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Posts by Mina Hanna

Oakville Accountants

Financing Services for Dentists in Canada

PROFESSIONAL ACCOUNTING SERVICES FOR DENTISTS IN CANADA

We are professional accountants specializing in tax planning and customizing financial strategies to help you through your dental career. We offer a wide range of tax and accounting services:

Our dental accounting & bookkeeping services include:

  •   Financial Statement Preparation
    • Monthly Bookkeeping for dentists
    • New Business Accounting System Set-up
    • Corporate Tax Return Preparation – T2
    • Personal Tax Return Preparation – T1
    • Tax Planning
    • Preparation and Filing of T4 Slips (For salaries)
    • Preparation and Filing of T5 Slips (For Dividends)
    • Incorporation and Corporate Reorganization
    • Dealing with CRA Inquiries and audits
    • Analysis and Consulting for Investing, financing, real estate investing

Accounting

Choosing the right accountant is one of the most crucial decisions you will make for your business. In order for you to effectively compete and succeed in today’s business environment, you need an accountant who is experienced, dedicated, and work with you as a part of your team.

Our in-depth experience with the dental accounting, combined with our accurate monthly reporting puts you in the driver seat by monitoring your financial performance on regular basis.

Bookkeeping

OnTrack Accounting helps dentists efficiently manage all their bookkeeping; from processing your payroll and handling your cash flow, to overall helping you run your business.

We help you manage the day-to-day bookkeeping, payroll and accounting issues, so that you can focus your full attention to run and grow your dental practice and have so much more free time

We offer fixed-fee dental bookkeeping services. This means there is no surprises when it comes to our fees and we do not charge extra for phone calls, meetings, or responding to CRA inquiries.

Tax Preparation

It’s all about the planning, filing your T2 – Corporate Tax return and your T1 – Personal Tax Return is not rocket science, yes of course it is complex and can be confusing and time-consuming. But it is the art behind it not just the science. Save yourself the headache and allow our professional tax accountants prepare and file your taxes correctly and in a timely manner.

Tax Planning

The game here is being proactive rather than being reactive, it’s all about the planning. It all starts with accurate and timely bookkeeping, which allows us together as a team to review your financial reports way before the year end and make tax planning decisions accordingly. Comes the time to file your taxes, you know exactly what to expect and there is no surprises.

Paying less tax, keeping more of your hard-earned money and increasing your cash flow are the basics. But also keeping in mind your financing capabilities and borrowing qualifications is very crucial while we are working on your tax plan.

Tax Planning is an art and science; it is a dynamic process as it is never carved in stone. Your Tax Plan is an active strategy and it should be reviewed and changed as your financial goals change and also changes to your personal life style from year to year


Financing Services for Dentists in Canada

At OnTrack Accounting we understand that every dental practice has its own unique set of opportunities and challenges. This requires from us a more involved approach. Throughout the years we have developed strong relations with professional banking partners who work very close to us while cooperating with our clients to help plan and build solutions that work for you.

Our clients benefit from working closely with our professional banking partners who help dentists coordinate practice loans,  lines of credits, leasing programs and mortgages while offering maximum flexibility for your dental practice. This is all done in a tax-efficient manner to help you optimize your cash flow and payment plan.

We only work with the best, that’s why we have chosen to work with Khouloud Nehme – RBC Commercial Account Manager (HealthCare Professionals) to provide distinct financing options for your dental practice needs:

  • Start-ups
  • Expansions
  • Dental Practice Acquisitions
  • Leasing Programs
  • Equipment Purchases
  • Dental Practice Refinance
  • Re-locations

Khouloud Nehme fully understands your unique position and your needs for loans and other lending programs. You can count on her expertise backed by one of the top financial institutions in Canada RBC.


 

Mina Hanna
President & Director

OnTrack Accounting

416-454-8812

 

 

 

 

 

 

 

KhouloudNehme
RBC Commercial Account Manager (HealthCare Professionals)
Royal Bank of Canada

437-993-1467

 

 

 

 

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Personal Real Estate Corporations (PRECs) in Ontario

Personal Real Estate Corporations (PRECs) in Ontario

Great News to Ontario Real Estate Professionals… Personal Real Estate Corporations (PRECs) in Ontario

Today, The Government of Ontario announced key strategic changes which will modernize the rules for registered real estate brokerages, brokers, and salespersons across the province of Ontario. Phase One was announced today, Oct.1st 2020, includes regulations that closely align real estate professionals with modern business practices.

The new measures will Allow real estate professionals to incorporate and be paid through Personal Real Estate Corporations (PRECs). For more information please visit us at www.ontrackaccounting.com

This is a result of efforts which started over a decade ago to help Realtors® achieve much needed tax fairness, which will result in a more efficient business environment, by getting paid through Personal Real Estate Corporations (PRECs) in Ontario.

As a Real Estate Professional – What does this mean to you to have a Personal Real Estate Corporations (PRECs) in Ontario ?


Five main tax-saving opportunities

It is very important and central to understand the tax benefits of incorporation, and it also comes at a cost and some additional responsibilities.

The Basics:

  • The corporate Tax Rate is 12.5% on the first $ 500,000 for small business corporations
  • The marginal tax rate on earnings above $220,000 per year is 53.5%
  • Of course, once you withdraw funds from the corporation, that money is subject to your personal tax rate.

