What is an Input Tax Credit?

If you’re a business owner in Alberta, then you’re collecting GST from your customers and remitting it to the Canada Revenue Agency (CRA). However, you’re also paying GST to your vendors on legitimate business expenses. The amount your remit to the CRA can be offset by the amount you pay to vendors. This offset is the input tax credit (ITC).

Without input tax credits, many products that we buy every day would be taxed over and over. Think, for example, of a sandwich you buy at our local Calgary corner store – the shop that sells it charges GST, as does the catering company that made the sandwich, the bakery that baked the bread, the cheesemaker who made the cheese, the dairy farm that produced the milk to make the cheese… and so on and so on.

What input tax credits mean for businesses is that while you may collect a large amount of GST, you only actually have to give the government the difference between what you collected and what you paid out. For this reason, solid bookkeeping is very important. This is why our bookkeepers work closely with our clients to keep meticulous records of both the GST that is collected and the GST that is pay out.

Your bookkeeping records have to be extremely clear and detailed because when you make an input tax credit claim to the CRA, you will be required to provide proof that these expenses were incurred legitimately and paid out as reported. The clearer this is, the easier time you’ll have working with CRA in the event you have to undertake a GST audit. While these audits are never any fun, they are also nothing to fear if your records are in good order and you have kept track of receipts.

Here’s a tip: when you receive a receipt from a supplier or service provider, make sure that the amount of GST is itemized on the receipt and that the vendor’s GST number is recorded on the receipt. You can save time and money by breaking out the GST and making a note of it on your cheque stubs so your bookkeeper doesn’t have to rifle through receipts or back it out.

Nobody likes paying tax, so it’s really important to keep on top of those receipts and see your bookkeeper regularly to be sure that you are claiming as many input tax credits as you can and offsetting your GST remittance. Your bookkeeper can also help you to keep on top of your GST remittance schedule, whether it be monthly, quarterly or annual.

If you are thinking about using the services of a professional bookkeeper, give us a call at 403 272-5513 ext 616 ore email bookkeeping@registriesplus.ca  for a free consultation. We are currently offering a Spring Special startup package for $150 and monthly bookkeeping from $99. You may be surprised at how affordable professional bookkeeping can be.

Calgarian defrauded $20K in CRA scam involving iTunes gift cards

On April 11, 2016, Calgary Bookkeeping posted a blog called How to Spot Fraudulent Activity At Tax Time. We saw this from CBC News Calgary and thought it was worthy of re-posting.

Calgarian defrauded $20K in CRA scam involving iTunes gift cards

A Calgary woman has been defrauded in a Canada Revenue Agency scheme to the tune of almost $20,000 involving iTunes gift cards, Calgary police said in a release Thursday.

The woman got a call Wednesday morning from a man claiming to work with the tax agency, stating an arrest warrant had been issued for her due to unpaid taxes…. Read more.

 

Summary of Changes to 2015 Personal Tax

tax changesWith each new tax year, Canadians can expect to see a number of changes. Sometimes the changes are good and sometimes they hurt. Whether or not you file using an accountant, bookkeeper, tax software or the old-fashioned paper forms, it’s always a good idea to understand what the changes are and how they impact you. This will also help you understand the different approaches our provincial and federal parties take in terms of the budget and how it’s financed. In either case, being
informed is just a good idea.

We know you don’t have time to read the seventy page guide book, so here’s a quick summary of some of the more impactful changes to personal taxes for the 2015 tax year. If you want a more detailed summary, visit the Canada Revenue Agency (CRA) website. Here’s a link to the What’s New for 2015 page

Individuals and families

  • Universal child care benefit (UCCB) – increased to $160 per month. There is also a new benefit of $60 per month for each qualified dependant aged 6 through 17
  • Child care expenses – increased by $1,000 per child.
  • Family caregiver amount for children under 18 years of age – has been eliminated
  • Family tax cut – allows for unused tuition, education, and textbook amounts transferred from a spouse or common-law partner
  • Children’s fitness tax credit – now a refundable credit

Interest and investments

  • Other deductions – the minimum amount that must be withdrawn each year from a RRIF, RPP and PRPP has been reduced.
  • 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
  • Interest paid on your student loans – interest paid for registered Red Seal apprentices can be claimed
  • Investment tax credit – Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 2016
  • Tax-free savings account (TFSA) – increased to $10,000

Other changes

  • Repeated failure to report income penalty –may be if the amount of income you failed to report on your return was $500 or more.

Missing a check from the CRA?

direct deposit

Are you missing a check or do you have an uncashed check from the Canada Revenue Agency (CRA)?

