Archive for the ‘Business’ Category

Tax Loss Selling – Turn a Loss Into a tax Win!

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When it comes to investing let’s face it, you win some, you lose some. While capital gains are always the goal, sometimes selling shares incurs a loss – but is it all bad? Not when you consider the “glass half full” strategy – “Tax Loss Selling”.

What is tax loss selling?

Tax loss selling is a tax planning tool that can reduce potential tax liability by minimizing capital gains. So, if you have realized capital gains during the year, and don’t mind selling investments at a loss to help reduce your taxes, then tax loss selling is a strategy for you.

How it works

Let’s say you have two securities, ALPHA and BETA. During the year you decide to sell security ALPHA which would yield a capital gain, but you also held security BETA which underperformed and has an unrealized loss. If you sold security BETA as well, you could recognize the losses and reduce your overall capital gain, which reduce the taxes you pay.  In this way, your loss could become a win!

What else you should know

  • You (and your spouse) cannot repurchase the same shares within 30 days of the sale (that means before or after the sale). Otherwise, the CRA will consider your loss as superficial. That means the loss will be denied and added back to the cost of the newly purchased shares.
  • This selling strategy should only be considered when dealing with a non-registered portfolio.
  • If you have had gains in the previous three tax years and are expecting capital losses in the current year, you may be able to carry those losses back three years.
  • Conversely, capital losses this year may be carried forward if you are anticipating gains in the future. Capital losses can be carried forward indefinitely with no expiry.

In order to take advantage of the tax savings of this strategy, remember that December 27, 2019 is the last day to sell your shares. This is because only trades settled on or before December 31 will be considered for tax purposes. If you would like more information on tax loss selling, give us a call today and let us help you WIN at the tax game.

Business Owners – Meet Bookkeepers of the Future!

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From self check-out at the grocery store to the convenience of ATMs, many of us have come to appreciate technology that makes our lives easier. If you’re a business owner and in the market for a bookkeeper, there’s new technology available to make your life easier too! That is, if you’re informed and make the right choice. We encourage you to consider why many business owners are embracing automated bookkeeping tools, as apposed to hiring a traditional “human” bookkeeper. Here are some pros and cons to consider:

The DOWNSIDE to traditional bookkeeping

  • Bookkeepers are one of the unregulated professions in Ontario, so it’s hard to know if you have hired a good one – until it’s too late.
  • Many bookkeepers limit their role to simply balancing books, and then walk away. A good bookkeeper should help you keep a pulse on the health of your business, keep you CRA compliant, ensure you have the proper reports to make sound business decisions, and more.
  • Some bookkeepers shy away from technology viewing it as a threat to their job, as apposed to an opportunity to help you grow and manage your business.
  • Qualified bookkeepers are out there, but they are few and far between and almost impossible to secure because all the good ones are maxed out. Then, if you can find one, they’re not cheap!
  • Many business owners lack proper communication with their bookkeepers and aren’t kept in the loop with what’s going on with their finances. This has resulted in poor business decisions.

The UPSIDE to embracing automated bookkeeping tools

  • Automation tools are cloud-based, so you can access your data anywhere that has an internet connection and from any device.
  • Allows you to easily grasp what is going on with your business in real-time.
  • Routine tasks (i.e. bank reconciliations, accounts payable and receivable processing) are automated to the click of a button, eliminating the many hours of mundane, repetitive data entry.
  • Helps you keep CRA compliant, is always current and secure which saves you many IT headaches.
  • Automation of data-importing ensures data completeness and reduces the risk of other human errors.
  • These tools are easy to navigate and allow for real-time reports at your fingertips anytime, anywhere.
  • Add-on tools mean you can migrate to a paperless retention of important back-up documents quite easily.

Certainly, bookkeeping is evolving for the better. Understandably, you may have many questions. How easy is the transition to a more automated bookkeeping platform? Does that mean you won’t need a bookkeeper? How much does it all cost? Call us today to get your questions answered and see the many ways we can assist you in making your life easier!

Introducing: Plooto!

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No, it’s not a planet. But if you’re a small business owner, Plooto may just change your world.

