Author: margento

TECHNOLOGY

Password manager software is an inexpensive way to secure all your passwords.

Our need for passwords to access everything in our life has become pervasive. Every agency, every computer, every credit card, every smartphone requires an exponential explosion of letters, numbers, and symbols to secure all information from hackers, whether it is personal data or corporate information.

To complicate matters, it is no longer permissible (or advisable) on many sites to use a simple password that is easy to remember, such as a word or name. Instead you must create a password with numbers, special characters, upper and lower case letters, and a minimum length.

One study suggests the average individual has at least 25 Internet-accessible accounts with passwords, while other sources suggest that number could be substantially higher. Is it any wonder that most individuals will, whenever possible, assign the same password to as many accounts as they can? Hackers know this and once they compromise one account, it often doesn’t take long to gain access to your other accounts.

Use Different Passwords

The best means of protecting your personal information is to use a different, unguessable password for every account. Most password management software includes the ability to generate passwords, and then store them for you. The beauty of using a password manager is that you only have to remember one password to access all of the passwords you need to remember.

High-end password managers support multiple languages and are able to tie in passwords with hundreds of websites. Two-factor authentication is usually required (and should be!) to protect data in the event someone finds your password and logs in on your device or tries to log in on a new device that is not registered.

Set Up

Setting up a password management app generally requires you to download and install the software and add browser extensions for each browser you use. If you use multiple devices, you will need to load the app on each one. To set up an account, you will use your email address and will need to come up with a master password or passphrase (i.e., one long, hard-to-guess password to rule them all).

One primary password gives you access to all your passwords.

After creating the master password comes the arduous task of entering data about the various accounts or sites you need to access.

Some password managers will import your user names, auto fill standard information, and pull passwords from your existing browsers, although, if you haven’t saved the passwords in the browser, the data will have to be entered manually. The password manager will typically assess the strength of your current password, and prompt you to generate a new, stronger password (typically at least 16 characters) for that site. Experts also suggest that you revisit your security questions and determine whether you want to change them as an added security measure.

Don’t Forget Your Master Password

Unlike a typical website with a “forgot password?” feature, the master password is often not recoverable in that way. There are very few password manager systems that provide a “hint” to enable you to try to rebuild your password. For most, you will have to start all over and rebuild the passwords for every site and every account keystroke by keystroke. Commit your master password to memory; do not click “remember my password” for your master password; typing it often will help you to remember it.

Cost Factor

Most of the providers of password manager software provide free trial subscriptions; several offer a limited version of their software for free, with the ability to upgrade for additional features and support for an annual fee. Freebie options aside, password manager services typically range in price from $20 to $60 annually.

In Case of Emergency …

If a person is incapacitated or dead it will be impossible for someone else to access the accounts. It is important to ensure that the software used provides the ability to set up an emergency contact to inherit your passwords. Some providers allow you to set a waiting period before a trusted individual can access the codes so that the accounts cannot be accessed while you are alive. If someone tries to access your accounts, you will be notified by email. Other providers allow you to designate specific accounts, such as the business account, that can be accessed by specific people, such as your business partner, or to designate personal accounts to a trusted relative or friend.

Large Benefit for Small Cost

Strong passwords are a necessity for everyone, and we all tend to use passwords that are easy to crack; this makes us easy targets for nefarious people looking to steal our information, money or identities. Using a password manager is an inexpensive way of ensuring access to the ever-growing number of sites we must access in our interconnected world while making it difficult for anyone else to gain access to our personal and financial information.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

Taxation

Be aware of changes to the income tax rules that will affect your 2017
filing.

For those already thinking about their 2017 income taxes, the following
summarizes some of the changes from 2016.

Tax Credits

The child tax credit for arts and fitness is gone. Since this tax credit
was capped at a maximum of $500 for fitness and $250 for arts per child in
2016, its removal will not likely have a major impact on most people’s 2017
return.

Education

The tax credit for education and textbooks for full- or part-time students
was eliminated effective December 31, 2016. Taxpayers with unused tax
credits from 2016 or prior years will be able to carry them forward and
apply them against future taxes.

The tuition tax credit is, however, still in effect.

In recognition of the need to support education in technical skills, the
number of courses eligible for the tuition tax credit will be increased.
Occupational courses provided by post-secondary institutions within Canada
will be granted the tax credit. If a bursary is provided, the amount will
likely qualify for either the full or basic scholarship exemption.
Examination fees paid to take an occupational, trade, or professional
examination to obtain a professional status recognized by federal or
provincial statute, or to be licensed or certified as a tradesperson, to
allow you to practise in Canada, may also be eligible for the tuition tax
credit. However, if your fees were paid by your employer or the employer of
one of your parents, or by a government program and not included in your
income, you cannot claim the credit.

Labour-Sponsored Funds

Those who invested in labour-sponsored venture capital corporations will no
longer be able to apply for the federal tax credit. Prior to 2017, a
taxpayer would receive a federal tax credit of 15% of the investment up to
a maximum of $750. Taxpayers should confer with their Chartered
Professional Accountants (CPAs) to determine whether a provincial tax
credit will be available in 2017 should they choose this investment
vehicle.

Income splitting is gone.

