5 Simple Internal Controls To Put In Place Around Financial Information

Internal controls are important to help safeguard businesses against errors, theft, and fraud.  There are many simple controls that a lot of business owners already have in place (locking up petty cash and blank cheques, background and criminal checks on employees and frequently changing passwords on programs).  However, when it comes to accounting, some owners think they are too small to be able to implement any simple yet smart and effective internal controls.

5 simple internal controls a business owner can put in place around financial information:

1.       Owner signs all cheques and only with appropriate supporting documentation attached.  Proper supporting documentation would include authorized purchase order, receiving report, supplier invoice.  Once paid, the invoice should be stamped or initialed to avoid duplicate payments.

2.       Mail should be collected by the owner or someone who has no accounting functions.  Mail should be opened by the owner but if time is a scarce resource then at a minimum the owner should open the monthly bank statements.  This way bank statements cannot be tampered with and cheques and payments are received directly by the owner.  If deposits at the bank are done by a person other than the owner, the owner should also complete the deposit slip before passing it off.

3.       Prepare budgets as this will help owners develop expectations.  Variances between actual to budget should be investigated thoroughly

4.       Review T4s for proper payroll deductions.  It’s a good time to also check that the T4s match to real people who have been employed and source deductions make sense.

5.       Review bank reconciliations as well as accounts receivable and payable sub-ledgers on a regular basis.  This will help identify errors and unusual transactions. Reviewing the sub-ledger will allow for timely investigation of old receivable and payables which may improve cashflow.   

New Residential Rental Property Rebate

The new residential rental property rebate (NRRPR) related to a property in Ontario can be worth as much as $24,000 to the builder.

To be eligible for a rebate there must be an:

Eligible Rental Property

• Detached or semidetached single unit house
• Duplex
• Condominium unit
• Townhouse
• A unit in a coop housing corporation
• A mobile home
• A floating home

Eligible Transaction

• purchased newly constructed or substantially renovated housing from a builder;
• constructed, or hired someone else to build, housing or an addition to housing;
• substantially renovated, or hired someone else to substantially renovate, housing;
• converted a non-residential property into housing; or
• made an exempt lease or sublease of land to another person.

When you buy a new rental property in Ontario:

When purchasing a property for rental purposes, you cannot assign the rebate to the builder and must file the rebate for directly with CRA. This does mean the additional upfront cash outlay of HST and waiting for rebate from CRA. Consideration should be given to such cash flow implications.

Filing deadline and time to process:

Depending on the specific type of rebate being applied for, the timing for filing can vary, but is generally a two year period starting from the date of the sale closing. The form to be submitted is GST524 and the associated forms noted therein. Generally, it takes CRA approximately two months to provide the rebate however this period can be longer if additional questions arise from CRA.

New Housing Rebate

The new housing rebate related to a property in Ontario can be worth as much as $30,000 to the purchaser.

To be eligible for a rebate there must be an:

Eligible House

• Detached or semidetached single unit house
• Duplex
• Condominium unit
• Townhouse
• A unit in a coop housing corporation
A mobile home
• A floating home

Eligible Transaction

• Purchased a newly constructed home
• Purchased a new condo
• Built a house
• Contracted someone to build a house
• Substantially renovated a house or condominium
• Contracted someone to extensively renovate a home or condo
• Added a major addition to a home
• Rebuilt a home that was destroyed by fire
• Bought shares in a newly constructed cooperative housing project
• Converted a non-residential property into a home

The property must meet the Primary Residency Requirement:

To be eligible for the rebate, a new house or condo unit must be used as the primary place of residence by the purchaser or their immediate family (meaning people related by blood, marriage, common-law partnership, or adoption). Please note that here are a number of factors considered by the CRA when determining whether or not a house is a person’s primary residence which include , but are not limited to; whether it is a mailing address for the individual, used on ID such as a driver’s licence, and how long the home has been inhabited.

When you buy a new home in Ontario for you to live in:

Typically when purchasing a new home, the related HST rebate is assigned to the builder and no rebate application is made by the purchaser. If this is not the case, you will have to separately apply for the rebate.

Filing deadline and time to process:

The rebate form GST190 (and the related, applicable provincial form) must be filed within two years of a new home or condo closing or construction completion. When a property has been built, please ensure to keep all invoices as submission of information related to these costs are required with such a rebate. Though processing times can vary, rebates are typically received from the Canada Revenue Agency (CRA) within two months.

