Tax & Business News
Trips, tips and traps
June 2016
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Links For June
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Latest info from StatsCan
Population estimate
36,048,521
CPI Annual Inflation
1
.7%
Unemployment Rate
7
.1%
GDP Monthly growth
-0.2%
Forward this email to a friend!
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The fear engendered by the mention of Canada Revenue Agency is so well established in our collective psyches that normally prudent clients feel compelled to comply with threats and intimidating tactics used by scammers. This accounts for the success they must have in coercing individuals to part with personal information, credit card details and even cash.
Read the article below and note the affirmations from CRA about collection methods they do not do so any attempt to extort from you will not succeed.
If however, you have been rudely dealt with by Canada Revenue Agency, there is a complaint process to which they are very diligent in following up.
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Permanent Links
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PAYROLL
TAXES
CALCULATORS
MISCELLANEOUS
SENIOR'S CORNER
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| Calendar of Important Dates |
 Corporations with a March year end, claiming the small business deduction must pay the balance of tax owing by the end of June.
Corporations with an April year end, not claiming the small business deduction must pay the balance of tax owing by the end of June.
Filing deadline for a December 31, 2015 year end is June 30
, 2016
June 15 - Self-employed personal tax filing deadline
June 19 - Father's Day
July 1 - Canada Day
Next Issue - July 11, 2016
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CRA SCAMMERS
CRA does NOT call out of the blue...
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Over the past while there have been numerous reports of individuals (scammers)
impersonating CRA collections agents
over the phone and demanding payments for alleged tax debts. The calls can be
aggressive
,
intimidating
, and may even threaten arrest by the RCMP or other officials.
The scammers may also request payment via various means such as regular or prepaid credit cards, wire/bank transfers, ITunes cards, or, simply, cash. In some cases, the scammer has the target's personal information, such as their address. It has been reported that some scammers go so far as to offer to meet the target at the nearest bank machine.
If an individual receives a suspicious call purporting to be from the CRA, care should be given to ensure no personal information is disclosed.
An individual may consider obtaining identifying information from the caller (such as a name, phone number, office location, and Agent ID number) and then calling CRA on their publically listed number (1-800-959-8281) to confirm that the call is legitimate.
The CRA has also stated that they will not:
- email a link requesting that recipients fill in an online form with personal or financial details;
- set-up an in-person meeting in a public place to take a payment;
- demand immediate payment by prepaid credit card; or,
- threaten with immediate arrest or prison sentence
To
report suspected fraudulent activity
, taxpayers may contact the
Canadian Anti-Fraud Centre
at
www.antifraudcentre.ca
, or, call toll-free at 1-888-495-8501. If a taxpayer believes that they may be the victim of fraud or have given personal or financial information unwittingly, they could contact their local police service, financial institution, and credit reporting agencies.
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A TAXING TIPS
CPP and EI may apply...
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Gratuities or tips received by employees are income earned from employment. However, it must be determined whether these tips are pensionable and/or insurable, that is, whether the employer should be withholding CPP and/or EI. This depends on whether the tips are considered to have been paid by the employer. Administratively, CRA looks at whether the tips are controlled by the employer or are considered to have been paid by the customer (a direct tip).
A December 16, 2015 Tax Court of Canada case examines whether tips paid to a restaurant's workers were subject to CPP and EI. The restaurant's annual revenues were approximately $6.5 million and the tips totalled $1 million.
The workers
divided the tips under a formula
which varied over time, with all workers, including the "front-of-the-house" employees (
servers
and the related
support staff
)
, and "back-of-the-house" employees
(
kitchen staff, managers
, and the catering
sales coordinator
)
participating. The employer had withheld and remitted CPP and EI on tips paid to the "back-of-the-house" employees, so only "front-of-the-house" employees were under Appeal.
The
Employer
testified that, although they
deposited and paid out the tips
, they considered these funds to be
held in trust for the employees
(likening it to GST/HST held for the Crown). The "
back-of-the-house
"
staff were entitled to a portion of the
tips
, computed as a percentage of revenues,
under
their
employment contracts
. The "
front-of-the-house
"
employees'
contracts
were
silent
on the matter of tips, and they
shared actual tips
from patrons, less the portion paid to the "back-of-the-house" staff. Their
tips were paid out (in cash for some time, eventually transitioning to cheques) separate from their wages and outside the payroll system.
Taxpayer loses!!
The Court found that
CPP and EI applied to tips paid by the employer
. The Court found that "
mere distribution
" of the gratuities by the employer, with neither control nor ownership, is sufficient to constitute
payment
by the employer. The Court also noted that
CRA's published interpretations
(for example, at
www.cra-arc.gc.ca/tx/hm/xplnd/tps-eng.html
) differentiate between controlled and direct tips, but that this may
not
be
the
correct
test - the only determinant is whether the employer
paid the tips to the employees.
As the employer had paid the tips to the employees, CRA was correct to assess CPP and EI.
Action Item: Consider whether your business is properly withholding and remitting CPP and EI on tips and gratuities earned by your workers.
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TAX FREEDOM DAY
May 17th in Alberta, later for everyone else...
