CSRS 4200: Impacts of a New Compilation Standard

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A change to CPA standards will soon impact on the scope of work we do for many of you.

This change, which has been years in the making, updates the rules for preparing and presenting certain types of financial statements.  The goal is to make “Notice to Reader” style financial statements more meaningful – both to you as the business owner, and to whoever else ends up viewing them.

All CPA firms will have to adopt the new standards for fiscal years ending December 14, 2021 and beyond.

Lohn Caulder is planning for a seamless transition to the new standard.  Clients should only notice small changes – a slightly altered look to your financial statements, and being asked a few additional questions each year.  A brief summary of these changes follows.

What is Changing?

Financial Statements

The new standards shouldn’t change the numbers on your financial statements, but they will add additional context.  The changes can be found in 2 primary areas:

  • Compilation Engagement Report: This is the new name for the “Notice to Reader” report found on page 3 of your statements. It will be quite a bit longer than what you are used to seeing.  Most notably, it now describes the responsibilities of both management and practitioner.  You can see an example of a the new wording on page 5 of the CPA Canada briefing
  • Basis of Accounting Note: The “Basis of accounting” note will describe the accounting method used in your business (most commonly: cash basis, accrual basis, or a mixture of the two). Many of business owners won’t know how to describe their ‘basis of accounting’, so we will help.  But please keep this in mind: you will be asked to acknowledge responsibility for the basis of accounting, so please ask as many questions as you need to!
Other Changes

In practical terms, implementing the new standard means we, the accountants, will be collecting more information from you, the business owners.  Please bear with us if we ask more questions than usual.  Some typical questions include:

  1. Enquires about the intended and expected users of your financial statements.
  2. Discussions about the methods of accounting you use.
  3. Asking you to sign Engagement and Management Representation letters before releasing the financial statements.
  4. Filling in gaps in our knowledge of your business. This could include things such as the number of people you employee, additions to your product line, or changes to your corporate structure.

For anyone who really wants to dig in we recommend this summary from CPA Canada: Compilation Engagements Management Briefing.  Or, as always, give us a call or send us an email.

CERS: The New Subsidy for Renters AND Owners

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We aren’t the first to say this, but things sure are changing fast these days!  Back in August (which feels like years ago now!), we wrote about Canada’s covid-related subsidies in a newsletter titled “CEWS in the News”.  Since then, every single subsidy we covered has been tweaked, extended, updated, or otherwise nixed

Today’s newsletter focuses on a subsidy that didn’t exist back in August.  We are going to talk about a new, significant addition to Canada’s covid relief program that we want to be sure every client of ours is aware of: the Canada Emergency Rent Subsidy, or “CERS”

For those who haven’t heard of it yet (it was just announced in October), CERS is a federal subsidy that assists businesses with their monthly property costs.  CERS is available to virtually all Canadian businesses, non-profits, and charities – to both renters and property owners – who have seen a drop in monthly revenues.  The subsidy runs in 4 week periods, starting with September 27 to October 24th, and continues through to June 2021.  At this point there is very little deadline pressure – CRA says they will start processing applications on November 30th, and continue to accept new applications for up to 6 months after the end of each period.

So how much is this subsidy worth?  The answer is, as usual, it depends!  CERS only funds a portion of your eligible property costs.  The important questions are: Which costs are eligible? and What portion of these costs can be claimed?

1. Which property costs are eligible for CERS?

If you are a renter, this includes most costs you are required to pay under a lease agreement, up to $75,000 per claim period. Think: base rent (excluding GST!), property taxes, insurance, and certain customary operating costs.

If you own your business property (which excludes homes), eligible costs may include property taxes, insurance, and interest on your mortgage, not to exceed $75,000 per claim period.

2. What portion of your costs can be claimed?

The portion of your costs that qualify for subsidy are tied to declining monthly revenues.

  • Revenue drops of 70% or more qualify for the maximum subsidy – 65%
  • Revenue drops over 50% and below 70% qualify for a subsidy between 40% and 65% (the calculation for this tier of subsidy is a bit too complicated for a newsletter!)
  • Revenue drops under 50% qualify for a subsidy equal to 80% of their revenue drop (for example, if revenues dropped 20%, your subsidy is 16%)

There is a final tier of subsidy we hope none of you find yourself in.  If any of you are in an industry that has been temporarily shut down due to a mandatory public health order, you qualify for the base subsidy plus a 25% top-up.  This bumps the maximum claim up to 90%.

Of course, this information is all high-level, and businesses will need to look at their eligibility on a case-by-case basis. If you think you might qualify, or have any questions about CERS or other subsidy programs, we are here to help!

