Archive August 2016

International Business: Revisit the Risks

lores_library_law_books_shelf_bzIf your company operates abroad, it needs to be aware of laws that are likely tougher than those in Canada when it comes to the liability of fraud.

Corruptions and bribery are among the laser focused topics covered by very tough legislation in, for example, Britain and Spain. Here are some measures your company should consider putting into place to tackle those two specific crimes and avoid stiff penalties. In the contemporary marketplace, it is no longer enough to claim that payments were necessary because that’s the way they do business there. Monitor all activity. Be certain your business can demonstrate to a court’s satisfaction that it had the necessary procedures in place to block criminal activity. Be able to show that your business monitors the activities of employees, enforces its code of conduct and anti-corruption policies, and tracks, reports and stops corruption in its tracks.

On top of that, a company must have:

  • The mechanisms necessary to track all payments made in the course of business.
  • A sustained track record of handling any discrepancies or explicit violations efficiently and effectively.

Understand the risks. Consult with your attorney and accountant to conduct a risk assessment focusing on the:

  • Effectiveness of your company’s anti-bribery training and education programs.
  • Risks inherent in each country and region where your organization does business. Find out about the best practices used by businesses with similar operations.
  • Size, frequency, nature and risks of your company’s transactions.
  • Extent to which the business hires third parties to sell or deliver its products or services.
  • Ability of the organization to monitor, investigate and report potential violations of the Spanish law, the Bribery Act and the Corruption of Foreign Public Officials Ac

Invest in education. All employees, as well as suppliers and contractors, should be expected to read and commit to your business’s code of conduct. The code should be clear about the company’s stand against corruption. Education and training materials should contain sufficient information on the legal and corporate consequences of bribery and other forms of corruption.

Consider adding another step to the process when vetting and approving vendors and other third parties. They should be aware of the scope and potential liability under the British and Spanish law. The best way to be sure vendors and third parties have read and understand the company’s code is to test them. The testing process should be designed to show that they understand the elements of bribery, know how to report suspicious activity and are clear what breaking the law can mean to them as individuals, to their companies and to your business.

Managers should take advantage of every opportunity to set the tone. For example, when training sales people, revisit corruption laws and explain how they affect their duties. Real-world examples and role-playing can be extremely effective

Consult with your attorneys about international fraud laws and have your legal counsel review your company’s practices and governance procedures.

Brand Your Business as Mature-Friendly

Ignoring the pool of older workers can be a mistake for businesses, particularly amid concerns about a shrinking labour force and the greying of Canada as the baby boomer bubble works its way through the population.

Stay Focused on the Law

lores_businessman_blindfold_suit_mbTake steps to ensure that your business is age-neutral and does not discriminate against older people in itsrecruitment process.

To help avoid being contacted by the  Human Rights Commission, err on the side of caution and steer clear of:

Direct or indirect statements or questions relating to age in job adsor applications.

Interview questions relating to age unless:

  • The job is aimed specifically at persons 65 years of age or older;
  • You run a special interest group serving a particular age bracket;
  • Age is a bona fide job requirement; or
  • You need to know a person’s age to determine eligibility for a special program to promote age equality.

Suggestions that your company needs to “rejuvenate” its work force or comments when evaluating candidates that refer to adaptability, the ability to be trained based on age, or concerns that it will cost to much to train a person because of age.

Patterns that show a preference for hiring younger workers, such as hiring a significantly younger candidate over an older one with equal qualifications.

With rare exceptions, work-related actions based solely on age are discriminatory and violate theCharter of Rights and Freedoms, the Human Rights Act and provincial and territorial statutes.

Employers are concerned that the country is on the verge of a major labour force shortage in the years ahead. Canada is already experiencing skill shortages in key sectors such as manufacturing, construction, information technology, health care, financial services and government.

Already some small and large organizations are experiencing shortages of skilled labour and a large majority expect the situation to become more pronounced.

