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05
MAY
2014

Ontario Provincial Budget Commentary – May 1, 2014

On May 1, 2014, Ontario Finance Minister Charles Sousa tabled his second Budget.

The deficit for the 2013-14 fiscal year is projected to be $11.3 billion, which is $400 million less than the amount estimated when the 2013 Budget was tabled. The deficit for the 2014-15 year is projected to be $12.5 billion and the longer-term forecast continues to call for a return to a surplus by 2016-17. Net public debt to GDP is projected to continue to increase until 2015-16, from which time it will to start to decrease.

Top income earners, large Canadian-controlled private corporations (CCPC), users of aviation fuel and tax-exempt diesel fuel, and smokers will all face increases in the taxes they pay.

Subsequent to the Budget’s release, the NDP indicated that they would not support it and a general election has now been called for June 12, 2014. As a result, the future of this Budget’s contents is uncertain.

Please click the link to read Lipton’s full Ontario Budget Commentary

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Lipton LLP to discuss these matters in the context of your particular circumstances. Lipton LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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25
FEB
2014

Let’s Talk – Winter 2014 Edition

A Message from the Managing Partners

Managing Partners Fred Arshoff and Jeff Nightingale discuss what Lipton LLP is striving to achieve in the months and years ahead.

Rule Changes with Respect to Foreign Income Reporting

The Canadian government has made it a priority to “crack down on international tax evasion and aggressive tax avoidance.”  As part of this effort, the government has released a revised Form T1135, the Foreign Income Verification Statement.  Tax partner,  Sunita Arora addresses what these changes mean.

Tax Season Tips

Tax season is just around the corner.  To make sure you’re prepared, assurance & advisory partner Paul Roberts offers his quick tips.

Software Compliance and Why it Matters

Manager of IT Services, Bryan Walderman provides his advice on how to avoid a software compliance audit.

Click Here to Read our Entire Newsletter

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20
NOV
2013

Getting Ready for 2014

With the exception of RRSP contributions (in most cases) and pension income splitting, any tax planning strategies intended to reduce one’s tax payable for 2013 must be implemented by the end of the calendar year.

While 2013 tax returns don’t have to be filed for at least another six months, it’s worth taking the time now to review possible tax-saving opportunities to make sure any necessary steps are taken before December 31st. Doing so can help avoid or minimize “sticker shock”, in the form of a large tax bill, when the annual tax return is completed next spring.

Make charitable donations for 2013

The federal and all provincial governments provide a two-level tax credit for donations made to registered charities during the year. To earn a credit for the tax year, donations must be made by the end of the calendar year. There is, however, another reason to ensure donations are made by December 31. For federal purposes, the first $200 in donations is eligible for a non-refundable tax credit equal to 15% of the donation. The credit for donations made during the year which exceed the $200 threshold is, however, calculated as 29% of the excess.

As a result of the two-level credit structure, it makes sense to aggregate donations in a single calendar year where possible. A qualifying charitable donation of $400 made in December of 2013 will receive a federal credit of $88.00 ($200 times 15% plus $200 times 29%). If the same amount is donated, but the donation is split equally between December 2013 and January 2014, the total credit claimed is only $60. ($200 times 15% plus $200 times 15%), and the 2014 donation can’t be claimed until the 2014 return is filed in April of 2015. And, of course, the larger the donation in any one calendar year, the greater the proportion of that donation which will receive credit at the 29% rather than the 15% level.

It’s also possible to carry forward for up to five years donations which were made in a particular tax year. So, if donations made in 2013 don’t reach the $200 level, it’s usually worth holding off on claiming the donation and carrying forward to the next year in which total donations, including carryforwards, are over that threshold. Of course, this also means that donations made but not claimed in any of the 2008, 2009, 2010, 2011, or 2012 tax years can be carried forward and added to the total donations made in 2013, and then the aggregate amount claimed on the 2013 tax return.

When claiming charitable donations, it’s possible to combine donations made by oneself and one’s spouse and claim them on a single return. Generally, and especially in provinces and territories which impose a high income surtax  (i.e., Ontario, Prince Edward Island and the Yukon) it makes sense for the higher income spouse to make the claim for the total of charitable contributions made by both spouses.