Indexing

RRSP contributions, tax brackets, and various tax credits will increase in
2017 to reflect the adjustment for inflation as measured by the Consumer
Price Index (CPI). The percentage increase for 2017 has been pegged at 1.4%
(i.e., the 2017 personal exemption will increase to $11,635 from $11,474 in
2016). To capture information on the new levels for all tax credits and
other deductions that have been indexed, you should visit the CRA website
page: “Indexation adjustment for personal income tax and benefit amounts”
http://www.cra-arc.gc.ca/tx/ndvdls/fq/ndxtn-eng.html

The notable exception to the inflationary increase is the Tax Free Savings
Account that will continue to have a $5,500 per annum maximum contribution
limit.

Work in Progress

Prior to March 22, 2017, unbilled work in progress was allowed to be
deferred until billed to clients. This deferral allowed certain designated
professionals (i.e., lawyers, dentists, doctors, and accountants) to delay
the recognition of income until the year when the work was invoiced to
clients. Effective March 22, 2017, this deferral of work in progress was
eliminated, resulting in an immediate income inclusion of work in progress.
A transitional relief will be available over a two-year period to help
mitigate the tax impact of this change.

Caregiver Amounts

Prior to 2017, three credits were available for those in need of
assistance:

• caregiver credit
• infirm dependant credit
• family caregiver tax credit.

To simplify the process and to recognize the need to provide financial
support to caregivers, a new Canada caregiver credit will provide a 15%
non-refundable tax credit maximizing at $6,883 of expenses for the care of
parents, brothers and sisters, adult children and other specified relatives
who have infirmities. An additional tax credit up to $2,150 on expenses is
available for the care of a dependent spouse, a common-law partner, or a
minor child with infirmities. The tax credit will be calculated using a
formula that reduces the credit dollar for dollar once the dependant’s net
income exceeds $16,163.

Intangibles

Prior to 2017, any gain from the disposition of intangibles such as
goodwill or trademarks, was treated as regular business income and was not
subject to the capital cost allowance rules. Now, any gain from the
disposition of goodwill and trademarks will become fully taxable as
investment income. Companies will now be required to transfer the
cumulative eligible capital pool as at December 31, 2016, to a new capital
cost allowance class 14.1. This pool will be depreciated at 7% annually on
the declining balance for the first 10 years, then at 5% annually
thereafter. For the expenditures incurred after December 31, 2016, a 5%
depreciation rate will apply.

T4s

Prior to 2017, employers were able to supply employees with their T4
information slips electronically if the employee gave permission. Effective
2017, the employer will not need permission. The employer must, however,
have safeguards in place to ensure confidentiality and provide paper copies
to former employees or employees on leave or upon request. Employees must
ensure the information received is correct in order to avoid penalties and
interest if they file an incorrect T1 tax form.

Possible Changes Ahead

While the changes noted in the 2017 Federal Budget were not as significant
as those in the Liberals’ first budget introduced in 2016, it signalled the
government’s intention to review the tax planning techniques that are
currently available to the owners of private corporations. Specifically,
the review will include the tax advantages provided to the business owners
by:

• income sprinkling
• holding passive investments via a corporation
• converting regular income into capital gains.

Unfortunately, the budget did not include much detail. The government is
expected to issue policy papers on this topic sometime during the summer of
2017, however. Any changes could impact the business owners significantly.

 

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

MANAGEMENT

Even when interest rates are at historic lows, interest costs can be
significant for businesses and owner-managers.

The Business

The significant rise in the cost of equipment, vehicles, real estate, and
inventory has prompted many businesses to increase business debt. Low
interest rates, combined with the ability to obtain larger loans with
extended payment terms, have allowed businesses to operate in a “business
as usual” mode with less consideration for the actual cost of borrowing.

To give some idea of the effect of even low interest rates on an
owner-managed business, the following key elements of most businesses have
been put forward as an example of the effect of interest costs on a
business. The effect of domestic borrowing has been added to show the full
impact of current interest rates on the owner-manager. Since lending rates
vary widely depending on a variety of factors such as risk, item to be
funded and the term, and are usually negotiated,

the interest rates used below have been chosen at random from Internet
sources; calculations are approximate and for illustrative purposes
only

• All loans have been made effective June 1, 2017.
• Commercial mortgage: $600,000 over 25 years at 3%
• Two work vehicles: $120,000 financed over five years at 6%
• Equipment loan: $200,000 financed over five years at 5%
• Operating line of credit: $50,000 at 3% a year
• Credit card debt: $10,000 at 15% a year on the outstanding balance

Commercial Mortgage

• Commercial mortgage amount: $600,000
• Interest for first year: $17,776
• Interest paid over first five years: $83,748
• Interest paid over the 25 years (300 months) of payment: $253,580
• Total commercial mortgage cost: $853,580

A sobering reality is that, when interest costs are factored in, the
$600,000 building ends up costing $853,580. Assuming the interest is a
deductible business expense, and assuming a 17% corporate tax rate, total
interest would be reduced by $43,109, thus reducing the overall cost of
purchasing to $810,471.

Work Vehicles

• Total purchase price of two vehicles: $120,000
• Interest for first year: $6,623
• Interest for five years: $19,196
• Total vehicle cost: $139,196

Equipment Loan

• Loan amount: $200,000
• Interest for first year: $9,179
• Interest for five years: $26,455
• Total loan cost: $226,455

Line of Credit

• Annual outstanding balance: $50,000
• Interest for one year: $1,500
• Interest for five years: $7,500

Credit Cards

• Average annual outstanding balance: $10,000
• Interest for one year: $1,500
• Interest for five years: $7,500

Over five years, the total interest cost to your business is $144,399. Even
at a 17% corporate tax rate and a corresponding $24,548 reduction over five
years, the cost of borrowing is still $119,851.

