Canadian Tax Podcast for the week of April 05, 2021. This week we cover:

• Principal Residence Exemption to be taxed?
• Joe Biden’s proposed corporate tax rate changes;
• Quebec lowers corporate taxes on small businesses;
• CRA’s “Before You Call” List;
• How to approach filing 11 years of late corporate and personal tax returns;
• What happens with late-paid instalments for self-employed people;
• Reporting joint venture income;

“This is the Canadian Tax Podcast, Episode # 006,  hosted by me, Cameron Ware. Good morning”

• “Happy Monday, it is the week of April 05, 2021. We’ll start with the news.

• Financial Post article talking about messing with the Principal Residence Exemption / capital gains exemption
• The fact that this is being talked about at all is concerning.
• Maybe a system like the US: $250k / $500k married;
• https://financialpost.com/real-estate/why-tinkering-with-the-capital-gains-exemption-is-the-nuclear-option-for-housing-market-intervention

• Joe Biden thinking of messing with corporate tax rate
• Generally increase from 21% to 28% (Then you have State tax on top of that.)
• Also wants to mess with GILTI rates (IRC ss 951A(a)), from 10.5% to 21%
• US shareholder of Canadian corp (Controlled Foreign Corp) = Problem
• https://www.cnbc.com/2021/03/31/biden-infrastructure-bill-companies-split-on-whether-to-fight-corporate-tax-hike.html

• Quebec budget released details that they will drop the Provincial SBD rates from 4% to 3.2%.
• Small businesses there will pay 12.2% combined Fed and Prov.
• https://www.advisor.ca/tax/tax-news/quebec-extends-tax-for-financial-institutions-drops-small-biz-tax-rate/

• CRA released their version of a “FAQ” for help prior to getting on the phone to call them
• Brilliant tips like: Check “Canada.ca”, or “Check Wait Times”;
• https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2021/before-call-how-to-get-answers-need-during-2021-tax-filing-season.html?utm_source=mediaroom&utm_medium=eml

• Hasn’t filed Returns In 11 Years
  • [quote]
  • Don’t feel badly. This is why I started the podcast: to help situations like this. I can’t answer everything, but hope to give a starting point.
  • #1: 11 years. Do you still have a corp? Wasn’t struck from the registry? (Hope that it was.)
  • If it was, just file a T2125 going forward.
  • If not, you technically have 11 years of T2’s, GST rtns, t-slips, and T1 returns.
  • Might be worth doing a Voluntary Disclosure Program application;
• Self-Employed: Instalments
  • [quote]
  • You’ve missed the window to do instalments. So that ship has sailed.
  • So if you have over $3k in taxes payable, CRA wants you to do instalments for the year.
  • SUGGESTION, but with teeth.
  • If you choose not to do the instalments, you get charged interest.
  • Sometimes a penalty ($1,000, or 25% of the instalment interest charged) /2
  • Rates are 5% right now
  • Just pay it now. One less thing hanging over your head.
  • https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html
  • https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments/instalment-interest-penalty-charges.html
• Joint Venture
  • [quote]
  • Joint Venture is a non-entity entity. It exists for a specific project or task
  • In this case, intention is that you are 50/50 venturers. (You do have a JV agreement, riiiight?)
  • Only difference is that co-venturer put up mortgage cash. Means her equity interest in the JV is higher (by whatever down payment.
  • Secondly, you need to report not “cash flow”, but your full portion of the JV income/expenses. 50% of income/expenses show up on your filings.
  • Fun fact: Usually will see 2 S125’s: one for your corp’s operations, and one detailing the 50% JV operation.
  • Few other things: Fixed assets are dealt with at the venturer level, meaning rarely (if ever) see depreciation taken at the JV level. (If you do, problem)
  • Stub period. Corp owners have different fiscal years to JV = need to do 12mo reporting for that specific period (Killed back in Nov/11).
  • https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p-171r/distinguishing-between-a-joint-venture-a-partnership-purposes-section-273-joint-venture-election.html
  • https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/partnerships-deferral-corporation-tax/joint-ventures-elimination-fiscal-period.html

That will wrap things up for today. Like always, if you have any questions, send them to [email protected], or find us on twitter: https://twitter.com/cdntaxpodcast  

This is Canadian Tax Podcast, thanks for listening.