With a bit of tax planning, you have a great opportunity to minimize the amount of taxes you pay if you setup a Personal Real Estate Corporations (PRECs) in Ontario. As professional Tax Accountants in Mississauga, Oakville and Downtown Toronto we specialize in corporate tax filing and tax planning for real estate agents

 

1- Tax deferral

# One of these benefits is the ability to defer taxes by earning your commission income inside your Personal Real Estate Corporations PREC, which is taxed at a lower rate than personal income tax rate. Allowing the excess income to be invested inside the corporation, with personal taxes limited to only what you draw out as a salary or dividend.

Shall you take out a salary or dividends or a mix of both ???
That is a whole different conversation which needs to be looked at on each individual situation
If you have any questions regarding your tax planning, please feel free to contact us at www.ontrackaccounting.com


2- Income Splitting

# Two of benefits from setting up a Personal Real Estate Corporations PREC is the opportunity to income splitting. However, this area is very crucial because few years ago, the federal government has established strict rules around Taxes on Income Splitting.

You have two options to use in your Personal Real Estate Corporations PREC to split income with lower-earning family members by paying your family members a salary or issue them dividends.

The condition is that, when paying salaries, the salary must be for “reasonable services performed”, which means your family members must be actively engaged in the business.

You can also pay your family member a reasonable amount of dividends if your family member is actively engaged in the business and is averaging at least 20 hours a week )or is receiving a reasonable amount of dividends based on their work performed, property contributed, or risks assumed relative to the corporation.

These are very strict rules introduced by the federal government

 

3- Declare dividends Versus taking a salary

# Three of benefits from setting up a Personal Real Estate Corporations PREC is that the Real estate professionals who are self-employed are pay CPP both the employee and employer portion. The combined amount of CPP is currently around $ 5800

When you are incorporated, you will have the opportunity to pay yourself either a salary or dividends. If you pay yourself a salary, you’ll still need to remit CPP. But if you pay yourself a dividend, CPP contributions aren’t required, leaving you with excess cash to invest in other income-producing investments.

So shall I take a Salary or Dividends ? or a mix of both ???
That is a whole different conversation which requires a more in-depth conversation and requires we look at each individual situation. Be careful of the effect of paying yourself dividends and the impact of that on claiming child care expenses and making RRSP contributions.

If you have any questions regarding your tax planning, please feel free to contact us at 416.454.8812
As professional Tax Accountants in Mississauga, Oakville and Downtown Toronto we specialize in corporate tax filing and tax planning for real estate agents.

 

4- Timing your Pay

# Four – In Canada, the more money you earn in a year, the higher your tax rate will be. And the lower money you earn in other years, the lower your tax rate will be —This is a very simple technique, so it makes sense to withdraw funds during a slow year for example or upon retirement or in a year where you decided to take a tour around the world and your income will be lower or for example if you ’re taking a year off as a parental leave.


5-  Investing Your Retained Earnings Inside the Corporation

# Five – When you leave the excess income inside the corporation and pay the lower corporate tax rate of let’s say 12.5%. You should only take out what you need outside the corporation and do not take out all what you earned. This would allow excess income inside the corporation to accumulate and may be after a year or few, you may want to invest the money inside the company, rather than taking it out and getting highly taxed on your personal hand with high personal taxes rates. Since the personal taxes only applies when you draw out funds as either a salary or dividend. However, the catch here is that the return on Investment (income generated from the investments)  inside the corporation gets taxed at a  higher since it is considered to be an inactive income.

Investing under a corporation and taxes on passive Income inside a corporation.
That is a whole different conversation which needs to be looked at on each individual situation
If you have any questions regarding your tax planning, please feel free to contact us at www.ontrackaccounting.com

The process of being incorporated can be a bit complex and dynamic, however it is can be an excellent tool for real estate agents to maximize their tax saving and keep their hard-earned commissions in their corporations.

With a bit of tax planning, you have a great opportunity to minimize the amount of taxes you pay. As Professional Tax Accountants in Mississauga, Oakville and Downtown Toronto, we specialize in corporate tax filing and tax planning for real estate agents

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Accountant for Year End

Tax Saving Strategies for Pharmacists

  • Whether you are an existing pharmacist with years of experience or if you are just getting started.
  • Whether you are a Staff Pharmacist, Relief Pharmacist or a Pharmacy Owner.
  • Whether you own one Pharmacy, or you own multiple pharmacies

As Professional Accountants in Toronto Downtown, we specialize in Pharmacy Accounting and Tax Planning.
We work with all types of pharmacists, Staff Pharmacists, Relief Pharmacists, New and Existing Pharmacy owners.
We provide Free Initial Consultations.

 

We all know the changes and challenges the industry is facing today

  • 25% – 40% decrease in generic prices
  • Costco confusion regarding rebates which are causing more reductions
  • New Proposed reductions on claim processing fees and MedsChecks Payments
  • Over Supply of Pharmacists in Toronto, Mississauga, Oakville and most of the GTA
  • All resulting in lower wages, staff cuts and reducing profits

 

Staff Pharmacist:

If you are a Staff Pharmacist working in 2-3 different pharmacies and you are earing your income as a T4 employee. You are probably ending to pay taxes at the end of the year. At the same time, you are driving a lot of KM every day to work your shifts.

If you are in this situation, we strongly recommend that, it would be better for you to charge as a relief pharmacist and take advantage of writing off business expense such as: Car, Cell Phone, Travel …..etc. ) and save a lot of taxes every year.

