income tax workshop 2015

Galloway Botteselle & Company

Taxes - Taxes - from resident to from resident to

practitionerpractitioner

Presented by:Selena Nisbet

February 25, 2015


OutlineOutline

• What can I deduct? What can I deduct? • Home office, meals, auto Home office, meals, auto

expensesexpenses• Keeping good recordsKeeping good records• Tax installmentsTax installments• Resident in different provincesResident in different provinces• IncorporationIncorporation


Why is this important?Why is this important?

• Physicians are in the top tenth Physicians are in the top tenth percentile of income earners in percentile of income earners in CanadaCanada

• Structuring yourself properly can Structuring yourself properly can have huge effect on taxeshave huge effect on taxes

• Goal is to minimize taxes and Goal is to minimize taxes and increase after-tax incomeincrease after-tax income


ResidentsResidents

• Deductions are limitedDeductions are limited• BCMA, CoPS BCMA, CoPS • CMPA now allowedCMPA now allowed• MovingMoving• Automobile (if required by employer)Automobile (if required by employer)

• CreditsCredits• TuitionTuition• Student loan interestStudent loan interest


Deductible expense vs. Deductible expense vs. tax credittax credit• Deductible Deductible

expensesexpenses• Professional exp.Professional exp.• RRSPRRSP• Child CareChild Care• MovingMoving

• Tax savings is Tax savings is based on your tax based on your tax bracketbracket

• Tax CreditsTax Credits• TuitionTuition• Student loan Student loan

interestinterest-5 yr CF-5 yr CF

• DonationsDonations-5 yr CF-5 yr CF

• Medical Medical expensesexpenses

• Bus passesBus passes• Tax savings is Tax savings is

the same (20%) the same (20%) in all tax bracketsin all tax brackets


Personal tax rates-2014Personal tax rates-2014


When to claimWhen to claim

• Tuition fees-ASAPTuition fees-ASAP• Student loan interest-ASAPStudent loan interest-ASAP• RRSP-$10k contributionRRSP-$10k contribution

• Income-$65k. Tax savings is $2,970Income-$65k. Tax savings is $2,970• Income-$150k. Tax savings is $4,580Income-$150k. Tax savings is $4,580• Return for 1 year is over 47%Return for 1 year is over 47%


Self-employedSelf-employed

• Moonlighting while a resident, orMoonlighting while a resident, or• After residency is completedAfter residency is completed• Rules are the sameRules are the same• Must report:Must report:

• Self-employed incomeSelf-employed income• Can deduct related expensesCan deduct related expenses


Can I deduct _____?Can I deduct _____?

Yes, if...Yes, if...• Expenses are Expenses are

incurred to earn incurred to earn incomeincome

• Expenses are Expenses are reasonable in reasonable in amountamount

• Allowed by the Allowed by the Income Tax ActIncome Tax Act

Not, i f. . .Not, i f. . .• Personal or living Personal or living

expensesexpenses• Capital Capital

expendituresexpenditures• Denied by Denied by

Income Tax ActIncome Tax Act


Business expense Business expense summarysummary• Accounting and legal feesAccounting and legal fees• Advertising and promotionAdvertising and promotion• Meals and entertainment Meals and entertainment • Annual license fees and professional Annual license fees and professional

duesdues• Bank chargesBank charges• InsuranceInsurance

• liabilityliability• officeoffice• business overheadbusiness overhead


Business expense Business expense summarysummary

• Interest on loans and lease Interest on loans and lease paymentspayments

• Convention expenses (2 per year)Convention expenses (2 per year)• Maintenance & repair of office Maintenance & repair of office

equipmentequipment• Professional development Professional development



• Office expensesOffice expenses• Postage, stationery, supplies, etc.Postage, stationery, supplies, etc.

• Salaries and employee benefitsSalaries and employee benefits• Telephone (business portion)Telephone (business portion)• Travel expensesTravel expenses



• Expenses incurred as a residentExpenses incurred as a resident• Medical libraryMedical library• Exams (as tuition now)Exams (as tuition now)• Computer and other assetsComputer and other assets

• 100% deduction ended Jan 31, 2011100% deduction ended Jan 31, 2011


Automobile expensesAutomobile expenses

• Determine business portion of auto Determine business portion of auto expenses.expenses.

