income tax workshop

Galloway Botteselle & Company

Taxes - Taxes - from resident from resident to practitionerto practitioner

Presented by:Selena Nisbet

January 29, 2014


OutlineOutline

• What can I deduct? What can I deduct? • Home office, meals, auto Home office, meals, auto

expensesexpenses• Keeping good recordsKeeping good records• Tax installmentsTax installments• Resident in different provincesResident in different provinces• IncorporationIncorporation


Why is this important?Why is this important?

• Physicians are in the top tenth Physicians are in the top tenth percentile of income earners percentile of income earners in Canadain Canada

• Structuring yourself properly Structuring yourself properly can have huge effect on taxescan have huge effect on taxes

• Goal is to minimize taxes and Goal is to minimize taxes and increase after-tax incomeincrease after-tax income


ResidentsResidents

• Deductions are limitedDeductions are limited• BCMA, CoPS BCMA, CoPS • CMPA not allowedCMPA not allowed• MovingMoving• Automobile (if required by employer)Automobile (if required by employer)

• CreditsCredits• TuitionTuition• Student loan interestStudent loan interest


Deductible expense vs. Deductible expense vs. tax credittax credit

• Deductible Deductible expensesexpenses• Professional Professional

exp.exp.• RRSPRRSP• Child CareChild Care• MovingMoving

• Tax savings is Tax savings is based on your based on your tax brackettax bracket

• Tax CreditsTax Credits• TuitionTuition• Student loan Student loan

interestinterest-5 yr CF-5 yr CF

• DonationsDonations-5 yr CF-5 yr CF

• Medical expensesMedical expenses• Bus passesBus passes

• Tax savings is Tax savings is the same (20%) the same (20%) in all tax bracketsin all tax brackets


Personal tax rates-Personal tax rates-20132013


When to claimWhen to claim

• Tuition fees-ASAPTuition fees-ASAP• Student loan interest-ASAPStudent loan interest-ASAP• RRSP-$10k contributionRRSP-$10k contribution

• Income-$65k. Tax savings is $2,970Income-$65k. Tax savings is $2,970• Income-$150k. Tax savings is Income-$150k. Tax savings is

$4,370$4,370• Return for 1 year is 47%Return for 1 year is 47%• Return for 5 years 8%Return for 5 years 8%


Self-employedSelf-employed

• Moonlighting while a resident, Moonlighting while a resident, oror

• After residency is completedAfter residency is completed• Rules are the sameRules are the same• Must report:Must report:

• Self-employed incomeSelf-employed income• Can deduct related expensesCan deduct related expenses


Can I deduct _____?Can I deduct _____?

Yes, if...Yes, if...• Expenses are Expenses are

incurred to incurred to earn incomeearn income

• Expenses are Expenses are reasonable in reasonable in amountamount

• Allowed by the Allowed by the Income Tax ActIncome Tax Act

Not, if...Not, if...• Personal or Personal or

living expensesliving expenses• Capital Capital

expendituresexpenditures• Denied by Denied by

Income Tax ActIncome Tax Act


Business expense Business expense summarysummary

• Accounting and legal feesAccounting and legal fees• Advertising and promotionAdvertising and promotion• Meals and entertainment Meals and entertainment • Annual license fees and professional Annual license fees and professional

duesdues• Bank chargesBank charges• InsuranceInsurance

• liabilityliability• officeoffice• business overheadbusiness overhead



• Interest on loans and lease Interest on loans and lease paymentspayments

• Convention expenses (2 per Convention expenses (2 per year)year)

• Maintenance & repair of office Maintenance & repair of office + equipment+ equipment

• Professional development Professional development



• Office expensesOffice expenses• Postage, stationery, supplies, Postage, stationery, supplies,

etc.etc.

• Salaries and employee Salaries and employee benefitsbenefits

• Telephone (business portion)Telephone (business portion)• Travel expensesTravel expenses



• Expenses incurred as a Expenses incurred as a residentresident• Medical libraryMedical library• Exams (as tuition now)Exams (as tuition now)• Computer and other assetsComputer and other assets

• 100% deduction ended Jan 31, 100% deduction ended Jan 31, 20112011


Automobile expensesAutomobile expenses

• Determine business portion of Determine business portion of auto expenses.auto expenses.

