All posts by Nevcon Accounting

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.

When the going gets tough … the tough get scanning!

I’m really into technology and making it easier for clients to deal with me. One of the ways I do this is by going paperless. Now what I have noticed is that going paperless has meant I seem to have way more paper then I ever did before!

Way more paper? Well, that’s mainly to do with shredding everything I receive after I’ve scanned documents into my computer system. Over the years, for my own I paper I scan and shred right away, but for clients I give them back the documents that I needed to complete their work.

fujitsu-scansnapI’ve tried many scanners and the best one I have ever had is the Fujitsu ScanSnap. I have now been using them for over ten years and never had a problem. They are built for document scanning and I have noticed that now Shoppers Drug Mart uses them for prescriptions. One is always on my desk to scan anything I receive.

Now, you may be asking “but how does that help me when I don’t own a scanner?” Over the years I have upgraded to new models that are faster, have new features and so on, but the old one always ends up in my trunk so if I’m at a client I can scan anything I need right away and I don’t have to take anything away. Below you can see the scanner in my trunk and also set up at a clients so I can get the information I need.

On the go with my Fujitsu ScanSnap in the back of the car ...

On the go with my Fujitsu ScanSnap in the back of the car …

Arriving at a client's location with my Fujitsu ScanSnap ...

Arriving at a client’s location with my Fujitsu ScanSnap …

I'm putting my Fujitsu ScanSnap to good use in a client's office.

I’m putting my Fujitsu ScanSnap to good use in a client’s office.

7 year-end tax tips for small business

thebalance-logoThis article from The Balance caught our eye because it offers some simple, straightforward advice for small business owners about wrapping up the current year and preparing for the new year. What’s nice is that the advice is applicable to different types of businesses, and it is not specific to a given region or country necessarily. Of course, for advice more specific to your area of business, your part of the world and your requirements, that’s where a good accountant is your best resource.

The Balance advises that your year-end checklist should include:

  1. Review your reports.
  2. Defer income.
  3. Make purchases.
  4. Run an inventory check.
  5. Start or contribute to a retirement plan.
  6. Contribute to charity.
  7. Start preparing for next year now.

Click here to read the complete article.

What else would you include as a good year-end practice? Add your suggestions to the comments on this post. Thanks!

When Nevcon Accounting has something new and interesting to tell you …

… we’ll post it here, to our new blog. We’ll give you updates on new small business and tax-related news, changes and trends, and we’ll also provide perspectives and recommendations on products, services, practices and more. This blog will take the place of the “What’s New” page from our previous web site, and it will be a complement to our Twitter feed (www.twitter.com/NevconAccount). Let us know if there are subjects that you would like us to cover here.

Logging allowable business mileage

question50I would like to maintain an accurate log but am struggling with determining what qualifies as allowable business mileage.

I work mainly from my employer’s office but use my personal car to see customers and suppliers, but do not get compensation from my employer. If I see a customer/supplier on my way to the office in the morning, does that leg count as 100% business mileage or does the leg from the customer/supplier to the office? Or does it only count as business mileage if I go to the office first and then visit the customer/supplier and then return to the office?

Can you please advise?

R.S.

answer50Business mileage is sometimes not cut and dried. First, for you to be able to claim the mileage, your employer needs to complete the form T2200 Declaration of Conditions of Employment. Once this is completed, you are then able to claim your mileage.

Travelling from your home to the office is not considered business travel, but personal. But in saying that, if you go to a customer or supplier on the way to the office that would be considered business mileage. You have one of two ways to keep track of this: you can use the whole trip and then deduct the mileage used from office to home, or just use the mileage from the customer/supplier to the office (times 2 for a round trip – this one is easier to use, in my opinion).

When calculating the actual expenses deductible, remember to use all the expenses of the car for the full year, including, gas, maintenance, and parking if any, and then it is prorated between business and personal. Also, I would keep some sort of diary (either a planner in the car or electronic record) of the trip and who you went to see. Also, the proration is total km driven for business divided by total km driven in the year.

Expenses travelling from home to work

question50I live in Barrie, Ontario and work in Ajax. The drive is 130 kms one way – that’s 260 kms per day – 1300 kms/week and 5200 kms/month. I keep all my gas, maintenance and car insurance receipts. Should I claim the mileage rate or the exact amount of my expenses per year? Can I expense both? Also, I will be moving to Oshawa in the next four months. What expenses can I write off with the sale of my home and moving expenses that will reduce my drive to 40 kms per day?

B.B.W.

answer50Hi. Thanks for writing. The travel from your home to work is not deductible as it is considered a personal expense. For the moving expenses, it depends on whether this is a new job for the expenses to be deductible. If you are just moving closer to your current office, the moving expenses are not deductible. However, if you are moving to a new office (within your company) or for a new job, then the moving expenses become deductible.