Category Tax

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.

Commentary on the 2019 Federal Budget

Dear Clients and Friends,

On March 19, 2019, the federal government released the budget for 2019.

This budget was not focused on corporate tax issues. Instead, the budget provided for a few directed measures for individuals with regard to re-training and purchasing a home. There were no changes to corporate or personal tax rates.

Please follow the link below to a summary of the budget presented by our Tax Team.

Federal Budget Commentary 2019

If you have any questions, please do not hesitate to contact your Segal tax advisor.

Best regards,

The Segal Team

New Quebec sales tax and e-commerce

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This article is from the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America. These articles are meant to pursue our mission of being the best partner in your success by keeping you aware of the latest business news.

Measures relating to the Quebec sales tax and e-commerce

The rise of e-Commerce created QST collection difficulties for suppliers with no physical or significant presence in Quebec. This situation negatively affected Québec’s supplier competitiveness, and it’s shorting the provincial government necessary revenue. The policy response to this was the Mandatory Registration System (MRS).

About the MRS

In its 2018-2019 budget, the Quebec government introduced the MRS (also known as the “specified registration system”) for non-resident suppliers. The rules require non-resident suppliers to collect and remit the QST on taxable incorporeal movable property and services supplied in Québec to people who live in Québec but who are not registered for the QST. Moreover, Canadian suppliers will be required to collect and remit QST on corporeal movable property supplied in Québec to a Quebec consumer.

To establish residency and location, non-resident suppliers can refer to a customer’s billing address, IP address or banking information. And customers who falsify this information could face stiff penalties.

MRS and eCommerce

Digital property and services distribution platforms (“digital platforms”) are now required to register under the MRS in cases where the digital platform controls the key elements of transactions with specified Québec consumers (billing, transaction terms & conditions and delivery).

Mandatory registration will apply to non-resident suppliers (NRS) when the value of taxable goods and services exchanged in Québec exceeds $30,000 a year. As NRSs registered under the new MRS are not subject to other QST provisions, claiming an input tax reimbursement is not possible. However, an NRS can register under the general QST if it meets registration requirements.

The Québec government’s goal is the make the MRS simple and easy to use. The return must be filed electronically on a quarterly basis and the remittance can be paid in USD and EURO.

The MRS comes into effect on January 1, 2019, for non-resident suppliers outside Canada, and September 1, 2019, for non-resident suppliers located in Canada.

For more information about the MRS, what it means for your business and how it may or may not affect how you do business, book a consult with us and we’ll get you prepared for continued success in Québec.

Contributed by Benoit Vallée from Demers Beaulne. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Deciphering the Notice of Assessment

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By the middle of May 2018, the Canada Revenue Agency (CRA) had processed just over 26 million individual income tax returns filed for the 2017 tax year. Just over 14 million of those returns resulted in a refund to the taxpayer, 5.5 million required additional payment and about 4.4 million returns were “nil returns” where no tax was owing and no refunds were claimed, but the return was used to provide income information to determine eligibility for tax credit payments (like the federal Canada Child Benefit or the HST credit).

No matter what the outcome of the filing, all returns filed with and processed by the CRA have one thing in common: they result in the issuance of a Notice of Assessment (NOA) by the Agency, outlining income, deductions, credits and tax payable for the 2017 tax year, whether you will be receiving a refund or you have a balance owing. The amount of any refund or tax payable will appear in a box at the bottom of page 1, under the heading “Account Summary.”

On page 2 of the NOA, the CRA lists the most important figures resulting from their assessment, including your total income, net income, taxable income, total federal and provincial non-refundable tax credits, total income tax payable, total income tax withheld at source and the amount of any refund or balance owing. Page 2 also includes an explanation of any changes made by the CRA to your return during the assessment process and provides information on unused credits (like tuition and education credits) that you earned and can claim in future years.

On page 3 of the NOA, you will find information on your total RRSP contribution room (i.e., maximum allowable RRSP contribution) for 2018.

Finally, page 4 provides information on how to contact the CRA with questions about the information provided on the NOA, on how to change the return filed and on how to dispute the CRA’s assessment of the individual’s tax liability.

In a minority of cases, the information presented in the NOA will differ from what you provided on your return. Where that difference means an unanticipated refund, or a refund larger than the one expected, it’s a good day! If the NOA will swing the other way, that’s less good.

When that happens, you must figure out why, and to decide whether or not to dispute the CRA’s conclusions. In that case, your best bet is to consult a tax or accounting professional at Segal LLP.

2017-18 Economic and Fiscal Update

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The fiscal cycle of the federal government follows a predictable annual path. Each spring, the Minister of Finance brings down a budget outlining the government’s revenues and expenditures and its surplus or deficit projections for the fiscal year which runs from April 1 to March 31. That budget also includes the announcement of any changes to the tax system which the government wishes to implement.

In the fall, the Minister of Finance announces the Economic and Fiscal Update which, as the name implies, provides an update of the government’s finances approximately halfway through the current fiscal year. Sometimes, as was the case this year, the Update includes announcements of additional tax changes.

The 2017-18 Economic and Fiscal Update brought down by the Minister of Finance on October 24, 2017 included a better than expected deficit picture for upcoming fiscal years. That improved fiscal picture allowed the Minister to announce a number of relieving tax measures. While the measures are few, they will affect a great number of corporations and individuals, whether through lower tax rates or increased taxpayer benefits. Those changes are as follows.

Effective as of January 1, 2018, the small business tax rate will be reduced to 10%. A year later, on January 1, 2019, that rate will be reduced again, to 9%.

Lower and middle income Canadian families are eligible to receive the Canada Child Benefit (CCB) — a non-taxable monthly benefit paid by the federal government. The amount of CCB received depends on the size of the family and the family’s net income. While there has been no change to benefit amounts, the Minister indicated that previously announced plans to provide annual cost-of-living changes to those benefits would be brought forward and implemented effective July 1, 2018. As of that date, the amount of benefits payable and the income thresholds which determine eligibility will both be indexed to inflation.

The full 2016-17 Economic and Fiscal Update can be found on the Finance Canada website at www.budget.gc.ca/fes-eea/2017/docs/statement-enonce/toc-tdm-en.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact your Segal advisor for more information on these topics how it pertains to your specific tax or financial situation.