If your business is planning to hire, it could benefit by bringing older, experienced workers on board. Those workers may have skills and education that make them competitive in the job market, and they are likely to add significant benefits to your business, including:

Increased creativity: Intellectual and creative capacities often grow with age. For example, musicians show increased ability until they reach their mid-60s and their skills don’t start to decline until they are 85 or older.

Loyalty: Older workers aren’t usually obsessed with advancing their careers, so they have a strong sense of loyalty that translates into less job-hopping and turnover.

Strong work ethic: The workplace provides opportunities for mature employees to be active and socialize. That means they may accept jobs that younger workers refuse. And because older employees tend to be more content with their jobs and their lives, they can often be easier to work with and supervise.

Lower absenteeism: As employees age, they tend to take fewer days off.

Strong role models: Younger people may pick up a sense of responsibility and diligence from their older colleagues, although there may be some tension between the generations.

Comparable productivity: Generally, older and younger staff members compare equally well when it comes to output.

With that in mind, your company might want to consider some creative strategies to help attract older employees or retain those already on your payroll. The following suggestions are some best practices your business could adopt to help achieve that goal:

1. State in job advertisements that your business looks for employees with maturity, good judgment and work experience.

2. Have a self-nomination process for career movement. Encourage mature employees to seek advancement and special assignments. Also, encourage managers to seek out opportunities for older workers as part of annual performance reviews.

3. Discuss ways to assess and redesign jobs for employees with special needs.

4. Educate managers and supervisors on age discrimination laws, age-neutral performance appraisals and the benefits of hiring and promoting older employees.

5. Train staff from managers down about how to recognize and avoid age stereotypes.

6. Provide flexible training opportunities such as mentoring programs, job rotation and on-the-job coaching, as well as peer and individualized training.

7. Offer phased retirement options. For example, allow employees to collect their full retirement benefits while continuing to work part-time or reduced hours. Another possibility is to let long-tenured and older employees stagger or reduce their work hours, even to part-time or per-diem status, while retaining benefits that generally are not available to part-time employees.

8. Rehire retirees as temporary and replacement employees. Provide retirees with re-entry training and flexible schedules.

9. Establish pools of retirees who can be called in times of increased labor demand.

10. Partner with local educational institutions. Bring classrooms into the workplace to make it convenient for employees to receive training and upgrade their skills.

11. Encourage employees to continue learning and improving, but hold them accountable for upgrading their knowledge and skills throughout their careers.

12. Offer alternatives to full-time employment. Set up job-sharing and other programs for employees who want to work fewer hours. With job sharing, employees who want a reduced work load can share the same job. Your business can also consider offering temporary or seasonal work, and hire mature, experienced individuals as consultants.

Back to University: Money and Tax Lessons for Your Students

When your kids leave for university or take on some other post-secondary educational endeavor, you want to do your best that they succeed both with their grades, taxes and money as they take on more adult responsibilities.

Help them understand how to manage credit and money as well as give them a solid background on their tax obligations and the deductions and credits that are available to them and to you.

lores_college_university_school_hall_mb

Living at Home

Not all students head off to live on campus. In fact, as costs of education and housing rise, increasing numbers of students and their parents are deciding it’s a lot less expensive to live at home and commute when possible.

If you decide commuting is the best way to go, here are some tips.

For the student:

  • Spend lots of time on campus. It will help meet other students, make friends and become more familiar with the school.
  • Join clubs or sports teams. This involvement is crucial, particularly in your freshman year.
  • Pinch pennies. One of the main reasons you’re living at home is to save money. Don’t lose sight of this.

For the parents:

  • Be supportive. You and the student would probably prefer that he or she live on campus. Living at home may not be ideal, but it’s financially smart.
  • Treat your student like an adult. This can help maintain a stable relationship and minimize conflict.
  • Make sure your student makes an effort to meet other students and becomes involved with campus life.

Understanding Taxes

As your children assume more responsibility they may also be taking on jobs. You can help them understand their tax obligations and the credits and deductions that are available to them.

