June 26, 2022,

Dear Valued Clients & Friends,

With tax season now competed and mid year approaching, it is a good time to take account of your financial situation and perform a financial, personal, and business health check.  As you prepare for the end of the school year and vacations, we wish you and your families a safe and healthy summer!

In this edition of the newsletter, I will review the most recent tax season, preparing for the remainder of 2022 and a financial health check.  Here are some topics that I will be discussing:

1. 2021 Personal Income Taxes Update & Planning for the remainder for 2022
2. Income Tax Reviews & Audits
3. Economic Update & Personal Financial Health Check
4. Corporation Renewals and Annual Return Filings
5. DocuSign & Client Portal
6. Advisory, Tax Planning and Cash Flow Planning

If you have missed any editions of the newsletter, please click on the following link:  AR Jaffer PC Newsletter Archives

We have been working very hard in providing personal tips & accounting, tax, and business content on social media.    Please connect and follow the links to my social media at your convenience (Facebook, Twitter, LinkedIn, Instagram) to stay fully updated on CRA Updates and tax planning tips for individuals & businesses.

If you get an opportunity, please also provide a google review available at the following link:

AR Jaffer Professional Corporation Chartered Professional Account Google Review

 

1. 2021 Personal Income Taxes Update & Planning for 2022

As the most recent personal tax and sole proprietorship tax deadlines have recently passed, you should have received your notice of assessments.  If you have not filed your returns yet, you can still send us the documents as it is always better to file even if the tax returns are filed late to avoid your account being flagged or subject to an audit (to be discussed further in the next section).  If you have any questions, please contact us.

2021 tax review:

Here are things to review from 2021:

1. Please send us a copy of your 2021 notice of assessment for our review.
2. If you had a tax payable, please ensure you have made the payment to avoid interest charges.
3. If you do not have a CRA My Account, please register on the CRA website.  Here is the link:  https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html
4. Please ensure your address and direct deposit information is up to date with CRA.  You can update it directly through your CRA My Account.

2022 tax preparation:

Mid-year is an excellent time to do a review of some areas of planning for the remainder of the year:

1. Installments:  If your tax payable in 2021 was greater than $3,000, you are required to make tax installments in 2022.  CRA will send you a letter on your CRA My Account with details.
2. RRSPs:  Please continue making 2022 RRSP contributions.  It is suggested to make monthly RRSP contributions rather than a lump sum on the Mar 1, 2023, deadline for optimal cash flow planning.
3. Prepare a folder for 2022 tax slips (common items include medical receipts, donation receipts, RRSP contributions and all your T3, T4 and T5 slips).

 

2. Income Tax Reviews & Audits

As The CRA generally does not require much supporting documentation in the initial tax e-filing, they often send a letter for a ‘review’to validate the information that has been submitted. Reviews are generally routine and should not cause any panic if you do receive a letter in the mail.  Reviews could require documentation from as far back as six years.  A review normally requires the taxpayer to respond within 30 days. Typical areas that are investigated are as follows:

1. Child care receipts
2. Support payments to an ex-spouse
3. Tuition receipts
4. Donation receipts – ensure that the donations are made through a registered Canadian charity
5. Sale of a principle residence or rental property

On the other hand, an ‘audit’ can occur from time to time if amounts filed do not match CRA’s records or if a taxpayer in continuously late in filing.  Common reasons for an audit are as follows:

1. If you file a ‘nil’ or ‘zero’ tax return.
2. Audits are also chosen based on the taxpayer’s risk assessment or past filing history.
3. Not filing tax returns consistently.   We recommend filing tax returns on time to avoid penalties or potentially being audited.
4. Net worth or lifestyle audit.  CRA reviews a taxpayer’s lifestyle and income filed to determine if their account could potentially be flagged.

The key recommendation is to keep all paperwork for 6 years, file on time and file accurately to avoid a CRA audit.  We are available to guide you if you receive any letters in the mail.

 

3. Economic Update & Personal Financial Health Check

As you may have seen recently, Canada’s inflation rate climbed to a 40-year high.  As costs of day to day living expenses increase, it becomes increasingly important to ensure your accounting and tax affairs are in order.  The other economic indicator that has changed recently is the rise in interest rates.  Interest rates have already risen 1.5% so far this year and economists project a further 0.75% increase in the fall. While reviewing your current personal and rental property mortgages, please contact me if you require some assistance on the financial impact of these rising rates.

