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Year End 2019 Newsletter 

December 12, 2019

 

Accounting 

Human Resources Solutions

Wealth Management

Company News

 

Separation/Divorce Tax Issues

 

 

When there is a breakdown in a relationship, your personal income tax situation can be significantly impacted.  It is essential to inform the CRA and your accountant or tax advisor as early as possible about the status change, including the date of separation.  It can affect not only your income taxes but also the benefit and credit payments that you may be receiving or could possibly be eligible for.

When there are minor children involved, there are three primary tax related items that should be considered:

  1. Canada Child Benefit
  2. Support payments
  3. Eligible dependant credit
toddler boy blowing dandelion

Canada Child Benefit (CCB)
This payment is a tax-free monthly payment that is paid to the custodial parent of any child(ren), under the age of 18. This credit is based on the income of the parent as reported on their annual personal income tax return.  As such, a taxpayer must file a personal income tax return to be considered for the CCB.


When there is shared custody of a child(ren) on a more or less equal basis, meaning each parent has custody of the child(ren) at least 40% of the time, both parents may be considered primarily responsible for the child(ren)’s care. Each parent is then entitled to half of the amount of CCB they would have otherwise qualified for if the child(ren) were living with them full-time. 


Regardless of whether the separation agreement states which parent is to receive the CCB, CRA looks at the living arrangements and care of the child(ren) specifically. When only one parent is primarily responsible for the child(ren)’s care, only that parent would be eligible for the CCB for that child and the CCB would be calculated based on their adjusted income. 


Support Payments
There are two types of support payments: child support and spousal support. 


Child Support payments are to support a child, or a child and a spouse or common-law partner, as stated in a court order or written agreement. These payments are not taxable or deductible to the parties.

 

Spousal support payments are to support a spouse or common-law partner as stated in a court order or written agreement. These support payments are made only to support the recipient and are generally taxable to the recipient and are deductible to the payer. 


For a payment to be considered a spousal support payment, five conditions must be met:

  1. The payment is a specific amount made to the recipient according to a court order or written agreement.
  2. The recipient is the payer’s current or former spouse or common law partner, and is living separate and apart from the recipient at the time the payment is made, because of a breakdown in the relationship. 
  3. The payment is made to support the recipient, the child of the recipient, or both. The recipient can use the payment at their discretion.
  4. The payments are payable on a periodic basis. The timing of the payments must be set out in the court order or written agreement.
  5. The payments are made to the recipient or an agent enforcing the collection of the amount.

There are situations where a payment is not considered a “support payment” as one or more of the above conditions are not met.  These situations include the following:

As the payer of spousal support payments will want a tax deduction for qualifying spousal support payments, care should be taken throughout the negotiation and settlement process.  It is highly recommended that a tax advisor be involved in the process and reviews any settlement agreements before they are signed. 


Eligible Dependant Tax Credit

When separated or divorced, you may be able to claim a tax credit known as the eligible dependant amount, as long as the following conditions have been met:

  1. You did not claim the spouse or common-law partner amount;
  2. You were not married or were separated from your spouse or common-law partner, were not supporting him/her and were not being supported by him/her; and
  3. You lived with your child(ren).

It is important that any separation agreement or court order be drafted appropriately, otherwise, the eligible dependant tax credit can be denied. 


For both parents to be eligible to claim the eligible dependant tax credit, each parent should be paying the other individual for their calculated child support under the shared custody. The set-off method, whereby the parent owing more child support pays the net difference, should be avoided as this will deny the eligibility to the eligible dependant tax credit for this parent. 


Child(ren) Supported by Both Parents: If both parents make support payments for the same child in the year, unless the parents can agree on who should make the claim in regards to the one child, the claim would be denied. If there are two or more children, and spousal support is being paid by both parents for the children, each parent may be eligible to claim the eligible dependant for one child. 


Credits Claimed Every Other Year: CRA allows, as long as all other criteria are met, that if the parents agree, they can make the eligible dependant claim for a child every other year, as long as the child is living with them on a more or less equal basis. 


