchanged;CPA Canada PACT guide;What to do with an incentive reimbursement or credit card cash back payment;Mechanics of the Climate Action Incentive;Double-tax on US-source income; [INTRO]: “This is the Canadian Tax Podcast, Episode # 008,  hosted by me, Cameron Ware. Good morning”  [NEWS SECTION] “Happy Monday, it is the week of April 19, 2021. We’ll start with the news.  [ITEM 1] – Quebec Filing Extension Last week Revenue Quebec extended the personal tax filing deadline.Dates still stay the same, but they won’t implement late filing fees if you file after April 30th, but before May 31st..Interesting to see what CRA does.CPA Canada continues to push for extensionhttps://www.revenuquebec.ca/en/coronavirus-disease-covid-19/faq-for-individuals/summary-table/https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/canadian-tax-news  [ITEM 2] – Budget Day Today April 19th is budget day.First budget released in two years.CBC leak says that it will cover a national daycare strategy, along with some luxury tax items.Supposedly staying away from capital gains tax changes.https://www.cbc.ca/news/politics/federal-budget-child-care-deficit-1.5992631 [ITEM 3] – File On Time Says CRA CRA, in one of their “Tax Tips” has stressed that it’s important to file your taxes prior to April 30th.If you want to apply for financial aid for May 1st and forward, you need to have filed your tax returns in order to be eligible.Specific programs that could have proglems are the Canada Recovery Benefit (CRB), the Canada Recovery Caregiving Benefit (CRCB) or the Canada Recovery Sickness Benefit (CRSB)https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2021/still-time-file-taxes-by-april-30-2021.html ITEM [4] – Accountants: CPA Canada’s New “PACT” GUIDE So venting a little bit here.For those of you who aren’t accounting nerds, CPA is phasing in new standards for Compilation engagements. So in normal-speak, if you’re a client, your accountant now HAS to do a bunch of extra stuff on your file, or go to jail.So here’s the rub: CPA Canada changes the rules, saying you NEED to do this, or else.Then, helpfully provide a new guide called “Practice management, advisory, compilations and tax” guide. PACT.Yours for only $395.So, governing body changes the rules. Then, in order for members to get guidance on how to comply with the new rules, CPA Canada charges you extra.When is CPA Canada going to actually support smaller members? (ie. Meaning the outfits who don’t audit public companies…)Law Society of Canada and provinces provide tons of support to their respective members. FREE support. Here’s AB. https://www.lawsociety.ab.ca/resource-centre/key-resources/practice-management/law-firm-start-up-kit/https://www.cpacanada.ca/en/business-and-accounting-resources/audit-and-assurance/standards-other-than-cas/publications/pact?utm_source=aprilemail&utm_medium=email&utm_campaign=PACT2021 QUESTIONS Where to report incentives?[quote]Typically this goes to offset bank charges/interest.Misc revenue or expense recoveries is the alternative if you want.Climate Action Incentive: How Do I Get The Money?[quote]So the CAI is processed right on your tax return.Added as an “extra refund”.Amount depends on spouse, kids, outside urban area, etc.Double-Tax on US income[quote]Cross-border stuff is tricky. I won’t get into the weeds here. Simplest answer is you’re likely missing the foreign tax credit claim on your Cdn tax return.Functionally: You get paid from US outfit, pay US tax.You show the full amount of income from your US job on your Cdn tax return.DOUBLE-TAX right now.However, claim foreign tax credit. Eliminates double tax.Pro-tip: File US 1040NR return, get back all of the US tax.Also, watch forex.  OUTRO That will wrap things up for today. Like always, if you have any questions, send them to questions@canadiantaxpodcast.ca, or find us on twitter: https://twitter.com/cdntaxpodcast   This is Canadian Tax Podcast, thanks for listening. 

