THE TAX TIMES - pibusiness.capibusiness.ca/wp-content/uploads/2016/10/October_2015.pdf · TAX TIMES...
Transcript of THE TAX TIMES - pibusiness.capibusiness.ca/wp-content/uploads/2016/10/October_2015.pdf · TAX TIMES...
THE
TAX TIMES October 2016
HOLIDAY BENEFITS
It’s that time of year where the weather gets cool but hearts get warmer.
Many employers are planning to hold a Christmas party for their staff or
give out year-end bonuses to get into the spirit of the season. However, do
you know how these things affect your employees’ taxable income?
Christmas Parties
If you host a social event for all of your employees that costs $100 or less per
employee, it is a deductible expense to your business but does not have to be
reported on the employee’s T4 as a taxable benefit. If you go all out and rent
the hotel ballroom downtown, hire a band, have an open bar, etc., you may
need to add the value of the party to your employees’ T4 slips.
Gifts, Awards, and Rewards
Any extra payment you give your employees that is in cash or near-cash (gift certificates, prepaid credit cards, stocks, etc.)
is a taxable benefit that must be reported as personal income.
You can choose to “gross up” the cash payment by remitting an additional amount to CRA. If your employee has a 20%
average tax rate and you want them to take home a $500 bonus without having tax consequences, you can increase the
value of the bonus to $625 and then remit $125 to CRA on their behalf. The full grossed-up amount will appear on their T4
but the remittance should ensure they don’t have to pay additional tax next spring. If you need help with this calculation,
you can always contact your Pi representative.
Non-cash gifts and awards under certain circumstances can be treated as non-taxable benefits. Gifts (by CRA’s definition)
are for special occasions like weddings, birthdays, and religious holidays. Awards (again according to CRA) are for overall
work contribution and are typically only given to a limited number of employees based on an evaluation. Gifts and awards
are also only non-taxable if they total less than $500 in value for the year.
Rewards and/or incentives for good job performance or meeting specific job goals are always taxable regardless of the
format. Any other bonuses or extra payments are also taxable to the recipient.
Since cash bonuses are taxable to the recipient, but non-cash gifts under $500 per year are non-taxable, here are some ideas of gifts that you can give to your employees at this time of year
1. Tickets to a sporting event, concert, or play
2. Smartphones, tablets, or other electronics
3. Hotel or spa packages to alleviate work stress
4. Tuition for a personal interest class (work-related tuition is already non-taxable)
5. Seasonal gifts like gift baskets or a voucher for a turkey or ham
Pi Business Solutions Ltd. www.pibusiness.ca October 2016
CLIENT PROFILE
Noreen Ward – The Gift Designers
It was just an absolute pleasure chatting with Noreen Ward from The Gift Designers in
her beautiful, well-kept office/warehouse in SE Calgary. She is a positive force.
The Gift Designers began operating in 2002. Noreen’s employment situation was
coming to an end and she was at a crossroads regarding what her next step would be. A
girlfriend suggested that they should go into business together to sell gift baskets. Once
the business became established, the friend made the decision to move back to BC to be
with her family, leaving Noreen to be the sole owner and heart of The Gift Designers.
As it turned out, The Gift Designers is so much more than just gift baskets. Where they really excel is in helping
businesses build client loyalty. As we all know, it is much easier to look after and nurture existing clientele, than
continually have to pursue new business. That is where The Gift Designers come in, their exceptional products are
customized on each client’s specific needs.
For example, at the beginning of each year, a mortgage broker will provide Noreen with a list of clients for whom gifts are
required, and the expected delivery dates. The Gift Designers will then tailor the baskets to the specific needs, desires, and
budget of the client. Over the years, they have proven time
and again that the quality and creativity of their baskets
exceeds expectations, and are on time every time. The
testimonials on her website prove that focus on service
and products have paid off.
It is much easier to look after
and nurture existing clientele,
than continually have to pursue
new business.
Noreen’s extremely positive outlook was clearly
illustrated when our discussion turned to the upcoming
minimum wage. There is frustration because she knows
she will have to raise prices, but yet she maintains that her
team is her biggest asset and success in business is not achieved
by focusing on the negative. Knowing that she is employing people in this difficult economy is the most satisfying part of
her business. Noreen knows if she continues to make sound strategic decisions, has a clear vision and plan for the future,
The Gift Designers will continue to exceed its goals. For more information, visit www.thegiftdesigners.com.
Let us deal with CRA
on your behalf
A man walks into a restaurant
with his pet alligator on a leash. “Do you serve tax collectors?” he asks the bartender.
“Of course” says the bartender. “Well” replies the man, “I’ll have a beer,
and my alligator will have a tax collector.”
Pi Business Solutions Ltd. www.pibusiness.ca October 2016
SEPTEMBER TRAVEL CONTEST WINNER
We recently ran a contest through the month of September where we were
encouraging people to visit our new website and share our content with
their friends and family to get a chance to win a $1,000 prepaid Visa card.
We are proud to announce that the
winner of the contest is one of our
newest clients, Jamie Gervais.
Jamie owns a company called
FoodImpact and has been putting
on nutrition presentations in
Calgary schools for the last 5 years.
Children from ages 5 to 18 learn about
healthy food choices and get a chance to put their newfound knowledge to the test
by making a nutritious snack.
She is hoping to make good use of her prize
by taking a trip somewhere warm during the Christmas break and helping to fund
her expansion to Edmonton next month where she can reach even more Alberta
children. For more information about Jamie, FoodImpact or to arrange to have her
come out to your school, please email her at [email protected]
REFERRAL BONUS PROGRAM
In addition to the travel contest,
we also recently launched a referral program
allowing existing clients to refer prospective corporate clients
and get a $100 gift card to a restaurant of their choosing.
