The Federal Government passed an updated (pre election) calendar 2000 budget with positive impact for all Canadian taxpayers. Highlights are as follows:
CORPORATE TAX FILINGS
- Effective October 18, 2000 the Capital Gains inclusion rate drops from two thirds to one half. This means that 50% of your post October 18/00 capital gain is tax free. The downside is that only one half of your post Oct 18/00 capital loss can be applied to other capital gains.
For calendar 2000 the Canadian taxpayer will have three distinct capital gain(loss) calculation periods. The first period is January 1, 2000 to February 27, 2000 when the inclusion rate is 75% on all capital transactions. The second period is between February 28, 2000 to October 17, 2000 when the inclusion rate on all capital transactions is 66 2/3%. The final period is between October 18, 2000 to December 31, 2000 when the inclusion rate for all capital transactions is 50%.
This years capital taxation changes will require the taxpayer to be very specific on the deposition dates for all capital transactions.
- The federal corporate income tax rate will drop at a faster rate then mentioned previously. The first 1% drop (28% to 27%) will occur in 2001 and further 2% rate cuts will occur yearly until the federal corporate tax rate is at 21%.
- Effective January 2001 self employed taxpayers will be allowed to deduct the employers portion of Canada Pension Plan from their income statement. Previously the self employed tax payer was required to remit the employers portion of the CCP paid (the lowest possible tax rate). This new method will reduce the taxpayers income at the highest tax level as the employers portion of the CCP will be an expense item.
- The education credits for post secondary students will increase to $400/month from $200/month for full time students and $120/month from $60/month for part time students.
- Federal personal income tax rates will be reduced at an accelerated pace. Effective January 1, 2001 the lowest 17% rate will be reduced to 16%, the middle 24% rate will be reduced to 22%(instead of the proposed 23% rate) and the highest 29% rate will be reduced to 26% on income between $60,000 and $100,000.
- Effective 2001 the deficit-reduction surtax will be eliminated for all taxpayers.
Since the beginning of calendar 2000 the federal government has required that each corporate tax return be completed utilizing the GIFI or General Index of Financial Information. This schedule requires that the income statement and balance sheet of the corporation taxpayer be restated in a format as prescribed by the tax department. We as your corporate tax preparers, have been completing the GIFI to the best of our ability. This system has been established in order to simplify corporate tax filing by eliminating the need to submit the corporations financial statements. In practice this allows the federal government to gather comparable financial data on similar businesses. Future fillings will need to be reviewed in detail in order to ensure that certain expense categories remain in line with your specific industry.
In June 2000 the Provincial government added the annual Corporate Information Return to the Provincial corporate tax filling requirements. This means that your corporate tax return preparer, Contren, needs to complete the directors and officers information return along with any other changes. We also need to confirm that any corporate structure changes have been filed on a timely basis. In most situations the corporate lawyers would have completed this information when required. Unfortunately it is your accountants responsibility at present. For future corporate tax filings our office will require a copy of your Articles of Incorporation, Directors Register and you Corporation Number(assigned by MCCR)
The bottom line is that in the past two years the amount of information to be filled with your corporation tax returns has doubled. We will require each clients assistance in order to ensure that all fillings are complete.
PROVINCIAL BUDGET UPDATE
- The personal cheques received from the provincial government are tax free. These funds are a refund of the personal provincial taxes paid in calendar 1999 up to $200 per taxpayer. These funds will not be included on your 2000 personal tax return.
- The province is eliminating the RST charged on parts and labour used to carry out repairs under warranty. The rate drops to 6% from 8% effective May 2, 2000, and drops another 2% per year every March 31. The final rate will be 1% for the period April 1, 2003 to March 31, 2004.
There is a "story" circulating about a garage owner who was subjected to a Retail Sales Tax audit this past year. During the audit the auditor discovered that the garage was buying goods such as "brake cleaner" RST exempt but could not find these items listed on any invoices to the garages customers. The garage owner explained that these items were included in the brake service but not charged individually. The auditor outlined the fact that the item must be resold in order to be purchased RST exempt. The garage owner was not able to produce any invoice that included "brake cleaner" purchases.
The point of this story is that with the menu board pricing the garage needs to detail all products that may be utilized to complete the service. The itemization may be time consuming but would prevent a similar outcome if you were audited by the Retail Sales Branch.
As you are aware Christmas, Boxing Day and New Years are statutory holidays. Our office will be closed noon Friday December 22, 2000 and will reopen the morning of Tuesday January 2, 2001.
You will be able to leave a message in the Voice Tel system which will be reviewed throughout the holiday season.
REGISTERED EDUCATION SAVINGS PLAN
A reminder that you must contribute to your childs RESP program prior to December 31, 2000 in order to be eligible for the 20% grant.
Your child must have contributed to an RESP in the year that they turn 15 years old in order to be eligible for any grant. This may be the perfect time to review your education plan for your children.
SIMPLY ACCOUNTING VER 8
A substantial percentage of our customers use Simply Accounting For Windows for their accounting. Version 8 has not been well received by our customers and in fact we use Ver 8 at Ruffins and we have substantial problems generating inventory/sales reports.
A couple of key problems that have been reported back to our ofice regarding Ver 8 are as follows:
- The problem running Ver 8 with Windows 2000. This combination seems to cause substantial illegal operations with all the unpleasant related problems.
- Year end procedures must be followed exactly ie. start new year, not simply by changing the using date. By changing the system date to the first day of the new fiscal year you may lose your current year earnings carry forward to the new year retained earnings.
- The minimum system requirements are far below the practical requirements. You need to be running a 366mhz or higher chip and you must have 64mb of RAM if you have are utilizing the inventory module.
If you are presently using Ver 7 we advise obtaining the January 2001 payroll update in this version and utilizing Ver 7 as long as the updates are available.
SIMPLY ACCOUNTING PAYROLL PROCESS
This year end payroll procedure is simplified for calendar 2000. You are able to print previous years payroll information (T4's etc.) after you switch the program using date to calendar 2001. In order to safeguard your payroll information you should make a backup diskette of your calendar 2000 information after processing your last 2000 payroll.This distinct diskette should be stored separately from your ongoing backup diskettes.
Please note that this procedure does not work for any Simply Accounting For DOS users. Any DOS users will need to save their calendar 2000 diskette after processing the last 2000 payroll. This diskette will be required to print your calendar 2000 T4's.
Please contact the office if you have any further questions.