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M M CPA Professional Corporation | Tax Accountant Toronto
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WHAT'S NEW FOR 2015 TAX YEAR- Chartered Professional Accountant Toronto
 
 
Individuals and families
 
Universal child benefit (UCCB) – The UCCB has increased to $160 per month for each qualified dependant under 6 years of age and there is a new benefit of $60 per month for each qualified dependant aged 6 through 17.
 
Child care expenses  – The maximum limit per child has increased by $1,000.
 
Family caregiver amount for children under 18 years of age (line 367)
The amount for children under 18 years of age has been eliminated and replaced by the enhanced universal child care benefit.
 
Family tax cut  – For 2014 and later years, the calculation for the family tax cut has been revised to allow unused tuition, education, and textbook amounts transferred from a spouse or common-law partner.
 
Children’s fitness tax credit  – The children’s fitness tax credit is now a refundable credit.
 
Interest and investments
Other deductions– The minimum amount that must be withdrawn each year from a registered retirement income fund (RRIF), variable benefit money purchase registered pension plan (RPP), and pooled registered pension plan (PRPP) has been reduced. If you have withdrawn more than the reduced 2015 minimum amount, all or part of the excess may be eligible to be re-contributed to a RRIF, RPP, account under a PRPP, or to buy a qualifying annuity and deducted.
 
Capital gains deduction – The lifetime capital gains exemption for dispositions of qualified farm or fishing property made after April 20, 2015 has increased to $1,000,000, resulting in a capital gains deduction limit of $500,000.
 
Interest paid on your student loans  – Interest paid on a Canada Apprentice Loan amount for registered Red Seal apprentices can be claimed on this line.
 
Investment tax credit  – Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 2016.
 
Form T1135, Foreign Income Verification Statement – This form has changed to introduce a simplified reporting method for individuals who own specified foreign property with a total cost of less than $250,000 throughout the year.
 
Tax-free savings account (TFSA) – The TFSA annual contribution limit has increased to $10,000.
 
Other changes
 
Repeated failure to report income penalty – We may now charge you this penalty only if the amount of income you failed to report on your return was $500 or more. The calculation of the penalty has changed.
 
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Why should I incorporate my small business?
 
Numerous people carry on business or own significant investments individually. Earned income is often taxed at a high marginal tax rate. The income tax paid on such income may normally be reduced or deferred by using a corporation.
However, before incorporating a business, the individual should analyze not only the tax consequences, but also the other implications of such a decision. For example, a professional wishing to carry on his activities through a corporation should review the provincial laws governing his profession because, in certain provinces, carrying on a profession through a corporation is not permitted. Other provinces allow professionals to carry on their profession through a corporation but impose strict rules on the holding of shares and various aspects related to carrying on the profession. Similarly, carrying on a business through a family corporation may be advantageous for tax purposes but not practical from a “business” point of view.
Often, a new business incurs losses in the initial years of operation. These losses, when incurred personally, are deductible from other sources of income. However, losses incurred by a corporation are deductible only against income earned by the corporation and, under paragraph 111(1)(a) of Canadian Income Tax act, may be carried forward for 20 years. It is therefore preferable from a tax standpoint to defer incorporation until the business becomes profitable when a person has other sources of income enabling him or her to use the losses.
Incorporation should also be postponed until the individual no longer requires all the income derived from the business to meet personal living expenses. It would not be advantageous from a tax point of view for an individual to incorporate if the entire corporate profits were paid out annually as salary or dividends only to the individual.
An individual wishing to carry on business through a corporation should also consider these factors:
-          description of the share capital
-          involvement of family members as shareholders
-          shareholders’ agreement
-          ownership of the assets used in the business
 
