Tackling the “Nobody Knows” Myth

A lot of times we have wondered if you need to report an income, or sale or property or an asset on your tax return. Also, a lot of times we have turned to that know it all co—worker or family friend for advice. Unfortunately, a lot of times, the advice is that the government won’t know about it and you do not need to report it.

Well, it general ends badly and let me tell you something: Government knows!

Let’s discuss a few reporting myths:

  • Sale of your house: If you sold your house, it must be reported to the Canada Revenue Agency. The rules changed in 2016. Failure to report can make you liable for penalties up to $8,000. So yes, it’s always better to discuss with an expert rather than just getting some friendly advice from your peers. And yes, the government knows as all transactions are made through a financial institution and recorded at the land registry office as well. The tax liability on the sale will depend on a few factors such as:
    • Did you maintain the house as principle residence for all years of ownership?
    • Did you rent it or use it as a home office? If yes, what percentage of the house was being used for these purposes?
  • Foreign Property: If you own property that is valued at more than $100,000, you are required to report it to on your tax return by filing form T1135. There may be no tax liabilities to reporting the property but failure to report will result in penalties of $2500 per year. So, suppose you bought a piece of land abroad for $100,000 10 years ago. You sell the land for $150,000 and bring the funds to Canada. The government at this point will review your transactions and failure to report the land for last 10 years will cost you $25,000.
  • Earnings from digital currency: The digital currency exchanges are not regulated and therefore no tax slips are issued but eventually all funds get transferred to Canadian dollars and can be tracked. Any gains made from digital currencies should be reported and appropriate tax should be paid.
  • Reporting inflated expenses: The government regularly audits the returns with self employment income or employment expenses. You may be tempted to play the audit lottery, but the government has recently substantially increased their efforts to audit a higher a number of tax returns and if you get audited ever, there is no chance that inflated expenses will escape the eye of an auditor.

Get help from professionals such as tax experts at Softron and ensure that your taxes are done right the first time. Call 905-273-4444 today and let the best handle your taxes.

Are you planning your taxes or just filing them?

It’s not tax season right now and therefore not many people are thinking about taxes. But while we will all be filing our taxes a few months later, major tax changes are taking place everyday and they are mostly bad news.

The Government of Canada has recently announced new tax measures against income sprinkling. Income sprinkling is the process where a small business owner can distribute the business income with his/her spouse or an adult child. So if the spouse or adult child is in a lower tax bracket, this can result in huge tax savings.

The Government of Ontario has already announced a 15 percent punitive tax on foreign property buyers but this is not all. The Federal Government announced last year that all property sales must be reported with the tax return even if you sold your principle residence. So, in case you missed it, you should be running to your tax accountant’s office as failure to report can result in penalties up to $8000.

The estate planning laws have also gone through major changes in the last year and an estate of a deceased individual can now only reap the benefits of progressive tax rates for 36 months after the death of an individual. In the past, income splitting could be achieved through testamentary trusts for a longer time period.

The opportunities for tax planning are becoming scarce and complicated every single day. The tax credits are getting reduced or completely getting discontinued every single year. Children’s fitness tax credit, arts tax credit, public transit credit are all a thing of the past now.

So, in these changing times, tax planning is more important than ever. It is important to make use of tax saving tools like TFSA and have an estate plan that will allow for passing on your wealth to the beneficiaries in the most efficient way. Poor estate planning often results in huge tax liabilities and time consuming legal complications for the beneficiaries.

The time to plan your taxes is when you are making investments, selling investments or when you are ready to plan your estate. It is when you are finalizing a structure for your business and also when you are saving funds for your retirement. All this just does not happen during the months of March and April.

Tax planning works best when you have a proactive approach. Talk to your tax accountant today if you are taking a big financial decision or it might be too late. Call 905-273-4444 and book an appointment for all tax issues and Softron tax professionals will be happy to help

2016 Taxes: Will Families Win or Lose ?

As we celebrate family day with our families, it also marks the start of another tax season. Taxes for families will be a mixed bag this year as a tax rate cut comes with a cut in tax credits too.
So, the big tax changes that will impact the tax bill for families are the following:

Middle Class Tax Rate Cut

The tax rate has been reduced from 22% to 20.5% for middle class earning individuals for the tax bracket for income between $45,282 and $90,563. This will not impact any tax payers that have an income below $45,282.