As Professional Accountants in Toronto Downtown we specialize in Pharmacy Accounting and Tax Planning, we provide Free Initial Consultations.

If you have any questions, feel free to contact us at 416.454.8812 or at mina.hanna@accountingontrack.com
We would be more than happy to answer your questions.

Relief Pharmacist:

If you are a Relief Pharmacist, so you are already invoicing and collecting HST

Depending in your level of income and your personal lifestyle we can help you decide on which would be better for your situation; Charge as a sole Proprietorship or a Corporation.

It is very common to be told or you may have heard from someone that for tax purposes you should incorporate your business. This is simply may not be true for each and every situation, in fact, in some cases, the opposite can be true.

The main advantage to incorporating your business is that the business pays a very low corporate tax rate compared to a much higher personal tax rates. Call us today to further discuss tax advantages of Incorporating your business, we are Professional Accountants in Toronto Downtown specializing in Pharmacy Accounting and Tax Planning.

 

Pharmacy Owner:

Whether you own one or more Pharmacies, sole or multiple operators, Identifying the proper legal entity structure helps to save thousands of dollars every year.

A very common mistake, we usually come across so often, where 2 operators owns one pharmacy or more, and of course each one of them has different income needs and lifestyle; but still take the same amount of salary or dividends. This of course is not be the most advantageous to your unique tax situation.

Listing spouses as shareholder’s allows proper income splitting and dividends sprinkling. Needless to emphasis on making sure of taking advantage of claiming allowable business expenses

Planning your taxes is simply taking a proactive approach rather than a reactive one. Tax-planning with one of our accountants in Toronto Downtown, Oakville, Mississauga is very dynamic. As tax accountants in Toronto Downtown, we ensure your tax-plan is concurrent with your financial situation and your personal lifestyle

As Professional Accountants in Toronto Downtown, we specialize in Pharmacy Accounting and Tax Planning.
We work with all types of pharmacists, Staff Pharmacists, Relief Pharmacists, New and Existing Pharmacy owners. We provide Free Initial Consultations.

If you have any questions, feel free to contact us at 416.454.8812 or at mina.hanna@accountingontrack.com
We would be more than happy to answer your questions .

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What is The small business deduction?

CCPCs Canadian-controlled private corporations are entitled to claim a small business deduction on active business income earned in Canada.

As professional Tax Accountants in Toronto downtown, we specialize in dealing with small businesses.

For the past ten years we have helped a lot of clients with their accounting, bookkeeping and corporate tax filing in Toronto. As professional Tax Accountants in Toronto downtown, we are specialized tax accountants for independent contractors servicing clients in Toronto, Mississauga and Oakville

 

What is an active business?

Active business includes a business, as well as an adventure in the nature of trade, it is essentially what it sounds like. Active income is typically anything other than investment income, rental income, leasing income, income from a specified investment business or a personal services business.

 

So Active business Income does not include:

1- A business that derives its income from property (including rent, interest, dividends, or royalties) and has less than six full-time employees (i.e., a “specified investment business”)

2- A business that provides personal services through a corporation, has fewer than six full-time employees and where, were it not for the presence of the corporation, the individuals providing the services would be considered employees or officers of the entity using those services (a “personal services business”).

The small business deduction currently provides a 9 % federal tax rate. The small business rate is available on active business income up to the amount of the Business Limit.  The current federal business limit equals to $500,000

 

Federal rates:

The basic rate of Part I tax is 38% of your taxable income, 28% after federal tax abatement.

After the general tax reduction, the net tax rate is 15%.

For CCPCs Canadian-controlled private corporations claiming the small business deduction, the net tax rate is:

9% effective January 1, 2019
10% effective January 1, 2018
10.5% before 2018

 

Provincial Taxes:

In Ontario, corporations carrying on business through a permanent establishment in Ontario are subject to both federal and Ontario corporate income taxes. The tax rates apply to taxable income allocated to Ontario.

The Ontario General corporate income tax rate is currently 11.5%.

The Ontario small business deduction (SBD) reduces the corporate income tax rate on the first $500,000 of active business income of Canadian controlled private corporations (CCPCs). Effective January 1, 2018, the lower rate of Ontario corporate income tax is 3.5 per cent.

The table below shows the general and small business corporate income tax rates federally and for the province of Ontario.  Rates differ from province to province. The small business rates are the applicable rates after deducting the small business deduction (SBD).

General Rate

Small Business General Rate

Federal

15% 9%

$500,000

Ontario 11.5% 3.5%

$500,000

 

While the federal government announced in 2018 that it is phasing out the $500,000 small business limit for corporations that earn between $50,000 and $150,000 of passive investment income in a taxation year, Ontario is not paralleling this phase out.

Ontario does parallel the federal SBD phase out where a CCPC’s (and associated groups of CCPCs) taxable capital is between $10 million and $15 million. CCPCs (and associated groups of CCPCs) with taxable capital of $15 million or more are no longer eligible for the lower rate of corporate income tax on the first $500,000 of active business income.

As professional Tax Accountants in Toronto downtown, we work with you to optimize your tax position regardless of the size of your business, Whether you are just starting your corporation, thinking of expanding, or already been operating for years, we Give you customized tax plan to help you save taxes.

Our team of experienced accountants downtown Toronto and Mississauga have a wide range of experience working with businesses of all sizes.

