Author Archives: Avner Polatsek

Cross Border Tax

Tax Planning and Preparation for individuals or entities that need to file in both the
US and Canada

Why You Need To Hire A Cross Border Tax Specialist

Filing your taxes can be stressful and can cause so much hassle. It can be more confusing if you are a US citizen and should consider a lot of rules and restrictions with your taxes. You might as well want to consider hiring a Cross Border Tax Specialist to help you with filing all your taxes.

Cross border tax specialists are experienced professionals who can comprehend with the existing and changing laws in Canada and US. What these specialists can do is to help their clients figure out certain segments like deductions and savings that their clients can get from their taxes. With the help of a cross border tax specialist, their clients can literally save time on computing their taxes and even submit their forms right on time. Because you wouldn’t want to end up paying more for your delayed files, right?

Hiring a cross border tax specialist is recommended, especially if you have multiple business transactions at hand. You can avoid confusions with the filling process, avoiding penalties to some errors or missing documents when you personally do the filing.

Some of these specialists are professionals that are certified public accountants who are registered and licensed to handle your tax concerns. There are also enrolled agents that you can consider to cater you with different financial situations. Although these enrolled agents aren’t considered as CPAs, they still have earned the privilege to represent tax payers through the IRS comprehension tests and experiences. These EA’s are already well equipped, so including them in your options are legitimate. Tax attorneys are also actually good for tax preparation needs as they understand client’s tax disputes, if there are any.

Given that hiring a cross border tax specialist poses great benefits, it is important for the client to build trust with their tax specialists. Here are some qualities that you must look for:

  • A true professional

Accountants have their areas of specialties. So you must find a professional that knows proper ethics to handling tax accounts and is very much familiar with your line of business. A good tax accountant should show commitment to the profession and should be involved in different industry groups. A membership to a group or certain groups can mean they are updated with the current changes in accounting and tax codes.

  • Mutuality

Biases should always be disregarded when handling a client’s tax. They should also be able to understand you and your business as well. Understanding between the client and tax specialist can make filing taxes easier and faster.

  • Flexible

With all the workload, these tax specialists should be able to manage their time well. There are deadlines to beat, tasks that may have to be repeated and demanding work schedule. They must be flexible, most especially if you handle multiple businesses. Tax specialists should be flexible with these circumstances for them to work efficiently.

  • Strong Attention to detail

With deadlines to beat, tax specialists should be very keen and punctual to what they are doing. They have to stay focused and not easily distracted when working with their clients.

  • Confidentiality

Private matters are often disclosed when filing taxes. Choose people someone you can trust. A tax specialist should be professional in keeping all the records of his clients confidential.

Tax time can be stressful. With a cross border tax specialist, US citizens in Canada can be at ease in filing their taxes.

Insurance Claims Forensic Accounting

AP Forensic Accountants is a world class provider of insurance claim consulting and forensic accounting services. We are well respected by both policy holders and insurance companies because we prepare comprehensive, logical and well-documented claims that result in reasonable insurance claim settlements. In addition to preparing claims, we serve as testifying experts on insurance coverage litigation matters. We also assist our clients on pre-loss matters, such as business interruption values and maximum probable loss studies.

AP Forensic Accountants are uniquely qualified to provide forensic accounting and insurance claims consulting services:
We prepare claims across a wide variety of industries including high technology, manufacturing, hospitality and gaming, retail, real estate, oil and gas, energy, chemicals, hospitals, transportation, medical devices, mining, food production and others.

We prepare complex property and business interruption claims involving earthquakes, hurricanes, fires, floods, tornadoes, terrorist attacks, builders risk, equipment breakdowns, product recalls, and others.

Our Service Offerings: Forensic Accounting & Claim Preparation, Expert Witness Testimony & Litigation Support, Analysis of Insurable Values, Maximum Probable Loss (“MPL”) Studies, CGL Insurance Allocations

Back to school tax credits

As the leaves start to fall and students start to dread the approaching school year, life gets inescapably busy. The summer always seems to fly by and when September hits, parents of post-secondary students find themselves frantically moving their kids into dorms and shelling out cash for textbooks. With all of this chaos, many people forget to keep track of some important receipts and come tax time, they lose out on some great school tax credits and tax deductions.

Tuition Tax Credit

Post-secondary students can claim their tuition fees to receive a tuition tax credit and need either an official tax receipt or a completed form T2202A to do so. This tax credit is fairly straightforward and is commonly transferred to a student’s parents if their income isn’t very high or if the parents are the ones footing the educational bill.

Note: If there are any student loans involved, you might want to become familiar with the rules for claiming interest paid on student loans for after the schooling is finished.