Overall, a breakdown in a relationship can cause many complexities for your income tax situation. Your Accountant or tax advisor should be involved in the process to ensure you take full tax advantage of these payments, deductions or credits. 

 

Top of Page

 

Redeemable Shares Issued in Tax Planning – Upcoming Changes

 

In addition to common shares, the issued share capital of many corporations includes preferred or special shares. For many years, the accounting standards have allowed most of these preferred shares to be shown on the balance sheet of the company as part of shareholders equity at their paid up capital amount, which is often a low nominal amount.

 

Woman meeting with woman and man at desk With upcoming changes to the Canadian accounting standards for private enterprises, effective January 1, 2020, it will be much harder to meet the exception that allows these types of shares to be classified as shareholders equity. Most corporations with these types of shares will now be required to present these shares as a liability on the balance sheet at their full value of the redemption amount. To accomplish this, there would be a corresponding adjustment to reduce retained earnings for the difference between the redemption amount of the shares and the original recorded value.

For example, a corporation may have preferred shares issued as part of a reorganization that have a paid up capital amount of $100 and a redemption value of $1,000,000. Currently, this redemption value is displayed on the balance sheet for information purposes, but the shares are only recorded at $100. When making the transition to the new accounting standards, the corporation will now be required to record the shares as a liability at $1,000,000, and reduce retained earnings by $999,900. 


This type of adjustment will have a significant impact on the appearance of the company’s balance sheet. Ratios, such as debt-to-equity calculations, could have a vastly different result with both a significant increase in liabilities and a corresponding decrease in shareholders equity. Companies will need to review any contracts that reference such calculations, such as banking agreements.


In addition, dividends on these types of shares will now be shown as an interest expense on the income statement, rather than a dividend payment recorded through equity, resulting in decreased net income.


If your corporation has these types of shares, your Accountant at Ward & Uptigrove can discuss how the company’s financial statements may be affected and what planning can be done to avoid any negative implications from these changes.

 

Top of Page

 

The Importance of “Vesting” in Estate & Will Planning For Farm Property

 

 

Upon death, several issues arise from an income tax perspective.  One of the biggest issues of concern is the “deemed disposition” rule which requires all accrued capital gains be reported in the final income tax return and taxes paid thereon.


However, there are exceptions to this general “deemed disposition” rule if certain requirements are met.  These exceptions can allow the accrued tax liability related to farm property to be deferred to a child, allowing the transfer of the family farm from one generation to the next without incurring income tax.

 

One specific requirement that must be met, but may be overlooked either during the drafting of a will or administration of the Estate, is the requirement that the farm property must become “vested indefeasibly” in the child within 36 months after the death of a parent.  

While the Income Tax Act does not define the expression “vested indefeasibly”, it is generally understood to mean that the “beneficial interest” in the property has been transferred to the child and the child obtains a right to absolute ownership in such a manner that the right cannot be defeated by any future event.  As long as the child has an enforceable right or claim to ownership, the property will be considered to “vest indefeasibly” even though the legal title may not yet be registered in the child’s name.  

Man's hand touching wheat in field

If the will is drafted such that upon death, the child acquires farm property as a specific gift, it will likely be considered “vested indefeasibly” in the child immediately.  This would be the case even if the will required the child give his sibling a mortgage on the property before the farm land is transferred to equalize the estate.


However, if the will is drafted in a general manner, such that all the property of the parent is left to several children in a non-specific manner and a farm property is included in the assets, the farm property would only “vest indefeasibly” in a child after steps have been taken to create a binding right for the child to receive it.  Failure to take these steps in a proper and timely manner would lead to a loss of the tax-deferred status of the farm transfer to the child and result in a large, unexpected tax bill to the Estate.  This may cause the farm property to have to be sold in order to pay the taxes.


The income tax rules concerning “vesting”, among other rules, are complex.  While the above discussion focuses on the transfer of farm property from a parent to a child, there are also vesting requirements on the transfer of property to a surviving spouse.  


As farm property values continue to rise, the tax benefit of being able to defer capital gains remains very important in ensuring farm property can be transferred and stay in the family.  To help your family benefit from the tax exemptions available, we recommend that your accountant is involved in all steps of the estate planning stage, drafting of wills and estate administration.

