Business Taxes

Corporation Tax Preparation Checklist- Income Statement

An income statement is a summary of your company's income and expenses over a specific accounting period. Most common items in an income statement are listed below.

Revenue

  • Sales of goods and services
  • Investment revenue
  • Commission revenue
  • Rental revenue
  • Other revenue

Cost of sales

  • Opening inventory
  • Purchases/cost of materials
  • Closing inventory

Operating Expenses

  • Advertising and promotion
  • Donations
  • Amortization of intangible assets
  • Goodwill impairment loss
  • Bad debt expense
  • Employee benefits
  • Amortization of tangible assets
  • Insurance
  • Interest and bank charges
  • Credit card … [Read more...]

GST/HST account for business

Depending on your business you may have to register GST/HST account.

Mandatory GST/HST account registration

You have to register for a GST/HST account if:

  • you provide taxable supplies in Canada; and
  • your business total amount of all revenues (before expenses) is more than $30,000 in four consecutive calendar quarters.

Voluntary GST/HST account registration

If you are a small supplier, which means your business gross annual revenue is less than $30,000, and you are making taxable supplies of goods and services in Canada, you can register voluntarily.

If you decide not to register for the GST/HST,

  • You do not charge the GST/HST to your customers
  • You cannot claim an input tax credit (ITC) to recover the GST/HST paid or payable on your purchases and operating expenses

If you decide to … [Read more...]

HST basic concepts for business

What is the HST?

The HST is a sales tax that applies to most goods and services in Canada. Generally, if you are a GST/HST registrant, you have to charge and collect the sales tax for the government on all taxable supplies (other than zero-rated supplies) you provide to your customers.

Taxable supplies of goods and services

Most property and services supplies in or imported into Canada are subject to GST/HST. Examples of taxable supplies

  • sales of new housing
  • sales and rentals of commercial real property
  • sales and leases of automobiles
  • advertising
  • taxi and limousine transportation
  • legal and accounting services
  • hotel accommodation
  • barber and hairstylist services

Zero-rated supplies of goods and services

You do not collect the GST/HST on these supplies. Examples of … [Read more...]

How to deduct Canada Pension Plan (CPP) contributions

As an employer, you have to deduct Canada Pension Plan contributions from an employee's pensionable earnings if that employee:

  • is in pensionable employment during the year; and
  • is not considered to be disabled under the CPP or the Quebec Pension Plan (QPP); and
  • is 18 to 70 years old even if the employee is receiving a CPP or QPP retirement pension. Exception: do not deduct Canada Pension Plan (CPP) if the employee is 65 to 70 years old, and gives you Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election with parts A, B and C completed.

You have to deduct CPP contributions from your employee's pensionable earnings. As an employer, you must contribute an amount equal to the CPP contributions that you deduct from your employees' remuneration.

Each year, the CRA provide the maximum pensionable … [Read more...]

How to deduct employment insurance (EI) premium

As an employer, you have to deduct employment insurance (EI) premiums from your employee's insurable earnings up to the yearly maximum. And you must contribute 1.4 times the amount of EI premiums that you deduct from your employee's remuneration.

Insurable employment includes most employment in Canada under a contract of service (employer-employee relationship).

There is no age limit for deducting EI premiums.

EI premium rate and maximum

Each year, the CRA give the maximum insurable earnings and rate for you to calculate the amount of EI to deduct from your employees.

In 2016, the maximum annual insurable earning is $50,800; the EI premium rate is 1.88%; the maximum annual employee premium is $955.04 and the maximum annual employer premium is $1,337.06.

You have to deduct EI premiums from insurable earnings you pay to your employees. In addition, you … [Read more...]

What is new for payroll deductions and remittances

As an employer, you have to make payroll deductions and remittances to pay yourself and/or your employees. Below is the latest update you should know to make your payroll deduction and remittances easier and painless.

Remit your payroll deductions quarterly instead of monthly.

Starting in 2016, if you are an new small employers, you can choose to remit your payroll deductions quarterly instead of monthly.

If your monthly withholding amount is less than $1,000 and you have a perfect compliance history, you will be eligible for quarterly payroll deductions and remitting.

You have to send your deduction before the 15th of the month immediately following the end of each quarter. The due dates for quarterly deductions are April 15, July 15, October 15 and January 15.

Online services for payroll deductions and remittances

You can … [Read more...]

How To Claim Your Home Expense Tax Deductions

home expense tax deductions

Claiming your home expense tax deductions can result in big tax saving. If you are work-at-home employee or self-employed, you may be qualified to claim your home expense tax deductions.

Make sure you are qualified to claim home expense tax deductions.

If you are work-at-home employee, you must get your employer’s signature on a form T2200 - Declaration of Conditions of Employment, which should confirm that you are required to do some work from home.

If you are self-employed, to be qualified to claim the deduction, at least one of the two following conditions must be met:

  • Your home office is your principal place of business; or
  • You use the work space in your home only for the purpose of earning business income, and use it on a regular, ongoing basis to meet clients or … [Read more...]

How to calculate capital cost allowance

If you use your capital assets for your business, you can claim tax deduction on your capital asset. To calculate capital cost allowance tax deduction, and any recaptured CCA and terminal losses, you should use Area A on page 5 of your Form T2125.

Even if you are not claiming a deduction for CCA, you still should complete the appropriate areas of the form T2125 to show any additions and dispositions during the year.

Below, we explain how to calculate capital cost allowance.

Column 1 – Class number of your properties

If this is the first year you are claiming CCA, you can find the class number in Capital Cost Allowance Class of commonly used business asset. If you claimed CCA last year, you can get the class numbers of your properties from last year’s tax return form.

Column 2 – Undepreciated capital cost (UCC) at the start of … [Read more...]

Capital Cost Allowance Class of commonly used business asset

Different capital assets may belong to different capital cost allowance classes and have different CCA rates. To calculate your tax deduction of your capital cost, you need to classify your capital assets into different assets classes, and then use the different CCA rates in the calculation. The following lists the classes and CCA rates for most commonly used business assets.

Capital Cost Allowance Class 1 with CCA rate 4%

Class 1 includes most buildings acquired after 1987, unless they specifically belong in another class. Class 1 also includes the cost of certain additions or alterations you made to a Class 1 building or certain buildings of another class after 1987.

You also include in these classes the parts that make up the building, such as:

  • electrical wiring;
  • lighting fixtures;
  • plumbing;
  • sprinkler … [Read more...]

How to claim capital cost allowance (CCA)

You can claim capital cost allowance (CCA) on depreciable assets to deduct your business income or rental income. Those depreciable assets include buildings, vehicles, furniture and equipments, that you use in your business. Those assets usually wear out several years, so you can’t deduct all their cost in one single year. Instead, you should claim capital cost allowance based on their capital cost and capital cost allowance rates.

1. Calculate the capital cost

Capital cost is the amount on which you first claim capital cost allowance. The capital cost of a property is usually the total of:

  • the purchase price (not including the cost of land, which is not depreciable);
  • the part of your legal, accounting, engineering, installation, and other fees that relates to buying or constructing the property (not including the part that applies … [Read more...]