For Canadians who have not been in the habit of making charitable donations, there is now an additional incentive to make a cash donation to charity. In this year’s budget, the federal government introduced a temporary (before 2018) charitable donations super-credit. That super-credit allows individuals who have not claimed a charitable donations tax credit in any of the last 5 tax years (that is, 2008, 2009, 2010, 2011 and 2012) to claim a super-credit on up to $1,000 in cash donations made after the budget date of March 21, 2013. The super-credit is equal to 40% of donations under $200 and 54% of donations over the $200 threshold. Donations in excess of $1,000 will, of course, be creditable at regular federal charitable donation credit rates of 15% and 29%, as outlined above.

Make a registered education savings plan (RESP) contribution

It’s possible for Canadians to save for their children’s education on a tax-favoured basis, through a registered education savings plan. While no deduction is provided for contributions made to the plan, investment income earned by those contributions accumulates tax-free, and amounts paid out of the plan to pay for post-secondary education are generally taxed at lower rates in the hands of the student and not those of the original contributor.

The federal government assists contributors to an RESP through a grant program, the Canada Education Savings Grant (CESG). The CESG is equal to 20% of the first $2,500 in contributions made during the year, for a maximum annual grant of $500.

While it’s possible to carryforward grant entitlement to a future year, there are restrictions on the amount of such carryforward. The best way to ensure that the maximum possible CESG is received is to make $2,500 in RESP contributions in each calendar year, by the end of that year.

Consider accelerating medical expenses into 2013

While most out-of-pocket medical expenses incurred by Canadians may be claimed for purposes of the medical expense tax credit, the rules governing that credit can be confusing. The basic rule is that qualifying medical expenses (a list of which can be found on the Canada Revenue Agency website in excess of 3% of the taxpayer’s net income, or $2,152, whichever is less, can be claimed for purposes of the medical expense tax credit.

More practically, the rule for 2013 is that any taxpayer whose net income is less than $71,750 will be entitled to claim medical expenses that are greater than 3% of his or her net income for the year. Those having income over $71,750 will be limited to claiming expenses which exceed the $2,152 threshold.

The other aspect of the medical expense tax credit which can cause some confusion is that it’s possible to claim medical expenses which were incurred prior to the current tax year but weren’t claimed on the return for the year the expenditure was made. The actual rule is that the taxpayer can claim qualifying medical expenses incurred during any 12-month period which ends in the current tax year, meaning that each taxpayer must determine which 12-month period ending during 2013 will produce the greatest credit amount. That determination will obviously depend on when medical expenses were incurred, so there is, unfortunately, no universal rule of thumb.

Medical expenses incurred by all family members can be added together and claimed by one member of the family. In most cases, it’s best, in order to maximize the amount claimable, to make that claim on the tax return of the lowest income member of the family who has tax payable for the year.

As December 31st approaches, it’s a good idea to add up the medical expenses which have been incurred during 2013 as well as those paid during 2012 and not claimed on the 2012 return. Once those totals are known, it will be easier to determine whether to make a claim for 2013 or to wait and claim 2013 expenses on the 2014 return. And, if the decision is to make a claim for calendar year 2013, knowing what medical expenses were paid when will enable the taxpayer to determine the optimal 12-month period for the claim. Finally, it’s a good idea to look into the timing of medical expenses which will have to be paid early in 2014. It may make sense, where possible, to accelerate the payment of those expenses to December 2013, where that means that they can be included in 2013 totals and claimed on the 2013 return.

Take a look at the amount of tax instalments paid this year

Millions of Canadian taxpayers (in particular, the self-employed or retired) pay income taxes by quarterly instalments, with the amount of those instalments representing an estimate of the taxpayer’s total tax liability for the year.