 

Top of Page

 

Spring Leadership 2020

 

Two men and two woman leaning over counter looking at report

This is our 24th time running this highly successful training program. The Leadership Learning Program is designed to give you and/or your employees the tools to lead and to supervise effectively. It covers leadership and self-awareness, productive time management, communicating for reduced conflict, coaching for engagement and developing high functioning teams.

  • Five consecutive Thursdays March 26, April 2, 9, 16 and 23 from 8:30 am to 12:30 pm
  • Early bird discount: $925.00 + HST if you sign up & pay before January 31, 2020
  • $995 + HST per participant if you sign up after January 31, 2019

To register or get more information email us at hrresults@w-u.on.ca, call 519-291-3040 ext. 709 or visit wardanduptigrove.com/leadership

 

Top of Page

 

Helping Your Employees with Maternity/Parental EI Benefits

 

Employees who chose the 18-month option at the beginning of their leave but opt to return to work earlier will have their payments cease upon their return to work; reducing the overall benefits received.  In this case, the employee could choose payments to be spread over the 12 month period; however, this leaves them with no benefits during the remainder of their 18-month leave.

 

Maternity/parental leaves are protected leaves under the Employment Standards Act. Employers are obligated to return employees to their pre-employment job, benefits and pay upon completion of their leaves.  When an employee takes maternity/parental leave, they are obligated to provide their employer with four weeks’ notice of their plans to return to work.  It is a best practice to assume the employee will take the 18-month leave unless they specify otherwise. This allows employers to effectively plan staffing and coverage during the leave.  

Couple looking at ultrasound pictures

 

Be sure to direct your employees to the EI website (https://www.canada.ca/en/services/benefits/ei/ei-maternity-parental.html) to ensure they understand how they are affected when collecting EI benefits.  Contact the HR Team to discuss how to effectively manage employee absence in your business.  

 

Top of Page

 

RESPs: What You Need to Know

 

An RESP is a government-assisted investment vehicle that helps families to save for a child’s education. There are 2 main types of plans, individual and family plans. An individual plan has one beneficiary whereas a family plan can have multiple beneficiaries, provided that all are blood relatives, or legally adopted children or grandchildren, of the subscriber. A beneficiary must be under the age of 21 to be eligible to be added as a beneficiary to the plan. 

 

Multi-generational family photo

About RESP Grants
A key incentive of the plan is the federal government’s Canada Education Savings Grant (CESG) which contributes 20% of the annual amount for each beneficiary, up to a maximum of $500 per year for each child under the age of 18. To get the maximum CESG for a child, $2,500 would have to be contributed to the RESP each year. The lifetime maximum CESG amount is $7,200 per child. There can be additional CESG amounts where the child’s family net income is less than $87,907.

 

Although CESG money is only eligible up to $36,000 of contributions to an RESP per child, up to $50,000 can be contributed over the lifetime of the RESP.


If a contribution is not made for a beneficiary in a given year, one year’s worth of grant money may be ‘caught up’ if an additional contribution (up to the $2,500 maximum) is made for a beneficiary.


Deposits and Withdrawals from Family RESPs
A family RESP offers flexibility in which beneficiaries are allotted deposits and withdrawals each year. Contributions can be made to any beneficiary, and a withdrawal made the same year for another beneficiary to the plan, without impacting government grant payments. Both the accumulated grants and growth in the account (each of these being taxable to the beneficiary) can be allocated amongst the beneficiaries of the plan without penalty, which is beneficial if schooling costs are higher for a particular beneficiary.

 

 

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Strategies for Melting Down Your RRSP

 

How do you get the money out of the RRSP without paying more tax than you should? Something to consider is to start withdrawing money before the mandatory age of 72.

 

One objective of the RRSP is to defer taxes from the time you are in a high tax bracket until you get into a lower tax bracket, thereby saving some tax on your contributions. At some point, however, you must take the money out. The government has made the deadline to be age 71 when you must convert your RRSP into an RRIF or an annuity and start withdrawing money at a government prescribed rate. The problem with waiting until then is that you have little flexibility as to what you can withdraw. If your RRSP is large, the mandatory withdrawal amount may push you into higher tax brackets. Advisor meeting with older couple in living room


Here are some strategies that would help you pay lower taxes on your RRSP withdrawals.