What we can do for you:

  • T2 Corporate Tax Return
  • T4 Slip
  • Incorporation
  • Bookkeeping
  • HST Return
  • T5 Slip
  • T3 Family Trust Return
  • Articles of Incorporation
  • Consultations
  • GST 74
  • CRA Correspondance
  • GST 20
  • T1 Personal Tax Return
  • Payroll

If you have any questions regarding your particular situation, feel free to contact as at 416.454.8812 or by email at mina.hanna@accountingontrack.com

We work with our clients to create effective tax planning strategy that is unique to your business and your particular tax situation. As professional Tax Accountants in Toronto downtown, we are specialized tax accountants for independent contractors servicing clients in Toronto, Mississauga and Oakville.

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Tax Accountant

How to Reduce Capital Gains Taxes in Canada

As professional Tax Accountants in Toronto downtown, we work with you to reduce your Capital Gains Tax. If you have any questions in regards to Capital Gains Taxes, feel free to contact as at 416.454.8812 or by email at mina.hanna@accountingontrack.com . As tax accountants specializing in real estate, we work with our clients to create an effective tax planning strategy to use all allotted exemptions and defer capital gains as much as possible.

Capital gains tax is due when you sell an asset or investment for more than what you paid for, with a 50% of the difference being added to your regular income. In Canada, there are a few major exemptions, and rules which may allow you to reduce your tax, depending on lot of factors.

While opening a registered account to shelter investments and using the principal-residence exemption to reduce capital gains tax on residential property are the two most basic tax saving strategies you can use to reduce your capital gains taxes. However, there are more into Capital Gains Taxes you should be aware of.

 

The Fundamentals ABC

You have to declare capital gains when you sell property or investments for more than what you paid for.

For example, if you bought an asset for $100,000 and sold it for $200,000, you have to declare a $100,000 capital gain in the year you sold the asset. The capital gains inclusion rate is 50% , so you would include $50,000 in your total taxable income of this year when you disposed the asset.

The inclusion rate is the same for everyone, but the amount of tax you pay depends on your total income, personal situation and your province of residence.

There are no capital gains triggered on the sale of your principal residence

There are no capital gains triggered on the sale of investments inside a registered plan such as RRSP or a RRIF,”

Capital gains are calculated based on the market value of the asset sold less the cost of acquiring that asset. As professional Tax Accountants in Toronto downtown specializing in real estate, we work with our clients to create an effective tax planning strategy to use all allotted exemptions and defer capital gains
as much as possible. If you have any questions in regards to Capital Gains Taxes, feel free to contact as at 416.454.8812 or by email at mina.hanna@accountingontrack.com .

Timing Your Transaction

Choosing the time of sale for your investment assets can be a powerful tool for tax reduction.

If you’re planning to sell investment assets that have made a profit, consider postponing the sale until after January 1 of the next year. You will incur capital gains tax that year and only have to pay by April 30 of the following year.

If your income fluctuates from year to year, selling during a year when it is lower will save you a lot of taxes.

If you have investment assets that have lost money, selling them in the same year as profitable ones will allow you to apply the loss against the profits and reduce your overall capital gains tax.

 

Charitable Donations – Gifts – Giving Away Assets

If you are making regular charitable donations or want to give money to family members, you can use donations or gifts to reduce your capital gains tax.

For example, if you plan to make a $1,000 donation to a charity, you can donate shares (stocks) which has a value of $1,000 rather than selling the shares (stocks), paying capital gains tax and adding cash to make up the $1,000 donation, making the donation in shares entitles you to the $1,000 charitable receipt for tax purposes, while not triggering capital gains tax.

Gifts to family members trigger capital gains tax, the CRA deems a gift to be a taxable disposition of an asset. Despite this, you could save money by giving an asset that has generated a loss, but that you want to keep in the family.

Gifting the asset produces a capital loss that you can apply to gains from other investments, while your family member reaps the future benefits of it.

 

Lifetime Capital Gains Exemption – LTCGE

One of the very generous aspects of Canadian taxes is the lifetime capital gains exemption.
If you own a business or operate a farm property successfully over an extended period of time, presumably it should have increased in value and you may, at some point, want to sell the business for example to retire. When this is the case, you may be completely exempt from tax, If you sold qualifying property, your gains of up to $800,000

 

What is considered to be active business?

Because businesses have to use at least 90 percent of their assets in an active business operating primarily in Canada to qualify, consider selling the business at a time when it can fulfill these requirements. To qualify for the Lifetime Capital Gains Exemption.

As professional Tax Accountants in Toronto downtown, we work small business owners to make sure they understand and carefully plan for their retirement or exit strategy and take advance of the LTCGE
Lifetime Capital Gains Exemption

If you have any questions in regards to Capital Gains Taxes, feel free to contact as at 416.454.8812 or by email at mina.hanna@accountingontrack.com and one of our professional Tax Accountants in Toronto downtown, will be happy to help you and answer any questions you may have.

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Tax Accountant

T2 Tax Return – Changes Affecting T2 Tax Returns

he Tax Season is upon us!  As your Corporate Tax Accountant in Oakville and Mississauga, I have summarized the 2016 Income Tax changes, which may affect our clients’ T2 Tax Return (T2 Corporation Income Tax Return) one way or another, depending on your own situation of course. Feel free to call us at 416.454.8812 or email at mina.hanna@accountingontrack.com if you have any questions.

