4 Reasons Why You Should Hire a Bookkeeper

Posted November 28th, 2012 by Lisa Patrick with 3 Comments

4 Reasons to Hire a Bookkeeper

If you are a bookkeeper looking for new clients, a good approach is to provide them reason why they should hire you. Let them know if they are starting a small business it is important to keep expenses to a minimum. Profits will happen eventually but often not within the first few months.  Some business owners will try to cut costs by not hiring a bookkeeper. Instead they will get admin staff to manage the financial records. Although expenses are reduced in the short term this could be a mistake.

Off-the-shelf accounting software may be easy to buy but it isn’t necessarily easy to use – properly. By hiring a good bookkeeper you will avoid some mistakes listed below.

1. Invoicing Incorrectly

Incorrect invoicing may entail a lot of extra time reconciling your products sold or services rendered, thus resulting in inability to collect from your customers on time. Also, if not done on time, invoicing can strain your cash flow.

A good bookkeeper will ensure that invoices are correct and prepared in a timely manner. They can also monitor “aging of accounts” to make sure that receivables are collected from customers on time.

2. Unknowingly Missing Deadlines

There are specific dates for filing your taxes and other requirements to the government. Missing a date,
no matter how unintentional, can cost you penalties and other charges. With a good bookkeeper, the
only thing that you have to worry about is getting all the pertinent information to them on time. They’ll
take care of the rest.

3. Incorrectly Classifying Items for Taxation Purposes

Tax laws are revised and updated periodically. What is classified as an item under a particular tax
bracket or rule may change.

A good bookkeeper is always abreast with the latest tax rules. They also have a clear understanding of
items that may be tax deductible for your business. Trust your bookkeeper and take advantage of their
knowledge. In the long run you will save money and headaches.

4. Lack of Know-How in Using Accounting Software

Inaccuracies in handling the accounting side of the business can potentially lead to more losses than you
think – Not to mention government penalties. It sounds obvious, but accounting software works best if
the correct data is inputted. What you put into the system, is proportionate to the output.

A good bookkeeper understands this perfectly. The advantage for your client is that they don’t have to worry at the end of your fiscal year.

Ensuring proper handling of your client’s company’s bookkeeping needs is paramount to your business success. Utilizing services and tools that will increase your efficiency and standardize your client’s bookkeeping needs provides you further credibility as a bookkeeper. C2online provides a free trial to their proven tools used in a bookkeeping office for the past 20 years. Other companies out there like Odotrack provide tools that ensure that your client’s expenses are recorded and tracked and make your bookkeeping tasks easier.

Lisa Patrick
Learn more tips to take your bookkeeping to the next level !




HST to GST

Posted October 30th, 2012 by Bill Kelsall with No Comments

British Columbians voted in a tax referendum in 2011 to return to the GST/PST tax regiment and to reject the HST.

The BC Finance Department announced August 11, 2011 that the PST would be reinstated at 7%. During the transition period, the Provincial portion of the HST will remain at 7%, along with the Federal portion at 5%.

On February 17, 2012 both governments announced that the change back to the dual tax system on April 1, 2013.

Generally, if tax becomes payable or is paid on or before April 1, 2013, the HST will apply. If tax becomes payable after March 31, 2013, PST and GST will apply.

For tangible personal property brought into the province after March 31, 2013, the Provincial component of the HST will not apply. This rule also applies to a service or intangible personal property supplied in a non-participating province to a resident of BC for consumption in BC. Likewise, the BC component of the HST will not apply to imported non-commercial goods. Non commercial goods that are accounted for by the relevant provisions of the Customs Act after March 13, 2013 will not carry the Provincial component, regardless of when they enter the Province. The same treatment applies to specified motor vehicles imported into BC after the cut-off date.

For self-assessed supplies imported after March 31, 2013 or the cost of which becomes payable or is paid after that date, the Provincial component of the HST will not apply.
The rates used to convert the amounts used for Income Tax purposes to credits or rebates for taxable benefits, passenger vehicles, aircraft and employee/partner rebates will be adjusted to reflect BC’s exit from the HST.

The time limits for refunds and rebates generally remain the same as now. However, new limitations would apply to the BC portion of the HST which become due or is paid after March 31, 2013.
In relation to returns and exchanges, if a item is returned on which HST has been paid and a refund is given, the HST is also refunded. If an exchange is made, no HST is calculated.

I have only included the most widely applicable rules to give the reader a general idea of the issues which will arise in relation to BC transistion to the duel tax system. Please consult your tax advisor or contact us in respect to your specific questions.

I thank KMPG and their TaxNewsFlash Canada, for powering this discussion.