  1. Consider deferring your CPP and OAS. Both of these Canadian pensions allow you to defer until age 70 to start receiving them, and you get rewarded for the deferral by receiving higher amounts. If you’re retired, you can then use RRSP withdrawals to fill the income gap that the CPP and OAS would have provided, so you can draw down your RRSP at a lower tax bracket.
  2. When you stop working, you would normally fall into a lower tax bracket, so top up your income to your existing tax bracket with RRSP withdrawals.
  3. Start an RRIF at age 65 to take advantage of $2,000 pension income credit. No matter how much income you have, this pension credit will allow you to withdraw $2,000 tax free from your RRIF, as long as you don’t have any other pension income. So, fund the RRIF with your RRSP money to take $2,000 out tax-free each year.
  4. If your spouse’s RRSP value does not equal yours, you can start to equalize the amounts by withdrawing from yours to put into a spousal RRSP, as long as you have contribution room. The tax on your withdrawal is eliminated by your equivalent contribution into the spousal RRSP.

If you’ve accumulated a sizable RRSP, you could benefit from a meltdown strategy years before you turn 71. Otherwise, the mandatory withdrawal rates may bump you into a higher tax bracket, or cause OAS payments to be clawed back, or decrease your Age Amount credit significantly. In all of these occurrences, you will be effectively paying more tax, so do some financial planning to avoid these situations. You may want to consult your financial planner to explore all your RRSP meltdown options.

 

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Staff Updates

 


As we reflect on 2019, our 61st year, we recognize another year of growth and progression with our staff. 

 

We are thrilled to welcome the following new staff members to our team:

 

Administration Agriculture Business Business HR Solutions
Carrie Henhoeffer Chris Raben Ryan Goetz Madison Topic Steve Lambier
Carrie Henhoeffer Chris Raben Ryan Goetz Madison Topic Steve Lambier

 

 

Congratulations to the following staff members who achieved their Chartered Professional Accountant (CPA) designations:

Autumn Johnson  Garrett Topic      

Autumn Johnson, CPA

Senior Accountant

 Garrett Topic, CPA, CA

 Senior Accountant

     

 

 

We are proud to congratulate the following staff members on their development and progression into new roles this coming year.

Brendan Magee Jennifer McArthur Dan Benbow Rita Cole  

Brendan Magee

CPA, CA

Partner, Business

 

Jennifer McArthur

CPA, CA

Partner, Agriculture

 

Dan Benbow

CPA, CA

Principal, Agriculture

 

Rita Cole

CPA, CGA

Principal, Business

 

 
Becca Newbigging Curtis Bults Heather Bowman Alana Rubick David Szasz

Becca Newbigging

Tax Manager

 

Curtis Bults

Senior Accountant

 

Heather Bowman

Intermediate

Accountant

Alana Rubick

Intermediate

Accountant

David Szasz

Intermediate

Accountant

 

  

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Please Note Our Christmas Shutdown

The offices of Ward & Uptigrove will be closed during the Christmas holidays from 3:00 pm on Tuesday, December 24th and reopening in the New Year on Thursday, January 2nd.

 

Merry Christmas and Happy Holidays from the Partners and Staff of Ward & Uptigrove Chartered Professional Accountants!

 

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Ward and Uptigrove Logo

Year End 2019 Newsletter 

December 12, 2019

 

Accounting 

Human Resources Solutions

Wealth Management

Company News

 
Separation/Divorce Tax Issues

 

When there is a breakdown in a relationship, your personal income tax situation can be significantly impacted.  It is essential to inform the CRA and your accountant or tax advisor as early as possible about the status change, including the date of separation.  It can affect not only your income taxes but also the benefit and credit payments that you may be receiving or could possibly be eligible for.