For more information, visit us on the web: http://www.rmtcpa.ca

Rosenswig McRae Thorpe LLP
Toronto, Ontario
416-977-6600

IFRS Leases (2016)

Our goal in this presentation is to focus on the following questions:

  • Overview
  • Accounting Details
  • Transition
  • Example
  • Impact of changes
  • Takeaways for Company’s business

To click on the full presentation, please click on the link below:

IFRS (Leases)

For more information, visit us on the web: http://www.rmtcpa.ca

Rosenswig McRae Thorpe LLP
Toronto, Ontario
416-977-6600

Taxable Benefit/Payments

We have listed some common taxable benefits to help you understand the tax implications.

benefit

*Unless contributed directly to the recipient’s RRSP
** If any of these items are reimbursed such that the employee receives cash, EI must also be deducted on the amount
*** Employer is responsible to calculate personal and business use for each benefit

Depending on the specific facts for each benefit, the tax consequences may change. Please contact us if you have any questions about taxable benefits.

If you wish to discuss about Taxable Benefits and/or Payments please contact us, and visit us on the web: http://www.rmtcpa.ca

Rosenswig McRae Thorpe LLP
Toronto, Ontario
416-977-6600

U.S. Estate Tax Issues for Canadians

Canadians need to be aware of U.S estate taxes. U.S estate taxes has a further reaching arm than most Canadians may think. Not only does it apply to U.S real property but also U.S. securities held in Canadian brokerage accounts and U.S mutual funds.

Who is responsible for U.S estate tax?

Canadians pay estate tax based on a ratio of the individuals U.S property over the individual’s total world-wide property. Canadian residents are allowed to benefit from the same unified credit as U.S residents based on the treaty. In 2016, the exemption at its highest allowable amount is $5,450,000 U.S.

As mentioned previously, Canadians only have to pay estate tax based on the ratio of the FMV of their U.S. situs assets over their world-wide estate assets as a whole.

By way of example for a Canadian who has U.S stock in a Canadian brokerage account.

A) Canadian died in 2016 and had a total net worth of $6,500,000;

• U.S stock is worth $2,500,000 and
• Canadian home and investments are worth $4,000,000

net-tax-calc

The Canadian resident will owe $127,385 of U.S estate tax on death. He may be eligible to reduce his Canadian tax for a portion of this amount.

Planning Ideas

There are a few ways of dealing with potential U.S estate tax. The first is to seek professional advice to quantify your exposure and develop a plan. Some things that may be suggested are:

1) Transferring your U.S stocks into a Canadian investment corporation solely controlled and owned by you
2) Buying life insurance to cover the liability
3) Financing any U.S real estate purchases with non-recourse debt.

Tax law is complicated and every situation is unique.

U.S estate tax rates and regulations

The graduated estate tax rates are as follows:

us-estate

If you wish to discuss about U.S. Estate tax issues or estate planning strategies please contact us, and visit us on the web: http://www.rmtcpa.ca

Rosenswig McRae Thorpe LLP
Toronto, Ontario
416-977-6600

Year End Tax Planning – Checklist for the Individual

1) Consider making your RRSP contribution before March 1st, 2017. Double check your RRSP contribution space with CRA. For every $10, you contribute, you save up to $5.30 of tax.

2) Consider making your charitable donations to a registered charity. Consider whether donating public accounting stocks with an accrued gain is better than donating cash. For every $10 you donate (after the first $200 of donations), you save $5 in tax.

3) Consider making an RESP contribution if you have children who plan on attending post secondary education. The investment income cumulates tax free and each child in entitled to a government grant contribution to the RESP.

4) Consider selling securities with a capital loss to offset capital gains realized during the year.
For every $100 in capital gains you shelter, you can save $27 in tax.

5) Considering making your final RRSP contribution if during the year you turned 71. If you are over 71 and still have unused RRSP contribution room, consider making the contribution to a spousal RRSP (if your spouse is younger than you).

6) Consider purchasing capital assets before year end, if you are self employed. If the asset is available for use before the end of the year, you can claim one-half of the usual tax amortization for the year.

7) Consider paying a salary or bonus from your corporation to yourself in December. Usually the payroll taxes for this is due by January 15th (this may be different depending on what your payroll filer).

8) Consider withdrawing funds from your RRSP if you have low income for the year.

9) Consider postponing purchasing interest bearing investments until January. Interest must be accrued annually on the anniversary date of the investment, unless the interest is paid more frequently. Therefore, instead of purchasing the investment in December 2016 and paying tax in 2017, consider making it in January 2017 and paying the tax in 2018.

If you wish to discuss about year end planning for an individual please contact us, and visit us on the web: http://www.rmtcpa.ca

Rosenswig McRae Thorpe LLP
Toronto, Ontario
416-977-6600