• Keep a travel logKeep a travel log• Automobile operating Automobile operating

expenses include:expenses include:• fuel, maintenance and repairs, fuel, maintenance and repairs,

insurance, loan interestinsurance, loan interest• Parking-may be 100%Parking-may be 100%


Automobile expensesAutomobile expenses

• Alternative methodAlternative method• Auto allowanceAuto allowance• Travel log still requiredTravel log still required

• 2013 rates2013 rates• $.54 for 1$.54 for 1stst 5000 km 5000 km • $.48 for > 5000 km$.48 for > 5000 km• Increase of $.01 over 2012Increase of $.01 over 2012


Entertainment Entertainment expensesexpenses

• Only deduct 50% of Only deduct 50% of meals/entertainmentmeals/entertainment

• Record client names on Record client names on receiptsreceipts


Can I deduct for aCan I deduct for a“home office”“home office”

• Meet one of two tests…Meet one of two tests…• principal place of businessprincipal place of business

oror

• used on a regular basis to meet used on a regular basis to meet clientsclients

• Business portion is deductibleBusiness portion is deductible• % of rent , mortgage interest, % of rent , mortgage interest,

taxes, utilities etc.taxes, utilities etc.


Bookkeeping and Bookkeeping and accountingaccounting

• Keep accurate recordsKeep accurate records• Required for preparing tax Required for preparing tax

return and for CRAreturn and for CRA

• Options for keeping trackOptions for keeping track• QuickBooks, Simply AccountingQuickBooks, Simply Accounting• ExcelExcel• Envelope methodEnvelope method


Accrual vs. cash Accrual vs. cash accountingaccounting

• Cash AccountingCash Accounting• record expenses and revenue at record expenses and revenue at

the time $$ is paid or receivedthe time $$ is paid or received

• AccrualAccrual• Record expenses when incurred Record expenses when incurred

and revenue when earned no and revenue when earned no matter when the $$ is paid or matter when the $$ is paid or receivedreceived


Tax installmentsTax installments

• Are a prepayment of current Are a prepayment of current year taxesyear taxes

• If required:If required:• March 15March 15• June 15June 15• September 15September 15• December 15December 15


Tax installmentsTax installments

• When are installments When are installments required?required?

• When tax owing in the prior When tax owing in the prior year is greater than $3,000year is greater than $3,000

• Only requires about $21,000 of Only requires about $21,000 of taxable incometaxable income

• Interest charged if not made Interest charged if not made (not deductible)(not deductible)


10 / 40 / 50 rule10 / 40 / 50 rule

10% of your fee goes to 10% of your fee goes to expensesexpenses

40% goes to taxes and CPP40% goes to taxes and CPP

50% is left for you50% is left for you


InstalmentsInstalments

Set aside 40% for taxes Set aside 40% for taxes every time you receive every time you receive

incomeincome


Where to file your Where to file your returnreturn

• Based on residency on Dec 31Based on residency on Dec 31stst

• Taxes on employment income Taxes on employment income paid in province of residence on paid in province of residence on Dec 31Dec 31

• Taxes on self-employed Taxes on self-employed earnings may be paid in earnings may be paid in province where earnedprovince where earned

• Income earned out of country?Income earned out of country?


Miscellaneous Miscellaneous

• Travel for job interviewsTravel for job interviews• Multiple jobsMultiple jobs• Married or common law-what Married or common law-what

changeschanges• NannyNanny• CRA a good resource: CRA a good resource:

www.cra-arc.gc.cawww.cra-arc.gc.ca


IncorporationIncorporation


Incorporation:Incorporation:

• An incorporated business is:An incorporated business is:• A separate legal entityA separate legal entity

• You are an employee of your You are an employee of your companycompany• Will receive a T4 slipWill receive a T4 slip

• Corporation pays a lower rate of Corporation pays a lower rate of tax than personallytax than personally


Personal tax rates-Personal tax rates-20132013


Corporate tax rates-Corporate tax rates-20132013


When should you When should you incorporate?incorporate?

If:If:•You can leave at least $30-You can leave at least $30-40k/yr in the company, or40k/yr in the company, or•You can income split with You can income split with family members, orfamily members, or•Liability is an issueLiability is an issue


Tax free savings Tax free savings accountaccount

When to useWhen to use• Short term investmentsShort term investments• With incorporationWith incorporation

• Benefits are reducedBenefits are reduced• $5k in TFSA vs $7,700 in $5k in TFSA vs $7,700 in

corporationcorporation


SummarySummary

• Keep proper track of expensesKeep proper track of expenses• Make required instalmentsMake required instalments• Incorporate if beneficialIncorporate if beneficial• RememberRemember

• It’s not what you earn it’s what It’s not what you earn it’s what you keepyou keep


QuestionQuestionss


GALLOWAY GALLOWAY BOTTESELLE & BOTTESELLE &

COMPANYCOMPANY300-2000 West 12300-2000 West 12thth Avenue Avenue

Vancouver, BC V6J 2G2Vancouver, BC V6J 2G2604-736-6581604-736-6581

[email protected]

income tax workshop

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