The hard truth is that interest costs even in times of low interest rates
have a very negative impact on the bottom line.

Canadians are extending repayment periods.

On the Home Front

At the end of Q1 of 2017, the ratio of Canadian household debt to
disposable income was 1.67:1 or $1.67 of debt for every $1 of disposable
income. Canadians borrowed $27.5 million in the first quarter, of which
mortgages accounted for $20.9 billion. Not only are Canadians borrowing a
lot of money, they are extending the periods of repayment for some
expensive items. Recent statistics indicate that in excess of 40% of all
new vehicles purchased are financed from 61 to 72 months; loans extending
from 73 to 84 months now make up almost 20% of new vehicle loans.

Home equity lines of credit (HELOCs) have increased as well. There are
currently about three million HELOC accounts in Canada; the average
outstanding balance in each account is estimated at $70,000.

For a moment, consider that the owner-manager, in addition to the business
debt that has to be serviced, has the following personal debt with the same
interest rates as the business.

Residential Mortgage

• Mortgage: $400,000 amortized over 25 years at 3%
• Interest for first year: $11,851
• Interest paid over five years: $55,833
• Interest paid over 25 years (300 months): $169,054
• Total mortgage cost over 25 years: $569,054

Vehicle Loans

• Two vehicles: $80,000 financed over five years at 2.7%
• Interest for first year: $1,974
• Interest for five years: $5,611
• Total vehicle cost: $85,611

HELOC

• Average annual outstanding balance: $70,000 for five years at 3.2%
• Interest for first year: $2,240
• Interest for five years: $11,200
• Total loan cost: $81,200

Total interest cost to service personal debt for five years is $72,644.

Given that the interest costs are in after-tax dollars and assuming the
individual is in a 30% tax bracket, the taxpayer has effectively paid an
additional $20,186 as well as the opportunity costs of not being able to
purchase investments or other consumer goods.

Impact on Business

Interest costs affect owner-managers both at business and home. Business
interest costs dictate the need to increase cash flow to service the debt
and therefore drive the need to increase sales volumes or prices to
maintain a sustainable profit.

Maintaining a lifestyle supported by debt increases the need to earn more
money to service that debt. For the owner-manager, that means procuring a
higher income from the business. This, in turn, creates additional pressure
on the business to increase cash flow, sales volumes, or prices to satisfy
the owner’s personal needs. An added consternation is personal income tax.
Not only will the additional income to the owner-manager create a higher
personal income tax, but it may result in increased business expenses for
other source deductions.

Risks of Low Interest Costs

The cost of borrowing, whether for business or for personal needs, has a
significant impact on the owner-manager as well as on business operations.
The service costs of debt are a major drag on cash flow, profits, and the
future financial health of the business, even in periods of historically
low rates such as we are living in right now. But merely making the monthly
payments is not enough; the loan must eventually be repaid. With interest
rates so low and the cost of borrowing so high, there is a serious risk
that, when the bank rate starts to move up again, as it inevitably will,
many owner-managers will be caught offside and unable to make even the
monthly payments.

Don’t let that owner-manager be you.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

MANAGEMENT

Correct pricing can mean the difference between business success and
failure.

Setting the price point for your product or service is not simply the
process of determining the cost of production then adding a mark-up. It is
more a matter of understanding the price the consumer will accept as the
value of your product or service and keeping the costs of production to a
level that will give you a profit at that price.

Consumers Buy for Value

Cost incorporates all the expenses incurred to bring a product or service
to a customer or client. Costs include: parts, labour, production
machinery, manufacturing space, administration, and transportation to the
consumer. These are the true costs of production and a starting point for
determining the price to the customer.

It is ultimately the consumer who decides the value of your product or
service to them and thus what they are willing to pay. This will be the
price that moves your product off the shelf.

Perception Is Everything

If a product is not moving and the price is reasonable given the cost of
production and the price of competitive products, it may be that the seller
has not provided enough information to the prospective purchaser to
establish value. For example, consider the common incandescent 60-watt
light bulb that traditionally sold for about 50 cents each. Newer LED light
bulbs, providing the same lumens cost $5 to $6, and yet they sell. Why?
Because consumers have been given information that persuades them that the
newer product has value. Governments and manufacturers have persuaded
environmentally aware consumers that long-life bulbs (LED bulbs are rated
to last more than 50,000 hours, which is about 35 years if left on for only
four hours per day, depending on the type of bulb) producing the same
number of lumens at lower operating cost is a value worth paying for.
Consumers are told the environmentally friendly LED bulbs will not only
help to save the planet, but also save money through reduced electricity
costs.

Pricing Strategy

Price is normally determined by cost plus mark-up or by estimating the
perceived value of the product/service. Neither method will move your
product/service if your competition is selling the same thing for less.
Check prices by visiting your competitor’s physical store or going online.

Shoppers are price sensitive. If your price is higher because of your
costs, you must convince the consumer your products are better, your
warranty is better, your service is better, or that you supply some other
advantage. Setting a low price is not the best course of action for any
business either. You may enjoy seeing your sales figures improve for a
while, but you risk destroying your brand if consumers unconsciously
reassign your product to a lower-priced brand category. If you constantly
discount, you will eventually be seen as a discounter. Customers will just
wait until you drop the price again. If the selling price does not cover
all your costs, your business will ultimately fail.