Plooto is a cloud-based technology that allows you to streamline repetitive, monthly bookkeeping tasks so you have more time to grow your business. When you connect Plooto to your cloud accounting software great things happen. Here are a few we wanted to share.

Pay vendors with your money, not your time

After some simple set up, you can auto-load upcoming accounts payables (bills) which saves you valuable time each month.

  • Customize payment approval – with a click of a button, anytime, anywhere.
  • Transfer money via email – from your bank to their bank, directly and securely.
  • Pay vendors easily – using only their email address, no login required or storing of confidential or sensitive information.
  • Payment continuity – allows you to pay anyone, anywhere with no surprises or confusing interfaces.
  • Payment records are automatically updated – without you having to match payments with invoices.

Make paying you foolproof

Plooto ensures that paying you isn’t frustrating for your clients. This helps your cash flow to – well, flow.

  • Getting paid through email – lets clients log into their bank account to schedule a payment.
  • Accepting credit cards – without having to share sensitive credit card information.
  • Accepting pre-authorized debit – ensures clients pay you on time, every time.
  • Payment status – allows you to see if your client opened your email and can gently remind them if they haven’t paid.  

So, while Pluto may have been decategorized as a dwarf plant, Plooto cloud-based software is hardly small or insignificant in comparison to other accounting software. Call us today to learn how you can start letting Plooto work for your business.

Cloud-Based Payroll Apps – TO THE RESCUE!

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We all enjoy getting paid. However, the process to ensure everyone gets paid accurately and on time can be a challenge. If payroll is part of your responsibilities, then you know what we’re talking about. Chained to your desk for hours, struggling to keep up with compliance rules, stressing to reach your payroll deadline and then – YIKES – you’re right out of cheques! Does this sound familiar? It might, if you’re using desktop payroll software. If you’re stuck in this vicious cycle, then cloud-based payroll apps may be the rescue remedy you need!

Set up takes minutes

Once you’ve transitioned to cloud accounting solutions, such as QuickBooks Online, it’s really becomes quite simple. A few minutes of your time setting up a payroll app today can save you BIG TIME down the road. For example, if your payroll is pretty consistent every month – it can basically run itself. Hourly employees, salaried employees, or contractors can all be set up to be paid at the same time.

Why should  you do all the work?

Most payroll apps offer similar features, some even do more than just payroll. The payroll apps outlined below allow employees to set themselves up and be responsible for their personal information. For example, they can review and access their paystubs on-line whenever they want. The apps also automatically perform payroll calculations and update the latest tax tables which takes the pressure off you! Here are some other liberating features:

  • Direct deposit – No more cheques required!
  • Automatic payroll calculations – No more tedious number cruching!
  • Online paystubs – Help save the environment!
  • CRA/WCB Remittances – Ensures you’re compliant!
  • Records of Employment – Off-boarding made easy!
  • Year end T4/T4As – The app prepares these, not you!

So, if you’re interested in breaking free and saying good-bye to the old-school approach to payroll, call us today. We’ll help you get current, get organized, and save you the precious time you need to focus on growing your business.

Goodbye “Old School” Data Entry – Hello Hubdoc!

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Are you up to your eyeballs keeping track of receipts, invoices and bank statements? Business owners know that the CRA requires these supporting documents to be in order in the event of an audit. However, the time it takes to gather and input all this information throughout the year can seem daunting! We feel your pain and want to share a more efficient way to keep track of these necessary documents.

Introducing: Hubdoc! Hubdoc is a cloud-based software that helps you collect, manage and organize receipts, invoices and statements seamlessly. Here’s how it works:

  • Hubdoc automatically fetches the latest monthly bank and credit card statements from all major banks. It can also fetch monthly bills from a growing list of vendors. (Yes, it’s that helpful!)
  • Hubdoc keeps a digital backup of your receipts and invoices in one central location. These can be easily submitted to Hubdoc through automatic fetch, email forwarding, scanning or just taking a picture through their mobile app. (Yes, it’s that easy!)
  • Using machine learning technology, Hubdoc extracts key information such as vendor name, dates and dollar amounts from your uploaded documents. (Yes, it’s that smart!)
  • Hubdoc integrates with QuickBooks Online which can help you automate your bookkeeping. With a click of a button, you can export the extracted data from Hubdoc and automatically create a transaction in QuickBooks Online. (Yes, it’s that automated!)

