Understanding Cash Flow Challenges

Home improvement contracting businesses often face fluctuating cash flow due to the nature of their projects, which can vary in size, scope, and duration. Additionally, delays in payments from clients, unexpected expenses, and seasonal fluctuations can further exacerbate cash flow challenges. Without proper planning and control, these factors can lead to cash shortages, missed opportunities, and ultimately, financial instability.

Effective Cash Flow Control Strategies

• Accurate Estimating: Begin by ensuring your project estimates are comprehensive and accurate. Thoroughly assess the scope of work, materials, labour costs, and any other expenses associated with each project to avoid underestimating and potential cash flow shortages.
• Clear Payment Terms: Establish clear payment terms with your clients upfront, including deposit requirements, milestone payments, and final payment deadlines. Clearly communicate these terms in your contracts to avoid misunderstandings and ensure timely payments.
• Invoice Promptly: Send out invoices promptly upon completion of milestones or project phases. Avoid delaying invoicing, as this can lead to delays in receiving payments and impact your cash flow.
• Follow-up on Overdue Payments: Implement a proactive approach to follow up on overdue payments from clients. Send reminders and make phone calls to encourage prompt payment and minimize the impact on your cash flow.
• Negotiate Vendor Terms: Negotiate favourable payment terms with your suppliers and vendors, such as extended payment terms or early payment discounts. This can help improve your cash flow by aligning your outgoing payments with your incoming revenue.
• Monitor Expenses: Keep a close eye on your expenses and identify areas where you can reduce costs or optimize spending. Look for opportunities to streamline processes, negotiate better deals with suppliers, and eliminate unnecessary expenditures to improve your cash flow.
• Build Reserves: Establish a cash reserve to cushion your business against unexpected expenses or fluctuations in cash flow. Set aside a portion of your revenue each month to build up your reserves and provide a financial safety net for your business.
• Invest in Technology: Consider investing in accounting software or cloud-based solutions to streamline your invoicing, expense tracking, and financial reporting processes. These tools can help you gain better visibility into your cash flow and make informed decisions to improve financial performance.

Partner with Koss Accounting for Expert Guidance

At Koss Accounting, we specialize in providing accounting and financial management solutions tailored to the needs of home improvement contracting businesses in Calgary and beyond. Our team of experienced professionals can help you implement effective cash flow control strategies, optimize your financial processes, and achieve your business goals with confidence.

Ready to take control of your cash flow and elevate your home improvement contracting business to new heights? Contact us today to schedule a consultation and discover how Koss Accounting can support your success every step of the way. Let’s work together to ensure a bright and prosperous future for your business.

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Calgary personal accountants | Explore the dynamic intersection of risk management and accounting in the vibrant business landscape of Calgary. As businesses evolve, so do the challenges they face. In this guide, we’ll delve into the crucial role of risk management in accounting in Calgary, drawing valuable lessons from Calgary’s unique business environment with the expertise of Koss Accounting.

Economic Volatility in Calgary:

Calgary’s economy is known for its sensitivity to the energy sector, making it imperative for businesses to navigate economic volatility. Koss Accounting emphasizes the importance of conducting thorough financial assessments, stress testing, and scenario planning to proactively manage and mitigate economic risks.

Regulatory Compliance Challenges:

As regulations evolve, compliance becomes a paramount concern for businesses in Calgary. Koss Accounting highlights the necessity of staying informed about changes in tax laws and accounting standards. This proactive approach ensures that businesses not only adhere to regulations but also optimize their financial strategies in compliance with the latest accounting in Calgary standards.

Technological Risks and Cybersecurity:

With the increasing reliance on technology, businesses face new risks related to data security and privacy. The Calgary personal accountants at Koss Accounting stress the need for robust cybersecurity measures and regular audits of financial systems. This proactive stance safeguards businesses against potential cyber threats and ensures the integrity of financial data.

Market Fluctuations and Investment Risks:

Calgary’s business landscape often encounters market fluctuations, impacting investment decisions. Koss Accounting advises businesses to diversify their investments, conduct thorough risk assessments before entering new markets, and adopt risk mitigation strategies to navigate uncertainties successfully.

Human Capital and Succession Planning:

In a city with a dynamic workforce, managing human capital risks is crucial. Koss Accounting advocates for strategic human resource planning, including talent retention strategies and succession planning. Addressing these aspects, accountants in Calgary can ensure business continuity and minimize disruptions associated with key personnel changes.

