Category: Business & Corporate Tax

Are board and lodging considered a taxable benefit for employees?

Board and lodging provided to employees at unreasonably low rates are taxable benefits. In other words, if the employee paid less than fair market value (FMV) for board and lodging, the employer will need to include the T4, the FMV of the cost less the amount the employee actually paid.  

I incurred meals expense that were reimbursed by my client. Is this expense 50% deductible to me or 100%?

If you received reimbursement for meals expense that you incurred, the meals expense will be fully deductible to you. However, you will also have to report the reimbursement that you received as income. In effective, the income will cancel out the expense.  

Will I have to report any taxable benefit on the personal tax return for exercising employee stock options at a private corporation?

Generally, in the year the employee stock options are exercised, a taxable employment benefit equal to the difference between the exercise price and the fair market value of the stock on the date of the exercise has to be reported as income on the personal tax return. If shares of a Canadian-controlled private corporation (CCPC)are … Continue reading Will I have to report any taxable benefit on the personal tax return for exercising employee stock options at a private corporation?

If a company is willing to pay money per month for an annual membership (fitness club, golf) again, is there a way to structure it not as just an expense of the company?

If a company is willing to pay money per month for an annual membership, both golf dues and sports clubs dues paid by your employer will be considered as a taxable benefit to you, unless you can establish that the dues paid were primarily for the advantage of the employer. This is a sticky area … Continue reading If a company is willing to pay money per month for an annual membership (fitness club, golf) again, is there a way to structure it not as just an expense of the company?

If a company leases a car for me, is it a taxable benefit? Is there a way for me to have my company simply pay for it?

Yes, there is a taxable benefit to you should your employer lease a car for you. These benefits are knows as the stand-by-charge and the operating cost benefit. The stand-by-charge means that you derive a benefit simply because the leased car is available for your use. The operating benefit is calculated based on the personal … Continue reading If a company leases a car for me, is it a taxable benefit? Is there a way for me to have my company simply pay for it?

What is a reasonable management fee?

Management fees are paid to the managers of a business for management services performed. Only reasonable management fees paid can be deducted as an expense. However, the Canada Revenue Agency has not explicitly stated what a reasonable amount is to charge for a management fee. Generally speaking, a reasonable management fee should be equal to … Continue reading What is a reasonable management fee?

I want to perform bookkeeping for my small business. What do you recommend me to use?

Answer: Wave Accounting is a free online-based accounting software that is available to all. It is simple to use and is aimed at small business owners. You can register here.  

Should I use Wave Accounting for my bookkeeping needs?

If you’re an independent contractor, IT consultant, or small business owner, then Wave Accounting is sufficient for your needs. It’s able to generate all of the financial reports required by your accountant and has the necessary tax codes such as HST. If you have multiple employees, a large customer base, or a lot of vendors, … Continue reading Should I use Wave Accounting for my bookkeeping needs?

Are there any pitfalls I should be aware of when selling a stock in a loss position?

This is a good strategy if you have capital gains in the current year or the past 3 years. However, you should be aware of the ‘Superficial loss’ rule. This rule states that if you sell your stock at a loss, and subsequently you or someone ‘affiliated’ to you (eg. Your spouse, etc) repurchases the … Continue reading Are there any pitfalls I should be aware of when selling a stock in a loss position?

My current employer asked me to become an independent contractor. What’s the benefit for them?

The employer won’t have to deduct CPP and EI because those are employment withholding requirements. They also will not have to pay for employment benefits and vacation pay. The cost of CPP and EI per employee could be higher than $3,000, so you can imagine the savings.  

Can my corporation pay for my for my cell-phone bill if I use it for business purposes?

A corporation can only deduct expenses that it incurs.  If your cell-phone is registered to you (and not your corporation) and you use your cell phone partially for business purposes, then you can ‘charge-back’ the business use portion of your cell phone bill to your corporation. It’s a best practice to first pay for the bill yourself. … Continue reading Can my corporation pay for my for my cell-phone bill if I use it for business purposes?

What happens if I did not file form T2057 when converting my sole proprietorship to a corporation?

When changing from a sole proprietorship to a corporation, you must file form T2057. Otherwise, capital gains tax will apply on the assets transferred by you (i.e. sole proprietor) to your newly created corporation. Also, a penalty is levied by the Canada Revenue Agency for filing form T2057 late.  The penalty is calculated as $100 … Continue reading What happens if I did not file form T2057 when converting my sole proprietorship to a corporation?

Can I pay a dividend to myself from my company in excess of the company’s retained earnings?

Generally, a company cannot declare a dividend above and beyond the retained earnings of the company on the dividend declaration date. You must wait until the company generates additional earnings before declaring additional dividends.  

I purchased a computer for employment purposes. As an employee, can I deduct this as employment expense?

In order to claim employment expenses incurred to earn employment income, you need to request a signed T2200 from your employer. However, the CRA has specifically mentioned that if you buy a computer or other capital assets, you cannot deduct this cost. Further, you cannot capitalize and depreciate (claim CCA) on capital purchases.  

If I sell services to clients outside Canada, do I have to collect GST/HST?

In determining whether you are responsible for collecting sales tax, you need to determine whether the services you provide occur in Canada or outside Canada. If the service is being performed outside Canada, your taxable supplies are considered export services and you do not have to charge GST/HST. However, if the recipient of the service … Continue reading If I sell services to clients outside Canada, do I have to collect GST/HST?
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