Using Hubdoc to automate your data entry and bookkeeping chores will leave you valuable time to focus on expanding your business. To refresh your memory about Cloud Accounting, please refer to our June 2019 blog. To find out if Hubdoc is right for you, contact us anytime. Say goodbye to old school headaches and say hello to Hubdoc!

What is Cloud Accounting

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Cloud accounting software is similar to desktop-based solutions, only they are hosted on the “cloud”. This means users will have access to their data from anywhere that has an Internet connection, and from any device – including laptops, smartphones, and tablets. 

Why should you adopt it?

One great reason is that cloud software applications are automatically kept current, so users no longer spend their time dealing with version updates. Cloud accounting also provides business owners the ability to get their information updates in real-time, anytime. Additionally, new features are being added regularly to increase productivity, which frees up precious time to focus on your business.

Similar to Netflix, most cloud accounting solutions carry a monthly subscription. No long-term commitments mean you won’t feel locked in with a specific vendor or cloud accounting technology. A monthly subscription allows you to manage your accounting records (including importing bank and credit card feeds), email invoices, and add useful third-party productivity improvement applications (applications are an additional cost).

What are the benefits?

Here are some other benefits to think about when contemplating cloud accounting solutions:

  • Access to extra software features that are not available on the desktop versions
  • Streamlined data-importing processes and built-in controls ensure superior data accuracy
  • Multi-user access
  • Unauthorized access prevention
  • Safe storage of financial data
  • Sync data automatically
  • Most accounting software companies are improving the features and functionality of their cloud-based software, NOT their desktop software

Still unsure if cloud-based accounting solutions are for you?

Here’s where we can help. We’ll provide a thorough analysis of your situation to ensure you are moving to the right software environment. Once you’re ready to move forward, we can help transition from the desktop applications you may presently be using into the appropriate cloud-based solution. Call us today and follow the “cloud”!

Should You Steer Clear of Company Owned Vehicles?

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It depends on how much business driving you do. In cases where business use is minimal, a company owned vehicle is simply a tax nightmare.

The Bumpy Ride from Phantom Income

On company owned vehicles, CRA imputes phantom income to the employee as follows:

  • Standby Charges – Calculated with reference to the purchase price of the vehicle (if owned) or the manufacturer’s suggested retail price (MSRP) for a leased vehicle.
  • Operating Cost Benefit – Calculated in relation to the company paid outlays like gas, repairs and insurance, etc.

In either case, you must include this phantom income depending on the extent to which the vehicle is used for business purposes.  If you don’t drive more than 1,000 KM per month on business AND have more than 50% personal use, the standby charge is a big number – the more expensive the car, the bigger the number gets.  The kicker is, as your car depreciates each year, the standby charge income stays high based on the original price you paid (or MSRP, if leased).

A Typical Road Travelled

Consider a typical scenario. A vehicle costing the company $40,000 is used 365 days a year by an employee (maybe the owner) who drives it to and from work (which is NOT business use) for a total of 30,000 personal KM a year.  The automobile benefit for this employee is $18,000 each year.  This amount is taxed at the same rate as salary and must be included on the employee’s T4.  If the automobile is used for five years, the benefit will remain at $18,000 even though the vehicle is depreciating over time. Over five years there would be $90,000 reported on this employee’s T4, even though the original cost of the vehicle was only $40,000!

Driving the Point Home

If you want to reduce the standby charges and operating cost benefit because you believe you are using your vehicle a lot for business purposes, buckle up for a tough drive! CRA requires you to maintain an accurate mileage log as proof of the percentage you use your vehicle for business. Also, if your phantom income is not reported properly, a CRA audit is sure to ensue, along with penalties and interest – we see this all the time!

The bottom line to our opening scenario, is that it makes better sense for the employee to buy the vehicle and ask for a tax-free mileage reimbursement for business KM’s driven at CRA’s allowed per KM rate.  No T4 implications, no phantom income, no complex reporting, no hassle. They simply keep track of the few business KM’s to support their expense claim. Done and done!