The final quarterly instalment will be due on December 15, 2013. (However, since this year December 15 falls on a Sunday, the actual date on which payment is due will be Monday December 16.) By that date, almost everyone should have a reasonably good idea of what his or her income will be for 2013 and so will be in a position to estimate what the tax bill will be for the year. While the tax return forms to be used for the 2013 tax year haven’t yet been released by the Canada Revenue Agency, it’s possible to arrive at an estimate by using the 2012 form. Increases in tax credit amounts and tax brackets from 2012 to 2013 will mean that using the 2012 form will result, if anything, in a slight overestimate of tax liability for 2013.

Once one’s tax bill for 2013 has been estimated, it’s possible to compare that figure with the total of tax instalments already made for 2013 and to determine whether the tax instalment to be paid on December 15 can be adjusted downward.

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08
NOV
2013

How to Choose an Executor

Choosing an executor — the person or institution you put in charge of administering your estate and carrying out your final wishes — is one of the most important decisions you’ll make when preparing a will.

Picking the right executor can help ensure the prompt, accurate distribution of your possessions with a minimum of family friction. Some of the duties required include:

  • Filing court papers to start the probate process (this is generally required by law to determine the will’s validity).
  • Taking an inventory of everything in the estate.
  • Using your estate’s funds to pay bills, including taxes, funeral costs, etc.
  • Handling details like terminating credit cards, and notifying banks and government agencies like Social Security and the post office of the death.
  • Preparing and filing final income tax returns.
  • Distributing assets to the beneficiaries named in the will.

Given all the responsibility, the ideal candidate should be someone who is honest, dependable, well-organized, good with paperwork and vigilant about meeting deadlines.

Who to Choose

Most people think first of naming a family member, especially a spouse or child, as executor. If, however, you don’t have an obvious family member to choose, you may want to ask a trusted friend, but be sure to choose someone in good health or younger than you who will likely be around after you’re gone.

Also keep in mind that if the person you choose needs help settling your estate, they can always call on an expert like an attorney or accountant to guide them through the process, with your estate picking up the cost.

If, however, you don’t have a friend or relative you feel comfortable with, you could name a third party executor like a bank, accountant or a professional who has experience dealing with estates.

Executor Fees

Most family members and close friends (especially if they are a beneficiary) serve for free, but if you opt for a third party executor, it will cost your estate. Executor fees  typically run anywhere from one to five percent, depending on the size of the estate.

Get Approval

Whoever you choose to serve as your executor, be sure you get their approval first before naming him or her in your will. And once you’ve made your choice, go over your financial details in your will with that person, and let him or her know where you keep all your important documents and financial information. This will make it easier on them after you’re gone.

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07
AUG
2013

Mel Leiderman Receives ICAO’s Highest Designation Level – FCPA, FCA

Lipton LLP Chartered Accountants is proud to announce that the Institute of Chartered Accountants of Ontario (ICAO) has granted the prestigious designation of Fellowship to Mel Leiderman.  Fellowship, the highest designation that the Institute confers, recognizes outstanding career achievements and leadership contributions to the community and the profession.

Less than 2.8 per cent of Ontario’s over 36,000 CPA, CAs have been elected to Fellowship, making this an exceptional honour.  To receive this designation, a member must be nominated and is required to have brought distinction to our profession through significant accomplishments in a number of professionally and socially important ways.

As a newly designated FCPA, FCA, Mel will be honoured by the ICAO at a presentation ceremony on September 19, 2013 in Toronto.

“I am very honoured and thrilled to receive this designation and to join such a distinguished group”, says Mel about his recent election.  “There is nothing more satisfying professionally than to be recognized by your peers.  I’d like to thank the Partners at Lipton who encouraged me to take on new challenges.  I would also like to thank my wife Helen for understanding the commitment required to achieve this designation.  Lastly, I thank my clients who continue to give me opportunities to be part of their organizations, to learn and develop with them as well as helping them achieve their goals”.

Mel graduated from the University of Windsor in 1973 with a Bachelor of Arts Degree. He continued his studies by completing his fourth year at the University of Western Ontario. After completing his undergraduate studies, Mel joined the accounting firm of Clarkson, Gordon (now Ernst & Young) in London, Ontario and obtained his CA designation while at that firm in 1977.