Corporate Taxes – T2 Corporation Income Tax Return

1- No Changes to the corporate tax rate

No changes have been proposed to the corporate tax rate on active business income, which is 15.5% during 2016. Unless there are further changes, any active business income generated during 2016 will be taxed at 15.5%.

2- Higher taxes on investment income inside corporation

There will be a 4% increase on corporate taxes on investment income earned inside a CCPC Canadian-controlled private corporation. This raises the corporate tax rate on investment income from 46.17% to 50.17%.

3- Higher taxes on dividend income inside professional corporation / holding company

There will be a 5% increase on corporate taxes on dividends received from most Canadian corporations. These taxes are refundable to the corporation if and when dividends are issued/paid to shareholders.

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RRSPs / Mortgages / Taxes

RRSPs / Mortgages / Taxes

Paying down my mortgage, or contribute to my RRSP which comes first ??

I’m often asked this question, which should come first, paying down your mortgage, or contributing to your RRSP.  My best strategy is to do a bit of both: If you can afford it, make an RRSP contribution to generate a bigger tax refund; then invest that refund in your mortgage every year.

 

Real Estate Mortgages: When you buy a home, you take a huge step towards creating a tax-efficient wealth. Your principal residence will likely be the primary and largest single sponsor to your overall net worth; it’s an investment that can provide tax-exempt capital appreciation, the potential for rental income or a home based business, and the leverage with which to acquire new income-producing assets.

Buying real estate comes with some big risks as well. Home mortgages represent more than 77% of all Canadian debt. That debt can become a crushing burden if you suffer a job loss, marriage breakdown or you are forced to renew your mortgage at a much higher interest rate.

While capital gains enjoyed on the sale of your principal residence are not taxable, but losses incurred are not deductible either—so it’s doubly painful if you must sell in a hurry at a loss.

Needless to emphasize, you need to manage the purchase processes very carefully. The interest rate you pay is a very important factor, especially because mortgage interest costs aren’t tax-deductible, unless your home is used for a home business.

Manage your wealth: A basic wealth management principle is to manage the non-deductible debt on your home mortgage by cautiously paying it down, often. Negotiate the opportunity to make lump sum pre-payments annually. Also, consider making weekly or biweekly payments instead of monthly payments. By doing so, you end up making a few extra payments a year, which quickly reduces the amortization period and the total interest paid over the lifetime of the mortgage.

Paying down your mortgage, or contributing to your RRSP which comes first:

A very common question, I’m often asked: which should come first, paying down the mortgage, or contributing to RRSP.

Generally speaking, the best strategy is to do a bit of both: If you can afford it; make an RRSP contribution to generate a bigger tax refund; then invest that refund in your mortgage every year.

Example:
Let’s assume you are in a 35% marginal tax bracket, and can contribute $12,000 annually to your RRSP. This will reduce your taxes by $4,200 a year, and when you get that tax refund, you can use it to pay down your mortgage. This even works much better if you can apply your tax savings to your mortgage throughout the year.  You can do it by asking your employer to reduce the taxes withheld at source to account for your RRSP contribution, then increasing your mortgage payments by the difference—in this case, by $350 a month. If you had a $375,000 mortgage at an interest rate of 5%, those extra payments would cut your amortization period by almost six years and save you $75,000 in interest costs.

You would also have accumulated about $480,000 in your RRSP, assuming a 35% tax bracket and a 7% compounding return. If your tax bracket stays constant in retirement you would be left with close to $312,000 after taxes, which you could continue to grow in a Tax-Free Savings Account. Your net worth statement, in short, would be quite impressive: featuring just over $1.5 million in assets. The icing on the cake is that your home value appreciates on a tax-exempt basis. And once equity is built up, it’s possible to secure a loan against your home for investment purposes, making the interest deductible; but only for investments in non-registered accounts.

You have more complicated situations, what should you do first—contribute to your RRSP or the mortgage?

The answer is, it depends: on the mortgage rate you are paying, the rate of return on your invested financial capital, and your marginal tax rate.

We have created tools to help you estimate your potential net worth under different scenarios, using different interest rates, RRSP contribution levels, marginal tax rates and a variety of rates of return on your RRSP investments. With our tool you’ll quickly discover that no matter which path you choose, your home will be a major contributor to your wealth in the years to come.

To find out which option is the best fit for your particular situation, give us a call at 416.454.8812 or email at mina.hanna@accountingontrack.com

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accounting services near me

RRSPs Registered Retirement Savings Plans

Maximizing your RRSPs effectiveness is considered to be one of the most powerful year-end tax planning techniques.

Registered Retirement Savings Plans (RRSPs) – Here is what you need to know in few words.

– The more you contribute to your RRSP the less taxes you pay (as long as you stay within your RRSP deduction limit)

– If you don’t have the money set aside for RRSPs; please call me, we will tailor a customized solution for you.

Please feel free to call us at 416.454.8812 or visit us at www.accountingontrack.com for a more personalized advice. Of course every individual’s tax situation is different and what works for one person does not necessarily work for everyone’s situation.

Registered Retirement Savings Plans (RRSP) – Tips and frequently asked questions.

What is RRSP ?

RRSP is a government approved program designed to encourage you to save for retirement by providing powerful tax reduction options.

This tax break comes in two forms:

1- The money you contribute into your RRSP is deductible from your taxable income, which will result in Immediate Tax Savings.

