GST

If you start a business, you will one day need to start charging GST on your products. Once you start charging it, you will also need to start doing remittances based off the schedule you have chosen. Like most things with the CRA, GST has many moving parts and rules. This post will only cover the basic rules of when to start charging GST on your products. If you are confused by GST and if you need to charge it, your bookkeeping professional will be able to help.

When do you need to start charging GST?

 

GST does not need to be charged by your company if one of the two situations applies:

 

  1. You sell only exempt supplies
  2. You are a small supplier.

 

Those two criteria might not mean too much to you as a business owner trying to figure out if you need to charge GST.

 

Exempt supplies are defined by the CRA here.  There are too many to be listed on this post, some examples of it are legal aid services, music lessons, and most health services performed by licensed professionals.

 

A small supplier is a business that has taxable sales that are less than $30,000 in four consecutive calendar quarters. The minute you cross over this threshold you must register for GST. If you remain below the $30,000 you can voluntarily chose to apply for and remit GST, but it is not a requirement.

 

How do you register for GST?

 

You can register for GST one of three ways:

 

  1. Business Registration Online, you can find information here 
  2. Submitting form RC1
  3. Calling the CRA at 1-800-959-5525

 

Remitting Periods

 

Once you have determined that you need to start charging GST, you must pick a reporting period. This means the frequency with which you need to file a GST return and remit the amount owing to the government. The period you may choose is based on your income. Below is a chart from the CRA website on your options for reporting period.

 

Annual taxable supplies threshold amounts Assigned reporting period Optional reporting periods
$1,500,000 or less Annual Monthly, Quarterly
More than $1,500,000 up to $6,000,000 Quarterly Monthly
More than $6,000,000 Monthly Nil

 

While annually does seem an attractive option if you qualify, there are a couple things you need to consider. The first is that it does not get you out of remitting money quarterly. If you owed more than $3,000 in the previous year in GST, you will need to make quarterly installments. If you neglect to make these installments, the CRA will charge you interest on your GST owed when you file if it is again over the $3,000.

 

When do you need to file?

 

It is important to ensure that you are filing and paying your GST on time. If you do not, the CRA will charge you interest and penalties and in extreme cases can even take money out of your bank account to cover the amounts owing.

 

The following is a chart for when you need to file & pay your GST by:

 

Annual 3 months after period end. For example, December period end, GST is due March 31
Quarterly Due the end of the next month after period end. For example, March period end, GST is due April 30.
Monthly Due the end of the next month after period end. For example, January period end, GST is due February 28.

For more information, you can check out the CRA website here.

Anywhere Bookkeeping

The accounting industry is changing and no longer do you need to come to an office to get bookkeeping and accounting services. Sharing a file is easier than ever and clients can do as much or as little work as they want. This post will briefly cover the advantages of using an online software.

The Software

On-Core is trained in, and works with two online accounting software’s. Below this section are pictures of each logo, you can click on them to be taken to their respective websites.

The first is probably the best known. Everyone has heard a radio ad or seen Danny DeVito on TV talking about QuickBooks Online. If you use QuickBooks Desktop you may have even seen a button for transitioning your desktop file to Online.

Transferring from desktop to online is relatively seamless whether you currently use QuickBooks desktop or not.

The second is a software from New Zealand, Xero. Xero has recently acquired Hubdoc and is working on transitioning into the Canadian market. Transferring from your current software to Xero is also relatively seamless.

Transferring to either of these is a great opportunity to clean up your file by eliminating accounts, vendors, or customers that are long inactive. However, with both, you will need to keep a copy of your old software as you will not be able to put in the detail of previous years, just opening balances.

Advantages


Paperless

Using online software is a paperless solution to bookkeeping. It can help to eliminate that storage room full of banker boxes that you have! You don’t need to hold onto that gas receipt from 2 months ago until you get to see your bookkeeper. You can simply take a picture, upload it, and toss it! It will be attached to the transaction in your online software and therefore easily accessible to anyone needing to see the backup.  