Price Changes

Changing prices should be handled with care. Regular customers are familiar
with your prices and if costs suddenly surge there may be a reduction in
sales. If you have to change prices, remove the old price tags and relabel.

Customers look at price but see value.

Provide Comparison

Shoppers may be looking at prices, but they are seeing value. Offer
products/services across a spectrum of values (i.e., extras cost more). The
automotive industry provides a classic model of this merchandising
approach: a base model with the price rising as features are added. This
approach connects the purchaser to your value proposition. Power windows,
heated seats and a high-end sound system are available on some models but
does the consumer perceive them as having value for them?

Boutique Niche

Once in a while, you may have a unique or trendy product/service or perhaps
you supply products/services associated with special holidays such as
Christmas, Chanukah, Valentine’s Day, special events such as weddings, etc.
These times may allow you to price on a value-added basis rather than
cost-plus-markup because the clientele’s perception of what is needed gives
them permission to spend more than they would if they were just making a
simple everyday purchase.

Know Your Customer Base

Pricing products and services should not be a mechanical process.
Owner-managers should examine their entire product line, determine their
customer base and the product/services expected, and identify the special
events that appeal to the environment they service. Knowing your customer
base allows pricing to be in line with your market and customers’
expectations. This will ensure your business will be able to cover all
operating costs and secure a profit sufficient to allow it to remain in
business for many years to come.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

TECHNOLOGY

A review of your HVAC system may show you how to improve your bottom line
by saving on the cost of energy.

Because lighting, heating and cooling represent 19%-25% of the cost of
operating a commercial business, control of energy costs is essential to
improving profit margins. A reduction of even 10% in these costs can
produce a significant improvement. But, because Canada is located in a part
of the world where temperatures can range from 40C below zero to 35C above,
it is inevitably expensive to keep internal temperatures at levels needed
to maintain comfortable working conditions through the changing seasons.

Heating and Air Conditioning

The best means of controlling the temperature in the working environment is
to install commercial programmable thermostats set to the workplace
schedule. Thermostats can maintain comfortable temperatures during working
hours, then be turned down or even off during nights, weekends, or
holidays, when the workplace is not being used. Managing temperatures in
this way can contribute significantly to the bottom line.

Smart thermostats have auto sensors that recognize when people enter or
leave the work area. Once everyone has left for the day, the system
automatically reverts to a lower setting to conserve energy; when the first
worker arrives in the morning, the system will start up and return to the
regular programmed schedule. When employees are absent for longer periods
such as holiday weekends, the automatic system can be shut off completely.
To prevent employees from tinkering with the temperature settings, smart
thermostats incorporate a security code that must be entered before the
temperature or other settings can be changed.

Most work locations have one central heating/cooling system that is fairly
easy to manage. If, however, your building(s) have different areas that
require self-contained heating/cooling systems, or if your business
operates at more than one location, wireless smart systems enable remote
control of individual thermostats through an app you can load onto your
computer or smart phone.

Some systems record the history of heating/cooling adjustments. This data
can be used to identify times and places of peak energy use, which, in
turn, may identify the need to upgrade windows, doors or insulation.

If you install a smart system, have an HVAC technician make sure the new
thermostats will communicate with the existing HVAC system.

Upgrade to multi-glazed windows with low-emissivity coatings.

Windows

Workplace windows should have at least two layers of glass with an inert
gas (e.g., argon) sandwiched between the layers. Normal double-glazed
windows have an R-value (i.e., the ability of material to resist the
transfer of heat) of 2.0; triple-glazed windows provide an R-value of 6.0.
These windows should have insulated edge spacers to reduce condensation,
insulated frames, and low emissivity coatings that reduce heat loss from
within and allow solar energy to enter. Multi-glazed windows not only
prevent heat from escaping, they also prevent the entry of unwanted heat
from the summer sun. Because of their thickness, multi-glazed windows
reduce the effect of road noise and are harder to break than single-pane
windows.

Maximize the return on your window investment by understanding the
benchmark ratings established by the Canadian Standards Association (CSA).
For instance, air tightness is measured from A1 to A3, water tightness
rated from B1-B7, and wind load resistance from C1 to C5. The higher the
number within each measurement category, the better the window.

Light-Blocking Curtains

To supplement new high-R and CSA-rated windows, you may be well advised to
invest in curtains and blinds especially if your building has extreme
window exposure to sun and cold winds. Curtains minimize the intrusion of
heat from the sun and take pressure off the cooling system. During cold
winter days, the curtains can be opened to allow the sun’s energy to
augment the heating system or closed to retain the heat on cloudy days.

Reduce Your Carbon Footprint

Controlling the heating and cooling of your premises with smart thermostats
and retrofitting of windows and window coverings are excellent ways of
reducing the high cost of energy use while reducing your carbon footprint.

Most provinces have programs that help small businesses conserve energy and
therefore reduce operating costs. Check with your provincial energy agency
to save energy through appliance and equipment upgrades, building
enhancements and by educating your employees about the need for proper
maintenance and more efficient use of existing equipment or lighting.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

 

TAXATION

Be aware of the changes that affect your 2016 income tax filing and beyond.

As you gather your 2016 tax data together for your CPA, take a few moments to read about the following changes and assess the impact they may have on you and your family’s filing for 2016 and after.

Principal Residence

There has been a significant change in the CRA’s policies regarding principal residency that must be followed by all taxpayers. Prior to 2016, there was a requirement to fill out form T2091 to designate your home as a principal residence. The form required you to designate the years in which the home was your principal residence. Although this form was required to be filed in the year of disposition, most individuals never filed the form because the resulting capital gain was often fully eliminated by claiming the principal residence exemption. Administratively, the CRA had waived this requirement to file if the exemption eliminated the gain.