Sec 380.2 of the Criminal Code — An addition to the judge’s toolkit, and bad news for crooked accountants

Posted September 5th, 2012 by Chris Green with 1 Comment

Probably the most difficult task facing any judge is the task of sentencing the newly convicted offender; certainly it is the part of the judicial process which attracts the most flak from the public. Everyone, it seems, is a critic.

What an outraged public doesn’t typically realize, however, is that judges are bound by a set of very elaborate sentencing rules and guidelines, some as laid down by our appeal courts, but others coming direct from Parliament and enshrined in the Criminal Code.

An example of the latter is the recently enacted section 380.2 of the Criminal Code. This section provides judges with an interesting new tool. It permits a judge to actually prohibit an offender “from seeking, obtaining or continuing any employment, or becoming or being a volunteer in any capacity, that involves having authority over the real property, money or valuable security of another person.”

What makes this section interesting is the fact that it allows the courts to intrude upon how one makes one’s living. It is one of the few, if not only one, to do so directly.

There has, of course, always been an indirect effect on one’s livelihood resulting from a criminal sentence. Truck or taxi drivers, who have been convicted of impaired driving, obviously cannot work as such while serving a licence suspension, and many truckers convicted of unrelated offences find their ability to cross the US border has been severely impacted. As a lawyer, when speaking to sentence on behalf of an accused, I will usually bring to the judge’s attention the possible impact of a conviction upon the offender’s ability to earn a living, in hopes that the judge might be more lenient, knowing that society was likely to impose other consequences upon the offender.

What judges cannot typically do, however, is to prohibit an offender from pursuing a given occupation, or at least not until now. A judge still cannot order that an offender not work as, say, a mechanic or carpenter, or work in retail sales. But now, in limited circumstances, a judge can order a defender not to work as an accountant or bookkeeper, stockbroker or financial advisor.

Section 380.2 applies only to offenders convicted of fraud, or the fraudulent manipulation of stock markets, and specifically permits a judge to prohibit a defendant from having any employment where he or she gets to handle other people’s money.

It is early days yet for this section of the Code, so it will be interesting to see what use the judges make of this new addition to their toolkit. It certainly isn’t going to make their task any easier. You see, two of the cornerstones of sentencing are 1) protection of the public, and 2) the rehabilitation of the offender.

It is tempting, for the protection of the public, to ban the bookkeeper convicted of embezzlement from ever again being employed as a bookkeeper, but how does that square with the judge’s obligation to consider the rehabilitation of the offender? Is society well served by denying any of its members the right to pursue a lawful occupation? This debate is central to our criminal justice system. If one believes in the possibility of redemption, then one should assist offenders in the rehabilitation process rather than throw roadblocks in their way. But if one views a criminal conviction as a sign that the person is irredeemably corrupt, one ought to lock them up and throw away the key.




Principle Residence Election

Posted August 29th, 2012 by Bill Kelsall with No Comments

Almost every one of us has, at one time or another, sold property on which we have claimed the “Principal Residence” election.

Without getting too technical, the basis for the exception and the qualification for the election is determined by dividing the number of years+1 that you have lived on the property by the number of years you have owned it, times the selling price. Thus, we have, L+1/O x SP; where L is the number of years ending after the purchase date that you have lived on the property or from 1971, whichever is less, O is the number of years ending after the purchase date that you have owned the property and SP is the selling price.

It is CRA policy to allow the tax free sale of a principal residence without the election form T2091 being completed if, by applying the above formula, the result is nil. However, an election on form T644 cannot have been filed in 1994.

Several types of property qualify as a Principal Residence. Some of these include a house, an apartment or unit in a multiplex, a cottage, mobile home, or a houseboat. Other types of ownership such as a share in a co-operative housing unit, if the sole purpose of purchasing the share is to inhabit the housing unit owned by the co-operative may also qualify.

So what constitutes a principal residence? First of all, it has to be owned solely by the taxpayer or jointly with another person or otherwise. Secondly, it has to be inhabited by the taxpayer, his spouse or common law partner, former spouse or common law partner or child.

The meaning of “inhabited” can be expanded to include elections made in the case of change of use of the property, such as rental use, for up to four years. It is extremely important to note that Capital Cost Allowances may not be claimed on the rented property during this period, or the election will be nullified. In the case of moving to gain employment, it can be expanded indefinitely as long as the taxpayer remains in Canada; the employer is not related to the taxpayer and the housing unit is 40 kilometers from the new place of employment. The taxpayer must resume inhabitation during the term of employment or within a maximum of two years after the employment terminates, or the taxpayer must die during his employment in order for the election to remain valid.

Partial change of use, such as renting out part of the property will trigger a deemed disposal of that portion at fair market value. The resulting capital gain is usually covered by the Principal Residence Election. However, should that portion of the property be reclaimed as a principal residence again at fair market value, a capital gain will result, based on the length of time the property was rented. We assume, of course, that the FMV is rising continually.

