Author Segal LLP

Tips for Picking Your Year-End

The new year brings new changes and new ideas; if you’re planning on incorporating or starting a business as a sole proprietor here is some advice to consider for planning an effective year-end.

Plan in Accordance with Your Highs and Lows

If your business is seasonal or cyclical, you’ll ideally want to establish a year-end that coincides with the end of your busiest period. The downtime following year-end will allow you to catch up on record keeping and will give you a clearer idea of how well your business has done. As an example, a landscaping business generally peaks over the summer season and may favour a September 30 year-end.

The year-end of a business that is structured as a sole proprietorship is always calendar year-end. The activity of your sole proprietorship is recorded on your personal tax return on a specific form. As a tax filer with a sole proprietorship, your return is due by June 15th instead of the usual April 30th due date. If there is a balance owing, it must be paid by April 30th.

Type of Business

Independent: A sole proprietorship or a taxpayer that is self-employed must use a December 31 fiscal year-end. It’s important to remember, a sole proprietorship is still subject to collect and remit HST if the revenue exceeds $30,000 in the year. Furthermore, a sole proprietorship needs to file all T-slips (i.e. T4s, T5s) depending on the extent of its operations.

Incorporated: If your business is incorporated, you have the option to choose any year-end if its within 365 days of incorporation. As previously stated, when selecting your year-end, you should consider your industry and choose the end of the busiest time for your fiscal year-end. Another bit of information that is important to note is that some year-ends are fixed for some industries, so be sure to check if yours is among those.

Changing a Fiscal Year

If you’ve come to realize your fiscal year is not the best fit as it currently stands, you do have the option to change it. The process is to first correspond with the Canadian Revenue Agency (CRA). You cannot change your year end for just any reason. It must be something substantial that the CRA will likely acknowledge as a valid reason. For example, if you opened your business and then realized that you’re busy in one season but not another, it would make fiscal sense to change your year end. Pursuing a tax advantage simply for convenience (IE. You have a vacation that you would like to plan around) is not a reason that will likely be accepted.

Greg Shagalovich CPA,CA

Greg is an experienced professional in the mid-size accounting industry. At Segal, he coordinates teams to fulfill large audits and reviews. Furthermore, Greg has experience in financial advisory services, including due diligence assignments. He is also one of the firm’s primary client liaisons. Greg is well adept at conducting compilation engagements for owner-managed business and corporations. Additionally, he plays an important role in developing the firm’s junior staff and co-op students. Greg also keeps the firm up-to-date on important new technology and tax preparation techniques with in-house seminars and presentations.

New Stock Option Rules

Initially, there was going to be a new set of rules for any stock options issued after December 31, 2019, effective January 1, 2020. However, the Department of Finance recently released a statement that the effective date of the new rules will be disclosed in a future communication- likely the budget released in March or April of 2020. Under this new regime, a portion of the stock option benefit may no longer be eligible for the stock option deduction.

Under the current rules, applicable to a non-Canadian Controlled Private Corporation (CCPC), an individual may be able to claim a stock option benefit deduction if the exercise price is greater than or equal to the fair market value of the underlying share at the time the option was granted. The deduction is 50% of the benefit.

Under the new rules, there is a calculation to determine whether or not the value of the options that vest in the year have a value that exceeds of $200,000. That is, all the values of shares for options that vest in a year must be considered to determine if their value at the time of the grant exceeds $200,000. Of this amount exceeds $200,000, a portion of the stock option benefit will not be eligible for the stock option benefit deduction. This means that even though, economically, an individual has received the same amount on the exercise of options as in previous years, the tax will increase.

Where an individual can stagger the vesting of options, so that the vesting amount is less that $200,000 in a year, it would save taxes for that individual. However, there must be a consideration of whether the individual could lose those stock options because they are not vesting as quickly as they would otherwise.

The other major change in the new rules is that corporations may be able to deduct that portion of the stock option benefit that the individuals cannot deduct. There are notification rules that the corporation must adhere to, for both the individual and CRA, in order for this to be allowed. Additionally, it is only the direct employer of the individual who can claim the deduction. This could be an issue if the actual stock option is being issued by a foreign parent company and not the actual employer of the individual.

These rules can become quite complex. It would be best to consult your local tax expert for advice on how to best navigate these changes for you and/or your business.

Howard L. Wasserman

Howard is a Tax Partner at Segal LLP. He a wealth of experience in both Canadian and international tax matters. He provides valuable insight on owner managed businesses, estate planning, international tax planning for corporations and individuals, postmortem planning, corporate reorganizations, mergers and acquisitions. Additionally, he has significant experience in dealing with Canada Revenue Agency on audits, appeals, negotiations and voluntary disclosures.

Segal Celebrates: Stellar CFE Results

Our 2019 CFE writers pictured with Managing Partner, Dan Natale (R)

Segal is thrilled to announce the stellar results of our 2019 CFE writers. 

All seven of our writers were successful and we extend our sincere congratulations to them all!

Congratulations to the following on their achievement in passing the CFE:

  • Chuck Dai (University of Toronto)
  • Jeffrey Lui (Wilfrid Laurier University)
  • Jessica Wen (Wilfrid Laurier University)
  • Jonathan Couse (Wilfrid Laurier University)
  • Khushpreet Sran (Wilfrid Laurier University)
  • Tiffany Ng (Wilfrid Laurier University)
  • Victoria Liu (Brock University)

Our writers’ hard work and commitment has paid off, and we share in their excitement as we celebrate this key professional milestone!

All the best, from the Partners and team at Segal!

Happy Holidays!

We extend a heartfelt thank you to our clients, associates and friends for making 2019 a wonderful year. We wish you all the best during this holiday season and a happy new year for 2020!

In the spirit of giving, Segal has made donations to two worthy causes:

  • Youth Without Shelter: a GTA-based not-for-profit that aids homeless youth with housing, counselling, and education.

  • Second Harvest: the largest food rescue organization in Canada and global thought leader on food recovery.
Please note our office is closed for the holiday season, effective Deceber 25. We will re-open on January 2nd, 2020.

The 2019 Tax Planner

Dear Clients, Friends & Associates,

As we come to the end of 2019, our tax team has been busy compiling a list of tax planning ideas that may potentially increase tax savings for yourself and your family members. The topics included in this year’s tax planner include:

  • New Tax Rules Affecting
  • Private Corporations
  • Personal Tax Changes
  • Corporate and Business
  • Tax Changes
  • Partnerships
  • Trusts & Estates
  • Key Dates
  • Corporate and personal tax rates

Segal’s 2019 Tax Planner is viewable here.

Should you have any questions or concerns, your Segal advisor can assist you in determining which of these ideas is the best fit for you.

Please do not hesitate to call your Segal advisor or our tax team with any questions about this year’s tax planner.

Thank you,

Segal LLP | Taxation Services