Personal Finance

Tax time! I'm a public accountant, so ask me, I'll try to respond frequently

  • Last Updated:
  • Oct 11th, 2019 7:45 pm
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Nov 19, 2004
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cs942008 wrote:
Jan 9th, 2019 11:33 am
Hi.. I turned to Self Employed in 2018.

All the project job remotely work @ home (Ontario, Canada) but the business owner in UK.
I invoices them monthly and wire transfer funds to my bank accounts directly.

Here is my questions?
How to do the CPP?
All my income from Foreign country, do i have to charge them HST?
How can I report the Foreign income with expense deduction?

Thank you so much!
Ch
You pay employer and employee portion of CPP when you complete your taxes.

Since you are invoicing a foreign company, HST is zero rated, so you don't charge the HST.

Report your income as self employed, (line 164). Expenses are calculated as part of the net on the T2125.
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May 1, 2004
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don242 wrote:
Jan 9th, 2019 11:50 am
You pay employer and employee portion of CPP when you complete your taxes.

Since you are invoicing a foreign company, HST is zero rated, so you don't charge the HST.

Report your income as self employed, (line 164). Expenses are calculated as part of the net on the T2125.
Thanks. Any suggestion about CPP calculator? Also. The CPP calculation are based on "Net Income ?" or "Total Income"?
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cs942008 wrote:
Jan 9th, 2019 4:09 pm
Thanks. Any suggestion about CPP calculator? Also. The CPP calculation are based on "Net Income ?" or "Total Income"?
Based on your net income (the amount on line 137). It is 9.9%, since you have to pay both the employee (4.95%) and employer (4.95%) portion up to a maximum of $5187.60 for 2018.
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Jan 23, 2018
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I'm no tax newbie but I'm trying to get my head around something I tripped over that doesn't seem to entirely make sense to me -- maybe there's a capital gains guru lurking here on RFD,

Long-winded background info -- in 2010 $X worth of flow-through shares were purchased in my wife's name directly from a listed mining company in exchange for CEE renunciation. Since her ACB for these shares is zero under such an arrangement, in a disposal she would have to report the entire proceeds of any sale as a capital gain and pay the appropriate taxes. No surprises there, that's how F/T shares work, but keep reading.

Several forgettable years have gone by and the current trading price is about 25% of its original value, but things are looking up again, and I now expect a full recovery at the very least. As such, I don't want to give up the position, but it simultaneously occurred to me that now might be a good time to formally liquidate her holdings to crystallize her inevitable capital gains exposure while the share price is depressed. In addition to that motivation, I also happen to be sitting on a rather substantial unbooked capital loss that can only be claimed against capital gains, so any plan whereby her position could be transformed into my position is a good idea.

If these were large cap shares I'd just sell hers and buy the same number back myself and solve the problem that way, but this particular stock is very thinly traded and it won't be easy for me to buy the same position back if she sells out on the open market. However, we both have accounts at the same brokerage house, so I came up with the idea of asking them to orchestrate a trade to cross the shares, selling for her account and buying for my account -- all I would need to do is temporarily fund the purchase in my account and we'd collect the proceeds from her account later.

Now I thought a cross on the exchange was a nice clean solution, but for reasons they couldn't / wouldn't explain, they said they couldn't / wouldn't do it. But what they did say is that because we were immediate family members (in this case, spouses) I/we could simply instruct the brokerage to transfer the shares from my wife's account to my account by internal journal entry by simply filling out their Letter of Direction (LOD) form and having our signatures verified -- no funding required, and no money need change hands within the brokerage.

Wondering if their LOD method was suitable for my purposes, I went to the CRA website to see what the rules are on such transfers and I found this -- https://www.canada.ca/en/revenue-agency ... rtner.html

Now, in my own case, it's FMV tax treatment I'm looking for, so I'll be walking the extra mile and papering up a bona fide sale transaction, but it's the rest of that CRA blurb that intrigues me. If I read it right, it implies that property can indeed be transferred between immediate family members without cash settlement or immediate tax consequence, whereby the receiving party simply assumes the transferor's ACB and just carries on.

If correct, that would seem to offer a big potential advantage if one could, for example, arrange to transfer a position to a lower tax rate spouse just before disposal to a genuine third party -- the tax savings could be huge. OTOH, when you consider the numerous nitpicking impediments in the Income Tax Act that preclude income splitting or the transfer of even trivial expenses/deductions between spouses, the ability to so easily fudge one's capital gains liability using a family transfer dodge appears to me to be a glaring inconsistency, and it makes me wonder if I'm misinterpreting what those rules say.