Advantages of incorporation

In addition to the possible tax deferrals resulting mainly from the fact that the corporate tax rate on active business income (ABI) is generally lower, incorporation may provide other significant tax benefits.
1. A corporation may be used to split income with family members who are often taxed at a lower tax rate than the individual managing the business.
A business may pay reasonable salaries to family members, whether it is incorporated or not. However, if the business is incorporated, the spouse may subscribe for common shares of the company using his or her own funds. In this way, dividends paid to the shareholder-spouse result in income splitting. Such planning is particularly worthwhile if the spouse has a low income and cannot be paid a salary.
However, consideration should be given to attribution rules that may apply, especially section 74.4, if the corporation is not a small business corporation.
A corporation is also a very useful tool for freezing an estate for the benefit of family members whereby the increase in the value of certain property is transferred to other beneficiaries, enabling them to use the CGD provided for in subsection 110.6(2.1).
2. A corporation may offer certain non-taxable benefits to its employees. An unincorporated business owner may not take advantage of these benefits because he or she cannot be an employee of his or her business.
Such benefits include disability insurance premiums, premiums to a private group health insurance plan, and interest-free loans, provided that certain conditions are met. In addition, a death benefit of up to $10,000 may be paid to the surviving spouse without any tax consequences. Other tax planning measures, such as the payment of a retiring allowance or the declaration of a bonus, are also possible.
3. The lower the tax rate is on income, the less cash is needed to pay non-deductible expenses, such as life insurance premiums often paid to provide for income taxes on death. For example, approximately $1,200 of before-tax income is required by a corporation eligible for the small business deduction (SBD) to pay a premium of $1,000. If an individual taxed at the top marginal rate paid the premium, approximately $2,000 of before tax income would be required to pay the $1,000 premium.
4. Because the corporate tax rate is lower, the corporation’s cash requirements are thus reduced, leaving more cash for operations, acquisitions, and expansion.
5.  For an individual whose income fluctuates significantly from year to year, the use of a corporation allows for the accumulation of income in the corporation, which enjoys a reduced tax rate for the years in which the individual’s needs are lower. The income is then paid to the individual in a year when his or her other income is not sufficient to meet his or her needs. In this way, the individual’s income is made consistent from year to year and income taxes may be minimized.
6. Given that the $400,000 CGD is available for a gain on the disposition of qualifying small business shares or family farm or fishing corporation shares, carrying on a business through a corporation could be more advantageous than carrying on the business personally. If a corporation were not used, the individual would be entitled to the CGD only if the property consists of certain qualified farm or fishing property or if all or substantially all the assets used in the business by the individual in his or her capacity as owner or through a partnership were transferred to a corporation before the sale.

 
Disadvantages of incorporation

There are also disadvantages to incorporation.
1. Using a corporation entails some legal and accounting fees on incorporation, such as fees for obtaining the articles of incorporation, and each year thereafter, the preparation of financial statements, income tax returns, and annual minutes.
2. To realize substantial tax savings, the profits of the corporation must accumulate within the corporation, except where income splitting is possible.
3. Losses incurred by a corporation that does not have sufficient income to absorb such losses cannot be used by the shareholders to reduce their own income.
Each of the individual who is thinking to incorporate must seek professional advice to secure their interest based on their current situation and future goal.

Tax Tips for Dentists – by CPA for Dentists in Toronto

Financially smart individuals know the key to wealth is reducing taxes. In Canada, tax is our single biggest expense, and for continued financial success it is essential to lower the annual tax drain.
Even though, not all of the following suggestions may apply to your particular situation and it is important to first consult your CPA for dentists in Toronto before implementing any of these suggestions.
Below is a list of tax-saving ideas you may wish to consider:

Creation of Professional Corporation-Incorporate yourself

Consider creating hygiene or a technical service corporation to administer hygiene revenue. A professional corporation (PC) may be used to operate your dental practice. This could result in tax savings and/or a tax deferral; because corporations are taxed at 15.5 percent on the first $500,000 of taxable income for calendar year 2015 compared with the top combined personal federal and provincial tax rates that range in Ontario of 49.53 percent.
Please note that this strategy only works if money is stayed within the PC or if the dentist elects to withdraw the money personally by way of dividend. If you need all the corporate income generated from your practice for everyday living expenses, then the PC may not earn a sufficient profit to rationalize the annual legal and accounting fees for corporate maintenance and tax filings.