Land, surrounding the property, which is not a share in a co-operative housing unit, up to one-half hectare may also constitute part of the principal residence without proof that it adds to the use and enjoyment of said property. Beyond this point, any excess area of land must be proven to be necessary to the use and enjoyment of the property by the taxpayer. Such things as minimum lot sizes, access to public roads and sub-division restrictions come into play here. It should be noted here that any land used to earn income from business or property will not be considered to be adding to the use or enjoyment for the purpose of the Principal Residence Exception.




Employment Status – Employee or Self-Employed?

Posted July 5th, 2012 by Bill Kelsall with 1 Comment

I would assume that most of us have run up against the question of whether or not a person is an employee or is a self-employed sub-contractor. This question frequently arises in the construction industry but does occur across the entire spectrum of businesses we deal with every day.

To determine a person’s status, it is recommended that we follow a two- step approach.

Step 1 – We must determine what the parties intended when they entered into their relationship. Did they enter into a contract of service (employer-employee) or did they intend to engage in a contract for service (business relationship). Sometimes the intent is obvious, as in a written agreement and sometimes there is no common intent. Workers and payers may set up their affairs as they see fit, but they must ensure that the status they have chosen reflects the actual terms and conditions of the employment.

Step 2 – The following questions will help you determine the working relationship and whether the intent of the parties is reflected in the facts:

· The level of control the payer has over the worker’s activities. Control is the right of the payer to exercise control over a worker concerning the manner in which the work is done and what work will be done. Obviously the more control the payer has over the worker the more the relationship takes on the aspics of an employer-employee situation. Such things as the degree of control held by each party and the payers right to exercise control (whether it is actually exercised or not) come into play. This issue can be clouded when dealing with professionals who have specific skill sets not held by the payer and require little or no direction in their daily activities.

Some situations which might indicate the payer is in control are: direction of how and when the work is performed; determination of the amount of pay (although negotiations do occur in an employee-employer relationship); availability of the worker to be employed by other payers while still engaged by one employer; ability of the payer to prioritize the payee’s time; ability of the payer to determine what work will be done; the overall work environment is one of subordination; even though the payer listens to the payee’s suggestions, the payer has the final word.

Conditions which indicate the payee is self- employed include: The payee works independently without control or supervision; The payee may provide services to more than one payer at a time; The payee can accept or refuse work from the payer; The working relationship does not have an high degree of continuity, loyalty, security, subordination or integration.

· A higher degree of ownership of tools and equipment required to do the job may indicate that the payee is self- employed. However, the courts have ruled that the mere requirement to supply tools and equipment does not, in itself, denote self-employment because many employees, such as auto mechanics, are required to supply their own tools.

Conditions suggesting an individual might be an employee would be: The payer supplies the tools and equipment required by the payee and is responsible for the repair, replacement and insurance costs associated with the tools and equipment.; The worker supplies the tools and equipment for the job and the payer reimburses the payee for them; the payer retains the right of use over the tools and equipment provided to the worker.

Conditions indicating an individual might be self- employed are: the payee provides the tools and equipment and also retains the responsibility for the repairs, maintenance and Insurance on these assets; The worker has a significant investment in the tools and equipment and retains the right over the use of them; The worker supplies the workspace from which the job is performed and is responsible for the upkeep of the workspace.

· Subcontractors and Assistants – If the worker has the right to hire or fire subcontractors or assistants, this would indicate that by doing so he is put into a position of occurring profit or loss and is therefore self- employed.

· Financial Risk – If there are ongoing fixed costs assumed by the payee or any costs for which he or she is not reimbursed or if he or she is financially responsible if the contract for which they are hired is not fulfilled, this would indicate the worker is a sub–contractor.

· Chance of Profit – If the payee has an overall chance of profit or loss arising from the performance of his duties, he or she is most likely self-employed. This is because he or she can pursue contracts and negotiate prices. Although employees may have expenses associated with their employment, these expenses would not exceed their pay and there would be no risk of loss.

The above is, by no means an exhaustive review of this subject and readers are cautioned that the points made may not apply in the Province of Quebec.

A payer or payee may request a ruling on their status through My Business Account by using “Request a CPP/EI ruling” service at www.cra.gc.ca/mybusinessaccount. A registered representative may request a ruling at www.cra.gc.ca/representatives.

A payer or worker may also request a ruling by writing a letter or completing form CPT1 and sending it to their Tax Services Office. More information is available by calling 1-800-959-2221.

This commentary is meant for general information only. Specific instances should be referred to you own tax consultant.

Writing articles on Income Tax is a rather daunting task. If you have suggestions on what you would like to see in future issues or have questions in regard to this subject, please contact me at www.taxnstuff.com.

Your indulgence is appreciated.