More tips to share for the rest of the year

I’mmm back … Does the thirst for tax talk continue beyond April 30?

Actually, I have been asked to contribute a column once a month on not only matters of personal tax, but also on accounting issues and opportunities that pertain to small business.  The entrepreneurial spirit is something near to my heart so it will be a pleasure to continue sharing.

However, there are some odds and sods coming out of every tax season that I always want to share, but seldom have the venue to express them.  This year I have an opportunity to enlighten you.  These may be gems to help set things up for the 2011 tax season.  Of course, most are very detailed so if my brief comments spark some interest I encourage you to research further.

Staying with the small business theme, it’s true that the filing due date is June 15 for proprietorships.  However, if the business has a tax liability it must be paid by the standard April 30 deadline.  Simply assuming your business will have a loss and therefore have no taxes due is somewhat of a dangerous, and perhaps expensive, approach to tax management.  Of course a strong set of current books may help, but not completing year-end accounting adjustments and ignoring tax law changes can lead to some unpleasant surprises.

The reporting of investments for tax purposes is sometimes a challenge.  During the past few years with our volatile economy, many people have chosen to dabble in the stock market.  If you have done this outside of a registered plan, remember to keep the records of all purchases of all stocks because one day when you sell, that cost is needed to determine your capital gain or loss.  The same applies to the paperwork associated with the purchase of investment real estate.

Along the same line, I am finding more and more people investing in what is referred to as “flow-thru limited partnerships”.  These are quite sophisticated investments.  Without going into detail, my point simply is this, if you are one of these investors, when you divest of it, the paper trail is typically poor but nonetheless the onus is on you to report the capital gain or loss.

Shifting gears, medical expenses are a family pooled deduction that is best applied to the lower income earner’s return since there is a 3% income threshold to surpass before the tax credit kicks in.  Although this fact is becoming better known, what isn’t known widely is that this claim can be made for any consecutive 12 month period.  This flexibility to stagger the timing over December 31 is valuable if a costly medical or dental issue arises late in one year and carries into the next.

Finally, a word of caution to home net-filers, and perhaps even to the users of some of the store bought software.   Changes to your name, address and other personal information including direct deposit that you may have entered and filed with Canada Revenue Agency may not actually be accepted by and updated with CRA.  Even with program warnings, often tax payers miss or ignore the fact that these changes will not be registered with CRA because the CRA website “accepts” the filing. If you are a do-it-your-self-er and if you need to make personal changes, it’s safer to mail your return, call CRA directly or use your CRA e-pass to ensure the changes are registered.

Ron Clarke has his MBA and is a business owner in Trail providing accounting and tax services.  Email him at  ron.clarke@JBSbiz.ca