 

Automation

While not every transaction is able to be automated, these online software’s can eliminate some of the repetitive transactions, saving your company time and money. This is done by linking vendors to their respective accounts. For example, Shell would be automatically be coded to automobile expenses.

 

Instant overview of your business   

If you stay on top of doing your books, which with automation is a snap, you will know where your business stands whenever you need. Traditional bookkeeping only allows you to get monthly reports on your business after the month is over. With online software, you can work with your bookkeeper to know where your business stands at all times.

 

No more paperwork drop offs

With online software you no longer need to make monthly visits to your bookkeepers office. With it being paperless, you can get your bookkeeping done by any bookkeeper and not have the stress of needing to deliver your monthly paperwork to get reports.

 

Disadvantage

 

Can be a little too easy

You may look at that header and think, how can it being a little too easy be a disadvantage? Online software make it easy to do it yourself. However, if you have not had any experience or training in doing your books, this can lead to mistakes being made. This mistakes will be costly to correct.

 

Conclusion

 

Online software is worth adopting. Bookkeeping companies are here to support you in the transition, ensuring that you can reap all the advantages of doing books through online software. On-Core has professionals that have been certified in both of these programs. We can train you on how to use these programs, and offer monthly support.

 

These programs can save you money, and On-Core is here to show you how!

Mileage Reimbursement

 

Using vehicles is an essential part of modern day business. Whether your employee needs to go visit a client, or goes to pick up stamps from the store. You need to know how to reimburse them for the kilometers driven.

 

Criteria for Reimbursing Kilometers to Employees:

There are three criteria that you must meet in order to make your employees mileage reimbursement tax free.

1). You must pay them according to the CRA’s reasonable rates. The CRA reasonable rate per-kilometer rate has gone up in 2019 (below is a chart with both the 2019 and 2018 rates). As an employer, you can choose to pay them more than these rates. However, all the reimbursement would become a taxable income to the employee.

2) You are only reimbursing your employees for business KMs driven.

3) You are not reimbursing your employee for any other expenses related to the use of the same vehicle. For example, you do not reimburse them for fuel in addition to kilometers driven.

 

2019 2018
For the first 5,000 KM $0.58 $0.55
For all KM after $0.52 $0.49

 

If you do not meet these criteria you must take CPP, EI, and income tax off the monies given to the employee for their KMs.

You can read more about this here, on the CRAs website.

If you have any questions, you can contact On-Core and our payroll specialists would be happy to help!

For information on tracking mileage if you’re a business owner, you can check out our post here. Which includes a free mileage log download sample. It is important to note, the same KM rates apply to business owners.

Employee Gifts & Awards

 

In December we did a post on employee gifts that pertained more towards employee gifts for the holidays. In this post we plan on expanding more into the year round rules on giving employee gifts and awards. We know that this subject can be a little dry, but it is vital that an employer understands these rules before giving gifts to their employees.

CRA Definitions

 

Gift – A gift must be for a special occasion, this can include religious holidays, birthdays, weddings, or a child’s birth.

 

Award – an award has to be for an accomplishment of the employee; an example of this includes employee of the year. Usually an award must be exclusive and there may even be a nomination process.

 

If the award is for a performance related reason it automatically becomes a taxable benefit to the employee. An example of this is giving someone a gift for meeting their sales quota.

 

The employee is allowed $500 of tax-free gifts and awards every year.

 

Cash or Cash Equivalent – If you give your employees cash, or something that can easily be converted to cash like a gift card, this is a taxable benefit and must be included in the employees income.

 

Note that everything taxable is also pensionable and therefore CPP applies. However, EI only applies when the gift was cash or a cash equivalent.

 

Long Service Awards

 

An employer is entitled to give their employee a long service award every 5 years of employment. Anything outside of this time-frame is automatically considered a taxable benefit.

Anything over $500 is also a taxable benefit to the employee. The good news is that this does not count towards the employees $500 gift and award allowance.

