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Small business owners, including incorporated professionals such as doctors, lawyers, accountants and others, will likely face a higher tax bill in the years ahead as a result of Finance Minister Bill Morneau’s announcement this week targeting several common, and until now, perfectly legal, tax strategies used in conjunction with private corporations.

The strategies under attack can be categorized into three main areas: income sprinkling, earning passive investment income in a corporation and converting a corporation’s ordinary income into tax-preferred capital gains.

Among these changes, it’s the first one — income sprinkling — which is perhaps deemed the most offensive of the three and the one that will likely have the broadest financial impact on small business owners and incorporated professionals.

Read more from Financial Post

The federal government announced a proposal Tuesday that would crack down on the practice of wealthy individuals spreading their income among family members to create major tax savings.

Ottawa is taking aim at three major loopholes, affecting as many as 50,000 families, including what is called “income sprinkling” using private corporations to shift income from an individual facing a higher personal income tax rate to a family member who is subject to lower personal tax rates or who may not be taxable at all.
“Many of the richest Canadians are unfairly exploiting the tax rules designed to help businesses thrive. We know that businesses, including small businesses, help grow the Canadian economy. These tax advantages are in place to help these businesses reinvest and grow, find new customers, buy new equipment and hire more people. We want to make sure those rules are used to do just that, and not to give unfair tax advantages to certain – often high-income – individuals,” said Bill Morneau, the federal finance minister, in a statement.
Read more from Financial Post

 

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Read more from Intuit

 

 While the Boston Bruins may not have won a Stanley Cup since 2011 when they defeated the Vancouver Canucks in Game 7, they achieved an off-ice victory last month when they faced off against the Internal Revenue Service in U.S. Tax Court.

The issue in the case was the deductibility of 100 per cent of the cost of player and staff meals when the Bruins played their away games in city arenas throughout the U.S.
and Canada. The Bruins stayed at hotels when visiting away cities and contracted with the hotels to provide the pregame meals to players and team staff. The Bruins’ owners deducted 100 per cent of the cost of the pregame meals at away games, totaling US$256,000 in 2009 and US$284,000 in 2010.

Read more from Financial Post

 

My friend James owns a manufacturing company and was interviewing for a warehouse manager position.

One candidate – a balding gentleman – excused himself after five minutes and returned to the interview room wearing a hair piece. Sort of odd. I guess some people just don’t plan ahead very well. Turns out he didn’t get the job.

Failing to plan ahead when it comes to your income taxes can be even more costly. Last week, I shared some tax issues related to those who own a corporation. This week, I want to share a primer on how to get money from your company in a no- or low-tax manner. Here are the top ideas to consider.

1. Take repayment of shareholder loans.

Read more from Globe and Mail