Reserves that estimate an amount generally depend on a future event. The Income Tax Act is specific on the treatment of reserves. A reserve, unless otherwise specifically authorized by a provision in the Act, is disallowed as a deduction against income. Deductible reserves, such as the following, are specifically authorized in section 20 of the […]

Section 67.2 restricts the interest expense deductible in regard to a passenger vehicle loan. The maximum deduction is set annually and applies to vehicles acquired in that tear. For 2006, it is $300 per month. A passenger vehicle is an automobile that cost over $30,000 (in 2006) before taxes. The cost definition of a passenger […]

The work space in the home must be the place where the employee principally performs the duties of the office/employment, or used exclusively for earning the office/employment income and used regularly and continuously for meeting customers (includes clients and patients) and others in the ordinary course of performing the office/employment duties.   HOME OFFICE EXPENSES […]

Section 37.3 restricts the amount that can be claimed for the leasing of a passenger vehicle. The maximum deduction is announced annually. For 2006, it is $800 per month (plus taxes). The deduction is based on the capital cost of the vehicle and can be less that the actual lease payment even where the actual […]

The expense is usually directly related to earning employment income; The terms of employment commonly require that the employee incur additional expenses in carrying out his/her duties of employment; and The employer does not reimburse for the expense.

Through the Act, the Department of Finance provides some exceptions to the taxation of fringe benefits. For example, to promote the privatization of health care and retirement pension plans certain benefits may still be enjoyed tax-free. The exceptions are, as noted, provided for a paragraph 6(1)(a) of the Act: Employer contributions to a registered pension […]

Employment income is reported based on a calendar-year, there is no alternative. The taxation year of an individual always ends December 31.

For tax purposes the distinction between an employee and an independent contractor is important for the following reasons: The deductibility of expenses is considerably more restricted for employees. Self-employed individuals may take more deductions. Employers must remit income tax, EI payments, and CPP payments to the CRA for employees only.   Non-tax implications for independent […]

After arriving at taxable income, a tax rate is applied to determine the preliminary federal taxes payable. The rates differ between corporations and individuals:  Individual rate are progressive; and  Corporations are subject to tax at a flat tax rate depending on the type of corporation.   Corporate Rates Differ Depending on the Type of Corporation […]

ITA Reference Offence Penalty 162(1) Failure to file a tax return by required date. 5% of unpaid tax, plus 1% of unpaid tax for each month in arrears (maximum 12 months). 162(2) Second offence within three years of first offence. 10% of unpaid tax, plus 2% of unpaid tax for each month in arrears (maximum […]