Environmental and Social Responsibility:

Calgary businesses are increasingly recognizing the importance of environmental and social responsibility. Accountants Calgary emphasize integrating sustainability into financial reporting and risk assessments. This not only mitigates environmental and social risks but also enhances the reputation and resilience of businesses in the community.

Conclusion:

As Calgary’s business landscape continues to evolve, the role of risk management in accounting in Calgary becomes more critical than ever. Koss Accounting stands as a reliable partner, offering tailored solutions to help businesses navigate risks and achieve financial success. Whether it’s economic fluctuations, regulatory challenges, or technological risks, Koss Accounting is committed to providing comprehensive risk management strategies that align with the unique needs of businesses in Calgary. 

Contact us today for expert guidance and proactive risk management solutions.

The post Calgary Personal Accountants | Risk Management in Accounting – Insights from Koss Accounting appeared first on Koss Accounting.

1. Understanding Calgary’s Tax Landscape

Calgary’s tax landscape is diverse and ever-evolving. Koss Accounting stays at the forefront of regulatory changes, regularly conducting in-depth reviews and analyses to keep our clients informed. We provide detailed consultations, helping businesses grasp the implications of current regulations, while also anticipating potential future shifts in tax policies that may impact their financial strategies.

2. Industry-Specific Deductions

Recognizing that each industry comes with its unique set of challenges and opportunities, Koss Accounting conducts industry-specific analyses. We collaborate closely with businesses to identify and leverage tax deductions and credits specific to their sector. This involves an in-depth examination of the business’s operations, expenditures, and industry trends to ensure optimal tax savings.

3. Incorporation Strategies

Choosing the right business structure requires careful consideration of tax implications. Koss Accounting provides comprehensive guidance on the advantages and disadvantages of different structures, considering factors such as tax efficiency, liability, and long-term financial goals. We work collaboratively with businesses to determine the most suitable structure that aligns with their specific needs.

4. Optimizing Capital Investments

Strategic capital investments can significantly impact a business’s financial health. A Calgary Accountant should assist businesses in optimizing their capital investments by exploring available incentives and deductions associated with equipment purchases and property acquisitions. We conduct thorough cost-benefit analyses to ensure that businesses make informed decisions aligned with their growth objectives.

5. Employee Benefits and Compensation

Structuring employee benefits and compensation packages tax-efficiently is crucial for both employers and employees. Koss Accounting engages in detailed discussions with businesses to understand their workforce dynamics, enabling us to recommend personalized compensation structures that not only attract and retain talent but also maximize tax benefits for the business.

6. Research and Development Tax Credits

In the realm of innovation and research, Koss Accounting specializes in guiding businesses through the complexities of qualifying for research and development tax credits. Tax Accountants Calgary experts collaborate closely with clients to identify eligible R&D activities, ensuring that businesses receive the tax credits they deserve for contributing to advancements in their respective industries.

7. Utilizing Tax Credits for Innovation

Real-world examples showcase how clients have engaged professional Accounting In Calgary and have successfully utilized tax credits for innovation. Koss Accounting illustrates how businesses have strategically aligned their innovative projects with available tax credits, resulting in both financial advantages and advancements within their industries.

8. Charitable Contributions and Community Involvement

Koss Accounting sheds light on the tax advantages of charitable contributions and community involvement. We assist businesses in identifying and maximizing tax benefits while contributing to the local community. Through personalized strategies, we showcase how businesses can create a positive impact while optimizing their tax position with Accountants in Calgary.

9. Foreign Income and International Tax Considerations

Navigating foreign income and international tax considerations can be complex. Koss Accounting conducts detailed analyses of businesses with international ties, providing insights and strategies to minimize tax impact in cross-border transactions. We ensure compliance with international tax regulations while optimizing financial outcomes for our clients.

10. Year-End Tax Planning

As the fiscal year approaches its close, Koss Accounting engages in proactive year-end tax planning with our clients. This involves a comprehensive review of financials, strategic decision-making, and the identification of available deductions. Accountants in Calgary guide businesses in making informed choices to optimize their tax position before the year concludes.

11. Tax Compliance Best Practices

Maintaining compliance with tax regulations is a top priority at Koss Accounting. We work closely with businesses to establish and implement best practices for record-keeping and compliance. Our team ensures that businesses not only meet their legal obligations but also position themselves for financial success through adherence to compliance standards.

12. Consulting with Tax Professionals

Koss Accounting emphasizes the value of seeking professional advice from experienced tax professionals in Calgary. We go beyond traditional Accounting in Calgary services, offering personalized consultations that delve into the unique financial needs of each business. Our collaborative approach ensures that businesses receive tailored strategies for sustainable financial health.

