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At Gilmour Group CPAs, we think differently. Those of you that know us well, know that we are not your typical accounting firm. At this year’s retreat we asked how are we different and why do we do what we do?

Following the theme that Tax is science, we believe that knowledge is power and we recognize that our clients can and do change the world. We strive to coach them and come along side them to bridge the gap by sharing knowledge to build success.

In this FAQ series on formulas for success, we intend to do just that.

At Gilmour Group CPAs, we believe that the formula for success is passion multiplied by knowledge squared. Or for us math types:

Einstein

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Gilmour group CPAs

TAX GAMES - find the answers from the TGIF posts on LinkedIn and Twitter

March 15: Now that winter is officially over the question on my mind is how do snow days affect taxes? Can they save taxes? (a) Yes (b) No

(a) Yes. Ok I really had to stretch for this question. I was going to post it in the winter but we had yet another Snow Day. For those that don't know, a "Snow Day" is an unofficial holiday in Canada when the weather is so bad that government services are closed and also many businesses are closed due to inclement weather. I should probably worded the question can weather have an impact on your taxes? Yes it can. Especially Natural Disaster strength weather.

Here are some examples. In the USA, you can have "Tax Relief in Disaster Situations" for example, affected taxpayers in a federally-declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either the year in which the event occurred, or the prior year. See Publication 547 for details.

In Canada, tax have deadlines have been extended due to ice storms and floods , for example, but rarely is there a special deduction or allowance provided. Individual tax payers can apply to have penalties removed if they can prove that a natural disaster impeded their ability to file on time or pay on time.

March 8: Do the Irish really pay less tax? I hear that tax rates in Ireland are very low. (a) Yes, they are low (b) No, that is just an urban myth

(a) Yes. The corporate tax rate for corporations engaged in active business (what they call trading income in Ireland) is lower than the rate for a similar business in Canada or the USA. For example, the rate in Canada is 27% combined in most provinces and in the USA it is 21% federally and then states taxes which vary from 0% to 3% are added.

However, it is hard to compare apples to apples because every country has different systems to encourage different segments of the economy. For example, in Canada, a "Canadian Controlled Private Corporation" can pay just 11% on its active trading income.

The moral is that you have to hear all the facts before you decide who truly has the lower tax rate.

Feb 15: Is coffee at the office tax deductible? (a) Yes (b) no?

(a) Yes. It is deductible in Canada to the employer as a deductible benefit to employees.

This brings up another question? If the benefit of having coffee available to you at the office taxable? In Canada, yes technically it is taxable, but Canada Revenue Agency has an administrative policy of allowing it. See publication T4130(E) Rev. 18:

"Policy for non-cash gifts and awards You may give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less annually. If the FMV (fair market value) of the gifts and awards you give your employee is greater than $500, the amount over $500 must be included in the employee’s income. For example, if you give gifts and awards with a total value of $650, there is a taxable benefit of $150 ($650 – $500). Items of small or trivial value do not have to be included when calculating the total value of gifts and awards given in the year for the purpose of the exemption. Examples of items of small or trivial value include coffee or tea, t-shirts with employer’s logos, mugs, plaques or trophies." Apparently though, this policy is under review at the official web page, which says:

"Please note that Folio S2-F3-C2, Benefits and Allowances Received from Employment, is currently under review. Employers should continue to follow current practices consistent with the information available in Guide T4130, Employers’ Guide – Taxable Benefits and Allowances."

Feb 8: Are chocolates for your sweetheart deductible? (a) Yes (b) no?

(b) No. Your sweetheart is not a business expense. This helps open the discussion though of the line between personal activities and business activities. In future issues we will address the line between an entrepreneurs personal life and business life again and again.

Feb 1: Can I deduct my dog on my income taxes? (a) Yes (b) no?

(b) No in most cases. This is one of those question I dread getting at a dinner party or from a fellow parent while standing at the sidelines watching our kids play sports. It speaks though to most people do not see the connection between taxation and expenses and the ultimate political motivations for making some things deductible and others not deductible. Going back to the question. The longer answer is that the dog must be connected to a revenue and the expense of the dog's care and the cost of the dog must be reasonably connected to an expectation of profit. Going one conceptual level up; income taxation is tied to revenue sources but expenses are allowed to be recognized against those revenue sources so that tax is only charged on net profits.

If the dog is a pet then it is not deductible.

If the dog is a working dog; for example the dog pulls a dog sled carrying tourists that pay for that experience or the dog is "employed" by a security company to patrol a building that the security company is paid to protect, then the dog is deductible.

Jan 25: If I leave Canada for six months (183 days) can I stop paying Canadian income taxes? (a) Yes (b) no?

(b) No. This question could have been asked many different ways. "How long can I be out of Canada and not give up my Canadian tax status?" Or the opposite question, "How long can I be out of Canada before I have to worry about my tax responsibilities switching to another country?" Or the classic question, "Can I take my money and run? And not worry about the long arm of Canadian tax?"

