Monthly Archives: March 2012

CPP Changes for Retired Small Business Owners – What You Need to Know

Changes to the Canada Pension Plan could affect your or your employees’ early retirement plans. The government-run Canada Pension Plan, or CPP, allows working Canadians to receive a retirement benefit after paying into a pension plan. CPP also has a disability benefit and a death and survivor benefit.

Below are a few things you need to know about new CPP changes:

You May Have to Deduct Contributions
CPP has undergone some notable changes in recent years, including new regulations for those who want to start collecting early. The most recent change took effect Jan. 1, 2012. Employers were notified that companies must deduct CPP on pensionable earnings from employees 60 to 65 even if they are collecting CPP.

How it Affects Employees 65 to 70
Employers also must deduct contributions for all employees between the ages of 65 to 70 – unless the employee decides not to contribute to the plan and has filed the election to stop paying CPP Employees cannot contribute the month after turning 70.

Under the Microscope
The Canada Pension Plan has come under scrutiny in recent years as employees and employers alike try to make sure they receive adequate retirement incomes. Employees – especially those nearing retirement age – should check with their employers to see how the changes impact them, and small business accountants should work with their employer to review how the changes could impact both the work force and the company’s finances.

For more information, click here to be redirected to the Canadian Revenue Agency.

Prepping Your Books for a CA Review

No matter how well you or your bookkeeper stay on top of all your business’ expenses, there may come a day when one or more auditors from the Canada Revenue Agency come knocking on your door. But being audited can be a relatively straight-forward process if all the paperwork has been accounted for. Below are a few small business accounting practices that will help ensure the process goes smoothly.

When in Doubt, Keep It

If, for whatever reason, any of your receipts aren’t legible, then it’s not considered a supporting document, and you lose the deduction. You also lose the deduction if you can’t produce a receipt. Your claims will be matched with your receipts by an auditor. Bottom line: When in doubt, keep track of all your receipts.

What’s Acceptable?

Credit card statements, bank statements and cancelled cheques are required documentation but are not considered an acceptable form of verification in Canada. Instead, you’ll be asked to produce invoices, receipts and mileage records.

Keep Track of Mileage

Even if you drive your personal car for business, you’ll still want to keep a detailed daily mileage log book that includes the starting mileage, name of people or places you visited, and the ending mileage. Your log book should also include all original gas station receipts.

Who Did you go to Dinner With?

If you go out to eat or entertain a client, make sure you write their name on the back of your receipt. There are some instances where you can claim meal expenses by yourself, too, for example if you can show that you had to work out of town that day.

What if I work from Home?

You can claim a home office if you can show that you have an area dedicated for work and to meet clients. That area can’t be your bedroom, though; it has to be enclosed and furnished as an office.

These simple tips will ensure that your records are more accurate, making tax time simple and efficient.