Canadian Tax Podcast for the week of December 14, 2021. This week we cover:
- CRA website down (again);
- US Electric Vehicle subsidy drama;
- CEWS audits resume;
- Moneysense tax tips released;
- Expense vs. Capital improvements for rental suite;
- US LLC troubles;
- Capital gain vs business income on investment trades;
[INTRO]:
“This is the Canadian Tax Podcast, Episode # 028, hosted by me, Cameron Ware. Good morning”
[NEWS SECTION]
- “Happy Tuesday, it is the week of December 14, 2021. We’ll start with the news.
ITEM [1] – CRA WEbsite Offline Due to Security threat
- The CRA has taken down their website after a potential global security threat
- CRA was not alone in this, as many organizations around the world were vulnerable
- Log4Shell exploit.
- There has been no indication that any tax payer information was stolen.
- It is still early, but as of now there is limited information available.
- https://www.canada.ca/en/revenue-agency/services/e-services/updates.html
- https://www.theverge.com/2021/12/10/22828303/log4j-library-vulnerability-log4shell-zero-day-exploit
[ITEM 2] – Canada makes aggressive stance on the US EV Credit
- Canada has now made a more aggressive stance, threatening to impose new tariffs.
- EV Bill has passed through Congress, now on to Senate.
- The EV tax credit could cause severe harm to Canada’s automotive sector. Trade Minister Mary Ng says the EV credit amounts to a 34% precent tariff on Canadian-produced electric vehicles, and violates the US-Mexico-Canada trade agreement.
- My guess: targeted tariffs like we did with the aluminum issue when Trump was in. ie. Kentucky Bourbon
- https://globalnews.ca/news/8443831/us-ev-tax-credit-canada-threats-explainer/
[ITEM 3] – CRA Resumes CEWS Post-Payment Audit Program
- CRA has announced it is resuming its CEWS post-payment audit program as of Fall 2021.
- Stakeholder email sent out Dec 7th.
- This is the wage subsidy program used by employers.
- CRA is going to contact claimants, and request relevant docs to verify revenues and payroll. Link to CRA’s FAQ where they detail specifics about what paperwork is needed.
- https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/canadian-tax-news
- https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-frequently-asked-questions.html#q33
[ITEM 4] – Tax Tips for 2021 Season
- MoneySense has released their tax tips for Canadians in 2021.
- Decent resource covering personal tax tips.
- 2022 the $400 flat rate home office deduction is still in place. Dividends vs salary in terms of claiming childcare.
- https://www.moneysense.ca/save/taxes/2021-tax-season-best-tax-tips-canada/
LISTENER QUESTIONS
- Tax deduction on work done to legalize basement rental.
- [Question]
- Usual: It depends.
- Capital additions vs expense.
- Trap: Principal residence deduction. Capitalize and take CCA = lose portion of principal residence. Don’t take CCA on rentals.
- What is the most effective way to receive dividends from US LLC as a Canadian?
- [Question]
- Trick question: There isn’t. Double tax.
- US flow-through, pay US personal tax. Canada says that’s corporate tax, not personal tax, so you don’t get a foreign tax credit. US draws/payments treated as foreign dividend.
- If you’re Canadian: Don’t own a US LLC.
- Capital Gain or Income
- [Question]
- Usual: active trading vs sitting on asset.
- Case by case basis. Casual trades here and there, capital gain. Day-trading with options etc, arguably business income.
- Always irony here: When you make money, everyone wants capital gains (50% taxable). Losses, everyone wants business (deductable against other income.)
That will wrap things up for today. Like always, if you have any questions, send them to questions@canadiantaxpodcast.ca, or find us on twitter: https://twitter.com/cdntaxpodcast
This is Canadian Tax Podcast, thanks for listening.
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