Dividend Payments

If you have a hygiene or technical service corporation with your children as the shareholders, you may pay a dividend to your children over 18, especially those attending university. Children over 18 without income are in lower marginal tax brackets, and dividend income is taxed at a very low rate as some taxes are paid at corporate level.
Here’s the advantage of paying dividends: an individual who earns regular income up to $36,375 per year pays a combined provincial and federal tax rate of 21 percent. When this money is received as dividend rather than regular income, the tax rate is 11 percent. Adopting this strategy reduces the tax burden by a full 10 percent.

Appoint Family Members

If you employ family members in your practice, prepare a written job description for each individual and pay a reasonable salary and bonus for services rendered. By having some income, children over 18 will accumulate RRSP room for future earnings. Canadians earning less than $11,138 for 2015 qualify for a personal exemption and pay no provincial or federal taxes.

Mortgage Interest Tax Deductible?

Many dentists have a mortgage on their home and happen to have excess capital in their practice’s bank account, consider writing a cheque from the practice to yourself, depleting this capital balance. Use this money to reduce or eliminate your home mortgage, ask the bank for a personal investment/business loan and invest the money back into your practice. This strategy converts the nontax deductible mortgage interest into a tax-deductible interest on a business or investment loan. An added plus is that it can help protect your money from creditors.

Health Spending Account

If you have a PC consider creating a personal Health Spending Account (HSA). An HSA is a bank account whose deposits are spent exclusively on health-care expenses. By having an HSA, you may convert health-care expenses into 100 percent business deductions and a non-taxable benefit for yourself. You determine both the amount of the annual contribution and how the benefit dollars are spent. Best of all, unlike traditional medical and dental plans, any unused funds remain in the account for your future needs.
Suppose an incorporated dentist in Ontario who earns $100,000 of net income incurs a $10,000 medical expense. The dentist would have to in effect withdraw $18,416 in pre-tax income from the PC to pay this bill. By using a Health Spending Account the company would pay only $11,000.00 – including the 10 percent administration fee – an amount that is fully tax deductible from the PC and a non-taxable personal benefit. The overall tax savings would be $7,416.

Advantage of Depreciation of Practice Assets

You may consider buying and installing big-ticket items for your practice – equipment, renovations, computer software – before year-end. This has the effect of increasing tax deductible expenses by way of the increased capital cost allowance (depreciation).

Retirement Savings Maximization

If you are an unincorporated dentist, you may contribute the maximum amount permitted each year to a RRSP. However, if you are employed by your PC and are earning a high income, consider creating a “super-RRSP” in the form of an Individual Pension Plan (IPP) or a Retirement Compensation Arrangement (RCA). Contributions to these latter two vehicles may exceed the maximum allowable RRSP limits, are fully deductible by your PC and are a non-taxable benefit for yourself. All increase in the total value of assets is tax-deferred until withdrawal. IPPs and RCAs offer significant amounts of additional tax-deferred income to be set aside for your retirement.
An example of two dentists, each 47 years old, both with net incomes over $100,000, but one is incorporated and the other is not. For the next 25 years, both make the maximum allowable contributions, the first to an IPP and an RSP, the second only to an RSP. At age 72, assuming an annual return rate of 7.5 percent, the incorporated dentist will have accumulated $4,800,101 in the combined IPP/RSP compared with a total of $3,310,822 in the RSP alone. This works out to an annual annuity income of $362,819 versus $250,251. The decision is clear: the incorporated dentist who contributes to both an IPP and an RSP may have an additional $1,489,279 of tax-sheltered assets in his or her retirement plan, as well as an extra $112,568 in annual retirement income.
 