March 2016 Federal Budget

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“Frankly, Scarlett . . . .”

Ten years, more or less, seems to be all the tolerance that Canadians have for their Governments.  At least, that is what we must assume, given our total surprise at the extent of the Liberal electoral victory last October.  In fact, as things evolved through the campaign, it seemed rather more likely that we would see the NDP holding the balance of power, in a Tory minority government.  NDP leader Thomas Mulcair must have believed it, too, as he was quoted making statements that were generally quite friendly (or at least conciliatory) to business.  That left the Liberals to carve out more extreme positions during the campaign, in order to distinguish themselves from the throng.  Read More

2016 Personal Tax Filing Season

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Welcome to the 2016 Personal Tax Filing Season!

It’s time again to file your personal tax returns. The deadline keeps changing – this year, those returns must be filed with the Canada Revenue Agency by no later than Monday May 2, 2016.

We’d like to deliver the finished product as quickly and efficiently as possible – and we’re sure that many clients will, as of today, already possess all the information that’s needed (much of the most relevant data may already be on our system – we usually just need the ‘small stuff’, and other items, to tie everything together). So, we’d like to encourage everyone to consider the “practical” deadline as really being early April – there’s little reason for any later than that!

To help us help you, organization is the key! This newsletter contains a few items to help you accomplish your annual filing obligation with as little trouble and expense as possible.

Personal Tax Season Checklists:

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Are you a non-resident who owns a rental property in Canada?

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If you are a non-resident with a Canadian rental property here is a guide of your tax filing obligations, important due dates and other issues you should be aware of.

Tax Filing Obligations
  • The tenant or property manager has an obligation to withhold non-resident tax at a rate of 25% on the gross rental income paid to a non-resident;
  • The tax should be sent to the Canada Revenue Agency (CRA) on or before the 15th day of the month following the month the rental income is paid;
  • The payer would have to prepare a NR4 slip to provide you the gross amount of the rental income and the amount that was remitted to the CRA, annually.

You could then elect under Section 216 of the Income Tax Act to pay tax on only your net rental income instead of the gross amount. Please note that you only have a two year period to make this election.
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Snowbirds Need to Watch Their Number of Days in the U.S.

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Global warming is still a theory to many Canadians, stuck as they are for many months in the snow and cold. So, the attractions of much warmer weather in the Southern United States remains a major draw for those “snowbirds”. Immigration and visa requirements are fairly relaxed for snowbirds, but there are tax issues that could cause problems for the unwary.

U.S. residents, like Canadian residents, are subject to tax on their worldwide income. But did you know that if you, as a Canadian resident, spend 183 days or more in the U.S. in any twelve month period (and not just in a calendar year) you would be considered a U.S. resident for tax purposes too? This would make you subject to tax on your worldwide income in both Canada and the U.S., and although there is a tax treaty between Canada and the U.S. to eliminate double-taxation, the result would lead to problems. And not just tax: extended residence in the U.S. can jeopardize or complicate your medical insurance coverage, immigration status, and estate tax exposure.

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Submitting Your Personal Tax Information to the ‘Cloud’

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Readers will recall that in January we announced a new “cloud”-based service, which allows clients to submit their bookkeeping data to a secure site on the Internet. That facilitates the transfer of large electronic data files very easily. Already many clients have used this system, and we’re receiving very positive feedback about it.

Thus encouraged, we now plan to expand the cloud program to the personal tax season.

It’s become a fact of life that many information slips ‘trickle’ in over the months of February and March, making it a nuisance for clients to accumulate everything in an envelope, and submit information only when it’s fully complete.

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Opting out of CPP Premiums

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We have noted that more and more of our clients are working well past what would normally be considered “retirement age”.

Of course, economic need is often the motivation. But we know, in most cases, that’s not the reason – most of these individuals can afford to retire, now. They simply don’t want to.

Without exploring the sociological issues that may be relevant in this decision, we are left with the fact that many persons age 60 or over have chosen to remain working, even though they may have decided to draw on their CPP early (which remains their privilege, although they must suffer a discount for doing so).

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Introducing the Lohn Caulder Cloud

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The term “cloud” is used these days to refer to places on the Internet where data relevant to you or your business is stored. As computerization has spread throughout our lives, and become much more portable, much of our important information can be vulnerable to accident or theft.

As the capacity of the Internet increases, the cloud offers a solution to the problem of data security, so long as it can be made safe and secure.

Lohn Caulder now provides a free and secure portal for clients that makes it easy to upload electronic data to us, via the Internet.

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