At Koss Accounting, our commitment extends beyond numbers; it’s about empowering Calgary businesses to navigate the intricate tax landscape with confidence and efficiency. Contact us today to embark on a journey toward financial mastery, where your business thrives through informed decision-making and strategic tax optimization.

The post Tax Accountants Calgary | Tax Optimization Strategies For Calgary Businesses appeared first on Koss Accounting.

Accounting Firms Calgary | In the fast-paced world of business, having a reliable accounting partner is crucial for steering through uncertain waters. At Koss Accounting in Calgary, we not only embrace the pillars of service responsiveness, understanding different engagement options, and delivering what you can rightfully expect from a professional CPA but also recognize the importance of proactively managing tight deadline rushes. In this blog post, we unravel the core tenets that define our commitment to your financial success while gently encouraging a proactive approach to avoid the last-minute workload surge.

Service Responsiveness

Beyond the Deadline Rush:

We understand that the tax deadline can be a stressful period for businesses, and at Koss Accounting, our commitment to service responsiveness extends beyond mere deadline compliance. However, Accounting Firms Calgary should believe in being proactive rather than reactive. By staying ahead and anticipating potential deadlines, we ensure that your financial matters are handled with the precision they deserve, without the unnecessary rush.

Proactive Solutions for Urgencies: Collaborative Planning

For those inevitable last-minute urgencies near tax deadlines, Koss Accounting offers proactive solutions. While equipped to handle urgent requests, we encourage collaborative planning to alleviate pressure during critical times. Our Accountants In Calgary believe in teamwork to address urgent needs without compromising the quality of our services.

Understanding Different Engagement Options

Strategic Planning for Long-Term Success:

Beyond managing deadlines, we emphasize the importance of strategic planning. Our Accountants In Calgary work collaboratively with clients to not only meet immediate accounting needs but also to lay the groundwork for long-term financial success. Understanding the nuances of Accounting In Calgary and our various engagement options allows businesses to choose a service model that aligns seamlessly with their goals while avoiding unnecessary stress during peak seasons.

What You Can Expect from a Professional CPA

Diligence and Expertise, Without the Deadline Crunch:

At Koss Accounting, our team of professional CPAs stands as a beacon of diligence and expertise. We believe in providing high-quality services without succumbing to the unnecessary crunch during peak seasons. By adopting a proactive approach, our clients can expect the same level of excellence without the stress associated with tight deadlines.

Transparent Communication for Future Planning

Communication is key, not just during tax season but throughout the year. We underscore the importance of transparent communication in demystifying the complexities of accounting. From explaining financial reports to providing proactive advice, our Accountants In Calgary foster an environment where clients are well-informed and can plan ahead to avoid unnecessary workload peaks.

Customized Solutions for Your Business

No two businesses are identical, and neither should their accounting solutions be. A professional Calgary Accountant should take a personalized approach, tailoring their services to meet the specific needs of your business. We encourage a proactive mindset, where financial planning is done ahead of time to avoid unnecessary stress during peak seasons.

Conclusion

In the intricate tapestry of business finance, Koss Accounting in Calgary stands as your steadfast partner, dedicated to providing unparalleled service responsiveness, diverse engagement options, and the expertise you can expect from a professional CPA. Beyond the deadline rush, we advocate for a proactive approach to financial planning. Connect with us at Koss Accounting, where your financial journey is met with precision, understanding, and a commitment to excellence – without the unnecessary stress of tight deadlines.

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FHSA: First Home Savings Account

The First Home Savings Account (FHSA) program is a government initiative designed to assist Canadian residents aged 18 and older in purchasing their first home. Here’s how you can make the most of it:

• Annual Contribution Cap: You can contribute up to $8,000 annually, with a lifetime cap of $40,000. This allows you to save towards your first home systematically.
• Unused Room Carry-Forward: If you don’t use your full contribution room in a year, you can carry forward up to $8,000 to the following year, maximizing your savings potential.
• Account Duration: The FHSA can stay open for a maximum of 15 years or until the end of the year in which you turn 71, providing flexibility in your savings timeline.
• Tax Deductible Contributions: Contributions to your FHSA are tax-deductible, offering a valuable tax advantage as you save.
• Spousal Participation: If you’re married or in a common-law relationship, both you and your spouse can have separate FHSA accounts, allowing for collaborative savings.

Transfers

• You have the flexibility to transfer funds from your RRSP to FHSA and vice versa using the RC720 form. This strategic transfer can optimize your savings strategy.