2- All interest or capital gains which you earn in your RRSP are tax free. (until you start withdrawing them)

How long can I keep my RRSP limit?

Any unused part of your RRSP deduction limit can be carried forward indefinitely.

If I can’t afford to put money in now, does the limit keep growing ?

If you can’t afford to put money in your RRSP this year, the RRSP deduction limit amount is carried forward to the next year and added to the deduction limit for next year.

What’s my RRSP deduction limit? How can I find my RRSP deduction limit for this year?

Your RRSP deduction limit is shown on your (NOA) Notice of Assessment for the previous tax year. You can also see it online using “My Account” service
at  http://www.cra-arc.gc.ca/myaccount/   or call the CRA at 1800.959.8281

Can I deduct interest and fees for my RRSP?

No. You cannot deduct any interest paid on funds you borrowed to contribute to your RRSP.
You cannot deduct fees charged directly to you by the plan administrator of your RRSP

I have lost money in my RRSPs that are mutual funds. Can I claim these losses on my return?

No, you cannot deduct mutual fund losses within RRSPs.

I have few RRSP plans at different banks. Can I combine them into one plan at one bank?

Yes you can – contact the financial institution you want to transfer the RRSP funds to. They will contact the other financial institutions to do a direct transfer of the funds.

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Tax Accountant

Tax Implications for Non-Residents

Tax Implications for Non-Residents

Investing in Canadian real property is becoming increasingly popular with non-resident investors. The Canadian tax consequences of investing in Canadian real property by a non-resident of Canada can be quite confusing. Since non-compliance with the Canadian income tax rules, particularly the withholding tax rules and the Goods and Services Tax (“GST”) rules, can result in significant penalties. Potential investors should be aware ofthese rules. For more information or if your require assistance please do not hesitate to contact us at 416.454.8812. We are professional accountants in Oakville and Mississauga serving clients in most of the GTA. We provide professional bookkeeping and accounting services in Mississauga, Oakville and Toronto.

This information is not intended to be a complete summary of the Canadian tax laws with respect to a particular situation. Rather, it is intended to provide a brief introduction of the rules which a potential investor should be aware of at the time of investing in Canadian real property. Each investor should consult directly with us on their individual particular situation. We are accountants in Oakville and Mississauga. We would be more than happy to discuss your particular tax situation. We offer a Free phone consultation. So please do not hesitate to contact us and one of our professional accountants in Oakville or Mississauga will be happy to help you, to determine the exact consequences of your particular investment situation.

Non-Residents Taxation

If you are a non-resident of Canada you may be subject to Canadian income taxes if you:
Receive rent from Canadian real estate; or Dispose of Canadian real estate. You may also be subject to Canadian income taxes as a result of receiving other income, or carrying on other activities in Canada, however, these issues are beyond the scope of this article.

Canadian Tax Rates

If you are a non-resident of Canada and you have taxable income in Canada (i.e. income resulting from those activities listed previously) you will be required to pay Canadian income tax on this income. A non-resident of Canada will be required to pay tax in Canada based on current tax rates,. This tax may be reduced by the income tax treaty between Canada and your country of residence.

Rental Property and Compliance Rules

In order to ensure that non-residents of Canada comply with the Canadian income tax laws, there is a system of rules involving both the non-resident and the agent, if any exists, for the non-resident. For Canadian rental property, this compliance system includes rules with respect to withholding taxes, NR6 forms, NR4 forms and Section 216 returns. If you need help completing any of your NR6 or NR4 forms, please feel free to contact us, we are professional accountants in Oakville and Mississauga serving clients in most of the GTA

Withholding Taxes

Rents paid to non-residents are subject to a 25% withholding tax on the “gross rents”, which is required to be withheld and remitted to Canada Revenue Agency (“CRA”) by the payer (i.e. the Canadian agent of the non-resident, or if there is no agent, the renter of the property) each time rental receipts are paid or credited to the account of the non-resident by the payer. If the payer does not remit the required withholding taxes by the 15th day following the month of payment to the non-resident, the payer will be subject to penalties and interest on the unpaid amounts. If you have any questions about withholding taxes, please feel free to take advantage of our Free Phone Consultation – We are accountants in Oakville and Mississauga and would be more than happy to help you. We provide professional bookkeeping and accounting services in Mississauga, Oakville and Toronto.

NR6 Forms

The requirement to withhold tax on the gross rents can be waived or reduced if the non-resident selects a Canadian agent to act on their behalf and an NR6 Form is filed and approved by CRA annually and signed by both the non-resident and the agent. The NR6 Form is used to estimate the “net rental income” (see subsequent discussion) that is expected to be received during the current taxation year. If the net rental income is in a loss position and CRA approves the NR6 Form then there may be no withholding requirement for the current year. If the net rental is not in a loss position, then the 25% withholding tax may be calculated on the “net rental income” amount and remitted as rent is received. An NR6 Form must be filed and approved for each taxation year before the first rent payment is received. In most cases, when income is being received throughout the year, the NR6 must be filed before January 1st of that year.
Any tax that is withheld can be claimed as a credit against taxes payable when filing your Section 216 personal tax return for the year (see below). If the amount withheld exceeds the income taxes otherwise payable, CRA will issue you a refund of the difference.

NR4 Forms

An NR4 Information Return must be filed by March 31st summarizing the amount of rents paid or credited to you by your Canadian agent, as well as the amount of withholding taxes, if any, paid to CRA on your behalf by your agent.