In 1978, he joined Lipton LLP and has been instrumental in the continuing growth of the firm.  Mel is the lead engagement partner for numerous clients of the firm. He has over 30 years experience specializing in assurance and advisory services, financing, tax, estate and strategic planning for corporations and partnerships. He constantly seeks to add value with his hands-on approach in areas including reporting requirements, tax matters, succession planning, organizational and strategic planning issues.

Mel is a member of the Society of Trust and Estate Practitioners (TEP) and is a certified director with the Institute of Corporate Directors (ICD.D).  He is also a member of the Professional Conduct Committee of the Ontario Institute of Chartered Accountants.

He serves on the Board of Directors and Audit Committees of Agnico Eagle Mines Limited (TSX, NYSE), Colossus Minerals Inc. (TSX) and Morguard North American Residential REIT (TSX).

Mel is a former member of the North York General Hospital Foundation Professional Advisory Committee, the Discipline Committee of the Ontario Institute of Chartered Accountants and the Accounting Standards Board (CICA) Private Enterprises Advisory Committee.

All the Partners and staff at Lipton congratulate Mel on this well deserved achievement.

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24
JUL
2013

CRA Announces Change to Reporting Foreign Income on Form T1135

Recently, the CRA released the revised Foreign Income Verification Form T1135 as announced in the 2013 Federal Budget. Effective immediately, taxpayers are required to use this new form.

Taxpayers must now provide additional information, including:

  • The name of the specific foreign institution, investment or other entity holding funds outside Canada.
  • The specific country to which the foreign property relates.
  • The cost of the property at the end of the year, the highest cost amount during the year and the income or gains generated from the foreign property, on a property by property basis.

 

However, there is some good news for those taxpayers who hold foreign property through Canadian brokerage and investment accounts. The new form states that “where the reporting taxpayer has received a T3 or T5 from a Canadian issuer in respect of a specified foreign property for a taxation year, that specified foreign property is excluded from the Form’s reporting requirement for that taxation year”. The Form includes a box that must be checked where such property is held, so it appears that the Form still does have to be filed even if all of the property is subject to T3/T5 reporting.

Where a taxpayer fails to comply with the requirements of the new form, proposed legislation adds a three-year extension to the normal reassessment period (which is generally three years from the date of the original notice of assessment) to the entire tax return. As a result, if a taxpayer fails to comply with the Form’s reporting requirements, the entire income tax return for the year will not be statute barred until six years after the date of the original notice of assessment.

We continue to keep current as more details are announced.

For additional information, please contact your Lipton advisor.

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01
JUL
2013

Congratulation to our recently promoted staff

 

 

Lipton LLP announces our latest promotions

 

The Partners of Lipton LLP Chartered Accountants are pleased to announce the following promotions effective July 1, 2013:

Bryan Walderman, BA, MCSE, has been promoted to Manager of IT Services. Bryan has been providing the accounting industry with IT support for over a decade and has been with Lipton since 2009. He is responsible for Lipton’s IT infrastructure as well as client consultations. Bryan also participates in the firm’s marketing activities.
Ilana Zeidel, CPA, CA, has been promoted to Tax ManagerIlana has been in public accounting since 1999 and a member of the Lipton family since 2012.  She provides tax compliance and advisory services to a variety of clients, including professionals. 
Brandon Burtnik, CPA, CA, has been promoted to Supervisor. Brandon has spent his entire accounting career at Lipton, and passed the UFE exams in 2010. As a member of our Accounting and Assurance team, he works with a variety of owner-managed clients in the manufacturing, real estate and construction industries.  Brandon is known for his dedication to the clients he services.
Meghan Killeen, CPA, CA, has been promoted to Supervisor. Meghan has been part of the Lipton family for her entire career, having passed the UFE exams in 2010. Her client work includes real estate, construction, manufacturing and distribution.  Meghan is valued for her attention to detail and technical expertise.

