Kustom Design Group of Companies

Tax Season is drawing near!

Posted on January 27, 2012 by Michael Lepitre

As we all know, the tax season is drawing nearer and nearer. In a couple of weeks, the T1 for 2011 will be available for you. So what can you do to make this tax season more bearable than the last? Get organized!

As simple filing system would be a big help this season. Start by gathering all your receipts, T-slips and other required tax documents. Next step is to organize your tax documents. Remember to keep it as simple as possible. It can be in a printed format or you can keep a folder on your computer as well, depending on which format you find most convenient.

Here are some of the documents you will need. This will give you an idea when you are gathering and organizing for this tax season:

Your previous Notice of Assessment. This will help you confirm if you had any carry-forwards from the last income tax return you filed.
T-slips such as T3, T4, T4A, T5, etc.
Donation receipts
RRSP slips
Medical Receipts
Childcare Receipts
Child fitness and arts receipts. Remember that parents can now claim the Children’s Arts Tax Credit which gives the opportunity for parents of children who participate in paid artistic, cultural, recreational and developmental programs to enjoy the same benefits as parents whose children participate in paid programs of physical activity.
Transit passes
Capital gains/losses
Tax shelter documents (donation slips and T5003)
Super Flow through’s (T5013, T5018, T101)
Employment Expenses (T2200)
Education Amounts (T2202)
Business (Income & Expenses or Corporate Wages)
Rental (Income & Expenses)
Interest on money borrowed to invest
Other investments
First time home buyer documents

These are the basic categories of documents you will need for this tax season. We suggest you start early and not wait the last minute!

About Kustom Design Group

Kustom Design is a group of interconnected companies, each company striving for the same goal: to provide excellent Accounting and Financial products and services to help clients SAVE on taxes, properly manage their finances and ultimately, achieve Financial Freedom and Lasting Wealth.

The Kustom Design Group offers a complete line of products and services in key areas of accounting, finance and tax; from accounting, consulting and strategic planning to financial and tax education. Visit our website for more information about our products and services.

Shareholder Loans Part 2

Posted on January 25, 2012 by Michael Lepitre

Here are a few more relevant topics related to shareholder loans.

Change in relationship

Even if the shareholder who received the loan ceases to be a shareholder, the loan received can continue to result in a taxable benefit.

Interest expense deduction

The amount of interest included as a taxable benefit can be included as part of an interest expense deduction when the proceeds of the loan were used to produce income from the business or property.

Forgiven loans

The forgiven amount must be included as income of the shareholder in the year that the year of forgiveness of the loan.

Loans to shareholder-employees

For shareholder loans, the benefit is always included in the taxable income of the actual recipient of the loan. There is a different rule for employee loans where in the benefit is always included in the taxable income of the employee even if the actual recipient is a third party.

It is required that an examination of the facts is made if a shareholder is also an employee. It should be determined whether the debt was incurred by virtue of employment or by virtue of shareholdings.

Tracking shareholder loans

Records of advances or loans must be kept in a general ledger account to proper tracking.

Converting a shareholder loan to employment income or dividends

In cases where funds are advanced to a shareholder/employee throughout the year, salary or dividends must be paid or recorded at the end of the year to clear the balance of the shareholder loan.

Note: A loan from the corporation to the shareholder is considered an asset of the corporation. If the loan is very substantial, it could disqualify a business from being a “small business corporation” meaning the business would not be eligible for the $750,000 lifetime capital gains exemption for the shareholder upon disposal of the shares.

Again, we would like to remind you that Kustom Design is here to help you with any of your concerns regarding Shareholder Loans. Please contact us today to book an appointment with one of our accountants!

Reference: http://taxtips.ca/smallbusiness/shareholderloans.htm

About Kustom Design Group

Posted in Small Business Information and Statistics | Tagged corporate loans, corporate tax calgary, shareholder loans, shareholders | Leave a comment

Shareholder Loans Part 1

Posted on January 23, 2012 by Michael Lepitre

Taxtips.ca recently came out with an updated article about Shareholder Loans. Here is a summary of the article.

A shareholder loan is a loan by a corporation to one of its shareholders or to a person or partnership who does not deal at arm’s length with the shareholder. This loan may result in a deemed taxable benefit to the shareholder.

The person or partnership is a shareholder of a corporation, is connected with (not dealing at arm’s length with) a shareholder of a corporation or a member of a partnership, or a beneficiary of a trust, that was a shareholder of a corporation.

In addition to these, the person or partnership because of that shareholding received a loan or incurred a debt to that corporation, a corporation related to that corporation or a partnership of which that corporation or any related corporation was a member.

The loan amount from this transaction will be included in the income of the person or partnership for the year in which the loan is made, except in certain circumstances. However, there is an exception to this rule. This rule does not if the entire loan is repaid within 1 year after the end of the taxation year of the lender, as long as the repayment was not a part of a series of loans or other transactions and repayments.

In addition to this, according to taxtips.ca, another benefit will be deemed to have been received by the shareholder unless interest has been paid on the loan in an amount greater than or equal to interest calculated at the prescribed rate. Please note that the payment of interest should have been made within 30 days after the end of the year.

