For taking charge of receipts when you’re on the go …

receipt-bank-logo

Have we mentioned how much we love Receiptbank? We recommend it to all our clients, and we’re enthusiatic users of the app ourselves. As Receiptbank points out, its mobile app is ideal for:

  • Taxi receipts
  • Train tickets
  • Restaurant/cafe receipts
  • Anything you get out-and-about!

Take a look at this quick and easy video to get up and running!

Psst … Did you know you can use Receiptbank for invoices you receive by email, too?

Links to key 2017 Ontario Budget coverage

Nevcon Accounting is pleased to provide the following links to articles, analyses and more, to help you learn more about the 2017 Ontario Budget, delivered April 27, 2017.

How to best claim your auto expenses

The following article from the Nevcon Accounting resources archives is still rather handy and relevant today:

Canadians love their automobiles and are ecstatic when they can figure out a way of claiming them as a deduction on their income tax returns. The authors of the Canadian Income Tax Act and the auditors employed by the Canada Customs and Revenue Agency (now Canada Revenue Agency) who enforce its provisions are not quite so enthusiastic. The rules relating to what a car owner can claim or how an employee or shareholder is taxed in terms of a vehicle that is provided to him have become so complex over the years that at times it seems that cars and income taxes do not mix.

For the driver, we have “standby charges” based upon the number of days that a vehicle is made available for use, with different rules relating to whether the cars are owned or leased by the employer. As far as the company providing the vehicle is concerned, we have limitations relating to the deduction of capital cost allowance (depreciation) based on the cost of the car and restrictions as to the deductibility of interest on funds borrowed to acquire it. We have rules relating to operating cost and others relating to parking as well as still others that assure that GST is being collected correctly.

Finally, the self-employed are required to keep track of the total number of kilometres driven in a year and allocate that figure between business and personal usage.

The fact of the matter is that over the years the income tax rules have become such a burden that many are looking for ways to reduce the extensive record keeping that is now demanded.

The way to alleviate this problem and put some sanity back into the calculation of an appropriate automobile expense for all involved is provided below. It is possible that in your particular situation, the traditional methods of calculating automobile expenses may produce greater savings. However, in the long run, if you follow what is suggested here, the few dollars in income tax savings that you lose will be more than made up by the amount of aggravation you will have eliminated.

Option #1 – No more company cars

Employers should get out of the car ownership business and pay those employees who require a vehicle to perform their duties a flat rate allowance for automobile expenses. The payment is an allowable deduction for the employer, but is taxable to the employee. The allowance must be generous enough to cover actual costs incurred and the associated income tax liability that will result.

Option #2 – Reimbursement of cost

Employers pay their employees who require a vehicle to perform their duties a flat rate per kilometre of business travel. The payment is deductible to the payor and is not included as income to the recipient as the amount received is considered to be a reimbursement of costs incurred. The rate to be paid can be based upon that paid by the government in similar situations.

In both cases, driving to and from work will not be considered business driving. This is in conformity with CRA guidelines. However, if one drives from home to see a customer or client and then goes to the office, or alternatively, goes to see the customer or client on his way home from the office, the distance covered will count as business driving.

Article ©2001 The Quarterly Dividend
Reprinted with permission

Links to key 2017 Federal Budget coverage

Nevcon Accounting is pleased to provide the following links to articles, analyses and more, to help you learn more about the 2017 Federal Budget, delivered March 22, 2017.

Surviving the tax audit process

The following is an excerpt from an article referenced in the Nevcon Accounting resources archives – and it is still timely and relevant today:

According to Canada Revenue Agency’s mission statement, their objective is to promote compliance with Canada’s tax, trade, and border legislation and regulations. Their main tool is the audit process. The majority of taxpayers file relatively simple tax returns with mostly T4 and T5 income. These tax returns do not represent a large compliance risk since tax is withheld at source on the T4 income and the amounts are easily verifiable. Accordingly, many taxpayers who report this type of income may never be audited by the tax department or have any dealings with a tax auditor.

167-tax-tipsThe complete article is found here, on the Globe and Mail web site:

The audit: How to survive a visit from the taxman
by Stephen Thompson
(from 2011/2012)

The book from which the article is excerpted is entitled 167 Tax Tips for Canadian Small Business. Here is an updated link to the book.