Tax Increase for High Income Earners

The tax rate has increased from 29% to 33% for all individual taxpayers making an income higher than $200,000. This tax increase has been made to compensate for the tax revenue loss that would be caused by middle class tax rate cut

Income Splitting Discontinued

The income splitting used to save up to $2000 for a lot of families with children where one spouse had income in a higher tax brackets as compared to the other spouse. This tax credit was extremely popular in families where one partner was making little and no income and the other partner was making most of the family income. The income splitting is no longer available for the 2016 Tax Year

Children’s Fitness and Arts Amounts Reduced

The fitness and arts amounts have been reduced by 50% for the 2016 Tax Year. The maximum eligible fitness amount is $500 for the 2016 tax year whereas the maximum eligible arts amount is $250 for the year. The fitness and arts amounts have been discontinued starting 1st January,2017 and will not be available for the 2017 tax season.

So overall, if you are couple with no children and making similar incomes, you will be most likely paying less in taxes this year unless you make more than $200,000.

If you are family where only one spouse was working and you were spending money on fitness and arts activities for your children, you might end up paying more or about the same in taxes depending on your income information.

If you are a family where one spouse makes more than $200,000 and the other spouse was not working and you used to take advantage of the arts and fitness amounts for children, the tax bill will be significantly higher this year as you pay a higher tax rate with no income splitting or fitness and arts credits.

Visit a Softron Tax location today to call 905-273-4444 for an appointment to plan and file your taxes with an expert

Softron’s Tax Courses

Whether it is changes in the tax law or changes to how the tax filing industry will operate in the future, major changes are happening in the tax industry. While the changes are exciting, it is critically important to that professionals who are in the industry or planning to work in the tax industry are on top of all the new changes.

Softron tax courses are offered every year and updated with the latest tax changes that take place every year like the estate planning and trust course this year has been updated with the new laws that came into effect on January 1, 2016.
Industry experts at Softron tax have designed these tax courses with the following features:

• The course materials not only include the theory but real life case examples that give an idea to the students on how taxation works
• Animated explainer videos that make it easy for students to understand the concepts.
• All courses are available online but students also have the option of in-class instructor led courses to get the necessary guidance
• Instructors are industry experts and love to share their knowledge and experiences from the industry
It is a great opportunity for accounting firms across Canada to get their staff trained with the latest tax knowledge and be job-ready for the upcoming tax season.

Softron Tax Courses are a great opportunity for all those who are looking for a career opportunity or adding value to their skillset. You can enroll today by visiting www.softrontax.com/courses or calling 905-273-4444 or 1-877-SOFTRON

“ An investment in knowledge gives the best return”

And the Winner Is…………..

The Election Campaign is in its last lap and all the major parties have tried hard in the past few months to convince the Canadian voters that they are the best bet for the future. Taxes are always a hot topic during the elections and all the parties are planning different tax cuts/increases if they are chosen to power.

We are soon going to have a winner but in today’s blog, we discuss different tax related topics for this election and ensure that our readers are the biggest winners when they make their choice.

Donate Tax-Wise: A lot of people are making political donations during the election season. Although we have a federal election underway at this time but it is important for you to know that political donations made to Federal political parties are tax deductible only to the extent of federal tax payable with a maximum tax credit of $650. It is a non-refundable tax credit. However any donations made to provincial political parties in Ontario generate a refundable tax credit. The maximum tax credit for provincial donation is $1330 which is more than double the federal limit. This means the taxpayers are better off making a donation to the provincially registered political party rather than the federal one. So for example, if you support the Liberal Party of Canada, you are better off making a donation to Ontario’s liberal party.

The Promises: All the political parties have come up with their action plan regarding taxes if voted to power. The present Conservative Government introduced Income Splitting and Enhanced UCCB last year. They promise to keep the taxes and benefits same for the individuals while reducing the small business tax rate from 11 percent to 9 percent by 2019. They are also promising an EI premium cut in 2017 which will marginally increase the size of your paychecks.

The Liberal party is promising an increase in tax for people who make more than $ 200,000 annually and they are proposing a 1.5% tax cut for taxpayers who have their income between $44K and $90K with the extra tax revenue they will generate. They are also proposing a smaller EI premium cut as compared to Conservatives in 2017 while extending the EI benefits. The biggest promise of the liberal party is to repackage the UCCB and Canada Chile Care Tax Benefit in a way that it will put more money in the pockets of middle class while lowering the benefits for people with family incomes of more than 200K

The NDP is promising a tax rate cut for small businesses from 11 to 9 percent in 2017 and increased corporate taxes. Both NDP and liberals plan on cancelling the income splitting and the increases TFSA Limit.

Canada is witnessing a very tight race in this year’s election with all three parties coming out as strong contenders to win his election. Overall all the parties are gunning for the middle class vote and this can be seen in their tax promises where they promise that taxes would go down for the middle class and increase for the rich.

However, the bottom line is that Death and Taxes are here to stay and while we will have a winner soon for these elections, Softron wishes that you, the Canadian tax payer turn out to be the biggest winner of all. So go out and vote to strengthen the democratic process and let’s make the taxpayers of this country a big winner !