First, students — as well as their parents or other supporting adults — should have a clear understanding of what sorts of income is taxable. Of course money earned from a full-time or part-time job that exceeds the basic personal amount in a year is taxable.

Of course students may have other income sources, some of which is tax-exempt some not:

  • Scholarships, fellowships, bursaries, and achievement prizes are tax-free as long as the students are enrolled in programs eligible for the education amount. Otherwise, only the first $500 is exempt.
  • Money earned as a teaching assistant and research grants, on the other hand, are taxable. In the case of grants, students may deduct certain costs related to the research, such as travelling expenses, lodging and fees they may pay to assistants.

Reducing Tax Liability

Once you have the taxable earnings issue down, you’ll want to know how to lower those taxes. Here is a guide to the credits and deductions that can help you and your student lower your tax bills:

Tuition Credits. Full-time and part-time students can claim a federal tax credit on eligible tuition fees, which generally include all mandatory amounts charged by post-secondary institutions. The costs of room and board or student association fees are not eligible. Most territories and provinces offer similar tax credits. The textbook credit is being eliminated as ofeffective January 1, 2017. Unused  textbook credit amounts carried forward from years prior to 2017 will remain available.

Education Amount. On top of the tuition credit, students can claim an education amount of $400 a month for each month that they are enrolled full-time. Most territories and provinces also offer an education amount.

Students enrolled part-time may be entitled to an education amount of $120 a month. The program must last at least three consecutive weeks and involve a minimum of 12 hours of courses a month.

Students can claim the full $400 federal education amount if they can attend qualifying courses only part-time because of a mental or physical impairment and are eligible for the disability tax credit.

Textbook Credits. Students can claim a federal tax credit on the costs of post-secondary textbooks. The credit is based on $65 for each month the student qualifies for the full-time education amount and $20 for each month the student qualifies for the part-time education amount. Nunavut and Yukon also offer textbook credits.

Transferring Credits. Students who don’t claim tuition, education and textbook credits can either carry them forward indefinitely to use later or transfer as much as $5,000 in unused credits to a supporting person such as a spouse, parent or grandparent. Those individuals can claim the credits on their own tax returns. Transferred credits must be claimed in the year they were incurred. Provinces and territories also allow credit transfers.

Moving Expenses. Full-time students can deduct certain expenses for moving to and from school for each academic period — as well as moving to and from a summer job — if the distance is at least 40 kilometres. The deduction can be made only against employment income in the new location or against research grants. The tax break can be taken in the year of the move or the following year.

Transit Expenses. Students can claim a tax credit for the cost of transit passes with durations of a month or longer. Money spent on electronic payment cards and weekly passes are also eligible under certain conditions. Keep the receipts. Parents or spouses of students under the age of 19 can claim the credit.

Rent. Some provinces offer either refundable property tax credits for rent paid or a property tax refund. Consult with your adviser to see if your province offers property-related tax breaks.

Child-Care Costs. Students or spouses can claim a child-care deduction if at least one spouse attends school full-time or part-time.

Student Loan Interest. Credits are available for interest paid on qualifying student loans. Some provinces have eliminated interest on provincial student loans. Check with your province.

Besides taxes, your student should learn about managing credit. Here are some tips:

  • Help your children select an appropriate card. Explain how having a credit card increases the risk they will make impulse purchases and try to persuade them to get a debit card instead. Help them analyze offers and compare interest rates, annual fees, grace periods, and penalties.
  • Make sure your children, or grandchildren, understand that significant interest is charged if a balance isn’t paid in full each month. Explain late fees, “teaser” interest rates, annual fees, and credit ratings.
  • Advise your students to use credit only for essential purchases such as books and car repairs and not for entertainment, electronics, and expensive clothes.
  • Show your children how to compare receipts to credit card statements and tell them it should be done regularly.
  • Warn your children to keep their cards secure to avoid unauthorized use and identity theft.

Keep in mind that this may be the first time your children will handle money without parental supervision. Help them out by developing a budget that takes into account all expenses, such as travel, food, entertainment, clothing, cell phone, computer costs, and medical expenses.