We recommend a cash flow plan, budget, or tax plan to be prepared to ensure you are able to plan for your net worth and eventually for retirement.  At a minimum, this should be prepared once every 5 years and then updated annually as your personal and financial situation changes.  We refer to this as a Financial Health Check.Please contact us if you require further details on how we can assist you with a Financial Health Check for your personal or business planning.

Here are my top 5 recommendations with the recent changes to the inflation and interest rates (note that these are general recommendations, and it is best to speak to a professional prior to making any decisions on changing your mortgage or investment situation) :

1. Pay down your highest interest rate loans first.
2. Consider refinancing to potentially lock in your rates.  An early renewal may be the key to secure a lower rate before the next interest rate increase.
3. Prepare an annual budget and cut down unnecessary costs.
4. Evaluate larger purchases and defer them into the future (eg. Car purchases, large renovation projects, high budget vacations).
5. Consider looking at new investments:
   1. Stock markets are down so there may be some good bargains to be sought out
   2. Crypto markets are down (please tread carefully here as crypto is still considered a new type of investment strategy)
   3. Real estate markets are also down, but may still be expensive given the rising interest rates

Navigating both rising inflation and interest rates can be complex. For this reason, it is extremely important to have a Financial Health Check in place and ensure that tax, investment, and cash flow strategies reflect your long-term goals.

We have some excellent planning tools on our website to help get you started with a Financial Health Check.  Click ARJCPA Financial Tools for more information.

 

4. Corporation Renewals & Annual Returns Filings

 

As mentioned in previous communications and newsletters, On October 18, 2021, the Ontario Ministry changed the process of Annual Return Filing.  Previously, the filing was included as part of the corporate tax returns under Schedule 546 (MGS) of the Corporate Tax Return. Effective for Corporate Tax Returns filed after October 18, 2021, the government has changed the process for annual returns and now requires corporations to file the annual return separately through the Ontario Business Registry website.

In order to web file the annual return, the corporation must request a Company Key, a One-Key ID, and a Service Ontario account.  The instructions are available at https://www.ontario.ca/page/ontario-business-registry. Please ensure that you have your Business Registration Name and Corporation Number available when requesting for a Company Key.

Once you receive your company key (generally received within 3 business days), you can log in to your One-key account, follow the prompts to setup your Service Ontario Account and then follow the steps below:

1. Click on ServiceOntario Account
2. Click on your business name
3. Click the “Make Changes” drop down button
4. Click on “File Annual Return”
5. Follow the steps to complete your filing.

Alternatively, your corporate/business lawyer can file the Annual Return on your behalf when they update your corporate minute books.  If you do not have a corporate/business lawyer, we can help you connect with a lawyer.

Note that this is only applicable to you for year ends corporate tax returns that have been filed after Oct 18, 2021.   If you have already completed the annual renewal this year, please retain this for future year end filings.

Please feel free to reach out to us for any assistance required in this process.

 

5. DocuSign & Client Portal Update

The past 2 years has allowed our firm to continue automating our processes.   We have gone virtually paperless and continue our path in improving our client experience.   In the past, we had a client portal that has undergone some improvements and our service provider, CCH has re-introduced the portal which we expect to roll out in the next few months.

Furthermore, we will be introducing DocuSign as an option for signing off on important accounting and tax documents.

Stay tuned for updates in the early fall.

 

6. Advisory, Tax Planning and Cash Flow Planning

Whether you are an individual taxpayer, sole proprietor, or corporate business owner, many of us have experienced a challenging past couple of years.  As part of our commitment and service delivery, we have been working with our clients on the following:

• Business Financing which includes
• $100k BDC working capital loan application. This is the most popular and easiest application process.
• Bank loan proposals & applications
• Lines of credit applications
• Applications to various government loan programs in response to the COVID-19 pandemic
• Preparation of business plans and cash flow projections
• Life Insurance Planning Strategies
• Cash Flow Planning & Budgeting
• Tax Planning and Corporate Restructuring (Holding companies, Estate Freezes, Trusts)
• Net Worth Analysis and Planning
• Strategies to achieve your short term and long-term goals

Let me know if you have any questions on these strategies and we can set up a call or meeting.

Please see our website for further details at https://www.arjcpa.ca/business-advisory-services/

 

Have a safe, healthy, and restful summer!

Sincerely,