Over Contribution

• Be cautious not to over-contribute (beyond $8,000 in a year or $40,000 lifetime), as this creates an Excess FHSA amount subject to a 1% per month tax. Use form RC727 to address over-contributions.

RRSP: Registered Retirement Savings Plan

The Registered Retirement Savings Plan (RRSP) offers the Home Buyers’ Plan, allowing you to withdraw up to $35,000 tax-free for a home purchase. Here’s how to leverage this program effectively:

• Repayment Period: The amount withdrawn must be repaid within 15 years, starting the year after the first withdrawal. Unpaid amounts are included in your income annually.
• Withdrawal Process: Utilize form T1036 for each withdrawal, ensuring a straightforward and compliant process.

Combine with First-Time Home Buyers’ Tax Credit

• Maximize your benefits by combining RRSP withdrawals with the First-Time Home Buyers’ Tax Credit, allowing you to claim up to $10,000 for a qualifying home purchase.

TFSA: Tax-Free Savings Account

The Tax-Free Savings Account (TFSA) complements your savings strategy, offering tax-free growth on your contributions. Here’s how to make the most of your TFSA:

• Contribution Room: As of 2023, the cumulative contribution room is $88,000, providing ample space for tax-free savings.

Flexible Withdrawals: Withdraw funds without impacting your contribution room, offering financial flexibility for various needs.

Real-Life Examples

Example 1: Maximizing FHSA and RRSP

Consider John, who strategically contributes $5,000 annually to his FHSA, transfers $3,000 from his RRSP to FHSA, and has a TFSA of $10,000. After five years, he has $40,000 in FHSA, providing him with $85,000 in tax-free amounts for a home purchase.

Example 1 Breakdown:

John has:

RRSP – $100,000

TFSA – $10,000

FHSA – $0

You only have $5,000 cash each year to put into any registered savings account.

John has:

RRSP – $100,000

TFSA – $10,000

FHSA – $0

You only have $5,000 cash each year to put into any registered savings account.

In each of the first years, you contribute $5,000 to the FHSA and transfer $3,000 from the RRSP to the FHSA

After the 5^th year:

RRSP – $85,000

TFSA – $10,000

FHSA – $40,000

Tax-free amounts available to withdraw to purchase your first home:

RRSP – $35,000

TFSA – $10,000

FHSA – $40,000

Total – $85,000

$35,000 has to be repaid by the end of the 16^th year after the first withdrawal from the RRSP or include $2,333.33 as income in each of the 15 years and pay tax at your highest marginal rate. If your highest marginal rate = 33%, your tax liability would be $777.78 (2,333.33 @ 33%)

Example 2: Collaborative Savings Strategy

Imagine Larry and Barbara collaborating to maximize FHSA, RRSP, and TFSA contributions. After five years, they collectively have $80,000 in FHSA, providing $195,000 in tax-free amounts for a home purchase.

Example 2 Breakdown:

Larry has:

RRSP – $50,000

TFSA – $5,000

FHSA – $0

Barbara has:

RRSP – $250,000

TFSA – $40,000

FHSA – $0

Barbara has $10,000 a year to put into a registered savings account and Larry has none.

First-year

• Barbara contributes $8,000 to her FSHA and $2,000 to her RRSP
• Larry transfers $8,000 from his RRSP to his FSHA

Second year

• Barbara contributes $8,000 to her FSHA and $2,000 to her RRSP
• Barbara transfers $1,000 from her RRSP to Larry’s FSHA
• Larry transfers $7,000 from his RRSP to his FSHA

Third to Fifth year

• Barbara contributes $8,000 to her FSHA and $2,000 to her RRSP
• Barbara transfers $8,000 from her RRSP to Larry’s FSHA

After the 5^th year:

Larry has:

RRSP – $35,000

TFSA – $5,000

FHSA – $40,000

Barbara has:

RRSP – $235,000

TFSA – $40,000

FHSA – $40,000

Tax-free amounts available to withdraw to purchase your first home:

RRSP – $70,000

TFSA – $45,000

FHSA – $80,000

Total – $195,000

For each Larry and Barbara, $35,000 has to be repaid by the end of the 16^th year after the first withdrawal from the RRSP or include $2,333.33 as income in each of the 15 years and pay tax at your highest marginal rate. If your highest marginal rate = 33%, your tax liability would be $777.78 (2,333.33 @ 33%)

Additional Resources: First-Time Home Buyer Incentive

Explore the First-Time Home Buyer Incentive, a program designed to assist first-time homebuyers in purchasing their first home. With 5% or 10% contributions from the government, this incentive enhances your down payment, making homeownership more accessible.