Am I missing a finer point here or something?
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Oct 14, 2012
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Woodstock
I must be missing something....
Doesn't that link say
" If that person or the trust sells the property during your lifetime, you usually have to report any capital gain or loss from the sale. "
so where's the benefit? Your wife gives the shares to you but when you sell them when they are worth a lot, she has to pay the tax, just as if she held them the entire time. How does that help?
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Jan 23, 2018
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BetCrooks wrote:
Jan 9th, 2019 5:32 pm
I must be missing something....
Doesn't that link say
" If that person or the trust sells the property during your lifetime, you usually have to report any capital gain or loss from the sale. "
so where's the benefit? Your wife gives the shares to you but when you sell them when they are worth a lot, she has to pay the tax, just as if she held them the entire time. How does that help?
That's part of my confusion -- if there's no benefit because the original owner remains liable for any capital gains tax, then what exactly has one accomplished by transferring the property in the first place?

The FMV transaction rules make perfect sense to me, but I don't get why there's such a lengthy discussion by CRA about the rules concerning what seems to be a pointless proposition
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Seks wrote:
Jan 1st, 2019 1:39 pm
I have an RRSP with RBC which was opened up in 2015. Maturity is 2020. It's only $500 (I did it as a test).

It seems like RBC will charge a fee (no idea what $?) if I wanna move my RRSP to somewhere else (Manulife). So there is no way to avoid such fees?
Are you transferring more than $500 to Manulife? If so, ask... nay... tell them to cover the transfer fees in return for your business. Or better yet... go with a financial advisor who will. Any FA that values you as a client will be willing to waive it... assuming of course you are not just depositing $500.
I'd love to write history... in advance.
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Aug 12, 2017
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Please remember, the first $3,500 of earnings are exempt from CPP. That being said, if you will earn over the yearly max ($57,400 for 2019) then you will cap out at $5,497.80 (employee and employer portion).

To correct the above poster, the CPP rate for 2019 is 5.10%, the feds increased it...it will eventually rise up to 5.90% in 2024.
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Aug 12, 2017
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threadhead wrote:
Jan 9th, 2019 5:15 pm
I'm no tax newbie but I'm trying to get my head around something I tripped over that doesn't seem to entirely make sense to me -- maybe there's a capital gains guru lurking here on RFD,

Long-winded background info -- in 2010 $X worth of flow-through shares were purchased in my wife's name directly from a listed mining company in exchange for CEE renunciation. Since her ACB for these shares is zero under such an arrangement, in a disposal she would have to report the entire proceeds of any sale as a capital gain and pay the appropriate taxes. No surprises there, that's how F/T shares work, but keep reading.

Several forgettable years have gone by and the current trading price is about 25% of its original value, but things are looking up again, and I now expect a full recovery at the very least. As such, I don't want to give up the position, but it simultaneously occurred to me that now might be a good time to formally liquidate her holdings to crystallize her inevitable capital gains exposure while the share price is depressed. In addition to that motivation, I also happen to be sitting on a rather substantial unbooked capital loss that can only be claimed against capital gains, so any plan whereby her position could be transformed into my position is a good idea.

If these were large cap shares I'd just sell hers and buy the same number back myself and solve the problem that way, but this particular stock is very thinly traded and it won't be easy for me to buy the same position back if she sells out on the open market. However, we both have accounts at the same brokerage house, so I came up with the idea of asking them to orchestrate a trade to cross the shares, selling for her account and buying for my account -- all I would need to do is temporarily fund the purchase in my account and we'd collect the proceeds from her account later.

Now I thought a cross on the exchange was a nice clean solution, but for reasons they couldn't / wouldn't explain, they said they couldn't / wouldn't do it. But what they did say is that because we were immediate family members (in this case, spouses) I/we could simply instruct the brokerage to transfer the shares from my wife's account to my account by internal journal entry by simply filling out their Letter of Direction (LOD) form and having our signatures verified -- no funding required, and no money need change hands within the brokerage.

Wondering if their LOD method was suitable for my purposes, I went to the CRA website to see what the rules are on such transfers and I found this -- https://www.canada.ca/en/revenue-agency ... rtner.html

Now, in my own case, it's FMV tax treatment I'm looking for, so I'll be walking the extra mile and papering up a bona fide sale transaction, but it's the rest of that CRA blurb that intrigues me. If I read it right, it implies that property can indeed be transferred between immediate family members without cash settlement or immediate tax consequence, whereby the receiving party simply assumes the transferor's ACB and just carries on.