Do you need to take a look at the Employers’ Guide to Taxable Benefits and Allowances?

Canada Revenue Agency advises you to use this guide (download it here or click on the book graphic) if you are an employer and you provide benefits or allowances to your employees, including individuals who hold an office, for items such as:

tax-guide-cover

  • automobiles or other motor vehicles;
  • board and lodging;
  • gifts and awards;
  • group term life insurance policies;
  • interest-free or low-interest loans;
  • meals;
  • security options;
  • tool reimbursement or allowance;
  • transit passes; or
  • tuition fees.

If you or a person working for you is not sure of the worker’s employment status, either one of you can request a ruling to determine the status. If you are a business owner, you can use the “Request a CPP/EI ruling” service in My Business Account. For more information, go to cra.gc.ca/mybusinessaccount. You can also use Form CPT1, Request for a Ruling as to the Status of a Worker Under the Canada Pension Plan and/or the Employment Insurance Act, and send it to your tax services office.

The importance of business interruption insurance

“Your ability to generate sales could be threatened at any moment. With business interruption coverage, a business owner can collect the income he or she would have expected to generate were it not for the unexpected event.”
– Insurance Bureau of Canada

The following article from the Nevcon Accounting resources archives is still useful and relevant today:

All owners of small businesses naturally hope that their company will never be faced with a sudden and unexpected interruption. However, like automobile and home insurance, business interruption insurance should be purchased just in case the unthinkable happens. Failure to do so could leave both your and your employees at risk.

The problems following a loss of property, equipment or inventory are frightening. Proper business interruption insurance can ensure the survival of the business both during and after the rebuilding process. The accompanying chart addresses the options involved in this type of insurance, which is usually included in business insurance packages.

Option Applicable
businesses
Description
Rental Insurance Real Estate Indemnifies for lost rent and other income derived from tenants. Standard insurance covers a period of twelve months or the time required to restore the property, whichever is less. More comprehensive coverage can be purchased allowing the insured reimbursement until rental income returns to pre-loss levels, thus compensating the owner until all repairs to the property have been completed.
Gross Profits Insurance All Covers a business up to net income before taxes and continuing expenses. If gross profits are under-insured, the insurance company may adjust the claim in event of a loss. If a business has insurable gross profits of $1 million but carries coverage for only $500,000, should it suffer a loss of $250,000, the insurer may only reimburse the owner to the same percentage that should have been insured – n this case, 50% or $125,000. This type of insurance can be purchased for periods extending beyond the standard twelve-month policy to allow the insured to be indemnified until such time as gross profits return to pre-claim levels.
Gross Earnings Insurance All Similar to gross profits insurance above, but can only be purchased for maximum of one year. Consequently, the indemnity period may run out before allowing the purchaser to cover the predetermined percentage of gross profits he/she wishes to insure.
Increase Valuation Insurance All This insurance is not provided by many carriers. If obtainable, it provides an alternative to gross profits/earnings insurance described above in that it predetermines coverage of inventory on a cost plus basis. This type of insurance is suitable for importers and distributors who do not hold stock beyond one inventory turnover period. Manufacturers or companies dependent on their physical premises to conduct business will not find this option attractive.
Extra Expense Insurance All Allows company to resume regular operations more quickly by providing funds for such items as temporary rent at an outside location, additional labour cost, etc. This type of insurance does not provide sufficient coverage on its own and is usually offered only in conjunction with other coverages outlined above.
Professional Fees Insurance All Pays for professional assistance to prepare proof of loss should a claim be required. This type of insurance can only be purchased in conjunction with other forms of coverages outlined above.

Article ©1998 The Quarterly Dividend
Reprinted with permission

Hubdoc – an indispensable tool for any business

Continuing with the different types of technologies I use, I’d like to discuss Hubdoc. I first saw a demonstration of Hubdoc about two years ago, and thought it was an interesting product that could benefit me and my clients. As always, I’m the tester for new software and other solutions, as I believe I should understand it and see what happens in real world use. It’s always amazing how many products I thought were a great idea on paper … and when I started to use them I found out fast that they would not be suitable for myself or my clients’ needs.

hubdoc-logoHubdoc is an application that can grab you bank statements, utility bills or anything else for which you have recurring invoices. Hubdoc is constantly adding new links to different sites so the software can automatically get bills and statements that are stored on a secure site for you to view. You can also have the system push the information for bills to QuickBooks online, so you don’t have to enter it and it will give you a copy of the bill in the transaction so you can view it whenever you want. You are also able to upload PDFs to the site.