To delve deeper into these savings vehicles and explore the First-Time Home Buyer Incentive, consult additional resources from reputable institutions such as TD Bank, RBC Bank, Forbes Canada, and the Canada Revenue Agency.

Embark on your homeownership journey with financial confidence. At Koss Accounting, we’re here to guide you through the intricacies of these savings tools, helping you turn the key to your first home, for everything related to Calgary Accounting, we ensure that your financial decisions are informed, strategic, and aligned with your dreams of a secure and prosperous future. 

The post Calgary Accounting | Unlocking Your First Home: Navigating Canada’s Savings Vehicles appeared first on Koss Accounting.

Key Highlights:

1. Extended Repayment Deadline: The Canadian government has just announced an extension to the Canada Emergency Business Account (CEBA) loan repayment deadlines. The new deadline for repayment to qualify for partial loan forgiveness of up to 33% is now January 18, 2024, instead of December 31, 2023.
   
2. Refinancing Flexibility: For businesses that applied for refinancing through the same financial institution that provided their CEBA loan before January 18, 2024, the deadline has been extended to March 28, 2024. This additional time is designed to give businesses a better chance to access relief and hear back about their refinancing applications. 
   
3. Conversion to Term Loans: From January 19, 2024, any outstanding loans, including those under refinancing, will turn into three-year term loans with a five percent annual interest rate. The term loan repayment will be interest payments $167/month with the principle due on December 31, 2026.
   
4. Loan Forgiveness Details: Repayment made by the new deadlines will result in significant loan forgiveness – $10,000 for a $40,000 loan and $20,000 for a $60,000 loan.

Real-World Impact:

• Sarah and Nick’s Scenario: Struggling to repay their $40,000 CEBA loan, Sarah and Nick will now have their loan converted into a three-year term loan from January 19, 2024, making manageable monthly interest payments of $167 until December 31, 2026, when the full principal will be due.
• Doug’s Opportunity: Doug, applied for $40,000 in financing from the bank that provided his CEBA loan to pay off his $60,000 CEBA loan. He will not hear from the bank regarding the refinancing by January 18, 2024. He will now benefit from the extended deadline of March 28, 2024, to secure financing and still be eligible for the $20,000 loan forgiveness on his $60,000 loan.

Note to Loan Holders:

Financial institutions will directly contact CEBA loan holders about these updates. Additionally, these changes are also applicable to CEBA-equivalent lending through the Regional Relief and Recovery Fund.

Stay Informed & Prepared:

It’s crucial for businesses to stay informed about these changes and plan accordingly. If you have any questions or need assistance, feel free to reach out to your financial advisor or the financial institution that provided your CEBA loan.

Please note that this newsletter is intended for informational purposes only and should not be taken as financial or legal advice.

The post 🍁 Special Edition: CEBA Loan Repayment Update 🍁 appeared first on Koss Accounting.

1. Contribute to Registered Retirement Savings Plans (RRSPs):
   1. Consider making additional contributions to your RRSP before the year-end deadline to reduce your taxable income.
   2. Review your RRSP contribution limit, which is typically based on your previous year’s earned income.
2. Utilize Tax-Free Savings Accounts (TFSAs):
   1. Contribute to your TFSA, as any investment income earned within this account is tax-free.
   2. Consider maximizing your TFSA contributions if you haven’t already.
3. Take Advantage of Capital Losses:
   1. Review your non-registered investment portfolio for potential capital losses to offset capital gains. This can help reduce your tax liability.
   2. Keep in mind the “superficial loss” rule, which prevents you from repurchasing the same investment within 30 days if you plan to claim a capital loss.
4. Review Charitable Donations:
   1. Make any charitable donations you intend to claim on your tax return before the year-end deadline.
   2. Keep receipts for your donations to support your claims.
5. Maximize Tax Credits:
   1. Ensure you claim all available tax credits, such as the Canada Child Benefit (CCB), the Canada Caregiver Credit, and the Disability Tax Credit.
   2. Consider eligible medical expenses, child care expenses, and other credits that may apply to your situation.
6. Review Your Business Expenses (if applicable):
   1. If you’re a business owner or self-employed, review your business expenses to ensure you’re maximizing deductions.
   2. Consider making necessary purchases or investments before year-end if they can be expensed.
7. Plan for Registered Education Savings Plans (RESPs):
   1. Contribute to RESPs for your children’s education, as the government provides grants and tax incentives.
   2. Be aware of the annual contribution limit and consider catching up on any unused grant contribution room.
8. Be Mindful of the Tax Deadline:
   1. Ensure you file your tax return by the April 30th deadline (or June 15th if self-employed), and pay any outstanding taxes to avoid penalties and interest.
9. Keep Detailed Records:
   1. Maintain thorough records of your financial transactions, expenses, and income throughout the year to support your tax claims.
   2. The CRA may review your claim for deductions and tax credits at any time. They will disallow the claim if you don’t have proper documentation.
10. Seek Professional Advice:
    1. Consider a year-end tax consultation to provide you with personalized guidance based on your specific financial situation.