Significant Rule Changes

For the taxation years that end on or after October 3, 2016 (e.g., the 2016 calendar year), if you sell your principal residence, you are required to report the sale and the resulting capital gain or loss on Schedule 3 of your T1. You are also required to file the form T2091 if you are claiming the principal residence exemption. These requirements are imposed regardless of whether or not the gain is fully exempt as a result of the designation.

A failure to file and disclose the information will have serious implications. Firstly, there is no limitation period (i.e., after which your returns are considered “statute-barred”) on the CRA’s ability to reassess in the future. Therefore, the deadline which would otherwise restrict the CRA’s ability to re-open the tax return would not start unless the information had been fully disclosed in the year of disposition.

Secondly, the principal residence exemption itself will only be allowed if the sale and the designation of principal residence are reported on your income tax return. Should you realize subsequent to the year of sale and filing of your income tax return that you did not file the sale of your principal residence, the CRA is not obligated to accept a late filing that designates the sale as a principal residence sale. Even if the CRA accepts the late filing, the taxpayer will be liable for penalties that are the lesser of $8,000 or $100 for each complete month from the original filing due date to the date the required information was received by the CRA in an acceptable format.

Since these rules will be effective for the 2016 calendar year, you should remember to report the sale of your principal residence if you had a disposition during the year.

Basic Personal Amount

The Federal Basic Personal Amount will increase to $11,474 for 2016, up from $11,327 in 2015. For 2017, the amount will be $11,635.

Marginal rates remain the same in 2017.

Marginal Rates

There have been no changes in the overall federal marginal tax rates; however, the thresholds for taxable income have been changed as indicated in the comparison table below. Keep in mind that these rates do not include the provincial rate nor do they include the various credits and deductions that may reduce the overall income tax for which you may be liable.

Other Changes

The 15% children’s fitness and arts tax credit, as well as the education and textbook tax credit, will be eliminated effective January 1, 2017. For 2016, the maximum Children’s Fitness and Arts tax credit will be 50% of the previous allowable amounts. Unused textbook and education tax credits from previous years may be carried forward and applied to reduce future taxable income.

• Teachers and early childhood educators will be able to purchase up to $1,000 of eligible school supplies for use in the classroom. From January 1, 2016, a 15% tax credit will be available on those purchases. For instance, if $500 is spent, a tax credit of $75 would become available to reduce taxable income. Teachers and early childhood educators should familiarize themselves with the allowable expenses and prepare a summary supported by the original receipts to assist in meeting Canada Revenue Agency’s guidelines.
• Prior to January 1, 2016, if a couple was supporting a child under the age of 18, the couple was able to split income to reduce the overall family tax liability. Effective January 1, 2016, income splitting is no longer available.
• Northern residents will have their residency deduction increased for the 2016 taxation year. The northern residency deduction will increase from $8.25 to $11 per day (or from $16.50 to $22 per day for living in a self-maintained dwelling) if you lived in Zone A for at least six consecutive months. If you lived in Zone B, the intermediate area, the deduction will increase from $4.125 to $5.50. ($8.25 to $11 per day for living in a self-maintained dwelling). The zone for deductions is determined on a province-by-province basis. Thus, to ensure the appropriate tax deductions are available to you, consult the CRA website, click on your province’s name, and search for your place of residence. Make sure your CPA is aware you resided in a zone that provided deductions for line 255 of the tax return.

Check with Your CPA for the Required Documents

There have been changes in personal tax issues in the 2016 year, but none are as important as the principal residence rules. If you have sold your principal residence in 2016, contact your CPA to find out what documentation is required to ensure you are meeting the CRA reporting requirements.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

TECHNOLOGY

Consider taking a few extra accessories when working offsite.

Working while on the road, whether at nearby job sites or when travelling to distant locations, usually means taking a smartphone, laptop or tablet.

The ability to work almost anywhere in the world is marvellous; however, when we are working at a hotel, jobsite, vendor or client location, or even at the cottage, we often wish we had the same conveniences we have at home.

Before taking your next trip, you may wish to consider adding a few of these travel essentials to ensure that, if your makeshift workstation is more like your home office, you will be less fraught with concern about your ability to complete the project.

Productivity

• For many, typing on the touch screens or keyboards provided on smartphones or laptops is inefficient and tiresome. Why not invest in a rechargeable portable keyboard that can be folded and placed into your briefcase? (Cost: approximately $20)
• If you find your laptop’s built-in touchpad or pointing stick frustrating to use, try a miniature (travel-sized) wireless or USB mouse to make dragging and dropping a lot easier. (Cost: approximately $10)
• Check your devices and determine what kind of battery they use. If any of your devices use separate disposable batteries, always ensure you have some spare AA or AAA batteries in the event your wireless keyboard or mouse dies at an inopportune moment. (Cost: approximately $2-5)
• If you frequently need to enter numbers on the go, punching one number at a time into the top row on a laptop can be frustrating. An external USB numeric keypad will make this task go faster, be more efficient and less frustrating than one-finger typing. (Cost: approximately $10)

Always carry extra USB sticks to create backups or share data.