Social Committee & Events

 

Social Committee – If the employer pays for the social committee, all gifts and draws through the social committee are deemed eligible towards the $500 gift allowance of the employee. However, if the social committee is funded by employees, either with their own money or through fundraisers, everything given out through the social committee with be non-taxable.  

Events – If an employer throws a party or hosts a social event outside of work, the event must be under $150 a person or it becomes a taxable benefit to the employee.

However, if the employer pays for a meal that also corresponds to a work reason, for example networking or an educational lunch, it is not taxable to the employee.

 

Calculation the $500 Limit

 

First, we will note that if you give your employees a small gift of little value you do not need to keep track of it. This can include things like a coffee mug, or a company branded hat.

For everything else your payroll professional will need to keep a list of all the gifts and awards that have been given to the employee. Anything over the $500 will need to be added into the employees income.

 

Example:

Wedding Gift – $300 piece of art

Birthday Gift – $100 gift card

Christmas Gift – $250 watch

5 Year Service Award – $600 golf clubs

 

The $100 gift card automatically needs to go into be added into the employees income as it is a cash equivalent item.

The 5 year service award is a separate item, however it has a value over $500, there $100 would be taxable ($600-$500)

The wedding and christmas gifts are both added together towards the $500 gift limit, $50 would be taxable ($300 + $250 – $500).

Therefore in total, the employee has to take $250 in taxable income for the year.

 

 

You can read more about gift giving on the CRA website, here. Or give us a call!

Tax Time

Tax time comes every year, and is a dreaded time for many, business owners and employees alike. This post is directed at sole proprietor taxes, if you are an employee and have any questions please give us a call and we can discuss your tax needs with you.

Posting this in February may seem early, however the earlier you start thinking about getting your paperwork ready for tax season the easier tax season becomes. It is also the way to become your tax preparers favourite client!

The first step to take is to gather all your paperwork. With it being February you may not have all your investment paperwork yet, however, you should have almost everything you need.

If you are doing your data entry, that is fantastic. We have a free spreadsheet below that you can use that creates a profit & loss statement for your accountant. You can find this at the bottom of this post. Once all your entry is completed then all you need to do is bring in your completed profit & loss and any additional investment paperwork to your accountant. From here they will be able to file your taxes for you. This method will save you money, and if you understand bookkeeping this is the way to go.

If the thought of doing your own data entry fills you will dread, don't worry you can still save yourself some money with the tips below.

  • Sort your shoebox before bringing it in to your accountant. Any accountant will of course sort it out for you, but this can quickly add to your bill
  • When sorting, make sure to sort it into groups, for example: supplies, meals, or vehicle expenses. This will help the data entry go quicker for your tax preparer.
  • If you have any purchases over $500 keep these separate from your normal expenses as they may need to be treated differently as assets.
  • Fill out a home based expenses sheet before coming to your tax preparer. You can find a copy of ours at the end of this post.
  • Bring your kilometer log with you.

As you can see the key to saving money on taxes is organization and being prepared. Any time a tax preparer needs to stop and pick up your file due to missing information your bill will climb!

On-Core can help answer all your persona tax questions & provides tax returns for an affordable rate! Give us a call today.

Home-Based-Business-Expenses.pdf

Free Profit & Loss Workbook!

 

Payroll FAQ – Part 2

 

This is the second post of our payroll FAQs. A reminder that these are general rules, for more specifics please visit the Alberta website through the links in the post. It is important to note, these are the minimum standards that must be met in Alberta. You are free to give your employees more than what is outlined below.

 

Vacation Pay

Vacation pay is something all employers are required provide for their employees and employees must use their vacation time within 12 months from when they earned it.

Employees are not eligible for vacation pay until they have been employed for a year, however an employer can allow for vacation before the year is over.

Employees earn 2 weeks of vacation for 1-5 years of employment and 3 weeks of vacation for 5 years and over. This time must be given in one unbroken period, unless the employee has requested to have it split up.

Employers can deny vacation time for operational reasons and decide when their employee takes the time. However, an employee must be given 2 weeks notice of the assigned time off.

