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GETTING READY FOR PERSONAL TAXES 2017

Personal tax filing season is just around the corner and it is time to start organizing your receipts and keeping track of tax forms that you will receive from your financial institution.  With proper planning and organization of your documentation, you can be sure to meet the filing deadline of April 30, 2018.

Below is a summary of changes introduced by our Government that may impact your tax return for 2017.

Public transit tax credit

Budget 2017 proposed the elimination of the public transit credit after June 2017. This means that even if you paid an amount before July 1, 2017 for a public transit annual pass, which is valid after June 30, 2017, you will have to prorate your cost to determine the amount paid that is for the period from January 1 to June 30, 2017.  No amounts paid for transit after June 2017 is eligible for a credit.

Ride-sharing drivers

Effective January 1, 2017, all the self-employed commercial ride-sharing drivers (i.e. Uber) have been required to register, collect, report and remit GST/HST, regardless of their total annual revenues from ride-sharing.

New Back-to-School Tax Credit for BC

Subject to the approval of the Legislature, the B.C. Back-to-School Tax Credit is a new, non-refundable tax credit of $250 per child providing a benefit of up to $12.65 per child.   Eligible BC resident parents must have a child turning an age from five to 17 in the tax year.

Consolidation of caregiver credits

Effective January 1, 2017, the budget proposes to consolidate the infirm dependant credit, the caregiver credit and the family caregiver credit into the new Canada Caregiver Credit (CCC). In most cases, the proposed changes will not restrict your credits. The main changes will be that the caregiver amount for in-home care of your parent or grand-parent who is not infirm will no longer be available and you are no longer required to live with the dependant to claim the new CCC.

Medical Expenses Tax credit (METC) – Reproductive Technologies

The Budget 2017 proposed changes in the application of the METC for reproductive technologies. The costs incurred for a medical intervention required in order to conceive a child that were previously not allowed as a medical expense are now eligible for a tax credit. The expenses incurred in the previous 10 years may be claimed. Amounts incurred in 2007 must be claimed by the end of 2017.

If you believe that you have incurred these amounts between 2007 and 2016 and need assistance in filing an adjustment, please contact our office to see how we can help you.

Elimination of various tax credits

In addition to the elimination of the public transit tax credit, the proposed changes will eliminate other credits, including the children’s arts amount and children’s fitness tax credit, along with the investment tax credit for child care spaces and the deduction for eligible home relocation loans.

Please note that the provincial counterpart of those credits may still be there even though they have been eliminated on the federal level.

If you need assistance in determining the impact it will have on your personal return, please contact our office and speak to one of our tax professionals today.

 

Proposed Changes to the Small Business Deduction

In the 2016 Federal Budget, new measures have been proposed to limit multiple access to the small business deduction (SBD). One proposed change that will affect a large amount of Canadian control private corporations and structures are SBD restrictions on payments between private corporations. This is important given that income taxed under the SBD is eligible to be taxed at a lower rate.  These changes will come into effect for taxation years starting on or after March 22, 2016. For example, companies with a year end March 31st 2017 onward will be effected by this new proposal.

This new term is coined as “Specified Corporate Income (SCI)” and will restrict access to the SBD on active business income (ABI) earned from providing services/property to another private corporation (PayCo) where there is common ownership, ineligible for the SBD.

ABI is considered income earned from a business source, rather than other sources such as property/investment income that is not incidental to the business. Common ownership is when there is interest in PayCo held by:

  • Corporation providing the service and receiving fees (ServeCo)
  • Any shareholder of ServeCo
  • Any person who is not at arm’s length with shareholders of ServeCo (for example, children, parents, siblings, spouse etc.)

Even a small amount of interest held may trigger these restrictions to apply. For example, if you own a small share in PayCo and your spouse owns a small share in ServeCo, these restrictions could apply. However, the budget has proposed that companies may assign a portion of their unused SBD limit to the other company to keep the SCI eligible for the SBD.

While the proposals may change during finalization into law, there is no doubt that many corporations will be affected by this new change. Please consult us if you believe that this change may affect your business in order to adjust your tax planning accordingly.

Know your Responsibilities as a Director

A director of a corporation may be personally liable for corporate remittances in certain circumstances. A May 5, 2016 Tax Court case provides a discussion where the taxpayer, who is also Director and 50% shareholder of a corporation, was found liable for the corporation’s unremitted payroll deductions and tax.

Director of corporations are held liable if he or she does not exercise a degree of care, diligence, and skill of a reasonably prudent person in comparable circumstances. In this case, the taxpayer was notified from the other 50% shareholder that the business was doing well, although reality was that the company was in financial difficulty and remittances were not being made. The taxpayer then received correspondence from CRA regarding arrears GST and payroll deduction remittances, which led to the taxpayer to discuss with the other 50% shareholder about the need to be diligent and stopping by every two to three weeks to check on matters.

However, the taxpayer continued to depend on the other 50% shareholder for news regarding the health of the company, even after receiving additional correspondence about outstanding source deductions. As such, the Director was found personally liable for corporate remittances. The Court concluded that the taxpayer was not diligent given the taxpayer’s knowledge of the corporation’s financial state and heavy reliance on the assurances provided by the other 50% shareholder. The Court also suggested that a reasonable person would verify if the remittances were being paid independently. The Director was personally liable for unremitted corporate GST/HST and source deductions.

It is important to continue to exercise a degree of care and review source documents to ensure payments to CRA are being made appropriately, especially in times of corporate financial difficulty.

 

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