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The articles
are intended to keep you up to date on trends and issues that may
impact your business and personal financial affairs. Please contact
us if you have questions about any of the issues
discussed.
Individual Pension Plans (IPPS).
Picture this as a
supercharged RRSP for incorporated business owners. They work best
for established entrepreneurs over age 45 earning in excess of
$86,000 personal earned income. This is the point at which you reach
the RRSP maximum of $15,500 for 2004. Owners at this stage often
have retained earnings in their company and must bonus themselves at
top marginal tax rates to maintain their small business tax rate. An
IPP lets you contribute up to 60 per cent more annually than an RRSP.
In addition, you can obtain a substantial past service contribution
going back to the date of incorporation as well as a very hefty
"top-up" once you "retire." The corporation makes a fully tax
deductible (including all set up and management fee) contribution on
your behalf that is exempt from payroll tax (CPP, EI, etc.). The
money is immediately vested in you and therefore creditor protected
from both a corporate and personal level. IPPs require an actuary to
set them up, but they should work closely with your financial
planner. This is not a do-it-yourself project.
Succession Plans
When Succession planning is like eating healthy
food and getting regular exercise: you know it is good for you, but
you procrastinate about doing it. The importance of succession
planning cannot be underestimated. The demographic picture confirms
this: succession planning is the No. 1 challenge facing small to
medium-sized business. Everyone wants someone to buy their
business, but few realize the true business value do to lack of
planning.
YEAR END TAX PLANNING
As we approach the end of 2005, it
is time again to tidy up loose ends to ensure the lowest filing
positions. In no particular order the following may apply to your
personal tax position. If any are applicable try a
Google
search to get tons of information
on how it may apply to you.
(RRSP,
Charitable donations, interest deductible for investments, medical
expenses, moving expenses, child support payments, principal
residence exemption, self employed persons, Private Health care
plans, borrowing to purchase common shares, home office expenses,
policy on tax free employee gifts and awards, deductible automobile
expenses, house hoppers. )
RETIRING ALLOWANCE
If you have worked for the same
employer since before 1996 and you are leaving your employment, an
amount you receive as a “retiring allowance” can be partially
sheltered by being transferred to your RRSP. The limit is $2,000 for
each year or part year of employment before 1996, plus $1,500 for
each such year before 1989 for which registered pension plan
contributions have not vested.
RRSP CONTRIBUTIONS GOING UP
2005
TAX YEAR $16,500.00
2006 TAX YEAR $18,000.00
2007 TAX YEAR $19,000.00
EXTERIOR REPAIR AND MAINTENANCE EXPENSES NOT ALLOWED
In a recent case Andreone vs. CRA,
the taxpayer ran a computer software company from his home office.
The taxpayer attempted to deduct certain costs incurred outside of
the house, such as exterior painting, brickwork repair, snow removal
and lawn care expenses. Canada Revenue Agency denied the deduction
for these amounts, claiming that they were personal expenses and in
no way had a business purpose. The taxpayer appealed to the Tax
Court but was denied the deduction for expenses.
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