 

When there are minor children involved, there are three primary tax related items that should be considered:

  1. Canada Child Benefit
  2. Support payments
  3. Eligible dependant credit

toddler boy blowing dandelion

Canada Child Benefit (CCB)
This payment is a tax-free monthly payment that is paid to the custodial parent of any child(ren), under the age of 18. This credit is based on the income of the parent as reported on their annual personal income tax return.  As such, a taxpayer must file a personal income tax return to be considered for the CCB.


When there is shared custody of a child(ren) on a more or less equal basis, meaning each parent has custody of the child(ren) at least 40% of the time, both parents may be considered primarily responsible for the child(ren)’s care. Each parent is then entitled to half of the amount of CCB they would have otherwise qualified for if the child(ren) were living with them full-time. 


Regardless of whether the separation agreement states which parent is to receive the CCB, CRA looks at the living arrangements and care of the child(ren) specifically. When only one parent is primarily responsible for the child(ren)’s care, only that parent would be eligible for the CCB for that child and the CCB would be calculated based on their adjusted income. 


Support Payments
There are two types of support payments: child support and spousal support. 


Child Support payments are to support a child, or a child and a spouse or common-law partner, as stated in a court order or written agreement. These payments are not taxable or deductible to the parties.

 

Spousal support payments are to support a spouse or common-law partner as stated in a court order or written agreement. These support payments are made only to support the recipient and are generally taxable to the recipient and are deductible to the payer. 


For a payment to be considered a spousal support payment, five conditions must be met:

  1. The payment is a specific amount made to the recipient according to a court order or written agreement.
  2. The recipient is the payer’s current or former spouse or common law partner, and is living separate and apart from the recipient at the time the payment is made, because of a breakdown in the relationship. 
  3. The payment is made to support the recipient, the child of the recipient, or both. The recipient can use the payment at their discretion.
  4. The payments are payable on a periodic basis. The timing of the payments must be set out in the court order or written agreement.
  5. The payments are made to the recipient or an agent enforcing the collection of the amount.

There are situations where a payment is not considered a “support payment” as one or more of the above conditions are not met.  These situations include the following:

  • Payments made before the date of the court order or written agreement
    • Amounts paid before a court order or written agreement takes place can be considered support payments, as long as the order or agreement states that any amounts previously paid are considered paid and received under the order or agreement.
    • This is only for payments made in the year of the order or agreement, or in the previous year.
  • Specific-purposes or third-party payments
    • Amounts payable under a court order or written agreement for specific expenses (for example, rent) to support the recipient or the child in the recipient’s custody. These payments can be paid directly to the recipient or to a third-party.
    • If the recipient can use the specific-purpose payments as they see fit, they are considered support payments.
  • Lump-sum payments
    • If periodic payments required by a court order or written agreement are overdue, and a lump-sum payment was made to bring them to date, the payment would be considered support.
    • If a court order states that retroactive support has to be paid for a specific period before the court order, this lump-sum payment would be considered support.

As the payer of spousal support payments will want a tax deduction for qualifying spousal support payments, care should be taken throughout the negotiation and settlement process.  It is highly recommended that a tax advisor be involved in the process and reviews any settlement agreements before they are signed. 


Eligible Dependant Tax Credit

When separated or divorced, you may be able to claim a tax credit known as the eligible dependant amount, as long as the following conditions have been met:

  1. You did not claim the spouse or common-law partner amount;
  2. You were not married or were separated from your spouse or common-law partner, were not supporting him/her and were not being supported by him/her; and
  3. You lived with your child(ren).

It is important that any separation agreement or court order be drafted appropriately, otherwise, the eligible dependant tax credit can be denied. 


For both parents to be eligible to claim the eligible dependant tax credit, each parent should be paying the other individual for their calculated child support under the shared custody. The set-off method, whereby the parent owing more child support pays the net difference, should be avoided as this will deny the eligibility to the eligible dependant tax credit for this parent. 


Child(ren) Supported by Both Parents: If both parents make support payments for the same child in the year, unless the parents can agree on who should make the claim in regards to the one child, the claim would be denied. If there are two or more children, and spousal support is being paid by both parents for the children, each parent may be eligible to claim the eligible dependant for one child. 


