Nothing is more frustrating than hiring someone only to have to start all over again within a short time…In addition to the cost of high turnover rates, your quality of service may be a casualty as well. Addressing turnover rates can be challenging for many employers, but luckily, we have put a list of things to implement to help you address the issue.
The first step in reducing turnover is to establish a recruiting and hiring process that enables you to identify candidates that have the right temperament for the industry. Ask potential employees about their goals to ensure that their long-term goals fit with the employment being offered to them to ensure this isn’t a temporary stepping stone for them.
Once hired, you may find it useful to have employees sign a code of conduct document to not only set the expectation of appropriate behaviour, but hold them accountable when the need arises.
Providing ongoing training enables your employees to keep sharpening their skills and learn your industry better. Training to new employees is necessary for them to work more effectively and efficiently and most importantly bridge the expectation gap between what is expected of them and what is being delivered. Confident employees generally have more pride in the work they deliver. Training manuals may also provide more legitimacy to your company. Ongoing training may be useful to develop either soft skills or specific skills necessary to perform the job. In addition to training, incentives for good service provided may also boost employee moral. Intrinsic rewards (rewards of a non-monetary base that provides a positive emotional reaction) are more effective than monetary rewards. Employee of the Month awards may provide employees with a boosted sense of accomplishment. Choosing what type of assignments they work on can make them feel part of the team and foster more loyalty on the long term.
Modern and quality equipment increase the quality of service and increase quality of service expectations among staff. Setting the stage is always important because working with old broken-down equipment sets expectations low. Do your employees come to work and have everything they need to perform their duties? If not, it may foster unnecessary frustrations. Salary packages should be competitive to retain staff and real advancement opportunities should be made available. Being a manager requires a lot of psychology work and may not be suited to everyone. If turnover is one of your issues in your business, I would consider hiring someone who has the necessary skills to help you manage staff.
Today is May 15th and we are exactly 29 days away from filing your sole proprietor tax return. If you are incorporated and your year end is December 31st, you are about a month and a half away from your filing deadline. This might be a stressful time of year for you…trying to find receipts left in your glove compartment…catching up on entering data into your accounting software…maybe you do not know who still owed you money as of December 31st.
Whatever your situation is, it may be a good time to think about whether your system is working for you or against you. A client of ours constantly asks two questions on her social media: what is holding you back in your business and how can I help? Your business’ finances are usually an overlooked piece of the puzzle and we can definitely support you keeping everything in order. But what if you cannot afford a $500 per month bookkeeper you ask? Not all clients need us the same so we offer different accounting support.
1 - Light Involvement: we have some clients that like to do their day-to-day and maybe even their bank reconciliations…but staying current with filing their GST returns and remitting payroll remittances might be where they need support. In this scenario, we would set you up with a cloud-based accounting system so that we can both access your information. There is also an option that is very cost-effective if you do not wish (or need) for a hands-on accounting system where the system automatically compiles the information for you on a daily basis. The initial set up takes some work, but it’s definitely worth it in the end because your year end is ready come tax time.
2 - Getting Deeper: some clients prefer to leave their invoicing and keeping track of payments coming in to us. We have some clients set up on cloud accounting software for those who still wish to see their information at any moment. Other clients are set up on our desktop software and are provided with monthly financial statements. We do all of their GST, payroll support, etc. We also provide our clients with what we call the decoding of financial statements to enable the client to understand their financial position to make good business decisions.
3 - High-Level: we have some clients that require more guidance in making business decisions. Business strategy support is why they came to us on top of bookkeeping support. We can answer questions of where are we and where are we going? They need cashflow projections, growth projections, government grants support, and other business decisions.
If you are struggling to keep everything organized, come have a chat with us. We can work out a plan to let you focus on what you do best.
Can I write that off? If you have asked this question, you are in good company. Getting to know what is a true business expense can save you bundles at tax time and prevent CRA to disallow your expenses. It can be pretty hairy, as a tax accountant, to figure out what your expenses should look like if you mixed your groceries bills with office supply receipts. The more you ask your accountant to pull out their calculator, the more it will cost you to get your taxes done. Here is what we recommend to make your life easier (and cheaper).
1. Keep your business account for business.
It is tempting to run through the drive through and reach for the business debit card. I would caution you against that. It blends business expenses with personal. At the end of the year, if you have not done anything with your books, it can be hard to remember if you bought that printer paper for personal use or for business use…or maybe that purchase was for the kids’ school supplies…who really knows?
The real bad news in this equation is that if CRA decides three years down the road that your paper purchase was in fact the kids’ school supplies, you will not only owe the taxes on the increase in your income, but the interest on the date that the taxes were due. For example, if CRA is auditing your books on May 15, 2021 for the 2018 year, your interest charges will be calculated using the date of April 30, 2019. That is two years of interest to add to the tax bill.