Communication and Storage

• When you are on the road, Internet connectivity may not always be available, and even when it is available, there can be restrictions such as speed or port limitations. Before heading out on your trip, make sure you have copies of all the necessary files with you. Do not rely on the Internet to back up to the cloud or to transfer data to your office computer. Always carry one or two extra USB sticks to create backups or share data. Always check the USB stick for viruses after it has been plugged into any other computer. (Cost: approximately $10)
• If you are using Skype or another video or audio conferencing app, have a high-quality set of headphones with a microphone to provide some confidentiality when addressing private issues. If possible, find a model that is compatible with all your devices, including your computer, mobile phone and tablet. (Cost: approximately $30)

Ready for Business

• If you travel out of the office with any frequency, keep a dedicated power adaptor in your bag or briefcase. Grabbing your briefcase and heading out to a job site only to find that your battery is low and you have left the power cable at the office is not a good way to start a meeting or presentation. (Cost: approximately $50-100)
• Changes in technology have created situations where devices are not always compatible with each other. It is best to have dongles to make sure you are covered for the most common ports that may not be built into your computer or device, such as VGA, HDMI and Ethernet. (Cost: approximately $20-30)
• Older buildings were never designed to accommodate the proliferation of modern electronic needs and thus may not have electrical outlets close enough to be reached by your plug-in adapter. Consider a two-metre (six-foot) extension cord as part of your emergency kit. (Cost: approximately $5)
• You would never think of plugging your laptop into a wall socket at the office without using a surge protector; yet, every time you plug in at another location, you are undoubtedly not using one. Perhaps it is time to carry a small and affordable wall-mount surge protector that will not only protect your computer or other device, but can also be used as a USB charging station. Quality surge protectors have swivel mounts to allow more adaptability, LEDs that verify the unit is working and provide surge suppression, low clamping voltage, shutdown technology, and EMI/RFI noise reduction. (Cost: approximately $15)
• Many new vehicles have built in USB ports that allow you to plug in adapters to charge or run your devices. For vehicles that do not come with built-in USB charging ports, you can still take advantage of this “free” power source with a converter that steps down the 12 Volt output to the input voltage required by your device. Newer adapters will allow up to 4 USB plug-ins to allow additional units to be used or charged. (Cost: approximately $30)
• If your vehicle does not already have a power outlet, you can plug a power inverter into the cigarette-lighter port to convert the 12 volt DC power into a 120 watt AC outlet like the standard electrical outlets you have at home and at the office. You can operate and charge your computer, or any other electronics using the standard plug without having to buy vehicle adaptors for each device. Read the specs or go online to ensure output amperage is compatible with the more sensitive devices being charged through the USB port. The downside of these units is that your vehicle battery will run down quickly unless the vehicle is running all the time. (Cost: approximately $60)

Start Filling Your Shopping Cart

The list of available technology to make life more bearable when you are working out of the office is almost endless. Putting together a travel kit of practical, inexpensive electronics can turn a potentially non-productive day filled with frustration and anxiety into a productive and successful venture — all for the low, low price of about $420.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

MANAGEMENT

Being motivated and inspiring motivation are the keys to success.

Motivation, according to Business dictionary.com is the “Internal and external factors that stimulate desire and energy in people to be continuously interested and committed to a job, role or subject or to make an effort to achieve a goal. Motivation results from the interaction of both conscious and unconscious factors such as the:

• intensity of desire or need
• incentive or reward value of the goal
• expectations of the individual and of his or her peers.”

Keeping yourself motivated and keeping staff motivated is difficult, especially for owner-managers constantly sidetracked by issues that pull them away from their course of action.

Know Yourself — Know Your Reasons to Be Motivated

One of the first steps to maintaining motivation is to determine the reason to pursue a project.

Determine whether your motivation is perhaps sparked by a deeply rooted need to emulate your parents, a desire to reach a million dollars in sales, or to meet the needs of others by providing a high-quality service or product.

Whatever your reasons, the following are some tips to maintain the drive to reach your goals.

• Treat your life as a project and yourself as the project manager. Break the project into long-term, medium-term and short-term projects. Over the long-term, you may want to sell your business for $20 million at age 60, but in the next five years (medium term) you want to reach $10 million in sales. In the short term (this year) you need to improve your operating margin to X%. As usual, Warren Buffett, chairman and CEO of Berkshire Hathaway and one of the world’s most successful investors, got it right: “I don’t look to jump over seven-foot bars — I look for one-foot bars that I can step over.”
• Establish the steps needed to reach the goal. Break each step into identifiable stages. Within each stage outline and document the task needed to complete that specific stage of operation. At the end of each day, review the outline and determine the progress. Such an approach allows you to determine the progress of that stage and to “tweak” the task to move forward quickly. Successful completion of the task will provide you with the motivation to move onto your next goal.
• Prepare yourself mentally for your day. When you awake, review what you plan to achieve that day. Outlining your goal motivates action and gets results.
• Maintain a list of tasks to be done. Thus, when a major task hits a delay and you start to feel overwhelmed, you can look to your list and work on a simpler task that can be more easily completed. Completing each task, even a small one, will provide confidence that other tasks can be successfully completed. Even small successes can sustain motivation and prevent demoralization.
• Pace yourself on all projects. Time frames that are too tight may lead to costly mistakes that will limit your ability to move forward. A measured pace ensures a better rate of success and the successes keep the flame of motivation lit.

You cannot achieve everything by yourself.