There are some exceptions for who receives vacation pay and how it is paid. For a full list, you can check out the Alberta government website, here. The most notable exception is Construction Workers. Their employers are not required to give them vacation time, but they do need to pay 6% vacation pay on each pay cheque.

How do you pay it?

Vacation pay can either be A) Paid out on every pay cheque B) Accrued for use when actual vacation is taken. If option B is selected, the employee must receive their vacation pay no later than the first pay period after the vacation has been taken.

For the first 5 years, vacation pay is calculated as 4% of the yearly wages, after 5 years it is 6%.

When calculating vacation pay, the following are not included:

  • Overtime
  • General Holiday pay
  • Termination pay
  • Tips
  • Expenses and allowances

If an employee is terminated or leaves before the first year, you must pay them 4% of their wages on their final cheque for their vacation pay.

 

General Holidays

What are they?

General Holidays, or as they are more commonly referred to statutory holidays, are paid days off work legislated by the provincial government.

In Alberta there are 9 mandatory statutory holidays and 3 optional ones. Each of these are listed in the chart below for your reference.

General Holiday Mandatory/Optional 2019 2020
New Years Day Mandatory January 1 January 1
Family Day Mandatory February 18 February 17
Good Friday Mandatory April 19 April 10
Easter Monday Optional April 22 April 13
Victoria Day Mandatory May 20 May 18
Canada Day Mandatory July 1 July 1
Heritage Day Optional August 5 August 3
Labour Day Mandatory September 2 September 7
Thanksgiving Day Mandatory October 14 October 12
Remembrance Day Mandatory November 11 November 11
Christmas Day Mandatory December 25 December 25
Boxing Day Optional December 26 December 26

 

How are they paid?

General holidays are to be paid to most employees immediately upon their employment. However, there are certain situations when you do not have to pay an employee for a general holiday, they are:

  1. An employee does not show up to work when they are scheduled to work on the general holiday
  2. An employee is absent without the employer’s consent on their regular working days surrounding the general holiday.

When paying an employee for a general holiday, there are 2 situations that can arise:

Did not work on general holiday

Pay the employee Average Daily Wage (5% of Wages + Vacation Pay + General Holiday Pay from the previous 4 weeks)

Worked on the general holiday

Employers can choose one of the below 2 options:

  • Pay Average Daily Wage plus 1.5x employees time worked on that day (including overtime)
  • Pay regular wages plus provide a future day off paid with their Average Daily Wage

If you chose the second option and the employee leaves the business before they take their day off, you must pay them their average daily wage on the final pay cheque.

 

You can check out the specifics of general holiday pay, here.

As always, if you have any questions about payroll, give us a call today!

 

Payroll FAQ – Part 1

Payroll is one of the most important aspects of your business if you have employees.  It can also be one of the most complicated functions to understand. The government and your employees expect you to get it right. This is the first post of two where we will cover the four most frequently asked questions we get from our clients about payroll.

What is the minimum wage?

Every province has a different minimum wage that is set by the government. In Alberta the minimum wage was raised to $15 per hour on October 1, 2018.

This wage is the same for everyone, there is no longer a lower minimum wage for people who serve liquor or receive tips.

There are some weekly & monthly minimum wages that apply:

  • Salespeople & other professionals – $598/week
  • Domestic employees that live in their employers’ home – $2, 848/month
    • It is important to note if the domestic employee does not live in their employers’ home you must pay them the $15/hour.

In addition to the minimum wage there is a minimum shift length that may apply.

For most employees, you must pay them at least 3 hours at minimum wage if they are required to show up to work (even if they are sent home before this). If your employee earns a wage higher than $15 an hour, you may pay them for actual time worked, as long as it is over $45.

There are some exceptions to this rule where you do not need to pay a minimum of 3 hours. One of which, is if it is the employee who cannot work the full 3-hour shift. Certain individuals also only require a minimum 2-hour shift, an example of this is an adolescent working on a school day.

You can click here for more information on minimum wage.

What is overtime & how is it paid?