Although the Canadian agent is required to file this form, it is often prepared by the non-resident’s Canadian accountant, and then signed by the agent, to ensure that all of the Canadian tax rules are complied with on behalf of the non-resident.

Section 216 Return

A Canadian income tax return must be filed by June 30 in respect of the preceding calendar year. This income tax return is pursuant to Section 216 of the Canadian Income Tax Act and will only include the income and expenses relating to the rental property.

In determining the net rental income to be reported in the Section 216, the expenses relating to the rental property may include the following:

• Advertising
• Insurance
• Interest on mortgages obtained to finance the acquisition of the rental property
• Repairs and maintenance
• Management and administrative fees and commissions
• Annual accounting fees
• Property taxes
• Utilities

If after claiming the above deductions there is net income from the property, you may be able to claim depreciation on the rental building as well as furniture and equipment included in the rental property. Since claiming depreciation may result in a larger gain on the eventual sale of the property, you should consult your personal tax advisor on whether or not to claim depreciation on the property in determining your net rental income.

If you not only own the rental property for investment purposes but also use the rental property for personal vacation purposes, a reasonable estimate of the personal-use portion of the expenses related to the property should be determined. This personal portion of the property expenses should be deducted from the total expenses, with only the net amount being deducted from rental income in determining net rental income.

It is important to keep records of all transactions related to your real property. These records should include a summary of all transactions as well as original documents to support those transactions.
Professional Bookkeeping is crucial to your real estate investment; we are bookkeepers in Mississauga and Oakville. We take care of all the small details on behalf of our clients and take that burden off their shoulders. As professional bookkeeper in Mississauga, Toronto and Oakville we provide services to non residents clients who invest in Canadian Real Estate. Please feel free to contact us and take advance f our Free phone consultation to discuss your particular situating with one of our Professional Accountants / Bookkeeper in Mississauga and Oakville.

Foreign Bank Loans

The interest payable on a bank loan obtained to finance the purchase of the rental property may be deductible in determining your net rental income in Canada, whether the loan is provided by a Canadian or foreign bank. However, if the loan is provided by a foreign bank and secured by the Canadian rental property, Canadian withholding taxes will likely be payable with respect to the interest payable to the foreign bank. You should therefore consult with a Canadian tax advisor prior to arranging a foreign bank loan to purchase a Canadian rental property.

GST and Rental Properties

The GST is a value-added tax, payable at the rate of 6% on certain sales and supplies in Canada. The following is a brief explanation of certain GST considerations with respect to rental properties owned by non-residents of Canada. It is not intended to be a complete explanation of the GST compliance rules, and specifically does not address periodic GST return filing, installments, and input tax credits claimable in reducing GST payable. If an individual decides to register for GST, these matters should be discussed with the non-resident’s professional tax consultant. Short-term residential rentals (i.e. rentals for personal accommodation for periods of less than 1 month at a time) are subject to GST. Generally, this means that rental of a skiing cabin or condominium for one week during the winter may be subject to GST, whereas the rental of the same property for a three month period will not be subject to GST.

However, even if the property is rented on a short term basis, if the owner of the property receives less than $30,000 of GST taxable revenues during a year, they are not required to register for GST. In this case, the renter would not be required to pay GST on the property and the non-resident will not be required to file GST returns, remit GST, etc.

GST on the Purchase of a Property

GST may be payable on the purchase of a particular property, depending on, among other things, whether or not the vendor of the property is a GST registrant and the use of the property prior to its purchase.
If GST is payable on the acquisition of the property, you may be able to avoid or reduce payment of the GST on the purchase, depending on your intended use of the property. If your intention is to acquire the property to be used primarily (i.e. more than 50%) for short-term rental, you may be eligible to register for GST. If you are registered for GST prior to the acquisition of the property, you will not be required to pay GST to the vendor on the purchase of the property.

Although you may be able to avoid paying the GST on the purchase of the property by registering for GST, if your short-term rental use does not exceed 90%, you will be required to self-assess a portion of the avoided GST and remit this directly to CRA. For instance, if you avoid GST on purchase of the property by registering for GST, but you expect your personal use of the property to be 20%, then you can avoid payment of the GST to the vendor, but will be required to pay 20% of the avoided GST directly to CRA. As well, if your personal use changes in the future, you may be required to self-assess and pay additional GST to CRA. The detailed rules related to the self-assessment of GST are complex and you should consult with your tax advisor.

If you register for GST to avoid the payment of GST on the purchase of the property, in addition to the potential self-assessment of GST explained above, you will be required to:

• Collect GST on all short-term rental contracts;
• File an annual GST return (due March 31st) reporting the net GST payable for the prior calendar year;
• Remit the net GST amount to CRA (with the GST return for the first year, and possibly by quarterly instalments in future years); and
• Charge GST on the eventual sale of the property.

If you have any questions or if you need help filing your GST / HST return, please do not hesitate to contact us. We provide professional bookkeeping and accounting services in Mississauga, Oakville and Toronto.

Disposition of Real Property

A non-resident of Canada is subject to Canadian income tax on dispositions of Canadian real property.