Canadian Tax Podcast for the week of April 05, 2021. This week we cover: Principal Residence Exemption to be taxed?Joe Biden’s proposed corporate tax rate changes;Quebec lowers corporate taxes on small businesses;CRA’s “Before You Call” List;How to approach filing 11 years of late corporate and personal tax returns;What happens with late-paid instalments for self-employed people;Reporting joint venture income; [INTRO]: “This is the Canadian Tax Podcast, Episode # 006,  hosted by me, Cameron Ware. Good morning”  [NEWS SECTION] “Happy Monday, it is the week of April 05, 2021. We’ll start with the news.  [ITEM 1] – CAPITAL GAINS TAX Financial Post article talking about messing with the Principal Residence Exemption / capital gains exemptionThe fact that this is being talked about at all is concerning.Maybe a system like the US: $250k / $500k married;https://financialpost.com/real-estate/why-tinkering-with-the-capital-gains-exemption-is-the-nuclear-option-for-housing-market-intervention  [ITEM 2] – JOE BIDEN’S CORPORATE TAX Joe Biden thinking of messing with corporate tax rateGenerally increase from 21% to 28% (Then you have State tax on top of that.)Also wants to mess with GILTI rates (IRC ss 951A(a)), from 10.5% to 21%US shareholder of Canadian corp (Controlled Foreign Corp) = Problemhttps://www.cnbc.com/2021/03/31/biden-infrastructure-bill-companies-split-on-whether-to-fight-corporate-tax-hike.html  [ITEM 3] – QUEBEC – SMALL BUSINESS DEDUCTION INCREASE Quebec budget released details that they will drop the Provincial SBD rates from 4% to 3.2%.Small businesses there will pay 12.2% combined Fed and Prov.https://www.advisor.ca/tax/tax-news/quebec-extends-tax-for-financial-institutions-drops-small-biz-tax-rate/ ITEM [4] – CRA: BEFORE YOU CALL CRA released their version of a “FAQ” for help prior to getting on the phone to call themBrilliant tips like: Check “Canada.ca”, or “Check Wait Times”;https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2021/before-call-how-to-get-answers-need-during-2021-tax-filing-season.html?utm_source=mediaroom&utm_medium=eml QUESTIONS Hasn’t filed Returns In 11 Years[quote]Don’t feel badly. This is why I started the podcast: to help situations like this. I can’t answer everything, but hope to give a starting point.#1: 11 years. Do you still have a corp? Wasn’t struck from the registry? (Hope that it was.)If it was, just file a T2125 going forward.If not, you technically have 11 years of T2’s, GST rtns, t-slips, and T1 returns.Might be worth doing a Voluntary Disclosure Program application;Self-Employed: Instalments[quote]You’ve missed the window to do instalments. So that ship has sailed.So if you have over $3k in taxes payable, CRA wants you to do instalments for the year.SUGGESTION, but with teeth.If you choose not to do the instalments, you get charged interest.Sometimes a penalty ($1,000, or 25% of the instalment interest charged) /2Rates are 5% right nowJust pay it now. One less thing hanging over your head.https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.htmlhttps://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments/instalment-interest-penalty-charges.htmlJoint Venture[quote]Joint Venture is a non-entity entity. It exists for a specific project or taskIn this case, intention is that you are 50/50 venturers. (You do have a JV agreement, riiiight?)Only difference is that co-venturer put up mortgage cash. Means her equity interest in the JV is higher (by whatever down payment.Secondly, you need to report not “cash flow”, but your full portion of the JV income/expenses. 50% of income/expenses show up on your filings.Fun fact: Usually will see 2 S125’s: one for your corp’s operations, and one detailing the 50% JV operation.Few other things: Fixed assets are dealt with at the venturer level, meaning rarely (if ever) see depreciation taken at the JV level. (If you do, problem)Stub period. Corp owners have different fiscal years to JV = need to do 12mo reporting for that specific period (Killed back in Nov/11).https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p-171r/distinguishing-between-a-joint-venture-a-partnership-purposes-section-273-joint-venture-election.htmlhttps://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/partnerships-deferral-corporation-tax/joint-ventures-elimination-fiscal-period.html OUTRO That will wrap things up for today. Like always, if you have any questions, send them to questions@canadiantaxpodcast.ca, or find us on twitter: https://twitter.com/cdntaxpodcast   This is Canadian Tax Podcast, thanks for listening.