Schedule a year end tax planning meeting ($350)

It’s important to remember that tax laws and regulations may change, so staying informed about the latest updates and seeking professional advice is essential for effective tax planning. Additionally, individual circumstances can vary widely, so what works best for one person may not be suitable for another.

Please note that this blog is intended for informational purposes only and should not be taken as financial or legal advice.

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The UHTA, effective from January 1, 2022, imposes a 1% annual tax on vacant or underused residential properties not owned by Canadian citizens or permanent residents. This tax is calculated based on the property’s assessed value or recent sale price, with the first payment due by April 30, 2024 

Note: Filing the UHT-2900 for December 31, 2022, year has been extended to April 30, 2024. The UHT-2900 for December 31, 2023, remains as April 30, 2024. Two years are due on April 30, 2024. 

Excluded Owners 

The UHT does not apply to Canadian citizens or permanent residents owning residential properties directly. However, indirect ownership through corporations, partnerships, or trusts may not qualify you as an excluded owner, even if you’re a citizen or permanent resident. Certain conditions apply for corporations, partnerships, or trusts to be exempt from UHT liabilities. 

Declaration and Penalties 

Filing a declaration with the Canada Revenue Agency is mandatory to claim any exemption. Missed or late declarations can result in significant penalties: $5,000 for individuals, $10,000 for others, and additional charges based on the UHT amount. Penalties increase over time and failing to file can lead to indefinite assessments under the UHTA. 

The Potential Problem 

Canadian citizens and permanent residents with indirect property ownership (via corporations, partnerships, or trusts) must be aware of their obligations under the UHTA. The declaration due dates differ from standard tax filings, hence it’s crucial to be vigilant to avoid penalties. 

Next Steps 

Non-Canadians and indirect property owners should consult with Koss Accounting to ensure compliance with UHTA requirements. Remember, the UHTA’s definitions and exemptions are detailed and specific, as outlined in Bill C-8 and various clauses under the act. 

We have included a tool to help you self assess your filing requirements under the Underused Housing Tax Act.

UHT Return Preparation Services by Koss Accounting 

Koss Accounting is ready to assist with your Underused Housing Tax (UHT) returns. To utilize our services, please request a UHT engagement letter from our office. We’re committed to providing thorough and efficient service, with pricing starting at: 

• $500 for the first UHT-2900 return for the year. 
• $200 for each additional UHT-2900 return per residential property for each identified owner. 
• Plus applicable GST/HST. 

Important Deadlines and Requirements: 

• To ensure timely completion, please engage us and submit all required information by Sunday, March 18, 2024. 
• After this date, we will assume you’re managing your UHT returns independently. 

What We Need From You: 

For each residential property owned as of December 31, 2022, and December 31, 2023, please provide: 

• Citizenship details if you’re not a Canadian citizen or permanent resident. 
• Latest property tax assessment, including property address, tax roll number, owner names, and assessed value. 
• Land title documents or details like Property Identification Number (PIN), ownership type, owner names and percentages, year of purchase, and recent purchase/sale price. 
• If applicable, partnership or trust account numbers. 
• Property type (e.g., detached house, duplex, townhouse, condo). 
• Confirmation of Canadian citizenship or permanent residency status for individual owners, partners, trustees, or corporate shareholders, or details on any applicable UHT exemptions. 
• In cases where market value is lower than assessed value or recent purchase price, a formal property appraisal. 

Our Commitment: 

Koss Accounting is dedicated to guiding you through this complex area of tax and financial planning. We aim to deliver optimal results and value your trust in our services. 

The post 🍁The Underused Housing Tax Act (UHTA) – Key Dates and Requirements Approaching 🍁 appeared first on Koss Accounting.

While all of the various programs providing financial assistance to families have had the same underlying purpose, the structure of those programs has evolved over the years. Generally, those changes have involved a move to a more means-tested benefit system and have, as well, recognized the additional costs which must be incurred by parents who are raising a child who has a disability. The current rules for the Canada Child Benefit (CCB) program are as follows.