Kristen Preszcator, CPA, CA has been promoted to Supervisor.  Since passing the UFE exams in 2010, Kristen has demonstrated strong leadership skills and technical ability.  After joining Lipton in 2012, her experience has served her well in providing assurance services (including those requiring International Financial Reporting Standards) to a variety of businesses, not-for-profit organizations and public companies.
Nini Yang, CPA, CA, has been promoted to Supervisor. Nini’s clients include real estate, manufacturing and construction.  She joined Lipton in 2008 and passed the UFE exams in 2010.  Nini’s professionalism and dedication to clients has endeared her to all her colleagues.

 

 

We wish all of them continued success as valued members of our firm.  

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19
MAR
2013

Risk Mitigation – When Catastrophe Strikes

In the course of doing business, a company may be affected by an insurable loss, such as a fire, flood, equipment failure or explosion. These incidents, if not handled properly, can result in significant damage to the company’s profit, financial stability and possibly its reputation. It cannot rely solely on its insurance policy to avoid the economic loss that can result from an incident.
The important steps to mitigate the risks of a loss include:

  • Having a formal risk mitigation plan in place.
  • Accounting for the claim with a proper reporting structure.
  • Properly quantifying the claim and being actively involved in managing the relationship with the insurance company.

 

Risk mitigation plan

At first, be prepared: Have a risk mitigation plan in place that can be put into action immediately upon the occurrence of the incident.
As part of the plan, identify people who will take charge and manage the claim process. Each member of the team would have preset tasks in the event of an incident. The plan should also specify alternative production facilities, suppliers and warehouse space, with the goal being to keep the company operational and minimize losses.

As a next step, carefully review insurance policies and identify all potential issues regarding coverage, valuations, exclusions and endorsements. If the policy is unclear, it should be reviewed with the insurance broker to make sure there is adequate coverage. Once an incident occurs, it will be too late to find out about coverage limitations that jeopardize the company’s ability to recover.
External advisers should be identified in advance to assist during the incident. They may include accountants, lawyers, risk managers, engineers and others. Using external advisers who can help with the claims process will allow the company to focus on its day-to-day operations. They will also allow the company to level the playing field with the insurance company and its representatives who deal with claims on a daily basis.

Also, most insurance policies will cover the costs of professional services needed to assist with the claims process, through the professional fee endorsement portion of the policy. External advisers are knowledgeable with how claims work and can accelerate the process, increase the recovery amount from the insurance company and relieve pressure on the company’s staff.

Accounting for a claim

It is vital to capture all loss-related costs. The company should set up an insurance receivable account on its balance sheet, with sub-accounts to capture all the costs in the correct “buckets” in accordance with the insurance policy. These may include cleanup and debris removal, property repairs, etc.

It is important to have the costs categorized correctly to facilitate the payment of the insurance claim. If the costs incurred from the incident are not allocated to the correct categories, the insurer may not pay for them. For example, costs related to the business interruption portion of the claim, such as loss of sales resulting from downtime, must be accounted for separately from property damage costs. Supporting documents should be included to provide backup for the costs, such as invoices, time sheets, cancelled cheques and correspondence.

Managing the relationship

In quantifying the claim, the company’s methodology should be consistent with its insurance policy. One of the most widely used methods is known as the “three-column approach,” which uses a modified income statement and presents the calculation in three columns. Column one itemizes results the company expected to achieve if not for the incident. Column two is the actual results achieved following the incident. The third column is the difference between the two, or the loss incurred. The company uses this method for its sales, cost of sales and extra expenses.

The company lead representative in charge of the claim should work closely and openly with the insurance company. This is not an adversarial relationship and should not be treated as such. The insurance broker should also be used as a resource to help co-ordinate the loss recovery. It is important to keep the insurer and adjusters advised of any changes that may affect the claim.
If after submitting its claim the company is not happy with the insurer’s settlement offer, it should take steps to explain its position carefully. External experts experienced in dealing with the insurer can be of assistance during this process. Make sure that all the components of the claim have been set out clearly and accurately with adequate supporting documentation.

As mentioned previously, the insurer requires documentation and will not just take your word for it. The company should present its claim in person to the insurer and may request that its broker be in attendance. Do not change the rationale or methodology of the claim once it has been submitted as this will damage the credibility of the claim.
By following the steps detailed in this article, a company can be better prepared to mitigate the losses from a loss incident.