If correct, that would seem to offer a big potential advantage if one could, for example, arrange to transfer a position to a lower tax rate spouse just before disposal to a genuine third party -- the tax savings could be huge. OTOH, when you consider the numerous nitpicking impediments in the Income Tax Act that preclude income splitting or the transfer of even trivial expenses/deductions between spouses, the ability to so easily fudge one's capital gains liability using a family transfer dodge appears to me to be a glaring inconsistency, and it makes me wonder if I'm misinterpreting what those rules say.



Am I missing a finer point here or something?

You are in fact correctly reading the section. Spousal transfers of anything are at the original ACB unless you specifically opt out of it. You do not need to do anything.
If she had capital losses and wanted to transfer at FMV, you would have to elect under section 74 to have the transfer go at FMV.

So all your worrying is for nothing. Source: am at CPA, CA
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Thecottager wrote:
Jan 10th, 2019 1:03 am
You are in fact correctly reading the section. Spousal transfers of anything are at the original ACB unless you specifically opt out of it. You do not need to do anything.
If she had capital losses and wanted to transfer at FMV, you would have to elect under section 74 to have the transfer go at FMV.

So all your worrying is for nothing. Source: am at CPA, CA
Thanks. Glad I boned up on this or I may have overlooked our need to formally file an election under section 74.5 to opt out. Also, it may be redundant but I still intend on cutting my spouse a cheque for the FMV of the shares and having her report her capital gain as of the date of transfer, just to underscore that this qualifies as a disposal for tax purposes on her part while also establishing my own ACB going forward. IMO that should eliminate any possible attribution challenges down the road by CRA.

FWIW I found another decent discussion related to this topic here if anyone is interested -- http://www.mondaq.com/canada/x/675958/C ... yers+Guide
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Oct 19, 2007
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atomiton wrote:
Jan 9th, 2019 9:08 pm
Are you transferring more than $500 to Manulife? If so, ask... nay... tell them to cover the transfer fees in return for your business. Or better yet... go with a financial advisor who will. Any FA that values you as a client will be willing to waive it... assuming of course you are not just depositing $500.
The RBC rep says I cannot even transfer the RRSP out to another financial institution until maturity date in 2020???
Type of GIC:
Non Redeemable Annual Compound
I already have an existing RRSP with Manulife with a substantial amount of $ in it. I just want to move this $500 ($530.16 current value) from RBC and merge it with the existing Manulife RRSP.
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Seks wrote:
Jan 10th, 2019 10:33 am
The RBC rep says I cannot even transfer the RRSP out to another financial institution until maturity date in 2020???



I already have an existing RRSP with Manulife with a substantial amount of $ in it. I just want to move this $500 ($530.16 current value) from RBC and merge it with the existing Manulife RRSP.
If you purchased a non redeemable GIC then you need to wait until it matures before you can transfer the money. You may be able to redeem it early, but there is likely a penalty. You would have to check the terms.
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Seks wrote:
Jan 10th, 2019 10:33 am
The RBC rep says I cannot even transfer the RRSP out to another financial institution until maturity date in 2020???



I already have an existing RRSP with Manulife with a substantial amount of $ in it. I just want to move this $500 ($530.16 current value) from RBC and merge it with the existing Manulife RRSP.
To be honest... I'd also look at just closing the account if there are no fees associated with that.
Alternatively, talk to your Manulife rep and ask... though I doubt a big company like Manulife will care enough to cover the fees.
I'd love to write history... in advance.
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atomiton wrote:
Jan 10th, 2019 9:53 pm
To be honest... I'd also look at just closing the account if there are no fees associated with that.
Alternatively, talk to your Manulife rep and ask... though I doubt a big company like Manulife will care enough to cover the fees.
It is a non redeemable gic so chances are he will at very least lose all interest to date if he tries to cash it. That is a conversation with RBC though and they seem to have already said no. A non redeemable gic is basically a contract until maturity.
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don242 wrote:
Jan 10th, 2019 9:33 pm
If you purchased a non redeemable GIC then you need to wait until it matures before you can transfer the money. You may be able to redeem it early, but there is likely a penalty. You would have to check the terms.
atomiton wrote:
Jan 10th, 2019 9:53 pm
To be honest... I'd also look at just closing the account if there are no fees associated with that.
Alternatively, talk to your Manulife rep and ask... though I doubt a big company like Manulife will care enough to cover the fees.
don242 wrote:
Jan 11th, 2019 7:28 am
It is a non redeemable gic so chances are he will at very least lose all interest to date if he tries to cash it. That is a conversation with RBC though and they seem to have already said no. A non redeemable gic is basically a contract until maturity.
If I try to cash it out now, I would pay $53 or so something in taxes...putting my net in the -ve.

I guess I have to wait until 2020.

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