The CCB is a tax-free monthly amount paid to parents of children under the age of 18.  Each “benefit year” runs from July 1 to June 30, and eligibility for and the amount of benefit for which a particular family may qualify is based on both current family size, and family income for the previous year. CCB amounts are paid around the 20^th of each month.

For instance, the current benefit year started on July 1, 2019 and will run until June 30, 2020. The amount of benefit payable to a particular family during the current benefit year is based, in part, on the income received by the family during the 2018 tax year. It is therefore necessary that the parents in a family have filed tax returns for the 2018 tax year, as the Canada Revenue Agency uses the figures in those returns to determine the amount of benefit for which the family is eligible. More specifically, the CRA uses the figure found on line 236 of the 2018 tax return as the income figure which determines the amount of CCB which a family can receive between July 2019 and June 2020. Where no tax returns for the previous year have been filed, no benefits can or will be paid during the current benefit year.

For a family which has a child or children under the age of 18, the following benefit amounts are payable during the current (July 1, 2019 to June 30, 2020).

• $6,639 per year ($553.25 per month) for each eligible child under the age of six, and
• $5,602 per year ($466.83 per month) for each eligible child aged 6 to 17.

The amounts set out above represent the basic benefit payable for each eligible child. Where, however, family net income for the previous year is more than $31,120, the amount of benefits payable are reduced. The benefit reduction for families of different sizes is as follows.

• For families with one eligible child, the reduction is 7% of the amount of family net income between $31,120 and $67,426, plus 3.2% of the amount of family net income over $67,426.
• For families with two eligible children: the reduction is 13.5% of the amount of family net income between $31,120 and $67,426, plus 5.7% of the amount of family net income over $67,426.
• For families with three eligible children: the reduction is 19% of the amount of family net income between $31,120 and $67,426, plus 8% of the amount of family net income over $67,426.
• For families with four or more eligible children: the reduction is 23% of the amount of family net income between $31,120 and $67,426, plus 9.5% of the amount of family net income over $67,426.

Families raising a child or children who have a disability inevitably face additional costs and such families are consequently eligible for additional amounts in the form of the Child Disability Benefit.

The basic requirements for the child disability benefit are the same as for the CCB, in that the child must be under the age of 18 and living with a parent. However, for purposes of the CDB an additional requirement is imposed, in that the child in respect of whom the CDB is claimed must be eligible for the federal disability tax credit. A child is eligible for that disability tax credit when a medical practitioner certifies, on Form T2201, Disability Tax Credit Certificate, that the child has a severe and prolonged impairment in physical or mental functions, and the Canada Revenue Agency (CRA) approves that certification.

Eligible families can, during the current (July 2019 to June 2020) benefit year, receive (in addition to the basic CCB) up to $2,832 ($236.00 per month) for each child who is eligible for the disability tax credit.

As is the case with the basic CCB, the amount of CDB which may be received is reduced as family income increases, as follows.

• For families with one child eligible for the CDB, the reduction is 3.2% of the amount of family net income over $67,426.
• For families with two or more children eligible for the CDB, the reduction is 5.7% of the amount of family net income over $67,426.

When a child is born, families must make an application for the CCB, and the process for doing so is outlined on the CRA website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-apply.html. Once the initial application is filed and approved, parents need only to file a tax return each year in order to continue receiving that benefit.

The CRA provides comprehensive information on both the CCB and the CDB on its website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview.html and also publishes a guide to that program, which can be found on the same website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4114.html.

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While having a home which has greatly appreciated in value may provide a sense of security, what it doesn’t provide is an income. Most retired Canadians are eligible to receive Canada Pension Plan and Old Age Security payments and, while those two programs provide the “backbone” of retirement income in Canada, they are almost never enough on their own to provide for a comfortable standard of living in retirement. Most retirees also have private retirement savings, usually through registered retirement savings plans (RRSPs), but once again, the amount saved by many Canadians through RRSPs falls short of what will be needed to generate a reasonable income over their remaining lifetime, especially where a retirement can last for twenty or more years, and when inflation over that time period is taken into account. Many retired Canadians are, in effect, “house rich and cash poor”.

