Category: income

Taxpayer Relief in Canada – Do I Qualify

If you have a tax problem in Canada, repercussions with the Canada Revenue Agency can be severe. If you filed your income taxes late or committed an infraction under the Canadian Income Tax Act, like failing to disclose income or writing off expenses that you weren’t entitled to, the Canada Revenue Agency has incredible power to punish you. By far the most common weapon that they use to punish you is your pocket book.When an income tax return is filed late and the CRA assesses what you owe, or a previously filed return is re-assessed and new monies are owed, the CRA will add interest and penalties to the amount of the tax debt that you owe. Often times, when an individual has a tax debt, the amount that they owe will double in size once the interest and penalties are calculated.Sometimes individuals have personal circumstances that led to their tax problem which is why taxpayer relief in Canada exists.

Taxpayer relief in Canada is a formal program offered by the Canada Revenue Agency where the CRA can agree to cancel all or part of the interest and penalties. You can qualify under the Taxpayer relief program in Canada for one of the following reasons:A natural disaster like a fire or flood. For example, you misstated expenses resulting in an inaccurate return filing because your basement flooded and all of your receipts were financial hardshipA documented personal issue like a medical problem or death in the familyAn error on the part of the CRAThe only challenge with the Taxpayer relief program in Canada is that it is a long and complicated process and very few applications under this program are granted. To hire a professional to make an application under this program could cost you thousands. In addition, the CRA will not reduce the principal tax debt owed. The CRA does not offer any program that will reduce the principal tax debt that is owed.Before considering making an application under the Taxpayer relief program in Canada you may want to first look at the principal amount of the tax debt you owe and whether you can afford to pay it off at all. Often people who owe a large tax debt are not even in a position to pay it, regardless of whether or not they receive interest and penalty relief under the Taxpayer relief program in Canada.

The longer you stretch out the time that you have a tax problem, the worse the tax problem will become. If the application under the Taxpayer relief program in Canada is denied, you will owe further interest that will have accumulated through the application period. The CRA will also continue to try to collect on the principal tax debt owed.There are other financial programs available that will freeze the interest on the tax debt that you owe and can even eliminate or reduce interest, penalties and the principal tax debt that you owe. These programs can also stop CRA collection action and provide you with immediate relief. These programs are not available through the Canada Revenue Agency, however you may access them through a financial consultant who works with people who have debt problems.

Tips To Reduce Your 2006 Income Taxes In 2007!

Income taxes are a substantial burden for business owners and real estate investors. There are few actions which can reduce your 2006 taxes after December 31, 2006. Unfortunately, most options to decrease revenues or increase exepnses are no longer available after year-end. This article summarizes four options for reducing your 2006 federal income taxes during 2007. These include reducing revenue, increasing real estate depreciation, increasing expenses by conducting a fixed asset audit and increasing expenses by converting capital expenditures into operating expenses.

The basic process for calculating income taxes is simple:

Revenue – expenses = net income, or taxable income,

Taxable income x tax rate = income taxes

Two options for reducing income taxes are to reduce revenues or increase expenses. It is not possible to change the tax rate except through congressional action. It may be possible to reduce revenue for taxpayers on an accrual accounting system. Taxpayers may be able to increase expenses by increasing real estate depreciation, personal property depreciation or operating expenses.

Accrual accounting recognizes revenue when it is earned. Cash basis accounting recognizes revenue when payment is received. Accrual basis taxpayers can review revenue which has been booked but not yet received. In some cases, it may be appropriate to increase the allowance for bad debt. There is little cash basis taxpayers can do to reduce revenue (after the end of the year).

Most real estate owners can sharply increase depreciation by obtaining a cost segregation study. Real estate depreciation schedules are typically established by simply separating land and long-life property. Long-life property is depreciated over 27.5 years for rental residential property and 39 years for commercial property. Cost segregation can usually increase depreciation by 50% to 100% during the first five to seven years of ownership by allocating a portion of the cost basis to 5, 7 and 15 year property. In addition, real estate owners can “catch-up” depreciation under reported in prior years without filing amended tax returns.

Fixed asset audits can be a cost effective means to increase operating expenses by removing phantom assets, removing operating expenses mistakenly coded as capital expenditures and correcting the depreciable life for incorrectly coded items. Phantom assets can include assets which have been lost, stolen or disposed of without removing them from the accounting records. The undepreciated basis of these assets can be converted to an operating expense after the error is discovered. In some cases, substantial operating expenses are incorrectly added to the fixed asset listing as capital expenditures. This could include items such as substantial roof repair or parking lot repair. The undepreciated basis of these items can be converted to an operating expense and written off when the error is discovered. The fixed asset listing is massive for many companies, sometimes exceeding 1,000 pages. With so many assets, it is difficult to ensure all are accurate. For items added with an incorrect and excessive depreciable life, it is possible to revise the asset life and “catch-up” depreciation under reported in prior years without filing an amended tax return. Instead, a form 3115 is filed with the tax return.

