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Galloway Botteselle & Company
Taxes - Taxes - from resident to from resident to
practitionerpractitioner
Presented by:Selena Nisbet
February 25, 2015
Galloway Botteselle & Company
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
Galloway Botteselle & Company
Why is this important?Why is this important?
• Physicians are in the top tenth Physicians are in the top tenth percentile of income earners in percentile of income earners in CanadaCanada
• Structuring yourself properly can Structuring yourself properly can have huge effect on taxeshave huge effect on taxes
• Goal is to minimize taxes and Goal is to minimize taxes and increase after-tax incomeincrease after-tax income
Galloway Botteselle & Company
ResidentsResidents
• Deductions are limitedDeductions are limited• BCMA, CoPS BCMA, CoPS • CMPA now allowedCMPA now allowed• MovingMoving• Automobile (if required by employer)Automobile (if required by employer)
• CreditsCredits• TuitionTuition• Student loan interestStudent loan interest
Galloway Botteselle & Company
Deductible expense vs. Deductible expense vs. tax credittax credit• Deductible Deductible
expensesexpenses• Professional exp.Professional exp.• RRSPRRSP• Child CareChild Care• MovingMoving
• Tax savings is Tax savings is based on your tax based on your tax bracketbracket
• Tax CreditsTax Credits• TuitionTuition• Student loan Student loan
interestinterest-5 yr CF-5 yr CF
• DonationsDonations-5 yr CF-5 yr CF
• Medical Medical expensesexpenses
• Bus passesBus passes• Tax savings is Tax savings is
the same (20%) the same (20%) in all tax bracketsin all tax brackets
Galloway Botteselle & Company
Personal tax rates-2014Personal tax rates-2014
Galloway Botteselle & Company
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 $4,580Income-$150k. Tax savings is $4,580• Return for 1 year is over 47%Return for 1 year is over 47%
Galloway Botteselle & Company
Self-employedSelf-employed
• Moonlighting while a resident, orMoonlighting while a resident, or• 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
Galloway Botteselle & Company
Can I deduct _____?Can I deduct _____?
Yes, if...Yes, if...• Expenses are Expenses are
incurred to earn incurred to earn incomeincome
• Expenses are Expenses are reasonable in reasonable in amountamount
• Allowed by the Allowed by the Income Tax ActIncome Tax Act
Not, i f. . .Not, i f. . .• Personal or living Personal or living
expensesexpenses• Capital Capital
expendituresexpenditures• Denied by Denied by
Income Tax ActIncome Tax Act
Galloway Botteselle & Company
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
Galloway Botteselle & Company
Business expense Business expense summarysummary
• Interest on loans and lease Interest on loans and lease paymentspayments
• Convention expenses (2 per year)Convention expenses (2 per year)• Maintenance & repair of office Maintenance & repair of office
equipmentequipment• Professional development Professional development
Galloway Botteselle & Company
Business expense Business expense summarysummary
• Office expensesOffice expenses• Postage, stationery, supplies, etc.Postage, stationery, supplies, etc.
• Salaries and employee benefitsSalaries and employee benefits• Telephone (business portion)Telephone (business portion)• Travel expensesTravel expenses
Galloway Botteselle & Company
Business expense Business expense summarysummary
• Expenses incurred as a residentExpenses incurred as a resident• Medical libraryMedical library• Exams (as tuition now)Exams (as tuition now)• Computer and other assetsComputer and other assets
• 100% deduction ended Jan 31, 2011100% deduction ended Jan 31, 2011
Galloway Botteselle & Company
Automobile expensesAutomobile expenses
• Determine business portion of auto Determine business portion of auto expenses.expenses.
• Keep a travel logKeep a travel log• Automobile operating expenses Automobile operating expenses
include:include:• fuel, maintenance and repairs, fuel, maintenance and repairs,
insurance, loan interestinsurance, loan interest• ParkingParking
Galloway Botteselle & Company
Automobile expensesAutomobile expenses
• Alternative methodAlternative method• Auto allowanceAuto allowance• Travel log still requiredTravel log still required
• 2015 rates2015 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
Galloway Botteselle & Company
Entertainment expensesEntertainment expenses
• Only deduct 50% of Only deduct 50% of meals/entertainmentmeals/entertainment
• Record client names on receiptsRecord client names on receipts
Galloway Botteselle & Company
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.