Ask the child to keep track of spending for a couple of weeks and then go over the budget to see if there are ways to cut expenses of if you forgot to factor in certain items.

College and University Aren’t Just for Young People

081216_Thinkstock_515263028_lores_KKAh, those hallowed walls of academia! Ah, those unwashed dishes and unrelenting schedules!

Many people who have successful careers or have raised their kids to adulthood — or both — consider going back to school. And you may be one of them. Perhaps you want the degree you postponed, or a second one. Perhaps you want to improve your prospects for a promotion, earn more money or start a second career you’ll love. Or maybe you just want a different perspective on the world.

Whatever the reason, going back to school demands time, money and commitment, so it isn’t a decision you should take lightly. Here are a few tips that may help ease your journey back into the world of colleges and universities:

Find the right fit. A student handbook is an essential tool. Read it before you apply to a college or university. The handbook provides details of the range of services and support available to students as well as the school’s educational policies and regulations. The handbook is also often available online from the school’s website. The handbook can help you determine if the school meets your needs, with factors such as affordability, easy access, childcare, expanded degree options, well-developed online learning programs or seamless credit transfers.

Map your degree. Compile a detailed list of requirements for completing a degree within your time frame. It will help you stay on track and understand where you are, where you’re going and how long it will take to get there. You don’t want to be signing up for many costly classes that wont’ help you accomplish your goal. That said, however, consider taking some classes just for the fun of it. While sticking to the requirements can save time and money, you run the risk of burnout if they stop energizing you.

Find an adviser. Find someone you trust and meet before you apply (and at least once each school term). Make sure the adviser is aware of your goals. Discuss all your options. Your adviser can also show you how to obtain financial aid, where to register and explain the rules for withdrawing from or switching courses.

Other resources for advice are professors as well as faculty and staff members who’ve been at the school for some time. Also, people you may know who attended the school can be a source of valuable information, particularly if they know you well.

Sources of Financing

Research your financial options. Just because you’re an adult returning to school doesn’t mean you aren’t eligible for scholarships or other forms of financial aid. While your adviser can help, do some research on your own.

If you’re working, you might want to discuss your plans with your employer, especially if you want to continue in your current field. Employers may have programs in place to subsidize employees looking to continue their education.

Many universities and colleges have scholarships and bursaries. Scholarships are generally based on academic achievement, but some also focus on community involvement (such as volunteering) or work in a specific field.

Scholarships typically have particular criteria you must meet to qualify, and many students might compete for the same scholarship. Many scholarships are open to international students as well as domestic students. You must apply for some, but others are awarded automatically.

Bursaries are usually based on both financial need and academic achievement. Bursaries and grants can also be offered through governments and private organizations.

And of course you can take out student loans and perhaps get help from family.

Make sure you completely understand any financial aid you receive. First, determine how much it costs to attend each school that awards you money. To find out, locate the Cost of Attendance (COA) breakdown in the award material (if it’s not provided or not broken down, contact the financial aid office and ask for a breakdown). Typically, the COA is the amount of tuition, books and supplies, miscellaneous fees and expenses and room and meal plans (most adult students don’t require these last two).

You’ll also want to know any student loan percentage rates and payback requirements on student loans.

Bottom line: Be sure you know just how much you’re getting and that it will be sufficient to finance your studies.

More Tips for Success

Start slow. Unlike more traditional college students, adults returning to school tend to have significant responsibilities, including families and careers. Juggling work and family is difficult on its own, but doing so with post-secondary course work is even harder. Taking things slowly can help you and your family adjust to the new schedules and demands. Many schools offer online courses, which can be especially beneficial for working professionals. They also can help you test the waters before the big plunge.

Make connections. It’s tempting to isolate yourself in order to keep on top of a busy schedule, but resist it. One of the side benefits of going back to college as an adult is being exposed to people you might otherwise not interact with. These new relationships will add to your experience and the quality of your life.