Overtime must be paid to employees if they have worked more than 8 hours in a day or 44 hours in a week, whatever is greater. It must be paid at 1.5 times the employees wage. If you choose, you can bank this time for your employees. However, this time must also be banked at 1.5 times the overtime hours and must be used by the employees within 6 months of earning it. You will need a banked time agreement with your staff.

Example of OT:

 

Monday Tuesday Wednesday Thursday Friday Saturday Sunday Total
Week 1 8 10 8 8 9 43
Week 2 9 8 8 8 8 6 47

 

Week 1: OT would be calculated on over 8 hours a day, as the week is under 44 hours.
The employee would get 2 (Tuesday) + 1 (Friday) = 3 x 1.5 = 4.5 hours OT

Week 2: OT would be calculated on over 44 hours a week, as Monday is 1-hour OT, the total of 47 – 44 = 3 is greater. Therefore, the employee would again be entitled to 4.5 hours of OT

 

Not all employees are entitled to Overtime, examples of employees not entitled are:

  • Mangers/supervisors
  • Professions, i.e. lawyers or engineers
  • Salespeople
  • Domestic employees

 

Some industries also carry different Overtime regulations, these can include ambulance attendants & trucking.

You can click here to find out more about OT rules and see complete lists of all the exemptions mentioned above.

 

Payroll FAQs Part 2 will be posted on our blog February 7, 2019. Check back to learn about general holidays and vacation pay!

If you have any questions about payroll, give us a call today!

 

2019 CPP & EI Rates

With the new year comes changes to CPP & EI rates. Below are the new 2019 rates, both have been increased slightly over the 2018 amounts.

 

CPP 2019 2018
Maximum Annual Pensionable Earnings $57, 400 $55, 900
Basic Exemption $3,500 $3,500
Maximum Contributory Earnings $53, 900 $52, 400
Contribution Rate 5.10% 4.95%
Maximum Annual Employee & Employer Contributions $2, 748.90 $2, 593.80
Maximum Annual Self-Employed Contribution $5, 497.80 $5, 187. 60

 

EI 2019 2018
Maximum Annual Insurable Earnings $53, 100 $51,700
Contribution Rate 1.62% 1.66%
Maximum Annual Employee Contribution $860.22 $858.22
Maximum Annual Employer Contribution $1,204.31 $1,201.51

 

It is important to remember that both CPP & EI have special rules. Payroll is not always straight forward, and it is best to have it done by a professional.

If you have any questions we have trained payroll professionals ready to help! Contact us today.

CRA Scammers

CRA Scams

CRA scams are everywhere right now, you hear about them on the news and you see the signs at grocery stores. These scammers find new ways every day on how to get money from Canadians. We may not be able to get them to stop trying, but by being informed you can protect yourself and loved one from losing money.

We have done a post in the past about CRA scams, however we wanted to do another one as we felt that this issue impacts Canadians everyday.

How CRA will contact you

Canada Revenue Agency will first send a letter to your home or business address they have on file about your monies owing. They send letters in brown envelopes and will ask you to call them. These amounts owing should be verifiable by checking your CRA online account, you or your tax professional can do this.

If you receive an email from the CRA you need to ask yourself the following questions:

  • Have I signed up for online mail through my CRA online account? If no, this is automatically a scam
  • Is it asking for personal information in the email? If yes, this is a scam. CRAs emails will simply let you know you have mail waiting for you in your online account

They will never text you to accept an etransfer. This is not how the CRA will give you a refund. CRA will direct deposit the monies they owe you into your bank account or send you a cheque in the mail. You need to sign up for the direct deposit service, which is done either through your online account, through an official form, or by your tax professional when you are filing your taxes. When it comes to refunds you also must ask yourself, am I expecting this? The CRA will not just give you money out of the blue, if it seems too good to be true, it most likely is.

How CRA will talk to you

Scammers may phone you, they have the ability to clone telephone numbers. It may appear to be coming from the CRA itself or your tax preparer. If you are ever in doubt you can hang up and call the CRA back or send your tax preparer an email. Your tax preparer will never be upset that you have emailed them to confirm a phone call.

