Presentation Agenda

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PresentationAgenda

• To provide specialized tax planning for
  individuals working in the IT placement industry
• To introduce tax strategies that will
  significantly reduce your personal tax payable
• Outline what information should be gathered, what
  are the deductible expenses, and how the
  information should be presented.

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1998 Tax Rates (Combined - Ontario)

• Taxable Income Marginal Tax Rate
• UNDER 29,500 26
• Next 29,500 40
• Over 59,000 50

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Our Objective
Follow an aggressive yet balanced approach
to minimize both income taxes and audit risk.
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1998 NON-REFUNDABLETAX CREDITS
AMOUNT
CATEGORY

• BAS IC PERSONAL 6,456
• SPOUSE 5,380
• DISABILITY 4,233
• PENSION DEDUCTION 1,000
• CPP, UI, MEDICAL, DONATION ACTUAL
• TUITION (EXCLUDING DONATIONS, ARE LIMITED
  TO THE LOW MARGINALTAX RATE AT 26)

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GENERAL RULE

• EXPENSES MUST BE
• REASONABLE
• INCURRED TO EARN COMMISSION
• OWN EXPENSES
• OTHER REQUIREMENTS
• CLAIM CANNOT EXCEED COMMISSION INCOME
• ORDINARILY CONDUCT THE DUTIES AWAY FROM
• THE EMPLOYERS PLACE OF BUSINESS
• RECEIVE A FORM T2200
• NOT IN RECEIPT OF A TAX FREE ALLOWANCE

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CONCEPTS OF COMMISSION EXPENSES

• REASONABLE
• CREATING GOODWILL
• MARGINAL COSTS

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SPECIAL RULESNON DEDUCTIBLE ITEMS

• Office in home must be principle place of work
• Salary and wages paid to others must be
  required by
• employer (need employers confirmation on
  T2200)
• Convention costs are a business expense and not
  an
• employment expense
• Personal Items
• Limitation in claiming vehicle depreciation,
  loan interest,
• and leases
• Only 50 of meals and entertainment is deductible

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Commission Expenses Supporting Documentation

• RECEIPTS AND VOUCHURES MUST CLEARLY
• SHOW
• Date Amount
• Name of business or establishment
• Description / purpose
• Name of recipient for gifts and entertainment
• VISA STATEMENTS SHOULD BE SIGNED BY
• TAXPAYER
• VISA OR MASTERCARD STATEMENTS ARE
• UNACCEPTABLE
• VEHICLE LOG BOOK / APPOINTMENT BOOK

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SPECIFIC DEDUCTIONSVEHICLE

• INCLUDING
• Repairs maintenance
• Insurance
• License Auto Club

• Fuel (gas, propane, diesel)
• Washes miscellaneous
• Parking and meters

• LIMITATION
• - 26,000 maximum on cost of vehicle 29,900
  
• including GST PST
• - 650 per month for lease payment
• - 250 per month for loan interest

• accurate calculation of lease deduction,
• capital cost allowance
• acceptable receipts
• not in receipt of capital allowance

• CRITICAL AUDIT AREAS
• gas claim based on Km driven
• try to limit business to one car
• ability to show personal / business use

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ELIGIBLE LEASING COSTS CALCULATION
EXAMPLE Car purchased July 2nd,
1997 Total lease charges paid in
1998 12,000 Total deducted in previous years
18,000 Total number of day s the vehicle 548
days was leased Manufacturers list
price 60,000
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ELIGIBLE LEASING COSTS CALCULATION
Enter total lease charges for paid for
1998 12,000 1 Enter total lease payments
deducted prior to 1998 6,000 2 Enter the
total number of days leased in 1998 548
3 and previous years Enter the manufacturers
list price 60,000 4 Enter the Greater of
line 4 or (29,412 51,000 5 GST/PST ) x
85 (550GST /PST) x line 3 5,554 6
30 -line
2 (25,000GST / PST ) x line 1 6,765
7 Line 5 Lower of line 6 or 7
Eligible leasing cost 5,554

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BUY OR LEASE?

• Leasing
• Better cash flow
• easy to maintain
• regular payment
• no hassle of selling
• subject to mileage
• limitations
• hard to understand
• terminology
• no control over lease

• Buying
• Need down-payment and Pay GST PST
  up front
• Maintain car regularly to
• keep value
• No limit on mileage
• Easy to understand the
• deal
• Have ownership
• therefore more control
• No sales tax paid on
• finance charges

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Vehicle Tips

• Commence your lease in
• January
• Purchase you car in
• December
• Remember to exclude
• the insurance,
• maintenance, and taxes
• from basic lease charges
• GST PST, insurance,
• and maintenance are
• operating costs

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DeductionsMarketing and Promotions

• Sales meetings Seminars
• Sales campaigns
• incentives
• Sales aids, courses and
• motivational materials
• Telemarketing client
• development
• Sub-commissions and finder
• fees

• Including
• Advertising
• Gifts and Give-ways
• (100)
• Meals entertainment
• (50)
• Hotel / Motel
• accommodation
• Travel - air, rail, etc.
• Taxis transit

• Critical Audit Areas
• Properly documented receipts
• Names required on back of restaurant and gift
  receipts
• Payments to spouse must be fully documented
• Sales congress conventions are not deductible
• recipients name and SIN must be provided for
  finder fees

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SPECIFIC DEDUCTIONS

• Including
• Accounting Fees
• Office Supplies
• Trade publications
• Telephone-business long distance cellular
• Professional licenses, fees and dues
• Liability insurance (errors omission)
• Equipment leases and rentals
• Office in home

Critical Audit Areas -Properly documented
receipts -Recurring long distance calls for the
same number -Detailed cellular phone
billing -No depreciation on office
equipment -Office in home may warrant an audit


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Audit Insurance

• As commissioned salespeople expenses are a gray
  area, CA4IT utilizes an aggressive position based
  on arguably related precedents.
• CA4IT sees themselves as champions of small
  business rights.
• Included in your tax planning, CA4IT will
  represent you until the third level of the appeal
  stage should Revenue Canada choose to audit.