Ask for help. If there’s an area in which you’re struggling, at home or at school, ask for help. Enlist your family’s assistance with chores and errands. Tell friends what they can and can’t do to encourage you. Reach out to fellow students for lecture notes and homework help. Talk to professors and faculty about assignments and coursework, especially if you have questions or don’t understand. Contact student services to help to improve study habits or test taking.

Devise a study routine. It works for kids, and it’ll work for you. Establish your own routine at the beginning of every school term to help you keep up with your coursework, improve your time management and help ensure you meet other commitments. And create a comfortable, well-lit, designated study space that’s all your own. Not only will it keep your study time separate from your home or work life, it will serve as a physical reminder to others to let you focus without interruption or distraction.

Schedule some downtime. You know what they say about all work and no play. Resist the urge to overfill your schedule.Leave some margin in your day for exercise, sleep, helping others or just relaxing and having fun. It will help boost your mood and productivity.

Make your first few days easier by exploring the campus before you start classes. You’ll gain comfort with your surroundings and improve your chances of getting to class on time.

CRA Reminder: Tax Instalments Are Due September 15

081816_Canadian_dollar_lores_KKCanada Revenue Agency (CRA) is reminding people who pay their income tax by installments that their next payment is due on September 15.

In a message posted on its website, the CRA pointed out that taxpayers can go online to see what they owe and make payments. And if you pay in instalments, you can sign up for email reminders one month before your taxes are due.

But first, you must determine if you’re among those required to pay their tax obligations in intalments. If tax isn’t withheld from your earnings or not enough was withheld for more than one year, you may have to pay tax in instalments. This can happen if you earn rental, investment, or self-employment income, certain pension payments, or have income from more than one job.

The instalments are to cover tax you would normally have to pay in a lump sum on April 30 of the following year. Instalments aren’t paid in advance; they’re paid during the calendar year in which you’re earning the taxable income.

Factors to Consider

Take into account three factors when determining if you must pay instalments:

  1. Where you reside,
  2. How much tax you owe, and
  3. Whether you’re a farmer or fisher.

The province or territory where you live determines the threshold used to determine if you must pay instalments. If your total tax liability, minus any amount withheld at source, is more than $3,000 for both the current year and either of the two preceding years, you must make instalments for the current year. (In Québec where provincial tax is collected by the province, the threshold is $1,800 for both federal and provincial tax.)

If you farm or fish for a living and are self employed, the rules are slightly different. You’ll receive a reminder in November and must make a single payment on December 31, 2016, if in each of the years 2014, 2015 and 2016 your total tax obligation exceeded the thresholds.

Instalment payments are calculated using your total tax owed plus any Canada Pension Plan (CPP) contributions owed and voluntary Employment Insurance (EI) premiums payable on self-employment and other eligible earnings.

(In Québec, instalment payments cover income tax plus the health contribution, contributions to the Québec Pension Plan and the Health Services Fund as well as premiums to the Québec Prescription Drug Insurance Plan and the Québec Parental Insurance Plan.)

If you received an instalment reminder from the CRA that shows an amount to pay, you may have to pay by instalments, unless your total tax owed for 2016 will be at, or less than, the thresholds.

Instalment Reminders

The CRA determines who’s required to pay instalments from previous years’ tax returns and sends reminders. But keep these factors in mind and discuss with your advisor:

You need only make an instalment payment if the CRA sends you a reminder. If you don’t receive one, you don’t have to make instalments, even if your tax liability exceeds the thresholds.

If you do receive a reminder, it’s based on the past. If you and your advisor are certain your current tax liability won’t exceed the threshold, you aren’t required to make an instalment payment. (The rules are similar in Québec.)

Instalments are due quarterly, on the 15th day of March, June, September and December. Reminders are sent out twice a year — in February for March and June payments and in August for September and December instalments.

Your final tax obligation is known only when you file your annual income tax return. If you owe more than the instalments, the balance must be paid by April 30. So plan ahead.