Licensing or Examination Fees

Paying to take an exam or to receive a license in order to practice a certain profession or trade in Canada might be eligible for the tuition tax credit as well. There are some exceptions if you are being reimbursed by an employer, so make sure to check with your accountant before you file your tax return.

Deducting Student Moving Expenses

If a student has to move in order to go to school (at least 40 km closer than their previous home), they can claim their moving expenses. Unfortunately, claiming moving expenses for school isn’t exactly as helpful as it is for work. A student can only deduct their moving expenses from the money they receive as a result of attending school and would have to claim as income.

In other words, if a student receives a bursary or a research grant and has to move to another location to complete their educational commitment, they can deduct their moving expenses from that income.

Textbooks

Even though textbooks range in price dramatically from faculty to faculty, the CRA handles textbook tax deductions in a one-size-fits-all approach. You can claim $65 per month for full-time studies and $20 for part-time. Your accountant will use your Schedule 11 to figure out exactly how much you can claim.

Make sure to keep all of these school tax credits and deductions in mind as the weather cools and the semester starts up. You will reap the benefits at tax time!

If you have any questions, please feel free to contact us. We are tax specialists and would be happy to meet with you.

inheritance

Tax problems with your inheritance

When someone passes away, it’s unfortunately common for their estate to include some messy tax problems. Unless the individual or their family is on the ball and has been taking proper care of their taxes, they might be leaving behind quite a headache.

What kinds of tax problems occur with the deceased?

There are a few common scenarios where family members are left to deal with tax chaos after their loved one has passed away. Most of the time, the issue is a result of a lack of tax knowledge and can be completely avoided. Some of these tax problems exist due to:

  1. Unpaid taxes – If someone has experienced a long illness before their death, they may have been neglecting their taxes for multiple years. The estate’s executor will be responsible for completing the required forms and making sure that the deceased’s taxes are up-to-date.
  2. Inheritance or estate taxes – You might be surprised by what parts of an inheritance are taxable for the recipient. Because there are different laws for different forms of an inheritance (eg. life insurance beneficiary vs. property), what the deceased intended as fair might end up being quite unequal.
  3. Hidden funds or assets – While it sounds like a pleasant surprise to discover that a relative had an overseas bank account you didn’t know about, you might be less than enthused to learn that they had also been neglecting to share that information with the IRS or CRA and they owe taxes on that money.

Make inheritance preparations now

No one enjoys talking with loved ones about a time when they are no longer around, but making sure that their (and your) taxes are in order can make a considerable difference in the future.

The first step is to ensure that you and your loved ones have an accountant you trust to help you navigate your current tax situation. Your accountant should also know about your plans in case of death. He/she will be able to give you information about the taxes your loved ones will have to pay on their inheritance and will help you to understand exactly what you’re leaving behind.

The Chicago Tribune recently posted about potential tax problems with an inheritance and looked to Douglas Rothermich, vice president of wealth planning strategies at TIIAA-CRF for his perspective. “Most families don’t want to let assets blow up their kids financially or create a wedge within the family,” he said. “It’s really important that older people planning their affairs think it through ahead of time so their loved ones don’t inherit a tax mess.”

If you would like to talk about the tax situation of an inheritance you have received or to plan in case of your own death, please contact us. We would be happy to help.

bookkeeping

Do I really need a bookkeeper?

At AP Tax, we offer accounting services, like preparing tax returns, but we also provide bookkeeping in Toronto. One of the questions we are regularly asked is whether or not a business needs an accountant or a bookkeeper (most likely, both).

We think that the main reason that we’re asked this question is that the definition of these two roles is a little blurry. Why hire a bookkeeper when you already have an accountant?

Big Picture vs. Daily Life

The main difference between an accountant and a bookkeeper is that an accountant looks at the big picture of your business and can advise you on financial strategy, especially when it comes to tax time. A bookkeeper is involved in the day-to-day activities of your business and keeps track of your income and expenses. They might even manage your payroll and take care of your accounts receivable and accounts payable. In other words, a bookkeeper follows through with the strategy your accountant creates.

When should I hire a bookkeeper?

The answer to this question really depends on you, the business owner. Some people hire a bookkeeper as soon as they start a business because they know that they want to have accurate and tidy books right from the beginning. Others do their own until they get too big to do manage.

Because bookkeepers can usually be hired for as many hours as you need them on a weekly or monthly basis, you can have quite a bit of control over how much of an expense they will be.