2. Get an app.
An app is a cheap solution to your accounting problems. We have people with apps that pull data directly from their business bank and credit card accounts automatically. It requires a bit of work initially to set it all up…but once the set up is done, the app gets it done for you. You can take pictures with your phone using the app for it to match it to bank transactions. It even breaks out the GST!
3. Know what you can claim as a business expense.
The big question is: did you use it to earn income? The $40,000 kitchen renovation you just did probably did nothing to help your yard maintenance business. I think the meals and entertainment receipts are one of the most questionable ones you might have. If you meet a client for business, keep the receipt and write the name of the client you met with. It is the surest way to ensure it does not get disallowed by CRA.
Just like marriage, the coming together of two people can be bliss or a complete disaster. It starts off with a great idea; Mark and Mike love each other’s company and both are experienced plumbers. What could be better than going into business together?
Pro Tip #1: Put Everything in Writing
The informality of the relationship may make you feel like just because it is your friend that nothing needs to be in writing, but the opposite could not be truer. Having things in writing keeps the both of you accountable to your agreement and your partnership.
Speaking of paper trails…you should also both be aware of what is going into the bank and what is going out. If you cannot reconcile your bank and keep accurate records of your accounts receivable, consider hiring a third unrelated party to keep track of those things for you.
Pro Tip #2: Put Your Cards on the Table From the Beginning
Conversations are much easier to have when you are in the honeymoon stage of your partnership. Before he crashed the company truck, it may be easier to discuss how an accident may affect each partner’s share in the insurance costs.
Other important conversations might be:
1. When will we pay dividends? 2. How do we decide who gets paid what? 3. What if we hire someone to help? Where does this person’s salary come from? Who tells this person what to do? 4. What happens if one of you dies or is unable to work? 5. How long do you wish to own your business? 6. What if a buyer shows interest in purchasing your business?
Pro Tip #3: Hold Each Other Accountable
It all boils down to fair and honest communication. If the other party angers you, tell them…in a nice way. There is a tendency to let family and friends’ poor behaviour slide…but it is not a good business move. Pick a time when you are both fresh and clear minded. Remind yourselves why you are in business together, then tackle the hard stuff.
Clients usually come to us wanting guidance on how to pay themselves. It is an important piece of the puzzle because the method of remunerating yourself affects not only your cashflow today and after retirement, but it also can change our game plan on how you can save for retirement.
There is a large body of financial experts that will argue that paying one’s self solely dividends will provide the business owner with the best tax savings and with the right strategy a greater retirement plan. However, if you do not pay yourself a salary, you cannot invest in RRSPs and you do not pay towards your Canadian Pension Plan (CPP).
CRA call center agents receive calls from distressed taxpayers that were under the impression that CPP was every citizen’s right and had not understood that not earning a salary meant that you were not contributing to your CPP. It can be a harsh discovery at 65 when your retirement plan included your dependence on your CPP. Conventional wisdom dictates that owners of a corporation that has annual taxable income of less than $500,000 you should pay yourself enough salary to maximize your RRSP and CPP contributions and pay yourself and pay dividends to yourself and your spouse for additional tax savings through tax splitting.
Still unsure of what to do? Contact us, we would love to discuss your options with you.
Are you self-employed use your car for work? Maybe you are an employee and your employer pays for all expenses related to the vehicle you use for work. A mileage log is an important step in using your vehicle as a tax write-off. Keeping poor records can result in an expensive blunder if CRA decides to come knock on your door for a surprise audit.
A detailed logbook is the best defense to support any vehicle expense used as a tax credit. For each business trip, you will need the following information:
number of kilometers you drive
If you do not wish to keep a paper log, there are many apps on the market to help the task of keeping an accurate log. Please also remember to jot down the odometer reading on your vehicle at the start and end of the fiscal year.
As a side note, if you change your vehicle during the year, please keep all details of the sale of your vehicle and the purchase of your new one. Don’t forget to record the odometer reading on both your old vehicle and the new one!
Have more questions? Do not hesitate to contact us!
Why pay for a professional tax preparer? I am happy you asked! It is so tempting when there are tax preparation software companies that boast that it is just like having an accountant guiding you through the tax preparation journey. Here is the thing, even with a tax software you can get yourself in trouble doing your own taxes or maybe you have more questions and cannot find the answer.
You are an employee and you owe a lot of money this year.
Being an employee, you rely on your employer to take off enough taxes so you won’t have to owe a large sum of money at tax time. However, there are some situations that arise that can result in you owing at the end of the year. Common culprits are having two or more jobs at once, the year following parental leave, and not updating tax forms with your employer after your life circumstances change.
You own an incorporated business.
