Tax Season is here! Spring isn’t the only season that has sprung! It’s also tax season! In this month’s tax-themed episode, Al speaks with Moneris’ Tax Manager Hanna Ghadban in our ‘Feature’ Interview to talk about all things income tax. Also…Are you an early filer of income tax like this month’s co-host Rick Stephan or are you a last-minute crammer like Al? Where do the majority of Canadians rank on that scale? In this month’s ‘By The Numbers’ Sean McCormick will help answer this question with real consumer data.
Tax Season is here!
Spring isn’t the only season that has sprung! It’s also tax season!
In this month’s tax-themed episode, Al speaks with Moneris’ Tax Manager Hanna Ghadban in our ‘Feature’ Interview to talk about all things income tax.
Also…
Are you an early filer of income tax like this month’s co-host Rick Stephan or are you a last-minute crammer like Al? Where do the majority of Canadians rank on that scale? In this month’s ‘By The Numbers’ Sean McCormick will help answer this question with real consumer data.
Also in this episode:
Al Grego:
Coming up on Shop Talk.
Hanna Ghadban:
They're a business partner. They're not just tax advice. They're going to know you and your family and your business, and they're going to hopefully give you an end to end service and not just tax, but a full picture of the landscape out there from a finance perspective.
Al Grego:
Hello everyone, I'm Al Grego.
Rick Stephan:
And I'm Rick Stephan.
Al Grego:
And this is the April 2022 edition of Shop Talk with Moneris. Welcome to Shop Talk, Rick.
Rick Stephan:
Thank you very much, Alex. Good to be here, although I'm not sure why you asked me to be the co-host.
Al Grego:
Well, why wouldn't I ask? You're the Director of Digital Channels at Moneris not to mention my boss.
Rick Stephan:
And this podcast's number one fan but I'll remember this started performance review time.
Al Grego:
Well then this better be the best episode yet.
Rick Stephan:
That's the spirit.
Al Grego:
Hey Rick, you know what my favorite day of the year is?
Rick Stephan:
Your birthday?
Al Grego:
No, yuck.
Rick Stephan:
Christmas?
Al Grego:
No, who's got that kind of money.
Rick Stephan:
I give up. What's your favorite day of the year?
Al Grego:
The day after I file my tax return.
Rick Stephan:
Really?
Al Grego:
Yeah. I mean then you don't have to worry about it for another year.
Rick Stephan:
Oh, well I guess that was a good day.
Al Grego:
Was? What do you mean was? You've already filed?
Rick Stephan:
Of course, haven't you?
Al Grego:
So you are an early bird?
Rick Stephan:
And you wait until the last minute?
Al Grego:
I do.
Rick Stephan:
That sounds extremely stressful.
Al Grego:
It is hence the following day being my favorite day of the year. When were the majority of Canadians fall on the tax filing scale?
Rick Stephan:
You mean early birds versus procrastinators?
Al Grego:
I prefer the term crammer.
Rick Stephan:
That type of analysis sounds like a job for Sean McCormick.
Al Grego:
It does. I think I'll ask him to in the by the numbers segment.
Rick Stephan:
So I take it this month's theme is tax season.
Al Grego:
How'd you guess?
Rick Stephan:
Call it a hunch. I mean taxes aren't always the most ex exciting things to talk about though. So what's on tap to help out our listeners.
Al Grego:
Well, I've got Moneris' tax manager, Hanna Ghadban as the feature interview to talk about all things income tax, a very important topic for all Businesses
Rick Stephan:
Makes sense.
Al Grego:
I Also speak with Clyde Seymour from Ryan ULC for our ask the experts segment.
Rick Stephan:
They certainly qualify as experts.
Al Grego:
And speaking of which while Clyde is certainly a tax expert, we here at Moneris or not. So, you know what time it is?
Rick Stephan:
Disclaimer, time,
Al Grego:
This podcast is provided on a complimentary basis for information purposes only. Facts and circumstances may vary from case to case so you should definitely conduct an independent analysis and consult with qualified tax professionals before taking any action in your particular situation.
Rick Stephan:
Good call. Our friends and legal will be very happy.
Al Grego:
Now let's get things going with my feature interview with Hanna Ghadban
Speaker 4:
Featured interview.
Al Grego:
I'm joined by Hanna Ghadban. She's a tax manager at Moneris. Hannah, thank you for joining us today.
Hanna Ghadban:
Absolutely. Pleasure.
Al Grego:
So Hannah, before we begin, there was a disclaimer at the top of this podcast Moneris, isn't a tax firm, so we're not here to give advice. Our advice would be to obviously seek tax advice from professionals, correct?