Work is changing and people can work more places in the world and they can take their work with them in a way that was completely un thought of even a year ago or ten years ago. I can think of several multinational workers I have worked with this week alone. One is in Miami but doing remote work for Brazil. One is German and working remotely from Columbia. A very frequent one in Canada is a worker that leaves Canada for the winter and continues to work remotely from the Caribbean or Mexico or USA.

The answer to the question "If I leave Canada for six months (183 days) can I stop paying Canadian income taxes?" is normally no. But a longer explanation is needed. Each country and in particular tax treaties between countries need to be consulted to determine if a person has responsibilities as a taxpaying resident of a country. Generally when a person exits one country, they enter another country for tax. It is hard to be "stateless" for tax and not owe tax to at least one country. Also the action of leaving and entering can have exit tax and in some cases arrival tax. Tax advisors like Gilmour Group consult tax treaties and national tax acts to help people determine which country they are a resident of and thus what country that they pay taxes. Tax treaties have a checklist that we use to guide the decision.

Jan 18: Was the engagement of Meghan Markle to Prince Harry a taxable event?? (a) Yes (b) no?

Not many people realize that when they get married or divorced until after they are married or divorced that there is a possible tax? Looking earlier than that is getting engaged taxable?

A) Yes, Prince Harry proposing to Meghan Markle was taxable
B) No, you are crazy. Love is not taxable

My bet is on B, but I think the real answer is that it depends if the engagement happened in Canada. If it did, there is no gift tax. If the engagement happened in the USA, there could be tax because Meghan Markle is a US citizen and bound by US gift tax.

The answer is that, as far as we know, the engagement happened in the U.K. In the U.K., there is a gift tax. However, it is tied into inheritance tax. That makes the analysis of whether the gift was taxable a bit of a challenge. My understanding is that we need to wait 7 years and see if Harry dies. That would retroactively trigger gift tax. If you are a U.K. Gift tax expert, please let us know with an answer, thanks.

Jan 11: When does it make the most tax advantage to purchase an asset? (a) Beginning of the year or (b) end of the year?

(a) The answer used to be B: because of the half year rule that places an asset purchase date half way through the year. This means that when an asset is purchased early in the year you only get a half year but when you purchase late in the year you actually round up to half a year. However that is all less important now that we are allowed 100% write off in the first year.
Visit Budget.gc.ca
"allowing the full cost of machinery and equipment used in the manufacturing and processing of goods to be written off immediately for tax purposes, and by introducing the Accelerated Investment Incentive to support investment by businesses of all sizes and across all sectors of the economy."

Jan 4: What resets to zero every new year? (a) CPP or (b) EI?

This is a trick question. Both of these “taxes” reset to zero every calendar year. This means that you start the calculations again each January 1.
The result is that often early in the year the “cost” to the employee and the matching “cost” to the employer are high. Later in the year employees are likely to have “maxed out” and thus no withholdings for CPP or are required EI. Thus their pay cheques get larger later in the year and the employers remittances get smaller.

Dec 28: When is the best time to be born for tax purposes? (a) Before midnight on New Year's Eve? or (b) after midnight on New Year’s Day?

(a) Before midnight. Tax deductions and credits are often allowed for a full year when an event happens sometime during the year. Thus a tax credit for a new born baby December 31, 2018 will be for the full year 2018. Visit Canada.ca

Dec 21: If Santa Claus had to pay income tax. Where would he pay it? (a) Canada or (b) USA

(b) USA. Assuming that Santa Claus lives at the North Magnetic Pole. The North Magnetic Pole (according to Wikipedia) was in Canada until 2017 and then moved towards Russia, which would have it moving “over” Alaska. It would take an expedition to the Magnetic North Pole to determine its exact location. Scientists are only estimating its location with math. You can still write a letter to Santa Claus in Canada. Address it to Santa Claus, North Pole, Canada Postal code HOHOHO.

Dec 14: Are Christmas presents a deductible expense? (a) Yes or (b) No

(a) Yes, if they fit within the narrow definition provided by the Canada Revenue Agency. Tax rules are often “yes” “but”.
Look for “holiday season”, the politically-neutral government expression for Christmas: Visit Canada.ca

Dec 7: Is there a tax advantage to living in the great white north? (a) Yes or (b) No

(a) Yes. There is a northern residents tax deduction for those folks who only see the sun for six hours a day at this time of year. No sunshine is no fun.
Visit Canada.ca

Nov 30: Which is higher? (a) Personal tax rates or (b) Corporate tax rates

(a) Personal tax rates. Personal tax rates are designed to be higher because there are so many more people than there are companies and thus the “tax base” is larger. Also a large tax base is less able to “move” away from taxation. Thousands Corporations can move more quickly than millions of citizens can move.
See FAQ #44 | See combined tax rates 2017 (FAQ) | See combined tax rates 2018 (PDF)

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FAQs

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