5 Reasons You Might Want a Bookkeeper

  1. You don’t trust yourself to do it. A lot of business owners acknowledge that they might not have the knowledge they need to manage their bookkeeping properly.
  2. You don’t have the time. If you’re spending time sorting through receipts and chasing payment, you aren’t really working at your business.
  3. You would like to be organized. Professional bookkeepers have well-refined systems so that when something comes up, like a broken piece of equipment, they are able to find the information you need to respond immediately and avoid your business coming to a grinding halt.
  4. You could use the information to grow. Having up-to-date records allows you to analyze trends in your business and identify ways to strategically grow.
  5. You think that you could save more money. It’s extremely common for a bookkeeper to save a business more money than they cost the business to keep around. One of the fastest ways to lose money is by not knowing where it is going!

Out of all of these reasons you might want to hire a bookkeeper, accuracy is probably the one you should be looking at first. Incorrect books could be affecting the tax that you’ll pay and will definitely jack up your accounting bill at tax time.

Contact us if you would like to meet one of our bookkeepers and hear more about how they can put your books in order.

global

G20 tackles multinational tax evasion – the world’s tax controversy

If you’ve been reading our tax blog, you’ll remember that we posted about Apple Inc.’s tax controversy and drew your attention to a couple of the potential charges they were having to defend to the CRA. If you recall, the big issue was about their tax strategy and the way they were conducting certain parts of their business overseas in order to pay less tax.

They’re obviously not the only ones who saw an opportunity to save some money overseas and took it, but with Apple’s tax controversy bringing these multinationals into the spotlight, public anger has been brewing. Last week’s G20 Finance Ministers and Central Bank Governors’ meeting in Moscow responded to these companies by vowing to make it more difficult to spread their profits offshore.

Multinationals are forced to pay more taxes

Angela Charlton reported for Global News about the G20 meeting and put a special focus on ambiguous tax laws for online economy.

“Stashing profits offshore may soon get tougher for companies, thanks to an ambitious plan released Friday by the finance chiefs of leading world economies aimed at forcing multinationals to pay more taxes.

Low tax payments by major global companies — including Google, Amazon, Facebook and Starbucks — have sparked public anger in Europe recently, as governments are struggling with high debts, low growth and austerity measures that are hitting ordinary taxpayers.

‘National tax laws have not kept pace with the globalization of corporations and the digital economy, leaving gaps that can be exploited by multinational corporations to artificially reduce their taxes,’ the Organization for Economic Cooperation and Development said in announcing the new tax plan Friday. It was unveiled at a meeting of the Group of 20 finance ministers in Moscow.

The Paris-based OECD says that the new 15-point plan includes ways to close loopholes and allow countries to tax profits held in offshore subsidiaries. If it is adopted, the measures would be implemented over the next two years and target such practices as deducting the same expense more than once, in more than one country.

The plan also has a special focus on the online economy, where commerce flows across borders constantly and it’s harder to tie revenue and profit to a single country.

U.S. Treasury Secretary Jacob Lew hailed the plan as a ‘major step toward addressing tax avoidance by multinational firms.’ In a statement out of Washington, he said, ‘We must address the persistent issue of ‘stateless income,’ which undermines confidence in our tax system at all levels.’

The plan’s designers insist it isn’t anti-business, and is in part aimed at making things more consistent for companies and governments.” Read the entire Global article here.

If you’re interested in reading more about the G20 meeting, check out Finance Canada’s release!

 

 

test tube science

SR&ED: Cash in on research and development!

Canada is known around the world as one of the biggest supporters of Scientific Research and Experimental Development, primarily through it’s SR&ED tax incentive program. Every year, the SR&ED program hands over $4 billion worth of investment tax credits (ITC) to over 18,000 Canadian corporations, sole proprietorships, partnerships and trusts.

That’s a lot of money up for grabs!

The point of the SR&ED program is to encourage Canadian businesses to pour their efforts into scientific and technological advancement in order to move their business forward which, in turn, helps Canada become a leader in these industries.

A Quick history lesson

The idea of the government providing support for research goes way back to the 1940s, when the federal government first introduced tax deductions for research and development. Since then, the SR&ED program has helped to fund countless projects, continually uncovering new information by way of scientific research and experimental development.

So, how does the SR&ED program work?

The SR&ED program gives tax credits to Canadian businesses that are performing research to uncover new information.

“Any business that is involved in basic or applied research, or in advancing technology in order to improve or develop new materials, devices, products or processes may be eligible under the SR&ED program.” (CRA)

Full descriptions of basic research, applied research, and experimental development, can be found on the CRA website.

The Canadian government then provides refundable tax credits for a certain percentage of eligible expenses from this research and development.

How much money are we talking about?

Canadian-controlled private corporations can receive a tax credit for 35% of their qualifying expenditures up to the first $3 million. After that, they receive 20%. If you’re another kind of Canadian corporation, proprietorship, partnership or trust, you can receive 20% back.

Refundable tax credit

Unlike some tax credits, the SR&ED program is refundable, which means that if your business ends up without a profit, you can get a cash refund for your research efforts.

