Phone:  780.814.7474  *  Toll free:  1.877.814.7474  *  Fax:  780.814.7409  

DECEMBER
2014
TAX TIPS, TRAPS... and other financial facts





Kevin, Trevor, Cheryl, Pat and the staff at Willsey Davis wish you and your family a Merry Christmas and a peaceful, happy and successful New Year.



Closed December 24 - 28; Open December 29, 30 & 31; Closed January 1 & 2

Our office will re-open with regular hours on Monday, January 5th 8:00 - 4:30; closed during the noon hour.

Please note these hours if you have a December 31st filing or payment deadline.





Kristen Petkus joined Willsey Davis & Co. LLP as a summer student in 2009 and in 2012 she received her Bachelor of Commerce degree from the University of Alberta. Kristen has recently passed the Uniform Final Evaluation (UFE). The UFE is the final step in attaining her Chartered Accountant designation. Congratulations on your success Kristen!

 




Stuff a Bug is back at Willsey Davis.  As a long time supporter of the Salvation Army, the Willsey Davis partners and staff are proud to contribute to the Q99 Salvation Army Stuff a Bus.  Our office has fun with our own Stuff a Bug event where we fill up a VW Beetle with donations & gifts and deliver it to the bus.  You may drop off items to the Q99 Stuff a Bus until December 22nd.  Go to the Q99 website   to find out where you can drop off your gifts.

STARS Hangar Dance will be held on January 17, 2015 and Willsey Davis is happy to have the opportunity to support this important fundraising event which ensures the safety and care of our community.

Big Hearts for Big Kids will be held February 14, 2015 in support of the Grande Prairie Youth Emergency Shelter Society.  The evening event includes a concert, raffles and auction to raise money to support GPYESS.  Since its beginning five years ago this event has raised over $550,000 to support, improve and change the lives of area youth.

QEII Hospital Foundation Willsey Davis is pleased to have been a sponsor of the QEII Hospital Foundation Festival of Trees for another year.  The festival was held in November raising nearly $350,000.  

We have also made other donations to The Grande Prairie Boys' Choir and to Big Brothers Big Sisters Ultimate Escape fundraiser.
 



If your business made payments to employees or shareholders for employment income, commissions, taxable benefits, dividends, interest or for other services during the year, the income may need to be reported to CRA on a T4, T4A, T5 or other slip.  The deadline to file these slips is February 28, 2015.



 As you approach your company year-end date you can expect to receive a year-end reminder letter from our office.  Along with that letter, an updated Engagement Letter will be included for your signature.  If you have any questions regarding your Engagement letter please do not hesitate to contact our office.

 

 




December 31, 2014 is fast approaching... see below for a list of tax planning considerations. Please contact us for further details or to discuss whether these may apply to your tax situation.

 

SOME 2014 YEAR-END TAX PLANNING TIPS INCLUDE:

  1. Certain expenditures made by individuals by December 31, 2014 will be eligible for 2014 tax deductions or credits including: moving expenses, child care expenses, charitable donations, political contributions, medical expenses, alimony, eligible employment expenses, union, professional, or like dues, carrying charges and interest expenses, certain public transit amounts, and children's fitness and arts amounts. Ensure you keep all receipts that may relate to these expenses.
  2. You have until Monday March 2, 2015 to make tax deductible Registered Retirement Savings Plan (RRSP) contributions for the 2014 year. Consider the higher income earning individual contributing to their spouse's RRSP via a "spousal RRSP" for greater tax savings.
  3. The age limit for maturing Registered Pension Plans, RRSP, and Deferred Profit Sharing Plans is 71 years of age.
  4. If you own a business or rental property, consider paying a reasonable salary to family members for services rendered. Examples include website maintenance, administrative support, and janitorial services.
  5. A senior whose 2014 net income exceeds $71,592 will lose all, or part, of their Old Age Security. Senior citizens will also begin to lose their age credit if their net income exceeds $34,873.
  6. Consider purchasing assets eligible for capital cost allowance before the year-end. A half year of depreciation deduction is allowed for most assets even if it was purchased just before the year-end.
  7. Consider selling capital properties with an underlying capital loss prior to the year-end if you had taxable capital gains in the year, or any of the preceding three years. This capital loss may be offset against capital gains in the current year, and then in the three preceding years.
  8. Registered Education Savings Plan (RESP) - A Canada Education Savings Grant for RESP contributions will be permitted equal to 20% of annual contributions for children (maximum $500 per child per year). In addition you may be eligible to receive a Canada Learning Bond which provides $525 in the first year, and an additional $100 each year until the child turns 15.
  9. A refund of Employment Insurance paid for certain non-arm's length employees may be available upon application to the CRA.
  10. Taxpayers that receive "eligible dividends" from private and public corporations may have a significantly lower tax rate on the dividends as compared to non-eligible dividends. Notification to the shareholder is required.
  11. A Registered Disability Savings Plan may be established for a person who is under the age of 60 and eligible for the Disability Tax Credit. Non-deductible contributions to a lifetime maximum of $200,000 are permitted. Grants, Bonds and investment income earned in the plan are included in the beneficiary's income when paid out of the RDSP.
  12. If required income, forms, or elections have not been reported to the CRA in the past, a Voluntary Disclosure to the CRA may be available to avoid penalties.
  13. For individuals who have not yet claimed charitable donations, consider making a donation of up to $1,000 in order to get a "super charged" donation credit. For these individuals with total donations of less than $1,000 in the current year, consider not claiming the donation amount until you have donated a total of $1,000 (can wait up to five years to claim the credit).
  14. Consider restructuring your investment portfolio to convert non-deductible interest into deductible interest.
    It may also be possible to convert personal interest expense, such as interest on a house mortgage or personal vehicle, into deductible interest.
  15. Are you a US Resident, Citizen or Green Card Holder? Consider US filing obligations with regards to income and financial asset holdings.
    Filing obligations may also apply if you were born in the US.
  16. Do you have foreign property or investments? Consider the filing obligations in both the foreign country and Canada.
  17. An investment tax credit is available in respect of each eligible apprentice. Also, a $1,000 Incentive Grant per year is available for the first and second year as apprentices. A $2,000 Apprenticeship Completion Grant may also be available.
    Provincial credits may also be available.
  18. Canada Pension Plan (CPP) receipts may be split between spouses aged 65 or over. Also, it may be advantageous to apply to receive CPP early (age 60 - 65) or late (age 65 - 70).
  19. Individuals 18 years of age and older may deposit up to $5,500 into a Tax-Free Savings Account in 2014. Commencing in 2009, annual contributions were limited to $5,000, though increased to $5,500 in 2013, for a total of $36,500 by January 2015.

2014 REMUNERATION

Some general guidelines to follow in remunerating the owner of a Canadian- Controlled Private Corporation earning "active business income" include:

  1. There are generally two options for paying earnings out of a corporation - salaries and dividends.
    The best method depends on the applicable provincial tax rates, quantity of personal and corporate income, and whether you can afford to leave earnings in the company.
  2. Notification must be made to the shareholders when an "eligible dividend" is paid.
  3. Elect to pay out tax-free dividends from the "Capital Dividend Account".
  4. Consider paying taxable dividends to obtain a refund from the "Refundable Dividend Tax on Hand" account.
  5. Corporate earnings in excess of personal requirements could be left in the company to obtain a tax deferral (the tax is paid when cash is withdrawn from the company).
    The effect on the "Qualified Small Business Corporation" status should be reviewed before selling the shares where large amounts of capital have accumulated.
  6. Dividend income, as opposed to a salary, will reduce an individual's cumulative net investment loss balance thereby possibly providing greater access to the capital gain exemption.
  7. Excessive personal income may reduce receipts and credits, such as Old Age Security, the age credit, child tax benefits, and GST credits.
    It may be advantageous to defer receiving Old Age Security receipts (for up to 60 months) if it would otherwise be eroded due to high income levels (greater than $71,592 for 2014).
  8. Salary payments require source deductions (such as CPP, EI and payroll taxes) to be remitted to CRA on a timely basis.
  9. Individuals that wish to contribute to the CPP or a RRSP may require a salary to create "earned income".
    RRSP contribution room increases by 18% of the previous year's "earned income" up to a yearly prescribed maximum ($24,270 for 2014; $24,930 for 2015).
  10. Spouses may jointly elect to have up to 50% of certain pension income reported by the other spouse.
  11. If you are providing services to a small number of clients through a corporation (which would otherwise be considered your employer), CRA could classify the Corporation as a Personal Service Business. There are significant negative tax implications of such a classification. In such scenarios, discuss risk and exposure minimization strategies with your professional advisor.



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