The government allows this deduction to give a tax break to individuals who pay for child care expenses so they can earn employment or self employment income.

There are three criteria that have to be met in order to claim child care expenses:

1. Eligible Child must be:

• Either under 16 or disabled
• Either your or your spouse/common law partner’s child or a child that is dependent on you or your spouse/common law partner for support and whose income does not exceed the basic personal amount ($11,635 in 2017)

2. Child Care expenses must be to enable the taxpayer to perform the undertaking of specific activities, which includes at least one of the following:

• Working as an employee
• Self employed in an unincorporated business
• Enrolled in a full-time or part-time educational program

3. Provider of child care services must be from one the following:

• Eligible child care provider (anyone other than the child’s father, mother, supporting person, person who has claimed the child on their tax return, and a relative who is under 18)
• Day nursery or day-care centre
• Day camp or day sports school
• Boarding School or camp

The maximum amount of child care expenses that can be claimed depends on the age and ability of the child. If the child is:

 
Generally speaking, when the parents of a child are married or in a common law relationship only the lower income partner can claim child care expenses but they are several exceptions. The higher income partner can claim child care expenses if the lower income partner is:

• Enrolled in a full or part time educational program
• Disabled
• Confined to a prison for more than 2 weeks

If the parents of a child are divorced or separated and both parents have joint custody, the parent who pays the child care expenses can claim the child care expenses on their return.

Child care expenses claimed cannot exceed two-third of your earned income for that year. Earned income includes:

• Salaries and wages
• Disability pension
• Employment benefits and employee stock option
• Income from an unincorporated business

Let me give an example. Jane and John are a married couple and have one child who is 5 years old. They pay $10,000 for day care for this child. John earns $100,000 per year and Jane earns $50,000 per year. Only Jane is able to claim child care expenses because she has the lower income. The maximum claim she can make is $8,000 because their child is under seven. This is less than two thirds of her earned income (50,000 x (2/3) =$33,333) therefore $8,000 is the allowable claim.

If you have any questions or would like us to help you prepare your tax return please contact our office.

Shahir Makhani, CPA

Reference: Folio s1-f3-c1

The post Commonly Missed Deductions Part 2: Child Care Expenses appeared first on Dudley & Associates, Chartered Professional Accountants.

First let’s determine if you qualify for this deduction.

The government states that you must meet the following factors to claim this deduction if you move to start a new job, or a business:

“a) it occurs to allow the individual to carry on a business or to be employed at a location (referred to as the new work location). The new work location must be in Canada unless the individual is absent from Canada, but resident in Canada;

b) before the move the individual ordinarily resided at a residence (referred to as the old residence) and after the move the individual ordinarily resided at a residence (referred to as the new residence);

c) both the old residence and the new residence are in Canada unless the individual is absent from Canada, but resident in Canada; and

d) the move allows the individual to be at least 40 kilometres closer to the new work location. The Federal Court of Appeal established in Giannakopoulos v M.N.R., [1995] 3 FCR 294, 95 DTC 5477, that the 40 kilometre distance is measured using the shortest normal route available to the travelling public.”

Let me give an example to demonstrate these criteria. Let’s say an employee is working at the University of Alberta in Edmonton and lives in Edmonton. He gets a permanent job offer at the University of Calgary in Calgary and he accepts the offer and moves to Calgary. He would qualify to claim moving expenses as he is moving more than 40 kilometers to be employed at a new location.

Let me give another example. Let’s say an employee is working in Edmonton. Her parent in Calgary gets sick so the employee moves to Calgary to take care of her parent. While in Calgary, she finds a new job. She would not qualify to claim moving expenses because she moved to Calgary for personal purposes not for employment.

You are able to claim a variety of moving expenses including:

1. Transportation and storage costs: This includes movers, storage of items being moved and insurance on items being moved.
2. Travel expenses: This includes vehicle expenses, meals, and accommodation for you and other members of your household.
3. Temporary living expenses: These expenses are incurred if you needed temporary housing before you are able to move into your new residence.
4. Cost of cancelling your lease
5. Incidental costs related to your move: Changing your address on legal documents, utility hook-ups, and replacing drivers licences.
6. Cost of maintain old home when vacant: If you are not able to sell your old home before you have to move, you are able to claim some of the expenses to maintain this property when vacant. This is limited to $5,000.
7. Cost of selling old home: Includes advertising, legal fees, real estate commissions, and mortgage prepayment penalty
8. Costs of buying the new home: Legal fees and taxes paid for the transfer of the new home

If you received an allowance or reimbursement payment from your employer related to the move, you must either include this payment in your income or decrease your expense claim by this payment amount.

You can only write-off these moving expenses against income earned in your new location. If you do not have enough income in your first year of living in a new location, you can write-off your moving expenses in subsequent years when you have sufficient income.

The government reviews moving expenses fairly often so ensure that you keep all relevant receipts and send them in when the government asks for them.

If you have any questions or would like us to help you prepare your tax return please contact our office.

Shahir Makhani, CPA

Reference: Folio s1-f3-c4

The post Commonly Missed Deductions Part 1: Moving Expenses appeared first on Dudley & Associates, Chartered Professional Accountants.

New business owners have a lot on their plate, and can easily lose track of an approaching tax deadline or financial data needed to submit their return.

Organization is key when preparing for tax time. As is taking advantage of the many tools and resources out there to support new entrepreneurs.

Set yourself up for success by following these four pillars of painless tax prep.

1. Commit to clean bookkeeping from day one

Year-round, effective bookkeeping is the best way new business owners can minimize tax season stress. With the wide range of accounting software out there, there’s no reason to rely on time consuming manual methods that leave room for error.

All-in-one options like Xero, KashFlow and QuickBooks automate your most important bookkeeping processes, including:

• Tracking expenses;
• Tracking sales and income;
• Creating and sending invoices and
• Managing inventory.

With your financial records all in one place and up-to-date, you’re better positioned to maximize your refund, while avoiding penalties associated with incorrect or incomplete tax returns.

2. Capture every business expense

Each year, 21% of small business owners claim less than half of their business expenses, largely because they don’t have a reliable system for documenting expenditures while on the go.

Without carefully logged receipts, entrepreneurs must forfeit valuable tax deductions, sacrificing cash they could be funneling back into their business.

Cash in on claimable expenses by using a mobile app to record receipt data, track mileage and generate expense reports. As an added bonus, many of these tools sync with your all-in-one accounting software.

3. Separate business from personal

Right from day one, small business owners should clearly divide their personal and business expenses. Differentiating between the two will make it much easier to claim deductions on your tax return – and support those claims in case of an audit.

Recommended steps to separate your business and personal finances include:

• Create a separate bank account for your business, and designate a credit card solely for business purposes (this will help you track expenditures while building up your credit and borrowing power);
• Never combine business and personal expenses (for example, if you buy printer ink for your home and your business at the same time, ask for two separate receipts);
• Pay yourself a set salary from your business checking account each month (this will help you determine how your income, as well as the business, will be taxed).

4. Always consult with an accountant

Not sure exactly what you can claim as a business expense? Wondering which accounting software to use or how to interpret local tax regulations?

Consult with an accounting professional to put your mind at ease – well before the filing deadline! In addition to managing the nuts and bolts of tax preparation, regular meetings with an accountant will help you continuously improve bookkeeping practices and better understand the financial workings of your small business.

Those organizational strategies you commit to now will promote positive relations with your local tax authorities – and the long-term financial health of your company.

The post Tax tips for new business owners appeared first on Dudley & Associates, Chartered Professional Accountants.