Since the beginning of September, we have given away 6 cards
to The Keg, Boston Pizza, and Ruth’s Chris Steakhouse.
WHERE CAN WE SEND YOU TO DINNER
NEXT MONTH?
Pi Business Solutions Ltd. www.pibusiness.ca October 2016
STAFF EDITORIAL The Hidden Costs of Raising Minimum Wage
As you likely already know, the NDP government has made a commitment to raising the minimum wage in Alberta to
$15.00/hour by October 2018. The underlying reasoning is hard to argue with. Who wouldn’t want to help people in
need? Low income families, single parent families, seniors without pension benefits, etc. might well need and benefit from
this kind of assistance. The government has published their case on why they believe raising the minimum wage is the best
way to accomplish this. www.alberta.ca/alberta-minimum-wage-changes.aspx
The sad truth is, this is only part of the story. Any benefit
received by these low-income workers has to come from
somewhere, so who is really winning and who is really losing?
If you listen to the soundbites, or read the propaganda, there is no downside to this legislation. In light of the fact that we
represent a significant number of employers, we felt that a more detailed analysis of the numbers was warranted. Wages
are often the largest single expense a business owner will incur and they need to understand the new financial reality. The
chart below is calculated based on a minimum wage employee working 40 hours per week, and while we realize that is not
always the case, we wanted to demonstrate the full potential impact.
Base rate before increase was $10.20 Calculations based on 2016 tax rates and credits
Hourly minimum wage rate
Total increase in employee's monthly
take home pay
Total increase in monthly government
revenue
Total increase in monthly cost
to employer
October 2015 $11.20 $122.89 $71.05 $193.93
October 2016 $12.20 $245.78 $142.09 $387.87
October 2017 $13.60 $417.82 $241.56 $659.38
October 2018 $15.00 $589.86 $341.02 $930.89
OVERALL, FULL-TIME EMPLOYEE ANNUAL TAKE HOME PAY COULD RISE BY AS MUCH AS $7,078.
It’s understood that even a small amount can mean a lot to low income earners, many of us having experienced that
ourselves. While this increase might be enough for some individuals, to experience a significant lifestyle improvement,
there is a caveat. Most minimum wage employees are not full-time and will not see the full benefit. In other cases,
employers may restrict the number of jobs, or restrict the number of hours per employee in response to these changes.
REVENUE FOR GOVERNMENT AGENCIES COULD NEARLY DOUBLE FROM $4,275 TO $8,368 PER EMPLOYEE.
37% OF THE INCREASED COST TO EMPLOYERS ENDS UP IN GOVERNMENT COFFERS.
These increases in government revenue are made up of both federal and provincial tax, as well as increases in both
employer and employee Canada Pension Plan and Employment Insurance premiums.
EMPLOYERS SHOULDER THE COST OF BOTH OF THESE INCREASES,
AND THEREFORE COULD END UP PAYING AN ADDITIONAL $11,171 PER EMPLOYEE PER YEAR.
When calculating the real cost of wages, employers often focus on just the hourly rate, while forgetting the other
associated costs. Those include increases to the employer’s portion of CPP and EI, as well as the cost of vacation pay. If
you are a small business with two or more employees, that cost will soon add up to be an unrecoverable amount.
For a discussion of the options employers have to deal with these realities, see our blog on October 28, 2016
Pi Business Solutions Ltd. www.pibusiness.ca October 2016
GET TO KNOW US – Teri Tetreault
Teri first started Pi Business Solutions in 2007, after having worked in the
income tax field for the previous 7 years. During that time, his roles included tax
supervisor, trainer for senior staff across Western Canada, and corporate tax
manager. As time went on, Teri found his vision of ideal customer service
diverging from his employer’s. That ongoing experience left him unsatisfied but
motivated to make a change.
"I set out to create a business that would deliver an opposite experience for the
client – one where we would promise exceptional service, and actually deliver on
that promise."
His commitment to that service promise has driven him to a level of expertise rarely seen in our industry. This expertise is
most apparent when he is engaged in corporate tax planning, overall tax optimization, and business consulting.
"I love saving clients piles of money! I really want to provide a service
that is superior to our competitors, that is delivered in a much more
personable way, and all at a fair price.”
When you offer this level of service, the business inevitably grows. Knowing that, Teri’s philosophy has
always been to invest in the right people when we find them – not when we already need them. That
way, the growth of our business never means the experience of the client has to suffer.
"We tend to hire in advance of demand on purpose so that we have the infrastructure in place when we
take on new clients. Though it’s a very expensive way to run a business, we believe it’s the only way. Many
other firms wait to have the demand, then hire the staff. Product quality can’t help but suffer when using that strategy.
Delivering quality is the most important thing we do, and we cannot lose sight of that."
"Never sacrifice quality or integrity for money. Ever. Period."
Teri sees accounting as a fun and strategic game he never tires of. "No two files are the same. There is always some little
twist. I love finding that unique solution, knowing that it's exactly right, and that no one else could make it any better.
Because every file is satisfying in its own way, my job is always rewarding."
In his spare time, Teri’s world centres around his adorable daughter Erica. When he’s not spending time with her, he loves
ball hockey, indoor soccer, and getting together with friends for game nights.
Watch for our next issue coming out in December when we will talk about important year-end tasks and tax law changes,
feature another client, and get to know someone else from Pi.
If you have any questions you’d like us to answer in an upcoming newsletter, email us at [email protected]