• Remember: No matter how much you learn or how much you try, you cannot achieve everything by yourself. Understand both your mental and physical limitations and pick your projects and tasks accordingly. Struggling to reach unattainable goals demoralizes. Knowing your limitations frees you to engage others more knowledgeable and allows you to say “NO” to tasks above your competence level. Staying within your capabilities within your field of expertise allows you to concentrate on what you are good at, which in turn maintains your confidence level and allows you to keep motivated.
• Be positive. Never say “I can’t”. Much of success is attributable to simple endurance. When you have self-doubts, talk to your spouse, a peer or an outside professional. Simply articulating your concerns often provides insight and renews confidence in your own ability.
• Read how others overcame similar obstacles. Meet with others inside or outside your organization who inspire you to move forward. Positive reinforcement or constructive ideas for change are great motivators.
• Motivation comes not only from within but from the enthusiasm and desires of others who share your dreams and goals. When you decide to take on a project, ensure your team is fully vested from the start. The mutually reinforcing drive, ideas, and solutions of a team will keep not only you motivated but will also maintain team motivation until the project is completed.
• “Success” is a word every entrepreneur likes to hear, but “failure” is the word that often creeps into an owner-manager’s thoughts when projects go off the rails. Fear of failure and the accompanying financial loss is a strong motive to keep going. Failure motivates us to re-examine our process and make changes to move forward until we succeed.

Managing the Crests and Troughs

Motivation to succeed starts out as a tsunami when an idea is first born but tends to diminish to a ripple before it reaches the shore of success. Ensuring that enthusiasm is maintained throughout the life of a project or for your business means that as an entrepreneur, you must manage the crests and troughs of the wave to ensure that motivation keeps your staff moving forward toward a future that fulfills the needs of your employees, the needs of your business, and, of course, your own personal needs.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

MANAGEMENT

Social media have their place, but do not forget to talk to each other face to face.

Social media are reducing the number of face-to-face conversations. “In person” encounters allow a person to speak while another responds spontaneously without resorting to the more formal structure of the written word.

Why do we seem to prefer Facebook/Twitter or emails rather than meeting with someone to discuss issues? The most obvious answer is that electronic media is more effective and saves us time. Psychologists tell us we find interacting with others through the computer is easier because a computer does not require us to become emotionally involved.

When to Meet Face to Face

Certainly there are situations when communicating via social media is effective, such as when sending a quick inquiry to a colleague. But when owner-managers need to announce decisions that will have an emotional impact and bring employee reaction, face-to-face meetings are a must for the following reasons:

• Face-to-face communication has incredible advantages since you receive an immediate response. If, on the other hand, you text someone and they do not respond, uncertainty prevails.
• One-on-one proximity allows you to “read” the respondent’s reaction to the message. A shrug of the shoulders, a deep sigh, or an unexpected expletive are great indicators of the recipient’s acceptance or understanding of what has been said.
• People need to be able to express how they feel about a project, a change in venue or a performance review. Face-to-face meetings allow each party to add a level of interpretation to the message by providing and reading body language, eye contact, or voice intonations. The meaning of words alone can often be misinterpreted. Receiving a text saying “The project is due next week.” sends a different message than someone who laughs and says “The project is due next week!” then rolls their eyes.

Talking face to face allows more effective negotiation.

• Talking face to face allows each party to negotiate more effectively by immediately understanding the obstacles and opportunities that may not be easily understood by simply reading a progress report or a job description.
• Communicating face to face provides each party a better opportunity to adjust their approach to ensure the end results are achieved. Interpreted another way, face-to-face interaction builds trust, creates understanding, and assists both parties to understand they share a mission for the project and the organization.
• Face-to-face meetings force interactions, which in turn create new ideas and approaches that are essential to success. Yahoo’s CEO Marissa Mayer indicated in a memo:
  Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being together.

Meeting through Skype is a means of communicating with remote jobsites. Surveys indicate employees like Skype because it allows them to “get more done” as they can handle one-on-one meetings without the distractions of social graces. However, such methods still disconnect the workers from each other and the company and as such it is important for management to instill the need to maintain one-on-one personal contact.

Communicating face to face embraces the seven most important elements of interpersonal communication by:

• clarifying expectations and purpose
• creating brief, unambiguous communication
• focusing all parties on a purpose
• setting a consistency of tone that allows individuals to understand the underlying pattern and seriousness of the message
• addressing all issues without the need to wait for additional instructions
• ensuring that all points relevant to both sides of the discussion are brought to the table and discussed
• allowing both parties to measure the knowledge and competence of the other party.

Get Back to Personal Contact

Even though Twitter has lifted the 140 character limit on messages, both owner-managers and employees must recognize that regardless of the length of the message, projects must be discussed face to face to generate the best results possible for the company, the employee and its customers.

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca

TAXATION

Operating an automobile for business and personal use has tax consequences.

Purchasing or leasing an automobile in the company name and allowing employees to drive the automobile has tax consequences that may require owner-managers to add a taxable benefit to the employee’s T4.

CRA Definition of Automobile

For there to be a taxable benefit, the employer must first determine whether the vehicle is an automobile under the Income Tax Act. The Canada Revenue Agency (CRA) defines an automobile as “a motor vehicle that is designed or adapted mainly to carry individuals on highways and streets and has a seating capacity of not more than the driver and 8 passengers.”