Galloway Botteselle & Company
Bookkeeping and Bookkeeping and accountingaccounting
• Keep accurate recordsKeep accurate records• Required for preparing tax return and Required for preparing tax return and
for CRAfor CRA• Options for keeping trackOptions for keeping track
• QuickBooks, Simply AccountingQuickBooks, Simply Accounting• ExcelExcel• Envelope methodEnvelope method
Galloway Botteselle & Company
Accrual vs. cash Accrual vs. cash accountingaccounting
• Cash AccountingCash Accounting• record expenses and revenue at the record expenses and revenue at the
time $$ is paid or receivedtime $$ is paid or received• AccrualAccrual
• Record expenses when incurred and Record expenses when incurred and revenue when earned no matter revenue when earned no matter when the $$ is paid or receivedwhen the $$ is paid or received
Galloway Botteselle & Company
Tax installmentsTax installments
• Are a prepayment of current year Are a prepayment of current year taxestaxes
• If required:If required:• March 15March 15• June 15June 15• September 15September 15• December 15December 15
Galloway Botteselle & Company
Tax installmentsTax installments
• When are installments required?When are installments required?• When tax owing in the prior year is When tax owing in the prior year is
greater than $3,000greater than $3,000• Only requires about $21,000 of Only requires about $21,000 of
taxable incometaxable income• Interest charged if not made (not Interest charged if not made (not
deductible)deductible)
Galloway Botteselle & Company
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 CPP50% is left for you50% is left for you
Galloway Botteselle & Company
InstalmentsInstalments
Set aside 40% for taxes Set aside 40% for taxes every time you receive every time you receive
incomeincome
Galloway Botteselle & Company
Where to file your returnWhere to file your return
• Based on residency on Dec 31Based on residency on Dec 31 stst
• Taxes on employment income paid Taxes on employment income paid in province of residence on Dec 31in province of residence on Dec 31
• Taxes on self-employed earnings Taxes on self-employed earnings may be paid in province where may be paid in province where earnedearned
• Income earned out of country?Income earned out of country?
Galloway Botteselle & Company
Miscellaneous Miscellaneous • Travel for job interviews (not Travel for job interviews (not
deductible)deductible)• Multiple jobsMultiple jobs• Married/common law - what Married/common law - what
changes?changes?• NannyNanny• CRA a good resource: www.cra-CRA a good resource: www.cra-
arc.gc.caarc.gc.ca
Galloway Botteselle & Company
IncorporationIncorporation
Galloway Botteselle & Company
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 tax Corporation pays a lower rate of tax than personallythan personally
Galloway Botteselle & Company
Personal tax rates-2014Personal tax rates-2014
Galloway Botteselle & Company
Corporate tax rates-2014Corporate tax rates-2014
Galloway Botteselle & Company
When should you When should you incorporate?incorporate?
If:If:•You can leave at least $30-40k/yr in You can leave at least $30-40k/yr in the company, orthe company, or•You can income split with family You can income split with family members, ormembers, or•Liability is an issueLiability is an issue•SR&ED may be an optionSR&ED may be an option
Galloway Botteselle & Company
Tax free savings accountTax free savings account
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 corporation$5k in TFSA vs $7,700 in corporation
Galloway Botteselle & Company
SummarySummary
• Keep proper track of expensesKeep proper track of expenses• Make required instalmentsMake required instalments• Incorporate if beneficialIncorporate if beneficial• RememberRemember
• ItIt’’s not what you earn, its not what you earn, it’’s what you s what you keep.keep.
Galloway Botteselle & Company
QuestionsQuestions
Galloway Botteselle & Company
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]@gbco.cawww.gbco.cawww.gbco.ca