• Keep a travel logKeep a travel log• Automobile operating expenses Automobile operating expenses

include:include:• fuel, maintenance and repairs, fuel, maintenance and repairs,

insurance, loan interestinsurance, loan interest• ParkingParking


Automobile expensesAutomobile expenses

• Alternative methodAlternative method• Auto allowanceAuto allowance• Travel log still requiredTravel log still required

• 2015 rates2015 rates• $.54 for 1$.54 for 1stst 5000 km 5000 km • $.48 for > 5000 km$.48 for > 5000 km• Increase of $.01 over 2012Increase of $.01 over 2012


Entertainment expensesEntertainment expenses

• Only deduct 50% of Only deduct 50% of meals/entertainmentmeals/entertainment

• Record client names on receiptsRecord client names on receipts


Can I deduct for aCan I deduct for a“home office”“home office”

• Meet one of two tests…Meet one of two tests…• principal place of businessprincipal place of business

oror• used on a regular basis to meet used on a regular basis to meet

clientsclients• Business portion is deductibleBusiness portion is deductible• % of rent , mortgage interest, % of rent , mortgage interest,

taxes, utilities etc.taxes, utilities etc.


Bookkeeping and Bookkeeping and accountingaccounting

• Keep accurate recordsKeep accurate records• Required for preparing tax return and Required for preparing tax return and

for CRAfor CRA• Options for keeping trackOptions for keeping track

• QuickBooks, Simply AccountingQuickBooks, Simply Accounting• ExcelExcel• Envelope methodEnvelope method


Accrual vs. cash Accrual vs. cash accountingaccounting

• Cash AccountingCash Accounting• record expenses and revenue at the record expenses and revenue at the

time $$ is paid or receivedtime $$ is paid or received• AccrualAccrual

• Record expenses when incurred and Record expenses when incurred and revenue when earned no matter revenue when earned no matter when the $$ is paid or receivedwhen the $$ is paid or received


Tax installmentsTax installments

• Are a prepayment of current year Are a prepayment of current year taxestaxes

• If required:If required:• March 15March 15• June 15June 15• September 15September 15• December 15December 15


Tax installmentsTax installments

• When are installments required?When are installments required?• When tax owing in the prior year is When tax owing in the prior year is

greater than $3,000greater than $3,000• Only requires about $21,000 of Only requires about $21,000 of

taxable incometaxable income• Interest charged if not made (not Interest charged if not made (not

deductible)deductible)


10 / 40 / 50 rule10 / 40 / 50 rule

10% of your fee goes to 10% of your fee goes to expensesexpenses

40% goes to taxes and CPP40% goes to taxes and CPP50% is left for you50% is left for you


InstalmentsInstalments

Set aside 40% for taxes Set aside 40% for taxes every time you receive every time you receive

incomeincome


Where to file your returnWhere to file your return

• Based on residency on Dec 31Based on residency on Dec 31 stst

• Taxes on employment income paid Taxes on employment income paid in province of residence on Dec 31in province of residence on Dec 31

• Taxes on self-employed earnings Taxes on self-employed earnings may be paid in province where may be paid in province where earnedearned

• Income earned out of country?Income earned out of country?


Miscellaneous Miscellaneous • Travel for job interviews (not Travel for job interviews (not

deductible)deductible)• Multiple jobsMultiple jobs• Married/common law - what Married/common law - what

changes?changes?• NannyNanny• CRA a good resource: www.cra-CRA a good resource: www.cra-

arc.gc.caarc.gc.ca


IncorporationIncorporation


Incorporation:Incorporation:

• An incorporated business is:An incorporated business is:• A separate legal entityA separate legal entity

• You are an employee of your You are an employee of your companycompany• Will receive a T4 slipWill receive a T4 slip

• Corporation pays a lower rate of tax Corporation pays a lower rate of tax than personallythan personally


Personal tax rates-2014Personal tax rates-2014


Corporate tax rates-2014Corporate tax rates-2014


When should you When should you incorporate?incorporate?

If:If:•You can leave at least $30-40k/yr in You can leave at least $30-40k/yr in the company, orthe company, or•You can income split with family You can income split with family members, ormembers, or•Liability is an issueLiability is an issue•SR&ED may be an optionSR&ED may be an option


Tax free savings accountTax free savings account

When to useWhen to use• Short term investmentsShort term investments• With incorporationWith incorporation

• Benefits are reducedBenefits are reduced• $5k in TFSA vs $7,700 in corporation$5k in TFSA vs $7,700 in corporation


SummarySummary

• Keep proper track of expensesKeep proper track of expenses• Make required instalmentsMake required instalments• Incorporate if beneficialIncorporate if beneficial• RememberRemember

• ItIt’’s not what you earn, its not what you earn, it’’s what you s what you keep.keep.


QuestionsQuestions


GALLOWAY GALLOWAY BOTTESELLE & BOTTESELLE &

COMPANYCOMPANY300-2000 West 12300-2000 West 12thth Avenue Avenue

Vancouver, BC V6J 2G2Vancouver, BC V6J 2G2604-736-6581604-736-6581

[email protected]@gbco.cawww.gbco.cawww.gbco.ca

mailto:[email protected]

income tax workshop 2015

Economy & Finance

tax bracketsin

contribution income

percentile of income

asapstudent loan

auto expensesexpenses

yr cf donationsdonations

taxes goal

incomeincome expenses