There are many options in how an owner of an incorporated business can chose to pay themselves. You can elect to pay EI, pay yourself a salary, pay yourself a year-end bonus, payout your shareholder loan or pay yourself or others dividends. Your choice will affect your retirement options when you are ready to retire because if you do not pay into your CPP, you will have no CPP benefits during your retirement years. Do you have a spouse that you can split your business income with and pay less in personal tax and less corporate tax?
You are a sole proprietor.
Being a sole proprietor is most likely the greyest tax zone there could be. There are so many expenses that could be used as a business deduction. This is where a lot of folks get themselves in trouble. Your $60,000 kitchen upgrade is probably not an admissible business deduction if you work from your downstairs office and your work does not involve any cooking. A professional tax preparer can help you draw the line between a business deduction and a personal expense. Sure, you may pay less tax upfront, but in case of an audit, you will owe the tax plus interest and penalties on inadmissible expenses.
You have different investments or medical expenses
RRSP slips are fairly common but require understanding about the timing of the purchase of money invested in RRSPs. Slips that show the book value and disposition costs that require a T5008 generally need more expertise. Medical expenses can be tallied up for a twelve-month period ending in the year of filing…it does not necessarily have to be for the calendar year.
Have more questions? Call us. We are always happy to hear from you.
Do you have children living with you? Beyond the joy and the fingerprint smudges, they can also provide you with some tax credits if you have had to pay a daycare, day nursery schools, caregivers providing child care services, day camps and day sports schools, boarding schools, overnight sports schools or camps where the room and board is involved. Keeping receipts is always necessary when you would like to include it into your tax return. We have encountered situations where the caregiver does not provide tax receipts to parents which means parents cannot use the child care expenses as part of their tax return.
There are different amounts that CRA allows for children of different ages and for children with or without a disability. For example, an amount of $8,000 per child can be claimed a child six and younger as opposed to $5,000 for children seven or over and $11,000 for children with disabilities. Generally, the rule is for the parent with the lower income to claim the credit but there are some exceptions. The higher income earner may claim the credit if the lower income spouse was enrolled in an educational program, was unable to care for the children due to a physical or mental impairment, was in prison or there was a breakdown in your relationship.
If there is a shared custody, the parents can form an agreement to share the credit. However, if one parent is in primary care of the child or children, then they will receive the credit. If you are new to your shared parenting arrangement, Form RC66 should be submitted to CRA to apply to share the credit. If one of the parents enters into a relationship with a person who is not the parent of the child but has the lower income, they may be the eligible person to claim the childcare credit in that household.
Also important to note; child support payments cannot be used for the childcare credit.
Do you have more questions? We would love to help. Contact Us.
Do you have medical expenses? Wondering if you can use them to reduce your tax owing? CRA has a long list to specify which medical expenses can be claimed on your tax return. Some examples of medical expenses that you cannot deduct are diaper services, non-prescription services, cosmetic surgery, vitamins and gym fees. If you are unsure, the best bet is to keep the receipt and check with us at tax time.
Maybe you did not know about the medical expense last tax season and you encountered the bulk of your medical costs between November and February ending in the tax year. The good news is that the timing for medical expenses does not have to be the same as the calendar year. However, the twelve months we choose to capture in one tax year has to end in that tax year. So, if we are filing your 2020 taxes, you must have paid for the medical expenses during a 12-month period that ends in 2020.
The timing becomes also important when we consider how much your total medical expenses cost you. The rule is that in order to claim medical expenses, they must total 3% of your net income (or $2,352 – whichever is less). One person per household (spouse and dependants) should claim the medical expenses.
Do you have more questions? We would love to chat.
Donating to a charity can make you feel like you are contributing to making a difference in this World, but can also give you some tax advantages. In most cases, you can claim up to a limit of 75% of your income…so the sky is essentially the limit.
Did you forget to claim your donations last year?No problem. You have five years to claim a donation. This may be to your benefit to accumulate multiple years because the charitable credit is greater for donations of over $200. You can also transfer your donations to your spouse (or vice versa) to maximize the tax impact of your donation.
The federal credit itself can make up to 29% of your income while the provincial income can reach up to 21% of your donation.
For example, Derek makes a $500 donation to a registered charity in 2019 and lives in Alberta:
1. The federal charitable tax credit (15% on the first $200 and 29% on the remainder) can be calculated as such: (15% x $200) + (29% x $300) = $117
2. The provincial charitable tax credit (10% on the first $200 and 21% on the remainder) can be calculated as such: (10% x $200) + (21% x $300) = $83
3. Derek’s total charitable tax credit is $200 Derek can use his $200 credit to reduce taxes owed that tax year. If he does not have taxable income in the current tax year, his best bet would be to hold onto those donation receipts for a year where his income is high enough to be taxable or his spouse can use the credit instead.