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Provincial tax freedom days (earliest to latest)
| Alberta |
May 17 |
| Saskatchewan |
June 1 |
| Prince Edward Island |
June 1 |
| British Columbia |
June 5 |
| Ontario |
June 5 |
| Manitoba |
June 7 |
| Nova Scotia |
June 9 |
| New Brunswick |
June 11 |
| Quebec |
June 13 |
| Newfoundland and Labrador |
June 14 |
These dates are best estimates and are subject to change once actual government revenues are announced.
Tables are based on an average family income of $105,236 and includes all taxes including property tax, sales taxes as well as income taxes. At 42.9%, its not cheap being a Canadian, however, if we are happy with the value for money, its a bargain.
Top of Page
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FUNDING OPPORTUNITY
Going global...
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Funding Available to Support Research & Development
Program Assists Canadian Companies with Global Collaboration
The Going Global Science and Technology (S&T) Program will contribute up to 50% to a maximum of $50,000 to Canadian companies, universities, and/or non-government centres towards establishing collaborative R&D initiatives with foreign for profit and/or not for profit organizations.
Funding is given for the face-to-face encounters needed to solidify the partnership and move it forward to the point where the researchers can begin the R&D phase of the initiative, (e.g. define objectives, activities, timelines, responsibilities, etc.). In developing such collaborative efforts, the program will support travel (e.g. airfare, local transportation, accommodation, meals, and incidentals) plus other non-research expenses (e.g. workshop or seminar expenses, translation services, photocopies, or hospitality).
A possible supported project could be the expenses of a Canadian manufacturers to select a foreign equipment designers to collaborate on developing new production technologies. Although individual companies can apply, funding preference will be given to projects involving and benefiting more than one Canadian organization.
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Recent CRA Decisions
There is no escape from tax...
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CRA CONTRADICTS THEMSELVES
Scientific Research and Experimental Development (SR&ED) expenses -
Whether corporate taxpayer's project involving the development of a
chocolate spread constituted SR&ED - In dismissing the corporate taxpayer's appeal for 2009 and 2010, the TCC concluded, in essence, that the taxpayer's research project concerning the development of a chocolate spread
did not involve SR&ED within the meaning of subsection 248(1) of the ITA, because there was no risk or technological uncertainty involved.
In dismissing the taxpayer's further appeal, the FCA concluded that: (a) it had to be presumed that, in reaching his conclusions, the TCC Judge did take into account all of the evidence before him,
including a certain letter from CRA specifically stating, on its face, that the taxpayer's research did involve a technical uncertainty; (b) the TCC judge made no errors in his findings of fact or in his conclusions of law, and properly applied the criteria established in Northwest Hydraulic Consultants Ltd. v. Canada 98 DTC 1839 (TCC) and affirmed by the FCA in C. W Agencies Inc. v. Canada 2001 CAF 393; and (c) there was, therefore, no requirement for appellate intervention. - ITA s. 248(1) "scientific research and experimental development"..
Employment insurance - Applicant denied benefits - Whether left employment without just cause -
The applicant was seeking judicial review of a decision of the Social Security Tribunal, Appeal Division which upĥeld a decision of the General Division that the applicant had left his
employment without cause, thereby not being entitled to benefits.
The applicant left his job after two days, telling the Canada Employment Insurance Commission that he quit because he was
claustrophobic and had to work in confined spaces and also because his colleagues looked down on him. A claimant who leaves his employment without just cause is disqualified from receiving benefits unless there was no reasonable alternative to leaving, having regard to all the circumstances.
The General Division found that the applicant
had not been medically advised to leave and did not give the job a reasonable try. It gave
no weight to a letter from a doctor that the applicant was medically advised to leave as the letter was obtained after the applicant's reconsideration request was denied and did not detail the employment or medical condition of the applicant. On appeal, the standard of review is that of reasonableness.
The Appeal Division can only intervene if it finds a breach of natural justice, an error of law or an erroneous finding of fact made in a perverse manner or without regard for the evidence. The Appeal Division found no such breach or error and upheld the decision of the General Division. The role of the Federal Court of Appeal is not to reassess the arguments but to determine whether the Appeal Division decision was reasonable.
On reviewing the evidence, it was reasonable for the Appeal Division to find that the working conditions were not so intolerable as to leave the applicant with no reasonable option other then to resign two days after he started work. It was also proper for the Appeal Division to concur with the General Division decision to disregard the medical letter. The Appeal Division decision was reasonable and the application for judicial review was dismissed. - Employment Insurance Act, RSC 1996, c. 23 , ss.
29, 30, 58(1).
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| Disclaimer |
 The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a commentary such as this, a further review should be done. Every effort has been made to ensure the accuracy of the information contained in this commentary. However, because of the nature of the subject, no person or firm involved in the distribution or preparation of this commentary accepts any liability for its contents or use.
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NEW NEWS
All you need to know...
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Watch this 10-minute rapid-fire discussion of select recent developments in the wonderful world of Canadian tax by the
Video Tax News Team.
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| Life in the Tax Lane - June 2016 |
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Sincerely,
Howard Render, CPA*CA
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