If you’re contemplating a business vehicle, we suggest giving us a call to discuss the tax implications. In the meantime, use this Automobile Benefits Online Calculator and start steering yourself in the right direction today.  https://apps.cra-arc.gc.ca/ebci/rhac/prot/ntr.action

The Many Hats of Small Business Owners

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If you’re the owner of a small business, to say you multi-task is an understatement! The various “hats” you wear can include accounting, marketing, information technology and human resources – which aren’t exactly small tasks in themselves.

If you’re feeling overwhelmed by the constant juggling act, out-sourcing your accounting functions can take some of the pressure off. That’s where we can help!

Scarrow Yurman & Co. has had the pleasure of supporting small business owners for over 30 years. Our support includes providing taxation and financial reporting services to ensure your accounting needs are organized and compliant. We worry about the tax rules and numbers, so you don’t have to!

Our vast experience with small business has also impelled us to write some monthly blogs. Whether you are one of our clients or not, we want to hear from you. Tell us what financial related topics interest you.  Here are a few from our archives:

A Business Use for GPS Systems

Benefits of Job Costing

Cloud-based Bookkeeping Software – A Word of Caution

Do You Need a Financial Advisor?

Incorporation of The Business; The Advantages

Mandatory Requirements for Efiling Personal & Corporate Tax Returns

Personal and Corporate Tax Instalments

So, if you are feeling overwhelmed as a small business owner, let Scarrow Yurman & Co. take on the “accounting hat”. Give us a call today (905-475-5200) and hats off to hats off!

New Tax Breaks for Equipment Purchases

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If your business is considering purchasing office equipment, vehicles, computers, practically any capital asset – we have fantastic news! The Department of Finance announced that as of November 20, 2018 tax depreciation rates have TRIPLED from the previous rates.

If you think that’s a nice perk, check this out! As of November 21, 2018, any manufacturing or processing equipment (new or used), purchased and used in Canada can be expensed at the full purchase price for tax purposes in the year the equipment is placed into use. This juicy new rule lasts until 2024 when the write-off drops to 75% and is phased back to the current rates after 2027.

To put this into perspective, if you are paying tax at the higher corporate tax rate of 26%, and your company is making good profits, you can get 26% tax relief in the year of purchase for manufacturing equipment – so it’s like that type of equipment is now “on sale”. 

For companies thinking of making capital asset purchases in the near future, we’re certain this awesome news tidbit will help you make that decision sooner than later!

Bookkeeping – Working Smart

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Bookkeeping is not just entering transactions, reconciling your bank statement and saying, “I’m done!” Bookkeeping lays the foundation for everything that is extracted from your financial data, and business owners deserve data they can trust. Good bookkeeping does require work, but working smart now saves time, money and headaches later. Here are some tips for working smart.

Be organized and efficient – We’ve all been there – scouring pockets, wallets and vehicles searching for a missing receipt from months back. That’s human, but frustrating nonetheless. However, when you have a consistent and secure location for receipts and allocate expenses as you pay for them, you decrease the risk of missing receipts or transactions.

Be software friendly – Trying to save money by not upgrading to the latest software or software update is not working smart. Not using current software can leave your files vulnerable to cyber hackers, not to mention the frustration of a slow and glitchy software experience. Keeping current also means you’ll benefit from many new features and improvements that can make bookkeeping easier and more efficient.

Be financially separate from your business – It may take some time to set up business accounts and credit cards but doing so is working smart. It’s much easier to track business transactions, and you’ll save money as your accountant won’t have to spend time sorting business vs personal transactions at each year end.

Be reconciled to reconcile – Reviewing your bank statements, credit card and vendor statements monthly (at the very least) can help you catch errors or potential fraud early in the game.

Be mindful – Use a sticky note, set an alarm in your calendar – whatever it takes to prepare and file sales tax, employment and payroll tax, worker’s compensation and income tax ON TIME. Also, remit the amounts owing ON TIME to avoid penalties and interest.

Be careful – If your bookkeeper is unsure about the posting of any unusual or complicated transaction, they should seek guidance from your accountant. A quick call can save a lot of trouble down the road.

Working smart may mean some extra effort and diligence today, but is definitely worth it to have a successful tomorrow!

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