Credits Claimed Every Other Year: CRA allows, as long as all other criteria are met, that if the parents agree, they can make the eligible dependant claim for a child every other year, as long as the child is living with them on a more or less equal basis. 


Overall, a breakdown in a relationship can cause many complexities for your income tax situation. Your Accountant or tax advisor should be involved in the process to ensure you take full tax advantage of these payments, deductions or credits. 

 

Top of Page

 
Redeemable Shares Issued in Tax Planning – Upcoming Changes

 

In addition to common shares, the issued share capital of many corporations includes preferred or special shares. For many years, the accounting standards have allowed most of these preferred shares to be shown on the balance sheet of the company as part of shareholders equity at their paid up capital amount, which is often a low nominal amount.

 

Woman meeting with woman and man at desk With upcoming changes to the Canadian accounting standards for private enterprises, effective January 1, 2020, it will be much harder to meet the exception that allows these types of shares to be classified as shareholders equity. Most corporations with these types of shares will now be required to present these shares as a liability on the balance sheet at their full value of the redemption amount. To accomplish this, there would be a corresponding adjustment to reduce retained earnings for the difference between the redemption amount of the shares and the original recorded value.

 

For example, a corporation may have preferred shares issued as part of a reorganization that have a paid up capital amount of $100 and a redemption value of $1,000,000. Currently, this redemption value is displayed on the balance sheet for information purposes, but the shares are only recorded at $100. When making the transition to the new accounting standards, the corporation will now be required to record the shares as a liability at $1,000,000, and reduce retained earnings by $999,900. 


This type of adjustment will have a significant impact on the appearance of the company’s balance sheet. Ratios, such as debt-to-equity calculations, could have a vastly different result with both a significant increase in liabilities and a corresponding decrease in shareholders equity. Companies will need to review any contracts that reference such calculations, such as banking agreements.


In addition, dividends on these types of shares will now be shown as an interest expense on the income statement, rather than a dividend payment recorded through equity, resulting in decreased net income.


If your corporation has these types of shares, your Accountant at Ward & Uptigrove can discuss how the company’s financial statements may be affected and what planning can be done to avoid any negative implications from these changes.

 

Top of Page

 
The Importance of “Vesting” in Estate & Will Planning For Farm Property

 

 

Upon death, several issues arise from an income tax perspective.  One of the biggest issues of concern is the “deemed disposition” rule which requires all accrued capital gains be reported in the final income tax return and taxes paid thereon.


However, there are exceptions to this general “deemed disposition” rule if certain requirements are met.  These exceptions can allow the accrued tax liability related to farm property to be deferred to a child, allowing the transfer of the family farm from one generation to the next without incurring income tax.

 

One specific requirement that must be met, but may be overlooked either during the drafting of a will or administration of the Estate, is the requirement that the farm property must become “vested indefeasibly” in the child within 36 months after the death of a parent.  

 

While the Income Tax Act does not define the expression “vested indefeasibly”, it is generally understood to mean that the “beneficial interest” in the property has been transferred to the child and the child obtains a right to absolute ownership in such a manner that the right cannot be defeated by any future event.  As long as the child has an enforceable right or claim to ownership, the property will be considered to “vest indefeasibly” even though the legal title may not yet be registered in the child’s name.  

Man's hand touching wheat in field

If the will is drafted such that upon death, the child acquires farm property as a specific gift, it will likely be considered “vested indefeasibly” in the child immediately.  This would be the case even if the will required the child give his sibling a mortgage on the property before the farm land is transferred to equalize the estate.


However, if the will is drafted in a general manner, such that all the property of the parent is left to several children in a non-specific manner and a farm property is included in the assets, the farm property would only “vest indefeasibly” in a child after steps have been taken to create a binding right for the child to receive it.  Failure to take these steps in a proper and timely manner would lead to a loss of the tax-deferred status of the farm transfer to the child and result in a large, unexpected tax bill to the Estate.  This may cause the farm property to have to be sold in order to pay the taxes.


The income tax rules concerning “vesting”, among other rules, are complex.  While the above discussion focuses on the transfer of farm property from a parent to a child, there are also vesting requirements on the transfer of property to a surviving spouse.  