The following article appears in the March 8, 2013 edition of Lawyers Weekly and can be viewed in it’s original form here.

 

Steven Polisuk is a Chartered Business Valuator, Certified Fraud Examiner and recognized as an expert witness in the Ontario Superior Court of Justice for the quantification of economic damages. For the past twelve years, Steven’s practice has focused exclusively in the areas of valuation, litigation support, personal injury claims and forensic accounting. Steven has published several articles and is well respected in his field as an expert in damage quantification for commercial litigation, insurance claims (including business interruption) and for personal injury matters. 

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14
MAR
2013

Beware of Fraudulent Communications

Occasionally, taxpayers may  receive, either by telephone, mail, or email, a communication that claims to be  from the Canada Revenue Agency (CRA) but is NOT. In all these cases, the communication requests personal  information, such as a social insurance, credit card, bank account, and passport numbers, from the taxpayer. These fraudulent communications are also referred to as scams or phishing.

Invariably, the communication  argues that this personal information is needed so that the taxpayer can receive a refund or benefit payment. Another common  scam refers the person to a Web  site resembling the CRA’s Web site where the person is asked to verify their identity by entering  personal information. Taxpayers should not respond to such fraudulent communications.

To better equip taxpayers to identify  those communications that do not come from the CRA, the following general  guidelines are provided.

The CRA does not do the following:

  • The CRA will not  request  personal information of any kind from a taxpayer by email.
  • The CRA will not  divulge taxpayer information to another person unless formal authorization is  provided by the taxpayer.
  • The CRA will not  leave any personal information on an answering machine.

 

When in doubt, ask yourself the following:

  • Am I expecting additional money from the CRA?
  • Does this sound too good to be true?
  • Is the requester asking for information I would not  include with my tax return?
  • Is the requester asking for information I know the CRA already has on file for me?
  • How did the requester get my email address?
  • Am I confident I know who is asking for the  information?

Examples You will find examples of a fraudulent letter, emails, and online refund forms on the CRA’s Web site. As per telephone calls, the CRA will occasionally leave messages for taxpayers on their answering machines. In these cases, a callback number will be provided along with a request to have the taxpayer’s SIN available upon callback. However, it is important to note that not all telephone messages purporting to be from the CRA are genuine. Should taxpayers wish to verify the authenticity of a CRA telephone number, they should contact the CRA directly by using the numbers on our Telephone numbers page.  For business-related calls, contact 1-800-959-5525 and for individual concerns, contact 1-800-959-8281.

If you have responded to a fraudulent communication and have become a victim of fraud, please contact the Royal Canadian Mounted Police’s Canadian Anti-Fraud Centre by email at info@antifraudcentre.ca or call 1-888-495-8501.

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24
AUG
2012

Partnership Year-Ends – Tax Changes

W hat are the tax implications of a member of a corporate partnership having a fiscal yearend different from that of the partnership? The latest federal budget provides a new answer to that question. Previously, partnerships owned by corporations could defer taxes on their income. They did this by setting the year-end of the partnership on a date after the year-end of the corporate partners. For example, if a corporate partner had a March 31 year-end, the partnership could have an April 30 year-end in order to defer the partners’ income taxes on 11 months of income from the partnership. The budget proposals of March 22, 2011 will do away with this deferral opportunity.

Henceforth, each corporate partner will be required to include in its current fiscal year its share of the partnership income calculated on the deferred portion of the partnership’s fiscal year. This period is referred to as the “stub period.”

There will surely be some fine-tuning of the calculations but generally this new rule applies to all corporate partners, other than professional corporations,
that have year-ends of March 23, 2011, or later. “Some clients were concerned about the additional tax burden of having to include additional income in
their fiscal years ended March 31,” says Tax Partner Sunita Arora.

“The government has made a transitional reserve available to permit the stub-period income to be brought into income over five years, using a graduated formula.”

Furthermore, the Canada Revenue Agency has stated that they will also apply similar rules to members of joint ventures and co-tenancies. At this point, these
details have not been released.