The difference between capital expenditures and operating expenses is often subjective. Are substantial roof repairs a capital expense or an operating expense? Reviewing disbursements which were listed as capital expenditures in 2006 may uncover items which can be converted to operating expenses.

Federal income taxes are a substantial expense for successful businesses. Tax planning is less glamorous than purchasing a new company or developing a new division. However, a modest effort focused on reducing federal income taxes can sharply increase net income.

Patrick O?Connor, MAI is president of O?Connor & Associates, a 180-person real estate services firm in business since 1974. Further information on reducing income taxes is available at: O?Connor can be reached at 713 686 9955 or poconnor@.

Outsource Your Tax Service Instead of Increasing Your Hassles Level And Risking Your Health

CEOs have one of the most stressful jobs as they are the company’s owner. Being the company leader, you should oversee the entire operations of your company. With the many responsibilities and grand expectations that come along with your job, a worry-free day may be rare for you. However, do not let this be the case! While your job may require a lot from you, you have to keep in mind that your health is as precious as your company. Running your business properly wouldn’t be possible when you are unhealthy. So, instead of increasing your hassles level and risking your health, search for a company offering tax service. Currently, other enterprises are doing the same thing because this option is deemed more beneficial for businesses. Entrusting the preparation and filing of your taxes to a professional tax service provider is a good way of ensuring that your taxes are properly and accurately computed. This is because a professional company specialising in tax services is staffed with qualified and trained tax specialists.

Furthermore, by working with a tax service provider, you don’t have to worry about filing your taxes as the firm’s going to do it for you. They ensure you that your tax returns are filed on time and you don’t have to worry for the last moment searching CPAs to file your return. Basically, the greatest benefit of outsourcing the preparation of your corporate taxes is that you spare your company from having unnecessary expenditures because of government fines and sanctions arising erroneous tax computations or delayed payment. What’s more is that you get expert service at a lower price as compared to forming your in-house accounting team. Outsourcing your tax return preparation services is helpful for companies as they don’t have to appoint seasonal employees and they can save their overhead expenses. With the relatively affordable cost and the several benefits of outsourcing tax service, there is no reason for you to not prefer this. More and more CPAs and accounting firms are opting to outsource tax return to India to help minimize operating cost and maximize efficiency and gain competitive advantage. As a business owner your time is best spent doing what you do well – working with customers. Time spent on preparing tax returns add little or no value to your customer relationship. Remember that with this option, you don’t just safeguard your health but also your company’s welfare.

7 Most Commonly Overlooked Sources Of Taxable Income

7 Most Commonly Overlooked Sources Of Taxable Income

1. Social Security Income
   Social Security benefits may be non-taxable, or partially taxable. It depends on your total income from other sources. If your sole source of income during the tax year was Social Security, your benefits are probably not taxable. But, if you have other forms of income, including tax-exempt income, it could make your Social Security benefits taxable. If you add half the amount of your Social Security Benefits to all other forms of income, and the total exceeds a ?base? amount, then a portion of your benefits will be taxable. In 2008, the base amount is $25,000 if single, married filing single, or head of household, and $32,000 if married filing jointly.
2. Unemployment Compensation
   People are always surprised that unemployment compensation is taxable income. This includes any amounts you received under federal or state unemployment compensation laws, state unemployment insurance paid by a state (or District of Columbia) from the Federal Unemployment Trust Fund. If you received unemployment compensation during the year, you should receive IRS Form 1099-G, showing the amount you were paid, and if any taxes were already withheld. If your unemployment benefit payments were made from a private, non-union fund to which you voluntarily contribute are only taxable if you received more money than you put into the fund.

Please note that as a result of passing the American Recovery and Reinvestment Act (ARRA), starting in 2009, the first $2,400 earned in unemployment compensation is excludable as taxable income.

3. Gambling Winnings
   Gambling winnings are fully taxable and must be reported on your tax return. Gambling winnings include any winnings from lotteries, raffles, horse races, or casinos. Both cash winnings and the fair market value of prizes such as cars and trips are counted as taxable income. If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must also include it in your income. A payer (such as the casino or track, etc.) is required to issue you an IRS Form W-2G if you receive certain gambling winnings or if your gambling winnings are subject to Federal income tax withholding. All gambling winnings must be reported no matter if any portion is subject to withholding or not.

Please note that you may deduct gambling losses only if you itemize deductions. You may claim your gambling losses as a miscellaneous deduction, however, the amount of losses you deduct may not be more than the amount of gambling income you have reported on your return.

4. Bonuses
   Bonuses or awards from your employer based on work performance are included as taxable income. Money, gift cards, property, or prizes such as a vacation trip all count as ?bonuses?. If the award you receive is a good or service, then you need to include the fair market value in your income. Even holiday bonuses count if your employer gives you cash, a gift certificate, or a similar item that you easily can exchange for cash.

