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Home Buyers Need To Check Residency Of Home Sellers If They Suspect The Seller Is Not Canadian

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Construction Activities: Reporting Obligations For Subcontractors

A July 17, 2017 Technical Interpretation examined the conditions which would require the filing of a T5018, Statement of Contract Payments.


Where a person or partnership primarily derives their business income from construction activities for a reporting period, a T5018 should be filed for any subcontractor payment or credit made relating to goods or services received in the course of construction activities. The reporting period may be a calendar or fiscal year but cannot be changed once selected (unless authorized by CRA). The term “construction activities” is broadly defined. It includes, for example, the erection, excavation, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling or removal of all or any part of a building, structure, surface or sub-surface construction, or any similar property. Such activities are considered to be those normally associated with the on-site fabrication and erection of buildings, roads, bridges, parking lots…

USA Citizens: Risks of Tax Non-Compliance

Photo by Aaron Kittredge from Pexels

Since January 1, 2016, the US State Department was able to deny or revoke passports to US citizens having a “seriously delinquent tax debt” or no Social Security Number associated with their passport. A “seriously delinquent tax debt” is one where the taxpayer owed more than $51,000, after January 1, 2018 (indexed going forward), in tax, interest, and penalties. 
An Alert on the IRS website recently noted that beginning January 2018 the IRS will begin certifying tax debts to the State Department. After receiving certification from the IRS, the State Department will not generally issue a passport.
In addition to passport denial and revocation, several states impose non-monetary, non-criminal sanctions for certain taxpayers who are sufficiently delinquent on their taxes. For example, New York, California, Louisiana, and Massachusetts may revoke driving privileges. 
Action Item: If you have an outstanding U.S. tax liability, or are concerned you may not b…

Reasonable Automobile Allowances: GST/HST Claim

A travel allowance paid to an employee for the use of their personal vehicle for business purposes will be non-taxable if it is reasonable. Where such reasonable allowances are paid, an input tax credit (ITC) may be claimed by the employer.The ITC is computed as the imputed GST/HST in the allowance, without adjustment for the fact that some costs likely did not attract GST/HST. In non-harmonized provinces/territories (such as Alberta and B.C.), the ITC would be 5/105 of the allowance.The ITC in a harmonized province is different.For example, in Ontario, with 13% HST, the ITC would be 13/113 of the allowance.Other HST provinces would apply this formula to their respective rate.
In a November 10, 2017 Tax Court of Canada case, CRA denied ITCs of $4,935 related to motor vehicle allowances paid to employees that were also shareholders. CRA argued that the allowances were not reasonable.
Taxpayer wins The allowances were based on the maximum per kilometre rates that the employer could deduct…

Door to Door Tax Scam

The Times Colonist (Victoria, BC) reports about a CRA fraudster coming to a citizen's door with handcuffs. Read more here.

Corporate Passive Investment Income: Proposed Changes

A new passive investment tax regime for Canadian Controlled Private Corporations (CCPCs) is proposed to apply to taxation years commencing after 2018. Passive income may include interest, rental, royalties, dividends from portfolio investments and taxable capital gains. 
Two significant changes are proposed. First, a limit to the small business deduction for CCPCs generating significant income from passive assets, and second, a new regime to stream the recovery of refundable tax to the payment of specific types of dividends (eligible versus non-eligible).
Access to the Small Business Deduction (SBD)The first prong of the proposals will reduce access to the SBD for CCPCs having more than $50,000 of passive income. CCPCs with passive income in excess of the threshold will incrementally lose access to their SBD, until $150,000 of passive income is reached, at which point the entire SBD will be lost. The prior year’s passive income will determine the current year’s SBD limit.
For purposes of…

Family Members: Can I Pay Them a Salary?

For a small business, whether operated as a corporation, proprietorship or partnership, it is quite possible that relatives of the owners or partners may be engaged as employees. Due to the closer familial relationship between employer and employee, CRA pays particular attention to ensure that the salary is truly an eligible deduction to the business. 
According to CRA, salaries to children and spouses are deductible as long as all of these conditions are met: the salary is actually paid;the work the family member does is necessary for earning business or professional income; andthe salary is reasonable when considering the family member’s age and the amount one would pay someone else.

CRA also states that T4s are required for all employees, including family members, and subject to payroll deductions, as appropriate. Payment in the form of room and board is not accepted by CRA.
CRA suggests that the average salary for an arm’s length person providing similar services under similar conditi…