As farm property values continue to rise, the tax benefit of being able to defer capital gains remains very important in ensuring farm property can be transferred and stay in the family.  To help your family benefit from the tax exemptions available, we recommend that your accountant is involved in all steps of the estate planning stage, drafting of wills and estate administration.

 

Top of Page

 

 

Spring Leadership 2020

 

Two men and two woman leaning over counter looking at report

This is our 24th time running this highly successful training program. The Leadership Learning Program is designed to give you and/or your employees the tools to lead and to supervise effectively. It covers leadership and self-awareness, productive time management, communicating for reduced conflict, coaching for engagement and developing high functioning teams.

  • Five consecutive Thursdays March 26, April 2, 9, 16 and 23 from 8:30 am to 12:30 pm
  • Early bird discount: $925.00 + HST if you sign up & pay before January 31, 2020
  • $995 + HST per participant if you sign up after January 31, 2019

To register or get more information email us at hrresults@w-u.on.ca, call 519-291-3040 ext. 709 or visit wardanduptigrove.com/leadership

 

Top of Page

 
Helping Your Employees with Maternity/Parental EI Benefits

 


Employers and Employees should know that the recent changes in maternity/parental EI benefits may disadvantage employees who opt to take the 18 month period off vs. 12 months. EI benefits are identical whether the employee takes 12 or 18 months, but the employee may choose to spread payments over the 12 or 18-month period.  
 
Employees who chose the 18-month option at the beginning of their leave but opt to return to work earlier will have their payments cease upon their return to work; reducing the overall benefits received.  In this case, the employee could choose payments to be spread over the 12 month period; however, this leaves them with no benefits during the remainder of their 18-month leave.
 
Couple looking at ultrasound pictures

Maternity/parental leaves are protected leaves under the Employment Standards Act. Employers are obligated to return employees to their pre-employment job, benefits and pay upon completion of their leaves.  When an employee takes maternity/parental leave, they are obligated to provide their employer with four weeks’ notice of their plans to return to work.  It is a best practice to assume the employee will take the 18-month leave unless they specify otherwise. This allows employers to effectively plan staffing and coverage during the leave.  

 

Be sure to direct your employees to the EI website (https://www.canada.ca/en/services/benefits/ei/ei-maternity-parental.html) to ensure they understand how they are affected when collecting EI benefits.  Contact the HR Team to discuss how to effectively manage employee absence in your business.  

 

Top of Page

 
RESPs: What You Need to Know

Multi-generational family photo

An RESP is a government-assisted investment vehicle that helps families to save for a child’s education. There are 2 main types of plans, individual and family plans. An individual plan has one beneficiary whereas a family plan can have multiple beneficiaries, provided that all are blood relatives, or legally adopted children or grandchildren, of the subscriber. A beneficiary must be under the age of 21 to be eligible to be added as a beneficiary to the plan.  

 

About RESP Grants
A key incentive of the plan is the federal government’s Canada Education Savings Grant (CESG) which contributes 20% of the annual amount for each beneficiary, up to a maximum of $500 per year for each child under the age of 18. To get the maximum CESG for a child, $2,500 would have to be contributed to the RESP each year. The lifetime maximum CESG amount is $7,200 per child. There can be additional CESG amounts where the child’s family net income is less than $87,907.

 

Although CESG money is only eligible up to $36,000 of contributions to an RESP per child, up to $50,000 can be contributed over the lifetime of the RESP.


If a contribution is not made for a beneficiary in a given year, one year’s worth of grant money may be ‘caught up’ if an additional contribution (up to the $2,500 maximum) is made for a beneficiary.


Deposits and Withdrawals from Family RESPs
A family RESP offers flexibility in which beneficiaries are allotted deposits and withdrawals each year. Contributions can be made to any beneficiary, and a withdrawal made the same year for another beneficiary to the plan, without impacting government grant payments. Both the accumulated grants and growth in the account (each of these being taxable to the beneficiary) can be allocated amongst the beneficiaries of the plan without penalty, which is beneficial if schooling costs are higher for a particular beneficiary.