Maybe you’ve moved or maybe one of your kids mistook your CRA check for a scribbling book. Whatever the reason for not having your check, the good news is that it’s still money owed to you by the CRA and these checks never expire.

The CRA has convenient processes for getting replacement checks and for things like cashing checks from someone who might have died.

They also offer direct deposit services so you can avoid check related issues. To learn more about direct deposit or how to recover missing checks, vist the CRA website here.

Personal finance getting easier thanks to CRA

Proof of incomeFor most people, visiting the Canada Revenue Agency website isn’t a daily or even weekly occurrence. In fact, it’s probably associated with a lot of pain for most people because who likes to think about paying taxes. However, the CRA website is actually doing a lot to make things easier for us when it comes to managing personal finances. I don’t imagine this post will convince you to replace your Facebook time with CRA browsing, but there are a few things you should take a peek at.

My Account

We bank online, we shop online, we play online, so why not manage our taxes, refund and employment records online? This is where the My Account service comes in. One you register for your My Account, you’ll be able to track your refund, view and modify your returns and check your benefits, among a range of other things. Learn more

Proof of Income Statements

Banks, employers, lenders and a range of other organizations will require proof of your income from time to time. This use to require letters from employers, bank statements, notice of assessments, T4s, etc. The CRA will now supply you with a PIS right from your My Account. It’s a huge time saver and much more convenient that traditional methods. Learn more

My Payment

CRA is now making it easier to make payments online. Now you can pay using Visa debit or Interact Online. Available with Scotiabank, RBC, TD Canada Trust and CIBC. Learn more

MyCRA Mobile App

This app is specifically for individual taxpayers. It lets you securely access and view things like:

  • Notice of assessments
  • Return status
  • Benefits and credits
  • TFSA and RRSP contribution limits
  • Home buyer’s plans.

You can also manage online mail, contact information, direct deposits and request at PIS. Learn more

Small Business Deductions

The accounting and bookkeeping community in Calgary has been keeping abreast of information from the Canada Revenue Agency (CRA) regarding small business deductions.

Two changes that we’re aware of are:

One: if a business is determined to be a Personal Services Business (PSB) then the small business deduction may be denied, and additional taxes may be applied. This is because these types of businesses are viewed as incorporated employees. Meaning that an individual provides employee-like services through a closely held corporation, rather than providing them directly as an employee.

Two: if a business is determined to be a Specified Investment Business (SIB), then the small business deductions may also be denied. The CRA views corporations earning investment income (interest, real estate rental, royalties, capital gains and dividends) as having generating SIB income. This change will have a strong impact particularly on the real estate sector like real estate agents and those earning rental income.

How to spot fraudulent activity at tax time

Albertans should always be on guard for fraudulent activity, but especially during tax season warns the Canada Revenue Agency (CRA).Fraud

Taxpayers should be vigilant when they receive communication by telephone, mail, text message or email from someone claiming to be from the CRA.

As the filing deadline for the 2015 income tax returns approaches, the public needs to be aware that there are many kinds of fraud whereby scammers claim to be from the CRA. These attacks are more common just before and after tax season.

These scams range from emails advising people to click on a link to receive a refund, to threatening or coercive messages that scare individuals into paying a fictitious debt to the CRA.

Push back from the victim can sometimes be met with threats that the matter will be escalated to police or other actions from the CRA that would damage the person’s financial situation. The scammer’s hope is that the tax payer will be frightened into complying.

It’s important to know that the CRA has strict policy and legislation to follow in terms of what it can and cannot do at tax time. Knowing this can help you spot fraudulent activity. For example, the CRA would never:

  • Threaten you with an arrest or with time in prison
  • Ask for information about your passport, healthcare card, or driver’s licence
  • Request personal information to be sent by email
  • Email you a link requesting you to fill in an online form with personal or financial details
  • Send you a link to your refund by email or text message
  • Setup an in-person meeting in a public place to take a payment
  • Demand immediate payment by prepaid credit card

If you suspect you’re being a victim of fraudulent activity, immediately contact the Canadian Anti-Fraud Centre online at www.antifraudcentre.ca or call toll free at 1-888-495-8501.

If you receive any questionable communication from the Canada Revenue Agency hang up and either call your tax professional or Canada Revenue Agency directly as follows:

Personal tax: 1-800-959-8281

Business enquiries: 1-800-959-5525

Here is the link for more information about the different types of fraud from the CRA’s website:

http://www.cra-arc.gc.ca/scrty/frdprvntn/menu-eng.html