There are three calculation options when it comes to instalment payments:

  1. No-calculation option. The CRA provides this amount on the reminder, calculated using information on your income tax and benefit return for the two previous years.
  2. Prior-year option. You use this option when your current year (2016) income, deductions, and credits will be similar to your previous year but significantly different from those two years ago (2014). Your accountant can calculate the amount based on the information from your income tax and benefit return for 2015.
  3. Current-year option. Generally, this option is preferred when current year income deductions and credits will be significantly different from those in the previous two years.

If you use the latter two options, and make the payments in full by their due dates, the CRA won’t charge instalment interest or a penalty unless the total instalment amount you use is too low.

Single August Reminder

If you receive a reminder only in August, your payment depends on your calculation option. If you opt for the CRA, no-calculation method, pay the amount in the reminder on the 15th day of September and December.

If you choose prior-year calculation, your accountant can determine your 2015 tax obligation and add any CPP contributions and voluntary EI premiums payable. You’ll pay 75% of the total on September 15 and 25% on December 15. The same holds for the current-year option except your accountant will estimate your 2016 tax obligation.

As with all tax payments, if the due date falls on a Saturday, Sunday or public holiday the CRA recognizes, your payment is considered on time if it is received or postmarked on the next business day.

Bear in mind that the CRA’s method of calculating instalments may result in an overpayment. This may happen if your income has been decreasing over the past two years.

You may also receive a reminder if your income jumped in a year from a one-time event, such as a capital gain without tax being withheld or if your sources of income changed from employment to retirement fund withdrawals without arranging for tax withholdings.

Substantial Penalties

If you fail to pay the required amounts on time, you could be charged substantial interest and penalties. First, there’s instalment interest calculated at the CRA’s prescribed rate. For overdue taxes that amounts to 5% in the current quarter.

Second, instalment interest charges are compounded daily, so the 5% interest rate is effectively an annual rate of 5.13%.

Third, there is a steep penalty for making late instalments or paying less than the required amount if instalment interest for 2016 is more than $1,000. To calculate the penalty, your accountant will determine which of the following amounts is higher:

  • $1,000, or
  • 25% of the instalment interest that would be payable if you hadn’t made any instalment payments for 2016

Then he or she will subtract the higher amount from the actual instalment interest charges for 2016. Dividing the difference by two is the penalty amount.

(In Québec, additional interest of 10% a year compounded daily is applied when the amount of the payment is less than 75% of the amount you’re required to pay. This brings the effective annual interest rate to approximately 17%. The current interest rate charged in Québec is 6%).

Clearly it’s advisable to pay instalments on time, even if you must borrow to do so. Because the CRA rates currently are higher than short-term borrowing rates, you should be able to get a better rate at a financial institution.

You can reduce or eliminate the interest charges and penalties on late instalments by overpaying subsequent instalments or paying them before their due dates. Interest earned on early or excess payments will be offset against any interest charges on late payments. Since instalment penalties are charged on the net interest, they’ll also be reduced.

Avoid the Lump Sum

Receiving an instalment payment reminder lets you know taxes aren’t being withheld from income at source. It may be necessary to make provisions for those taxes if you want to avoid having to come up with the entire amount when you file your income tax return in the spring. Consult your accountant to come up with the best way you can stay on top of your tax obligations.

How Corporations Pay Tax

Generally, corporations have to pay their taxes in instalments.

Instalment payments are due on the last day of every complete month of your tax year or of every complete quarter if you’re an eligible small CCPC.

The first payment is due one month or one quarter less a day from the starting day of your tax year. The rest of the payments are due on the same day of each month or of each quarter that follows.

The balance of tax is paid two or three months after the end of the tax year — depending on your corporation’s balance due day — after making deductions for instalments paid during the year.

After all monthly or quarterly interim payments are made for the current year, you’ll receive the first Form RC160, Interim Payment Remittance Voucher, for the next year, along with another Form RC160. This additional form will show the tax year-end of the current year. Use this form to remit your balance-due-day payment, if applicable.