In many cases, those approaching retirement opt to sell their current home – sometimes in order to move to a smaller, easier to maintain dwelling and sometimes simply to free up the capital represented by their accumulated equity.  However, while selling and downsizing is the option chose by many retirees, not everyone wants to leave the family home at retirement. There are many situations in which moving and downsizing isn’t desirable or even possible. Especially for those living in smaller centres, where the types of available housing may be limited, downsizing or choosing to rent could mean having to move to another community. Moving and leaving behind friends and other social supports is difficult at any age, and especially difficult when it coincides with a major life change like retirement. As well, it’s increasingly the case that adult children “boomerang” back to the family home after finishing their education. In many cases, such adult children are unable to find long-term employment or remuneration from available employment isn’t sufficient, or sufficiently secure, for them to take on the financial obligations of having their own home, even as a tenant. For a variety reasons, then, it may be that retirees need to stay, or choose to stay, in the current family home. Where that is their choice, and the only factor creating pressure for them to sell that home is the need to free up equity to create or increase cash flow during retirement, there are other options available.

One of those options which is currently receiving a lot of attention is the reverse mortgage. Reverse mortgages are better known, more widely used and have a much longer history in the U.S. than they do in Canada. However, such financial vehicles are now being advertised and promoted on a regular basis in the Canadian media, and it’s likely that by now most Canadians have at least heard of them.

Simply put, taking out a reverse mortgage allows qualifying homeowners to obtain a sum of money based on the value of their home and the equity which they have accumulated in that home without selling that home. It’s also possible, using a reverse mortgage, to structure the receipt of funds in different ways. The homeowner can choose to receive a lump sum amount or can opt to receive a series of payments which will provide a regular income stream, or some combination of the two. And, with a reverse mortgage, no repayment of the funds advanced is required until the homeowner moves out of or sells the home.

When described in those terms, a reverse mortgage can sound like the perfect solution to a cash-strapped retiree. The ability to ease cash flow worries while remaining in one’s own home with no requirement to make any payments at all can sound like the best of all possible worlds. And it’s certainly true that taking out a reverse mortgage can make sense for retirees who are house rich but cash or cash-flow poor. But, as with all financial tools, it’s necessary to understand both the benefits and the potential costs and risks of getting a reverse mortgage.

The potential downsides of a reverse mortgage start with the basic costs of obtaining one. Setting up a reverse mortgage involves a number of costs for the homeowner, including the need to have one’s property appraised. There will also be closing costs, and the homeowner will be required to obtain independent legal advice, and to pay the cost of obtaining such advice.

Once the reverse mortgage is taken out, interest will, of course, be levied on all amounts provided, and will accumulate from the time the funds are first advanced.  Total interest costs can add up very quickly and reach significant amounts by the time the debt is eventually to be repaid, usually out of the proceeds from the sale of the house.  And, of course, every dollar of funds advanced and interest levied reduces the amount of equity which the homeowner has built up, on a dollar for dollar basis.

In order to obtain a reverse mortgage, the homeowner must be at least 55 years of age. And, where there is already a mortgage or other form of loan secured by the home (as is increasingly the case for retirees), the reverse mortgage lender will require that any such indebtedness first be paid off with the funds received from the reverse mortgage.

The major benefits of a reverse mortgage for many retirees is that amounts received are not subject to tax and do not affect the borrower’s eligibility for means-tested government benefits like Old Age Security or the Guaranteed Income Supplement. And, of course, the homeowner is not required to make payments while living in the home, putting much less of a strain on cash flow. Offsetting that benefit, however, is the fact that the interest rate charged on a reverse mortgage is usually higher than that which would be levied under a traditional mortgage or other similar financial products. As well, under the terms of many such arrangements, a prepayment penalty is levied where the homeowner moves or sells the house within three years of obtaining the reverse mortgage.

Many retirees who obtain a reverse mortgage do so with the thought that the debt will not need to be repaid until after their death, when the house will be sold. However, it’s necessary to consider the possibility that the homeowner/retiree will need to move from his or her home at some point in the future to an assisted living facility. Care in such facilities does not come cheap, and in many cases the retiree must shoulder all or a part of the cost of such care on an out-of-pocket basis. If the retiree is counting on his or her home equity to pay for such care, it’s necessary to consider the extent to which the reverse mortgage will reduce that accumulated home equity and consequently the funds available to pay for needed care.

For those who are considering whether a reverse mortgage is the right solution for them in retirement, Canada’s Financial Consumer Agency suggests getting answers from prospective lenders to the following questions:

• What are all the fees?
• Are there any penalties if you sell your home within a certain period of time?
• If you move or die, how much time will you or your estate have to pay off the loan’s balance?
• When you die, what happens if it takes your estate longer than the stated time period to fully repay the loan?
• What happens if the amount of the loan ends up being higher than your home’s value when it is time to pay the loan back?

More information on reverse mortgages in general can be found on the FCAC website at https://www.canada.ca/en/financial-consumer-agency/services/mortgages/reverse-mortgages.html.

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