This definition of an automobile [paraphrased from 248(1) from the Income Tax Act] does not include “a van, pick-up truck, or similar vehicle” that:

• can seat no more than the driver and two passengers, and in the year it is acquired or leased is used primarily to transport goods or equipment in the course of business, or
• in the year it is acquired or leased, is used 90% or more of the distance driven to transport goods, equipment, or passengers in the course of business; or
• pick-up trucks that you bought or leased in the tax year that:
  a) you used primarily to transport goods, equipment, or passengers in the course of earning or producing income
  b) you used at a remote work location or at a special work site that is at least 30 kilometres away from any community having a population of at least 40,000.

Restrictions on Deductibility

Vehicles that fall within this definition of an “automobile” are subject to a maximum capital cost allowance addition (available for future capital cost allowance) of $30,000 plus HST. This limitation imposes a significant constraint on many business owners’ primary motivation for purchasing the vehicle in the corporate name. Vehicles such as king cab trucks that do not fall within the definition of “automobile” are not subject to such a restriction since they are considered necessary for the business and are not considered “luxury vehicles”. There are also restrictions imposed on leased automobiles. Generally, monthly lease costs for automobiles are restricted to $800 plus HST.

Taxable Benefits

In addition to the restrictions on the deductibility of annual depreciation (or leasing costs), users of such vehicles are also deemed to have received a taxable benefit from the corporation for the use of the vehicles for non-business purposes.

For example, assume an owner-manager purchases a high-end SUV in the company name but the owner-manager’s spouse uses it primarily (i.e., more than 50% of the use) for non-business purposes. Assume also that the base price of this vehicle is $90,000 and the overall cost of owning the vehicle, once HST is added, is $101,700. The standby charge to the employee is calculated at 2% per month of the total cost of the vehicle. Thus, the standby charge for the employee is calculated at $101,700 at 2% ($2,034) per month or $24,408 per year. The standby charges would be reduced in cases where the vehicle is used primarily for business purposes and annual personal driving does not exceed 20,000 kilometres.

On top of the standby charge, an additional operating benefit of 26 cents per personal kilometre driven is taxable in the hands of the employee. In the case where the vehicle is primarily used for business purposes, the operating benefits could be reduced to 50% of the standby charges if the benefit results in an amount lower than otherwise calculated.

(Standby charges for a lease can be expensive as well. A monthly lease cost of $1,350 over 84 months creates a standby charge for 12 months of $10,800 plus an operating expense benefit as mentioned above.)

Owner-Manager’s Use of Vehicles

Owner-managers may believe they are not subject to the available-for-use rules because they are shareholders of the corporation and not employees. The CRA has made it clear that owner-managers are subject to the same taxable benefit as employees as indicated by the CRA’s reference to archived IT63R5 Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer — After 1992.

Paragraph 18 reads as follows:

Shareholder Benefit
18. The above guidelines may generally be applied to a shareholder of a corporation. Subsection 15(5) provides that, for the purpose of subsection 15(1), the value of the benefit to be included in a shareholder’s income when an automobile is made available to such a person (or to a person related to that person) by a corporation, whether or not resident or carrying on business in Canada, is calculated on the assumption that subsections 6(1), (1.1) and (2) apply with such modifications as are required in the circumstances, and as though the references therein to “employer” were read as references to “corporation.”

Working from Personal Residence

Many owner-managers may work from their principal residence and thus have access to the vehicle 24 hours a day. The question is: “Does the close proximity of the vehicle mean that it is available for personal use and therefore a taxable benefit must be added to the owner-manager’s income at the end of the year?”

CRA: There is no taxable benefit if the automobile is operated for business use only.

Taxable Benefits

“An automobile is available to your employee if he or she has access to or control over the vehicle. It includes any part of the day, weekends and holidays during the calendar year.” (This suggests that, since the vehicle is parked at the place of residence and is available 24 hours a day — 365 days a year, there is a taxable benefit.)

“If your employee does not use the company’s automobile for any personal driving, there is no taxable benefit, even if the automobile is available to your employee for the entire year. This applies as long as the kilometres driven by your employee are in the course of his or her employment duties and the vehicle is returned to your (business) premises at the end of his or her work day.” (This suggests that, if the owner-manager can establish that they do not use the vehicle for personal use at all and park it at the “corporation’s” premises [also the owner-manager’s principal residence] then there may not be a taxable benefit.)

Keep Detailed Records

Convincing taxation authorities that the vehicle is not used for personal use will require due diligence and good record keeping since the CRA will take into consideration many factors when determining whether available-for-use benefits should be added to income.

The first line of defence is a complete log book. Record the odometer reading as at January 1 of and December 31 of each calendar year to establish the total annual distance the vehicle has been driven. Log each business trip taken plus a description of the purpose. Hypothetically, the number of kilometres driven for business trips and the total kilometres driven should be the same.

Although it is highly unlikely an owner-manager would purchase or lease an expensive “toy” and use it primarily for work purposes, the CRA may start to review the purchase of vehicles to ensure they are indeed “work vehicles.” Additional calculations and circumstances will alter the available-for-use add-on, whether for a purchased or leased vehicle. But, as our hypothetical taxable benefit examples demonstrate, the additional taxable benefit will push the employee (i.e., owner-manager) into a higher tax bracket and thus bring closer scrutiny by the CRA.

Consult Your CPA

Calculation of available-for-use benefits is complicated and may be somewhat offset by taxable deductions within the corporation. If your business is considering purchasing or leasing a vehicle that will be operated in the gray area between business and personal use, consult your CPA to ensure you understand the potential personal tax consequences.

 

Contact Argento CPA today!

Source: BUSINESS MATTERS

Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
Contact us: patricia@adamsonwriters.ca