When you are talking to the CRA they will never:

  • Use aggressive language or swear at you
  • Threaten you in any way, this includes “getting you arrested”
  • Leave you voicemails with personal information in them
  • Leave you an automated voicemail message
  • Tell you not to talk to your tax professional
  • Offer to “phone your accountant for you” and put them on the line
  • Not let you hang up

 

How the CRA deals with monies owing

If you actually do owe money to the CRA they will work with you to get your debt repaid to them. They have payment plans that accommodate how much you can afford, you can find information on that here. They will not ask you for gift cards, bitcoins, banking information, or credit card information. You should always pay the CRA through official channels. These include online banking, at an actual bank or through the CRA my payment portal.

 

How to protect yourself

The best way to protect yourself is to be informed about how the CRA deals with Canadians and about your tax situation. Always hire a tax professional that you can trust and sign up for a CRA online account, which you can do here.

Also remember not to give out any personal information.

Below are resources for you to use if you are ever in doubt of a CRA call.

 

CANADA REVENUE AGENCY

Phone: 1-800-959-8281 (individual tax enquiries line)

Business: 1-800-959-5525 (business tax enquiry line)

THE CANADIAN ANTI-FRAUD CENTRE

Phone: 1-888-495-8501

You can find more information on these scams at the CRA website.

If you have any questions about CRA scams, contact us today.

Holiday Gifts

With the Holidays fast approaching it is important to discuss employee gifts & bonuses. As with most things for payroll, employee gifts have specific rules to follow.

We will start with the disclaimer that this post is only going to cover the basics of the gifting policy outlined by the Canada Revenue Agency that has to do with the holidays. We will be posting another blog in early 2019 that goes into more of the specifics of this policy overall, keep checking back for that!

If you have any questions concerning this policy please give On-Core a call, or check out the policy on the CRA website, here.

 

Holiday Parties

Holiday Parties are a common occurrence at this time of year. You may be thinking to yourself, “this is a post about employee gifts, what does a holiday party have to do with that?” What you may not realize is the CRA has determined an acceptable amount of money you may spend on your employees for a party. An employer is allowed to spend up to $150 per employee on an event. This must include everything, the food, drinks, ticket prices, cab fare home, etc. If you have stayed within this limit then the party is free to the employee, however if you spend over the $150 per employee the entire amount becomes a taxable benefit to your employees.

Gifts

A gift is defined by the CRA as being given to an employee for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child. Therefore, gifts for the holidays will fall into this policy.

Cash or Cash Equivalent Gifts

Cash bonuses are always a taxable benefit to your employee and must be added to their income. It always needs to go through your payroll, and therefore your payroll professional must be notified if you have given these monies outside of the normal payroll run.

One thing to note is that gift cards or certificates are referred to as a cash equivalent and must be treated as cash.

All cash benefits are pensionable, and insurable. This means that in addition to income taxes you must deduct CPP & EI.

Non-Cash Gifts

A non-cash gift is something that the employer has bought and given to the employee; this could include items like concert tickets or a turkey for the holidays. An employer has more leeway with non-cash gifts, as long as they fall into the definition laid out by the CRA mentioned above.

You can give an employee a total of $500 worth of gifts in the year before they become taxable. This means you need to be keeping track of the gifts you give out. At the end of the year if you have gifted more than the $500, this amount must be included in the employee’s income. For example, you have given $650 worth of non-cash gifts, $150 ($650 – $500) is the taxable benefit.

All non-cash benefits are pensionable, this means that in addition to income taxes you must deduct CPP & EI.

Some good news, the CRA doesn’t completely nickel and dime your employee gifts, non-cash items of minimal value do not need to be added to $500 calculation. CRA gives the following examples of minimal value items:

  • Coffee or tea
  • T-shirts with employer’s logos
  • Mugs
  • Plaques or trophies

We know this can be complicated to follow but we are here for you if you have any questions.