 

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2015 Tax Planning with Toronto CPA

Taxation is one the most important obstacles to the creation and preservation of freelance wealth in Canada just like most of the part of the world. Whether or not you are a student, a married or single parent, an employee or the owner-manager of your own business, a CPA in Toronto will guide you in tax planning which is easy-to-understand ways that may assist you keep additional of your hard-earned bucks and boost your family's resources and value.
Up thus far for 2015 by the personal tax planning coming up with team at one in all Canada's largest skilled professional accountant associations, Toronto CPA, this year's tax planning offers you the newest on federal and provincial decrease amounts, and new info on:
 
 Making a sound financial statement for your family's future and your retirement
 Creating the foremost of the special tax breaks on the market for college students, operating folks, first-time home patrons, seniors, and other people with disabilities
  Developing an investment strategy and coming up with for investments in tax-effective vehicles like stocks, bonds, mutual funds, and insurance merchandise
  Deferring taxes through fashionable savings vehicles like Registered Retirement Savings Plans, exempt Savings Accounts, Registered Education Savings Plans and Registered Pension Plans
  Reducing taxes on your financial gain from your job or your business by maximising your claims for things like vehicles, moving prices, and residential workplace expenses
  Structuring your charitable donations, each throughout your period and in your can, to assist maximize the worth of the gift to the charity and therefore the tax edges to you or your estate
  Shielding your earnings and property from U.S. financial gain and estate taxes
 Making an inspiration to go away additional to your heirs and fewer to the tax authorities through ways like estate cooling, family trusts, and business succession coming up with
 Fulfilling your obligations to a deceased person's estate and beneficiaries as an fiduciary and estate trustee
 Coping with the tax collectors, from filing your come to launching an attractiveness of taxes in question
 
 
Tax coming up with for you and Your Family – M M CPA Professional Corporation is your guide for saving cash at tax time and every one year spherical. Contact your Chartered Professional Accountant NOW!

#2015taxplanning #taxplanningbuide #charteredaccountant  

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Tax Planning Canada

The tax system in Canada provides for a two-level system for taxing corporate income: first in the corporation, and then in the hands of the shareholder when dividends are received from the corporation. Dividends received from a corporation resident in Canada by an individual are subject to a specific tax treatment based on the principle of integrating the income of the corporation and that of the shareholder.
A shareholder may also be an employee or executive of the corporation and, in this capacity, receive remuneration in the form of salary. A shareholder-manager of a private corporation may therefore remove funds from the corporation in the form of salary or dividends. The method of distribution chosen will generally be that which maximizes net after-tax cash in the hands of the shareholder, after taking into consideration the income tax payable by both the shareholder and the corporation. However, this does not mean that the shareholder may avoid personal income taxes on the income received from the corporation. This approach merely serves to minimize income taxes.
To prevent shareholders from withdrawing or benefiting from the corporation’s property or capital other than in the form of salary or dividends, thereby avoiding tax at the personal level, the Income Tax Act (ITA) contains a number of special rules. Therefore, it is very important to plan your taxes both at personal level as well as corporate or business level. M M CPA Professional Corporation has extensive experience in tax planning for owner managed business and high income families. You may wish to contact a Charted Professional accountant at (416) 463-3330 to learn more about it.

https://www.perfectaccounting.ca/tax-planning-canada/

Year-end Tax Tips 2014:
 
We are approaching the most magnificent time of the year, but this is also when to make moves that could save you money come tax time when we will face the reality of tax return.
Many of us are still thinking that tax time is far away not until in next 3 months, but it’s really all year long. Tax payers should be keeping your receipts all year long, but there are few things you can do at this time of year that can be helpful for you.
Is there anyone who wants to pay more taxes than they really owe? Do not forget that income tax is the one time of the year you can get some money back.
Here are some year-end tax tips that could be helpful for many Canadian tax payers. If you have the options to minimize the taxes before the end of the year, why you will be paying much when filing the tax return?

Prescribed rate loan for income-splitting 

investment income can be split with family members (such as your spouse, common-law partner, or kids) in a lower tax bracket by lending funds to them using the federal government’s prescribed rate, which is one per cent until the end of 2014.
In case if you take out a loan before the end of the year, the one per cent interest rate will be locked in for the duration of the loan, regardless of future prescribed rate hikes. It’s also beneficial for couples with children under 18 to review their income-splitting options in light of the recently announced Family Tax Cut, which provides a non-refundable credit of up to $2,000.