If it is reasonable to conclude that the rate of interest on any loan is the same or greater than the rate which would have been agreed upon by the parties dealing at arm’s length, there will be no taxable benefit related to the interest of the loan.

We will continue to cover more details about the Shareholder Loans on the next blog!

If you have any questions about the Shareholder Loans, Kustom Design will be glad to help you out! We have experts in this specific area who will be able to provide you with the knowledge and guidance you need so please contact us today!

Reference: http://taxtips.ca/smallbusiness/shareholderloans.htm

About Kustom Design Group

Posted in Small Business Information and Statistics | Tagged corporate loans, corporate tax calgary, shareholder loans, shareholders | Leave a comment

RRSP’s – What are they and are they good or bad? Part 4

Posted on January 20, 2012 by Michael Lepitre

So let’s now breakdown some of the Goods and Bads of RRSPs, starting with the Goods:

Good facts about RRSPs:

Tax Deduction in the year you contribute
Long Term Growth of Investments
Deferred tax on Growth of Investments
Forced Savings program

Bad facts about RRSPs:

You are eventually taxed
There is a limit on how much you can contribute (may be a good)
Unlike other investment vehicles, you cannot use RRSPs as collateral
You are restricted as to what you can invest in
There are age and income restrictions to RRSPs
Government is in control of the rules
RRSPs are in trust for the government
You cannot receive the tax favorable benefits of Capital Gains and Dividend Income inside of an RRSP
You cannot deduct investment losses on your taxes

10.You cannot deduct interest and carrying charges if you borrow money to invest in an RRSP

This gives you an idea of some of the main Goods and Bads of using RRSPs. Your bottom line is that you need to plan thoroughly to decide if using RRSPs is for you or not! Again remember the key if you are using RRSPs is to contribute when your income is high and withdraw when your income is low.

If you are contributing to RRSPs definitely consider using a self directed RRSP as there are many advantages. Also if you are considering withdrawing from your RRSP, do it in increments of $5,000 or less as the withholding tax is lower. The key in withdrawing an RRSP is to have a tax plan. Kustom Design can help you plan a tax effective RRSP withdrawl if this is what you are looking at doing.

There are many more strategies available with and without RRSPs so do come plan with Kustom Design to ensure you maximize your potential and minimize your tax. Some of the other things you can look at is using your RRSP to give yourself a “Self Directed Mortgage”, where your RRSP holds your mortgage! Other strategies could be tax shelters and flow through shares. Come take our Financial Boot Camp to learn more about all of these topics and more. You can sign up for the Financial Boot Camp on our website at www.kustomdesign.ca

About Kustom Design Group

Posted in Tax Advice Information and Updates | Tagged Calgary, CRA, michael lepitre, RRSP, save tax | Leave a comment

RRSP’s – A “How to” by Michael Lepitre: What are they and; Are they good or bad? Part 3

Posted on January 20, 2012 by Michael Lepitre

RRSP contribution limits are calculated annually on your “earned income”, not passive income, and show up on your Notice of Assessment. Always know your contribution limit before contributing, because if you over-contribute you will get penalized and have to pay for it! If you are unsure of your contribution limit you can always contact CRA to get it.

Another interesting fact about RRSPs is that you don’t have to contribute cash. You can contribute stocks or securities that you already own. They key is that they must be RRSP eligible investments.

There is so much to learn about RRSPs…let’s go on. You can also take a withdrawal from your RRSP to purchase your first home. This is called the Home Buyer’s Plan. You are not taxed on this withdrawal, but must pay it back over the next 15 years, or claim it as income over the next 15 years.

There is also something called the Lifelong Learning Plan (LLP), you can withdraw up to $10,000 a year, or up to $20,000 in total each time you participate in the LLP to help pay for your education. All you have to do is repay at least 10% per year for up to ten years. Participants must start to make repayments two years after their last eligible withdrawal, or five years after the first withdrawal, depending on which due date comes first. Amounts withdrawn must be repaid within 10 years.

RRSPs are one of the few “after the year” tax planning opportunities that the government allows. You can contribute to an RRSP for up to 60 days after the end of the calendar year and still have it qualify for that calendar year. This is an interesting factor as you can contribute to your RRSP in February 2012 and get a tax deduction for 2011.(an example) Why would the government allow this? There are a few reasons, such as RRSPs can bring out hidden money into the financial realm which earns income for financial companies, and those financial companies pay tax on the revenue generated. Also we must keep in mind that RRSPs are actually in trust for the government. If the government were in a position where they were collapsing financially they could take all the RRSPs as they are in trust essentially for the government if they need them! …This is of course a scary thought, but it must be considered!

About Kustom Design Group

Posted in Investment Tips and Advice, Kustom Design Accounting Services News, Tax Planning and Tax Preparation | Tagged Calgary, Calgary Tax Service, michael lepitre, RRSP, Tax Advice Information and Updates | Leave a comment

Kustom Design Group of Companies

Tax Season is drawing near!

Shareholder Loans Part 2

Shareholder Loans Part 1

RRSP’s – What are they and are they good or bad? Part 4

RRSP’s – A “How to” by Michael Lepitre: What are they and; Are they good or bad? Part 3

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