Tax Tips and Expert Advice- February 2022 Networking Mixer
Justin Tanner of Gitzel and Company joined us for our first monthly Networking Mixer of 2022. Justin brought forth some valuable information regarding Tax Tips and other Expert Advice for our local businesses.
Justin started the evening discussing general tips for when you work with the Canada Revenue Agency (CRA). He suggest to to err on the cautious side if receiving a phone call from the CRA as many scammers try to access your information by pretending to be a representative. When the CRA is in contact with you; ask for their Name, their Agent ID, their phone number, and their location. With this information, you can hang up and contact the CRA directly to verify the agent before giving them any of your personal data. Once you have confirmed they are in fact a representative of the CRA, you can return their call or you can report a scam to the CRA directly at that time. To find the appropriate contact for the CRA, check out their Contact Us page here.
If you feel you may be contacted by a scammer, what kind of signs can you look for?
Usual evidence of a scammer may include: the agent being reluctant to provide you information, they may be using aggressive language such as you will be sent to jail or you need to confirm right now, they may ask for payment via an unusual method (gift cards, prepaid credit cards, crypto currency), or they recommend you apply for benefits over the phone with them right then and there. The CRA will not ask you to complete any of the above and will be more than willing to provide you with their agent details for you to confirm.
Justin also stated that you are not required to perform a verbal interview over the phone with a CRA agent. Any queries presented to you, may be requested to be sent in written form. This offers you the opportunity to confirm the details of the query prior to answering with uncertainty. In addition, you may have an authorized representative who are able to contact the CRA on your behalf. Requesting the query be sent to you in writing will allow you the to contact that representative to speak on your behalf. The CRA will not email you directly nor will they accept an email from you to them. If the CRA is to contact you via email, it will only be to provide you the information that something has been uploaded to your My Account or My Business Account and you must give prior consent before they will contact you this way.
If you would like to have a more hands on approach to your CRA account, and for ease of access, Justin suggests clients apply for a CRA My Account or My Business Account. Both of these offer access to prior assessments, tax slips, account balances as well as offers you the ability to perform online filing for payroll, GST, and corporate taxes. It is simple to apply for an account however verification is completed initially by mail so give yourself time to set it up before your next filing is due.
If the CRA happens to send you a pre-assessment or post-assessment of your filings, make sure you respond or have your authorized representative respond. These assessments are to provide the CRA with further details on your claims and if left unanswered, these claims could face denial. If you are up for review, provide the documents requested and they will respond further if they require any additional documentation.
Business taxes are also a topic Justin touched on for us at the Networking Mixer. A business expense simply put is an expense that relates to your business generating income. Justin elaborated about how the onus to prove how an expense was utilized as a business purpose is on the client.
In home office expenses are a larger concern now that we have spent some time moving our offices over the past few years. In this case, you are eligible to write off a base percentage of your home which relates to the space being utilized as your office. The fees are calculated by the square footage your office encompasses for the heat, electricity, insurance, maintenance, mortgage interest, and property taxes. You are unable to claim your kitchen table as a viable office nor are you able to use the principal portion of the mortgage as an expense.
Vehicle expenses are another confusing topic for many and Justin simplified it for us. If the vehicle is owned by the business and solely used by the business, you may deduct 100% of the expenses associated with the vehicle. If the vehicle is owned by the business and utilized at times for personal, you must keep a log of the personal usage and this is considered a taxable benefit for the driver. If the vehicle is owned personally and utilized for the business, the expenses can only be deducted for the times the vehicle was used by the business. Again, documentation will be required so keep all receipts and use a mileage app or some other form of log as proof. Alternatively, in order to claim the mileage for a vehicle expense, the business or the driver may use the simplified method of tracking. Here you will utilize a standard fee per km for the first 5,000 kilometers and then a reduced rate for any mileage above that limit. These rates change on an annual basis and are available on the CRA website. Keep in mind that with this method, you will still be required to keep a log for the mileage used by either the business or the driver.
Meals and entertainment are subject to a 50% deduction unless the event invited all employees such as a Summer BBQ, Christmas Party, etc. These events may be written as a 100% deductible and you may host this type of event up to six times per year. In order to claim meals and entertainment expenses, you must be able to provide supporting documentation of who attended the meal along with a receipt for the expense.
Advertising expense is typically a larger account for many businesses as they promote their products and services to the public in a variety of ways including charitable donations. If you are donating to a registered charity, it is not always in the best interest for your taxes to claim this through your business. If possible, make a personal donation to the charity and you will receive a larger deductible come tax season.
When it comes to charging GST, Justin shared that it is mandatory to charge GST once your revenue reaches $30,000 in any 12 month period. You may choose to register to charge GST as soon as you register your business and this would be done to ensure you are not over the limit before you realize. If you claim GST, you are also eligible to deduct GST from your business expenses. Filing will depend on your taxable revenues but is most often quarterly for small businesses.
Incorporation? Partnership? Sole Proprietor? What should I choose? Justin simplified this for our guests as well by simply stating if you are making enough money through your business to allow your self to survive, you can utilize sole proprietorship and/or partnership. If you are leaving money in the business which in turn is re-investing in the business, you can defer some of the taxes by incorporating. In other words "Is the business making more than you need to live off? Then incorporate." Incorporation does incur initial costs and can seem a bit pricey however it does offer some benefits of limited liability and a lower tax rate. If you are making the decision to incorporate, Justin suggests you discuss it with your taxation and legal council before proceeding to confirm it is in yours and your businesses best interest.
Justin also touched on a variety of issues for businesses to consider when operating such as Medical benefits and expenses, foreign income verification statements, capital gains, and winding up your business before retirement. We were grateful Justin took the time to join us for our February Networking Mixer and suggest that if you have any questions regarding your Taxes and Business Accounting practices, speak with your accountant or give Justin a call!
Justin Tanner, CPA,CA- Gitzel & Company
Justin moved to Stettler in 2005 after graduation from the University of Lethbridge. He obtained his Chartered Accountant designation in 2008 and become partner of Gitzel and Company CPA's in 2011. His areas of expertise include assisting and advising individuals, not for profit organizations, corporations, municipalities, proprietorship and partnerships in matters related to tax, accounting and planning.