 

 

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Strategies for Melting Down Your RRSP

 

How do you get the money out of the RRSP without paying more tax than you should? Something to consider is to start withdrawing money before the mandatory age of 72.

 

One objective of the RRSP is to defer taxes from the time you are in a high tax bracket until you get into a lower tax bracket, thereby saving some tax on your contributions. At some point, however, you must take the money out. The government has made the deadline to be age 71 when you must convert your RRSP into an RRIF or an annuity and start withdrawing money at a government prescribed rate. The problem with waiting until then is that you have little flexibility as to what you can withdraw. If your RRSP is large, the mandatory withdrawal amount may push you into higher tax brackets. Advisor meeting with older couple in living room


Here are some strategies that would help you pay lower taxes on your RRSP withdrawals.

  1. Consider deferring your CPP and OAS. Both of these Canadian pensions allow you to defer until age 70 to start receiving them, and you get rewarded for the deferral by receiving higher amounts. If you’re retired, you can then use RRSP withdrawals to fill the income gap that the CPP and OAS would have provided, so you can draw down your RRSP at a lower tax bracket.
  2. When you stop working, you would normally fall into a lower tax bracket, so top up your income to your existing tax bracket with RRSP withdrawals.
  3. Start an RRIF at age 65 to take advantage of $2,000 pension income credit. No matter how much income you have, this pension credit will allow you to withdraw $2,000 tax free from your RRIF, as long as you don’t have any other pension income. So, fund the RRIF with your RRSP money to take $2,000 out tax-free each year.
  4. If your spouse’s RRSP value does not equal yours, you can start to equalize the amounts by withdrawing from yours to put into a spousal RRSP, as long as you have contribution room. The tax on your withdrawal is eliminated by your equivalent contribution into the spousal RRSP.

If you’ve accumulated a sizable RRSP, you could benefit from a meltdown strategy years before you turn 71. Otherwise, the mandatory withdrawal rates may bump you into a higher tax bracket, or cause OAS payments to be clawed back, or decrease your Age Amount credit significantly. In all of these occurrences, you will be effectively paying more tax, so do some financial planning to avoid these situations. You may want to consult your financial planner to explore all your RRSP meltdown options.

 

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Staff Updates


As we reflect on 2019, our 61st year, we recognize another year of growth and progression with our staff. 

 

We are thrilled to welcome the following new staff members to our team:

 

Administration

Carrie Henhoeffer

Carrie Henhoeffer 

 

Agriculture 

Chris Raben

Chris Raben

 

Business 

Ryan Goetz

Ryan Goetz

 

Business 

Madison Topic

Madison Topic

 

HR Solutions 

Steve Lambier   

Steve Lambier

 

 

Congratulations to following staff members who achieved their Chartered Professional Accountant (CPA) designations:

 

Autumn Johnson  

Autumn Johnson, CPA

Senior Accountant

 

Garrett Topic      

Garrett Topic, CPA, CA

Senior Accountant

     

 

We are proud to congratulate the following staff members on their development and progression into new roles this coming year.

Brendan Magee

Brendan Magee, CPA, CA

Partner, Business

 

Jennifer McArthur

Jennifer McArthur, CPA, CA

Partner, Agriculture

 

Dan Benbow

Dan Benbow, CPA, CA

Principal, Agriculture

 

Rita Cole  

Rita Cole, CPA, CGA

Principal, Business

 

 

Becca Newbigging

Becca Newbigging

Tax Manager

 

Curtis Bults

Curtis Bults

Senior Accountant

 

Heather Bowman

Heather Bowman

Intermediate Accountant

 

Alana Rubick

Alana Rubick

Intermediate Accountant

 

David Szasz

David Szasz

Intermediate Accountant

  

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Please Note Our Christmas Shutdown

The offices of Ward & Uptigrove will be closed during the Christmas holidays from 3:00 pm on Tuesday, December 24th and reopening in the New Year on Thursday, January 2nd.

 

Merry Christmas and Happy Holidays from the Partners and Staff of Ward & Uptigrove Chartered Professional Accountants!

 

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