What is the difference between a corporation and proprietorship?
A corporation is a separate legal entity from yourself. If you’re incorporated, you would have ‘Articles of Incorporation’, however registering for a Business Number or registering a trade name does not mean you are incorporated. If you incorporate your small business, you need to register for a Business Number and can also register a trade name. You do not need to incorporate to protect a trade name.
A proprietorship means you are the business. You are able to operate a business, register for a Business Number and register a trade name, but still remain a proprietorship.
Accounting vs bookkeeping
While bookkeepers record the financial transactions of your business, accountants analyze the data and use it to generate reports and prepare financial reporting records, including tax returns, income statements and balance sheets. Accounting involves creating the balance sheet, accruing for non-cash transactions and calculating the income taxes. At this stage, we make sure you get credit for all the deductions and write-offs you qualify for. We’ll also explain where all your cash went, how much equity you are building in the business, review your company’s financial results, plan for the future, and e-file all the tax returns, GST returns, T4 slips (wages), T5 Slips (dividends) and T5018 Slips.
About the CRA
The CRA is a Canadian federal agency that administers tax laws for the Government of Canada and for most provinces and territories. It also oversees the registration of charities in Canada and delivers social and economic benefits and incentive programs through the tax system. The CRA is responsible for reviewing tax returns and collecting taxes owing. Your accountant helps you prepare your tax returns and related documents, and is your representative with the CRA, much like your lawyer would represent your interests in court. We know the rules, laws and rates, and we handle your otherwise unpleasant dealings with the CRA. We make sure your books are kept in accordance with the law, and also ensure you’re taking advantage of every tax credit and deduction available to you.
What kind of clients do you work with?
Right now we are only working with small business owners who are Incorporated. We specialize in bookkeeping and accounting for consultants, contractors, subcontractors, self-employed tradespeople, realtors, professionals and holding companies. We’re always available to answer your questions, big or small, and can recognize if there’s a tax advantage you’re missing out on.
How do I find my CRA profile and account balances?
You can go to www.cra-arc.gc.ca/myaccount and sign-in or register for an online profile. If it is your first time using this service, this may take a few weeks. The CRA “My Account” profile allows you to track your refund, view or change your return, view your RRSP limit, change your address and much more. Once you complete the registration process, a CRA security code will be mailed to you. Once you receive this security code you can enter it during the “My Account” registration process and gain access to your profile online.
Can’t you just do it on your own?
Technically, yes but it’s a lot easier with an expert on your team. In fact, the CPAs we have on staff have extensive knowledge of the changing tax laws – including ones related to the equipment and resources you need to do your job. You won’t spend your valuable time sorting through a mountain of receipts. You won’t have to deal with the CRA. Your taxes will be filed on time. And you’ll get a streamlined process that makes life as a small business owner just a little bit easier.
Accountants prepare your tax returns based on the information you provide and your accountant does not know things about you unless you tell them. The accountant will have a director of the corporation sign a Management Representation Letter prior to filing the corporate tax return. By signing this letter, the director agrees that there’s nothing in the financial statements that they know to be false or misleading. When reviewing a tax return with you, we answer any questions you have and explain the returns in as much detail as you need. If a mistake is made on our end, we resolve it without any inconvenience to you.
Over contributing to RRSPs
It’s extremely important that you do not over-contribute to your RRSP account. Before you invest in an RRSP, check the balance on your NOA or call us to confirm your RRSP balance. RRSP contributions that exceed the allowable RRSP threshold available to you is subject to a 1% per month tax.
If you receive wages, and are under the age of 65, then you must pay into CPP. The more you pay into CPP over your career, the larger the benefit you will receive when you retire. CPP contributions are not a tax – they are an investment into your pension plan. If you do not contribute to CPP, you won’t receive CPP payments when you reach age 65. In 2016, the typical CPP cheque is about $1000/month for people that contributed regularly over their career. This amount increases with inflation each year.
Calculating payroll remittances
You can use the CRA payroll remittance calculator (see link below), or you can ask us to determine the amounts. There are a number of payroll technologies and services available, including Payment Evolution. Ceridian is a payroll service that you can engage to perform your payroll administration. CRA Payroll Deductions Online Calculator:
For regular remitters, payroll remittances are due by the 15th of the month following the payment. If you’re an owner paying yourself a wage on an annual basis, your CPP must be paid in full by January 15th of the year following. T4 Slips are due February 28 and summarize all the wages and remittances made for each employee during the year.
What is a CRA “Investment Account”?
To declare T5 or T5018 slips, your business needs an investment account. An investment account number is your 9 digit Business Number followed by “RZ 0001”.
Is my “contractor” actually an “employee”, in the eyes of the CRA?
This is a very important question and has been at the centre of many court cases and tax disputes. The answer depends on many contributing factors and there’s no silver bullet that decides either way. The penalty for paying a worker as a contractor, when the CRA later deems them to have been an employee, is that your corporation should have been paying half that employee’s CPP and EI contributions during the entirety of employment. There would also be penalties and interest on these amounts. The employee would also have been eligible for all other benefits under employment law.
What deductions are there for rental properties?
If you have a rental property, the basic write-offs include the interest you pay on your mortgage, property taxes, insurance, utilities (if you pay them), repairs & maintenance, property management fees, advertising, accounting fees, condo fees, and bank fees. Some repairs are expenses and some repairs are capital additions. Larger, more permanent improvements to the property must be capitalized and depreciated over a number of years. If you have ever or plan to ever use the rental property as a principal residence, then you must be careful to not disqualify yourself from claiming the Principal Residence Deduction. The Principal Residence Deduction is available on your home, and means you don’t pay tax on capital gains of your own home when you sell it. If, at any time, you rent out the house that you also plan to claim the Principal Residence Deduction on, you should talk to us first.
The CRA sent me a Process Review letter – what does this mean?
Each year, the CRA conducts several review activities that promote awareness of and compliance with our self-assessed Canadian tax system. It can happen a number of different ways, including by random selection or when unusual information appears. The government’s analytics and software continue to improve their ability to spot mistakes and unusual items, which means Process Reviews are increasing in frequency each year. A process review letter will request documentation or receipts to support a specific claim on your tax return. As your representative with CRA, we can respond to any letters and work together to gather and submit the necessary paperwork.
What services do you provide?
Everything really. As your small business partner, we do your bookkeeping, deductions, write-offs, expenses, tax returns, GST filing and more. We can help you with tax planning too.
What’s the real value of working with True North?
We’re true small business experts who understand the unique challenges related to being a small business owner. We do everything possible to streamline the process and make running a small business as easy and stress-free as possible. Need more convincing? Here other some other benefits of working with us:
A customized calendar of important dates and payments
Automated tax & GST instalment payments through your online banking
A customized document request list using terms that you understand
Reminder notifications to keep you on schedule
Options when it comes to communication and file sharing – in-person, Dropbox or email
Efficient technology and software
One price with zero surprises