Charitable Donation

A donation up to $200 yields a 15 per cent federal tax credit and anything above that produces a 29 per cent credit. Add in provincial tax credits and you could be looking at credit between 40 and 50 percent. Sponsor a run, give to the United Way, make a donation to your alma mater, you can help them, and secure a nice tax break.
Note that there’s the first-time donor’s super credit. Introduced last year, it gives an extra 25 per cent federal tax credit to those who are giving for the first time or who haven’t claimed the charitable donation tax credit since 2007. What is that mean to you that you can get a 40 per cent credit for up to $200 in cash donations and a 54 per cent credit for donations between $200 and $1,000. 
Furthermore, charitable donations are to gift publicly-traded securities or mutual funds, with accrued capital gains instead of cash.
This will eliminates capital gains tax and entitles you to a tax receipt for the fair market value of the security being donated. 

Give a boost to RESPs

RESP contributions must be made by December 31. Not like RRSP contributions that can be made in the first 60 days of 2015 for a 2014 tax credit,
In the occasion that you haven’t maximized your RESP contributions in past years, you can catch up one year at a time. The rules require that there is no annual contribution limit to the RESP, but there is a lifetime limit of $50,000 per child. As a result, you could contribute $5,000 to the RESP and get $1,000 of the CESG [Canada Education Savings Grant] if you’re catching up from previous years, since; the basic CESG is a payment of 20 per cent on RESP contributions.
Think through tax loss selling
You may want to see if you can take a loss to help offset your gain and reduce your tax liability, If there is a big capital gain in 2014. Any transaction needs to be settled on or before December 23 in order to qualify for your 2014 tax return.
Note that the tax loss selling doesn’t apply to investments inside an RRSP or Tax Free Savings Account (TFSA).

Your kids can help to minimize taxes too!

A very good opportunity for you to keep your kids active and get some tax credits as well. The federal government not only announced an increase the Children’s Fitness Amount to $1,000 but made it retroactive for 2014. Don’t only collect receipts at $500 just like last year; but make sure you’re keeping receipts. You claim your receipts in the year you paid the fees so a few extra activities now could bring some tax savings when you file your return.
Furthermost people don’t understand what types of programs are eligible for a tax credit under the Children’s Arts Amount. You can claim to a maximum of $500 per child fees paid for an artistic, cultural, recreational, or developmental activity. It’s not just art classes; it could be karate lessons, piano or tutoring.
You must contribute to the development of creative skills or expertise in an artistic or cultural activity, provide a substantial focus on wilderness and the natural environment; help kids develop particular intellectual skills; include structured interaction among children where supervisors help children develop interpersonal skills; or provide enrichment or tutoring in academic subjects etc.
 
Are you turning 71 in 2014?

If yes, you have until December 31 to make any final contributions to your RRSP before converting it into a Registered Retirement Investment Fund (RRIF) or registered annuity.
Keep in mind that, it may be beneficial to make a one-time over-contribution to your RRSP in December before conversion if you have earned income in 2014 that will generate RRSP contribution room for 2015. If you have a younger spouse or partner, you may also want to consider making contributions to a spousal RRSP until the end of the year your spouse or partner turns 71.
You may consider consulting with a Chartered Professional accountant in Toronto for year end tax planning before it’s too late. keep in mind that tax planning is for yourself which has to be done proactively. Tax return filing is the legal requirement; you rarely can save tax at tax return filing !
 

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Perfect Accounting and Tax Services review on YELP

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If Canada’s tax code was straightforward and simple, you might not need help from a Toronto accountant. You would be able to turn in the very minimalistic paperwork yourself, make any required payments, and that would be that. You wouldn’t stay awake, ever, worrying about taxes, wondering how to file them correctly, wondering how to stay on top of the paperwork, wondering how to find the money you need to pay the CRA. read more.......

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Did you know?
Canadians spend more on taxes than food, shelter:

The average Canadian family spends more on taxes than on food, shelter and clothing combined,a new study released today by the Fraser Institute, a Canadian public policy think-tank that focuses on free markets and government policies targeting consumers. read more on cbc.ca
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