At first, I wasn’t so sure that this would be useful, but as I started to add my bank feeds and other bills I became increasingly amazed at what it could do. Just setting up my bank feed, I ended up with close to three years worth of statements for me to view (this depends on if you have electronic statements already set up). It also brought in the information on any payment I’d made via email transfer, so I could easily see who I was paying on them instead of the statement just saying “email transfer” and not identifying the recipient. I was quickly becoming very impressed! As I have added different billers to the account and uploaded others, I figured out what this system is really great at: EASY ACCESS to all your statements and bills

Hubdoc is all about having to source documents, to be able to verify something or to have handy when you have a CRA audit and need to produce documents for them. This is where Hubdoc becomes invaluable. As well as always putting a PDF of the invoice in your online accounting software, it also allows you to access every invoice at any time from your computer. No more going into a filing cabinet or storage box to find that invoice … hoping it’s in the right folder. As an accountant, I also can access clients’ documents so if they have a problem with a bank reconciliation I can see the statement at the same time as my client, so I can see and understand problems and know quickly how to correct them.

So if you ask me, I tell any client that Hubdoc is an indispensable tool for any business.

Technology is wonderful … most of the time

Technology is wonderful … most of the time. Continuing on from my scanner discussion and how I use technology to go paperless, we should talk about what accounting software I use.

I have used different systems over the years, from Sage 50 to Accpacc and QuickBooks desktop software. In my own practise, I tend to see something new and innovative and will try it out so that when clients are using it I have the experience needed to help them with problems. A few years ago, I decided that I wanted an accounting system that allowed me to work on whatever computer I was on, no matter what location I was at. Normally a desktop solution cannot do this unless it’s installed on a laptop which I always had to take with me. (I still do carry a laptop with me everywhere).

I started using hosted solutions which at the time was the only thing available and allowed me access no matter where I was, but it was expensive. A few years ago, Intuit QuickBooks came out with an online version. Was it the best software out there? Not compared to a desktop version, but it was the best of online software available. I started using the software for testing so I could understand how it works and what sort of client it would be good for. Back then it was not suitable for all situations and even today … well, it is greatly improved, but it still is not suitable for some clients.

intuit-quickbooksWith QuickBooks online, as you set it up, you input your online banking information so the program can fetch your bank feeds and match it with cheques you have written, customer payments and so on. At first I thought this was totally unhelpful, but as I used the product more and more I notice just how easy it was to notice items I had not entered and to have the software do it for me. Is it perfect? Of course, not. I have noticed occasionally the bank sends the information twice at different times (sometimes months after it happens), the payroll system is still being improved along with the sales tax system. But overall, it is a good product that is continually improving with pricing that is less that a traditional desktop system.

I signed up for the accountant’s edition as, of course, I’m an accountant. As the name suggests, that version is only available to accountants and bookkeepers. It allows me to access client files with their approval so I can see what the problem is in real-time as they are trying to do something. I also can offer it to my clients at a wholesale rate which is cheaper than the advertised rate. If you wanted to pay them directly it can be done, but my discount expires within the first year. If I pay the bill and bill you the discount, it’s for as long as you are a Nevcon Accounting client.

There are lots of other online products around like SageOne, Freshbooks, Wave and more. Is QuickBooks online better then the rest? In some ways, I find it better then the others, but what I find good for me may not be ideal for you. That is why I’m here so I can go over your needs and ensure the software you pick is suitable to you and your business requirements.

Over the next little bit, I’m going to go over the different apps I use and why I think they are great. Stay tuned!

Accepting an honorarium

question50I recently took part as moderator for a couple of public events at an industry festival. I was approached to do the job through someone who knows me from my work in the industry. For doing the job, the festival organization gave me an honorarium of $200. Since the connection is work-related, how do I account for this as income?

B.W.

answer50
This would be considered part of your income, and should be accounted for on your personal income tax return. If your accountant manages both your business and personal returns, he/she can assist you accordingly.