Withholding Taxes

In order to ensure that the non-resident complies with the Canadian tax rules on the sale of property, the purchaser of the property is required to withhold a portion of the vendor’s proceeds and remit this to CRA on behalf of the non-resident vendor. As explained below, the requirement to withhold a portion of the proceeds can be avoided if certain clearance certificates are provided by CRA, either reducing or eliminating the withholding taxes to be remitted by the purchaser.
In general, the purchaser is required to withhold 25% of the gross proceeds related to the disposition of land and 50% of the gross proceeds related to the disposition of buildings.
In order to reduce, or eliminate, the required withholding taxes, the non-resident can file certain forms with CRA in order to request clearance certificates from CRA that provide for a lower withholding tax amount. If approved, the withholding taxes related to the land disposition can be reduced to 25% of the difference between the gross proceeds and the cost of the land. In addition, the withholding taxes related to the building disposition can be reduced to a percentage of the difference between the gross proceeds and the undepreciated capital cost of the building. The percentage related to the building may vary depending on the amount of the difference. Once CRA issues the requested clearance certificates, the purchaser will only be required to remit the amount stated by CRA.

Income Tax Return Reporting

The non-resident will also be required to file a special Canadian personal income tax return by June 30th of the year following the disposition of the real property. In this return, the non-resident would report the actual gains or losses on the sale. In calculating the gain or loss on the property, the non-resident will be able to claim the real estate commissions and legal fees as a deduction in determining the net proceeds of the sale.

Generally, the actual income taxes payable with respect to the sale of the property will be less than the withholding taxes remitted on the sale of the property. As a result, the non-resident will generally receive a refund of a portion of the withholding taxes that were originally remitted to CRA.

Books and Records

It is important to keep records of all transactions related to your real property. These records should include a summary of all transactions as well as original documents to support those transactions. It is especially important that documents substantiating the original cost of the real property, as well as the cost of all improvements and/or additions to the land, building, furniture and equipment should be retained to substantiate these costs at the time of reporting the gain or loss on the sale of the property.

Professional Bookkeeping is crucial to your real estate property; we are bookkeepers in Mississauga and Oakville. We take care of all the small details on behalf of our clients and take that burden off their shoulders. As professional bookkeeper in Mississauga, Toronto and Oakville we provide services to non residents clients who invest in Canadian real estate. Please feel free to contact us and take advance f our Free phone consultation to discuss your particular situating with one of our Professional Accountants / Bookkeeper in Mississauga and Oakville.
All information provided here is of a general nature and is not intended to address the circumstances of any particular individual or entity. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information or if your require assistance please do not hesitate to contact us. We provide professional bookkeeping and accounting services in Mississauga, Oakville and Toronto.

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Salary Vs Dividends

Salary or Dividends?  

The question which almost every small business owner who wants to save taxes ask. If you are a small business owner and you want to save takes, you need to understand the difference between dividends and salaries.

Deciding on the right compensation strategy between salary and dividends can be quite complex. There are pros and cons with each tactic and this also could be different depending on each individual’s situation.

I always advise in order to save a lot of taxes the best strategy encompasses a combination of both salaries and dividends custom-made and personalized to the individual’s particular situation.

Even more – there is no strategy or tax plan that is carved in stone – because our life style and situation change from time to time

If you are (same as plenty of other small business owners) are uncertain about the best strategy for you on whether you pay yourself a salary or a dividend? Feel Free to contact us at 416.454.8812 or email me at mina.hanna@accountingontrack.com


Salaries / Bonuses:

Advantages:

  1. Paying yourself a salary will increase your RRSP contribution limit.
  2. Salaries are subject to CPP (Canada pension plan). Paying your CPP now will increase your CPP benefits when you retire.
  3. The salaries paid to you is an expense to your corporation and is tax deductible
  4. Certain expenses such as automobile expenses incurred for work are only deductible against employment income.
  5. Child care costs incurred are deductible against your employment income.
  6. More beneficial / easier when trying to obtain and loan or a mortgage from a bank.

Disadvantages:

  1. Payroll processing and CRA remittances on monthly basis. You will either have to hire an accountant to help or you have to do it yourself. If you have any questions about Payroll or you need someone to help you with your Payroll in Mississauga, Oakville and most of the GTA Feel Free to contact us at 416.454.8812 or email me at mina.hanna@accountingontrack.com
  1. The CPP Cost – This will be the employee portion and the employer portion too.
    Employee/employer maximum contribution (4.95%) $2,544.30 x 2 = $ 5088.60

Dividends:

Advantages:

  1. The first $35,000 – $40,000 of dividends received results in a very small amount of income tax payable by you. As long as the tax payer does not have any other source f incomeDisadvantages:
  1. Dividends received do not increase your RRSP limit.
  2. Child care costs incurred are not deductible against dividend income because dividends are not considered earned income.
  3. Banks and financial institutions prefer to see a T4 slip with a stable salary as opposed to a T5 Slip with dividend.Therefore, with all the dynamic advantages and disadvantages to both salaries and dividends. The best strategy involves looking at your unique individual situation and tailoring a customized tax plan which involves a combination of salary and dividends.As of 2014, there has been an increase in the personal tax rate on non-eligible dividends received, resulting in narrowing the gap to almost perfect incorporation between salaries and dividends. This means whether you pay yourself dividends or salary the total income tax cost will be practically the same.While the income tax benefit is almost gone there are still some advantages of paying yourself a dividend – however it really depends on each particular.If you need an accountant in Oakville or an accountant in Mississauga to help you save taxes and tailor a customized tax plan for your individual situation. Please call us at 416.454.8812 or email me at mina.hanna@accountingontrack.com
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