How do I apply?

The SR&ED program’s major draw is that it doesn’t require approval before the research and development can begin. If your expenses qualify and your research meets the requirements, you can claim this tax credit when you file your taxes.

Don’t go at it alone!

If you have any questions about the SR&ED program, we highly recommend that you obtain the services of a tax specialist. The forms and guidelines are quite detailed and require some knowledge of the program to complete. Many people hold off on their research and development until they speak with a tax specialist to determine whether the expenses they are planning to incur will fall under the SR&ED category.

As always, we’re happy to help with the SR&ED program or with any other tax services you may need. AP Tax Group is a full service Toronto based accounting firm specializing in US and Canadian tax.

mountain climber

Is your hobby a business?

A common question we receive is: Can I claim business expenses for my hobby?

While it’s tempting to call your hobby a business because of all of those great business expense tax write-offs, the process is a little trickier than simply filing certain tax forms.

Why does it matter?

The main benefit of considering your hobby as a for-profit-endeavour is that the CRA will allow you to claim business-related expenses and if these expenses are more than your business income, you can claim a loss. Anything from your mortgage to your car insurance might qualify as a business expense and a loss can reduce the taxes you pay from other income sources.

Proving Your Hobby is a Business

Because of this potential tax advantage, people try to push their luck and call their personal hobby a business to get a tax break, but never intend to actually make a profit.

You can probably guess that the CRA doesn’t look too kindly on this.

4 Things the CRA might look at to determine for-profit status:

  1. Your past profit and loss experience – Losses will attract attention, as most businesses claiming a loss for more than two years would probably shut down or make serious changes. The CRA will be looking at your past claims to determine whether or not you’re trying to use your hobby just to get a tax break.
  2. Your training or expertise – If you say that you’re starting a business that requires a certain certificate or level of education, the CRA might want to see that you’ve completed this training.
  3. How you’re planning to succeed – Many businesses experience losses, especially when they are in the building stages. This is completely fine as long as the CRA can see what you’re planning to do to make a profit – your intended course of action.
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  4. Whether expecting a profit is reasonable – As we mentioned before, a business claiming multiple years of losses is a red flag. The CRA needs to see that your business has the potential to make money. In other words, if you’re saying that you are renting properties, but never charging enough rent to cover your costs, you might have a problem.

Currently, we are seeing a huge rise in entrepreneurship, as many people want to create their own jobs out of their existing passions. This is great for many reasons, but we want to ensure that you’re covered for tax time.

Our number one tip for people turning their hobby into a business is to keep spectacular records. When your hobbies make money, you need to start treating them like a business and reap the rewards of all of the deductions that can come along with them!

If you need any help determining whether or not your hobby can be classified as a business, contact us. For Americans living in Canada, there are extra IRS considerations when filing your taxes as a business. We specialize both US and Canadian taxes and would be happy to assist you.

 

 

 

 

chalkboard oops

I’ve filed my tax return, but I made a mistake!

Making an error when you file your tax return happens – especially when you’re unfamiliar with new tax laws or a change in your tax situation. Sometimes a form’s wording is confusing and people insert incorrect information or other times, someone makes a simple human error. In most cases, there are set steps you need to take if you’ve caught an error and need to make a correction.

Mathematical Errors

If you’ve added numbers incorrectly or something else of that nature, you probably don’t need to do anything. As your tax return is processed, errors like this are usually caught.

Forgetting to attach a schedule

Neglecting to attach addendum sheets, like: itemized deductions, dividend and interest income, business profit or loss, and capital gains will usually result in the IRS asking for whatever is missing. You will need to send in the information they ask for and then they will process your tax return. If you catch this before they do, get the sheets ready, but you don’t need to send them in until they ask for them.

Incorrect information

Submitting false information is more serious than simply forgetting a schedule or making a math error on your tax return. If you’ve realized that you forgot to claim some of your income or didn’t claim a credit you were eligible for, you will need to file an amended or corrected return.

How to file an amended or corrected tax return

  1. The first thing you will need to do is fill out a Form 1040X and explain your changes.
  2. If the corrections involve any schedules, you’ll need to submit these along with your Form 1040X.
  3. You usually have 3 years to file a corrected tax return if you’re claiming a return or credit.

Additional information:

  • The IRS should take 8-12 weeks to process your corrected tax return.
  • If you feel like it is taking longer than it should to hear back, you can check on your return with “Where’s My Amended Return?”
  • You cannot file an amended tax return electronically through e-file. You will need to mail paper copies of your forms and schedules.

If you would like help filing your amended tax return, get in touch with us. We are tax specialists and will gladly correct any of your mistakes and double check to make sure that you haven’t missed anything.