Please note that if you receive personal property (e.g. something other than cash, gift card, or its equivalent) as an award for length of service exceeding five years, the fair market value of the award is less than $1,600, and the award is presented as part of a meaningful presentation, it can generally be excluded as income.

5. Punitive Damages
   If you were awarded damages for actual monetary losses (due to property damage or medical care for injuries) the funds are generally not taxable. However, if any damages were awarded beyond compensating you for monetary losses, like punitive damages, (usually to punish or make an example of a defendant based on outrageous conduct), interest, emotional distress, injury to reputation etc these are all taxable income.
6. Reimbursed Business Expenses
   Reimbursed business expenses may be considered taxable income, depending upon whether your employer meets the requirements for an Accountable Plan. To be considered an Accountable Plan, your employer?s reimbursement or allowance arrangement must meet all of the following rules:

Employee paid or incurred expenses that are deductible while performing services as an employee.

Employee adequately accounts for these expenses to employer within a reasonable time period.

Employee returns any excess reimbursement or allowance within a reasonable time period.

If your employer?s reimbursement arrangement does not meet all three requirements, the reimbursements you receive for business expenses should be shown on your W-2, and the payments should be reported as income. You can get this income back by itemizing your deductions and completing IRS Form 2106 with your return.

7. Severance Pay
   Any type of severance pay or payment on the cancellation of your employment contract is taxable income. This includes a lump-sum payment for accrued vacation or leave time, or back pay awards as the result of a judgment or settlement. If you choose a reduced severance payment in exchanged for your former employer paying for an outplacement service or employment agency, you must include the unreduced severance pay as income.

Uniform Tax Relief- A Way to Obtain Tax Refund

Paying off taxes is obligatory and it is indeed an irresponsible act on the part of people not to pay off taxesIt is obligatory for every responsible citizens of a country to pay off the accurate amount of tax to the government in the correct time. These money paid as tax is, in turn, spent by the government to boost up the well being of the individuals as well as society and to make improvement in the social infrastructure.The government of any nation also offers plethora of tax exemptions for the benefit of the populace. This is why people must in no way cheat the government by means of evasion of taxes for the reason that in case they really have predicament in repaying duties the government is going to certainly hear them.Tax relief is provided to those people who have definite uniforms at their place of workGovernment assist individuals in several ways by offering means of tax cut off. Among those ways, an evident one is uniform tax relief provided by the government to those having uniforms in their place of work.

These exemptions provided to the individuals can save lots of money. In United Kingdom the administration offers tax relaxation to the individuals having uniform in their employment places in that the price needed for purchasing, laundry expenses, repairing in addition to the maintenance price of the uniform are reimbursed by the government to the workers.What are the necessary conditions laid down in order to get the uniform duty relief by the government?If individuals have the intention to acquire uniform tax relief from the government it is vital for them to satisfy the mandatory conditions laid down by the government.

These conditions include the followingIn first case it is necessary that this uniform must have the company logo and it must not be at any cost worn outside the working place.The next necessary fact to keep in mind is that varying rates of tax reduction is applicable for different workers in accordance with their employment trade. Therefore to obtain tax relief the workers must be acquainted with the group they actually belong to. They must also know the reduction amount.Laundry expenses in actual are the expenditures that individuals cannot avoid but they can certainly same money simply by making use of the laundry coupons. This may be taken into consideration as the most excellent method to trim down the laundry expenditure.

Tax Relief: Let?s Be Fair And Charitable

Any tax scheme should reflect a nation?s goal to increase productivity and to improve the lives of people of all income and social levels. As it is now, the U.S. tax system has too many inequities. Let?s look at a few:

1. Successful small entrepreneurs must give almost 50% of their income to government in taxes
2. Most Americans can?t deduct their charitable donations
3. Marriage often means that a couple will be subjected to higher tax burdens
4. Farms and businesses owned by families are sold to pay death tax
5. Single parents (usually women) are in a higher marginal tax bracket than the wealthy

This is not a fair system and a tax plan must provide tax relief for those who belong to the groups described above.

When the income tax was established, the importance of supporting and encouraging charitable donations by providing a deduction for doing so was realised. Unfortunately, a whopping 70% of persons who file taxes cannot deduct the donations to charities because these deductions are not itemized.

While the intention is not to make the wealthy ?pay? for being wealthy, a fair, balanced tax relief must see the more affluent citizens bearing a bigger portion of the tax load; and by allowing each taxpayer to deduct her/his charitable donations by expanding this deduction to non-itemizers, millions or even billions more will be gained in charitable contributions.

So let?s encourage the government, through the way we vote and lobby and protest, to be for fair and charitable in the tax plan, so that we all – rich or not-so-rich – would get that tax relief.