Hanna Ghadban:
Yeah, tax is always a gray area. So you definitely would want to seek professional qualified tax advice for your particular situation because it really depends case by case.
Al Grego:
That's right. But I mean it is tax season, especially personal income tax season is coming up. First of all, maybe you can tell us which side of the fence you're on. Are you an early filer or are you a crammer like me?
Hanna Ghadban:
I'm not super early, but I'm not April 30th.
Al Grego:
No, so you're right down the middle. Okay. Well that's that's good.
Hanna Ghadban:
Once April 1st comes around, it's usually triggers me to do it.
Al Grego:
Yeah, you're right. Once April hits it get a little antsy. We'll find out how the rest of Canadians do it later on in the by the numbers segment. So let's talk about personal income tax. I mean, first of all, when's a deadline?
Hanna Ghadban:
The deadline for personal tax returns is April 30th. And so if you're a sole proprietor, so you have a business that's not incorporated, you're going to need to report your business income and expenses on your personal income tax return. And like I said, the amount owing is going to be due April 30th but since you're a self-employed individual your return isn't really technically due until June 15, but most people just file and pay and do all of that as of April 30th deadline.
Al Grego:
Now years ago I was a contractor and so I was a sole proprietor and I remember that because of you had to file your own. I mean, I had help. I obviously I sought a professional to help me with my taxes, but the whole having to pay installments ahead of time was something that I had a hard time with. But that's something as a sole proprietor you have to do. You don't pay all your taxes at the end of the year. You pay them throughout the year.
Hanna Ghadban:
Yeah, depending on how much you owe. CRA kind of wants you to make installments along the way, as opposed to waiting until the end, when you're filing your tax return. So they usually notify you of how much your installments need to be made. It's typically quarterly and it's usually based on prior years' income. So if it's your first year, you're not going to have installments, but then after you may. So like I said, CRA, I will notify you and tell you that you need to make quarterly installments. And it would be based on the year prior year's income, because you don't know what your net income's going to be for the current year.
Al Grego:
As a sole proprietorship I knew other contractors and other so proprietors who eventually incorporated, because there were some advantages to doing that. What are some of the differences between the two, sole proprietorship and incorporation?
Hanna Ghadban:
So the corporation would have its own deadlines separate from you as an individual. So depending again, what your fiscal school year end is, the tax return for a corporation is six months after. So let's say you do have a December 31st year end. It would be due June 30th of the following year. And then kind of similar to any tax owing for the corporation is typically due two or three months after year end. So February or March. And typically if you're a small business, what's called a Canadian controlled private corporation, a small owner managed business, you usually have three months to make sure you have your final payment in. But talking about incorporating whether should or shouldn't, let's say if you are a sole proprietor that's really something that you need to seek tax advice on because a tax advisor could determine if or when it makes sense.
Hanna Ghadban:
So typically as your business is growing, that would be something that you could look into at some point and they can talk to you about the advantages and disadvantages of incorporating kind of what the corporate tax rates are because they are different than personal. And they can maybe do some tax planning for you when you have a corporation such as what's the right mix of salary and dividends. Would you pull out a salary? Would you pull out a dividend from the corporation to pay yourself? Would it be a mix of both those types of things?
Al Grego:
So does that mean you filed two tax returns, then a corporate and a personal every year?
Hanna Ghadban:
Yeah. So you could be an employee and then if you're getting a salary, would the corporation would issue you a T4. Some people just stay as shareholders and just receive a dividend and so you wouldn't have a T4 per se, but. But yes, you would have your own personal tax return filing for April 30th and the corporation. The corporation is a separate legal entity. So you kind of have to see it as its own person.
Al Grego:
I mean, we talked about seeking a tax professionals advice, we just talked about one of the reasons helping you decide whether you're a sole proprietorship or whether it makes sense to incorporate, what are some of the other things that a professional would help you with?
Hanna Ghadban:
Yeah. So they can also help you with just determining what you can deduct as expenses for the business because I think there's a lot of things that can be expensed, but you need to know kind of where there might be any restrictions or limitations. So, in most cases you can deduct supplies and office expenses, but you could also deduct travel as long as it's not, let's say meals and entertainment. So, meals and entertainment, there's a limitation from a tax perspective, you can only deduct 50% of those costs.
Al Grego:
And I mean, another bonus to having a tax advisor is they're usually on top of the different grants and credits that you can take advantage of. So what are some of the grants, for example, maybe a small business might want to look at?
Hanna Ghadban:
Yeah. So there's a lot out there and then sometimes they're not well known. So, a tax advisor could help you identify which ones you and or your business could qualify for. I guess given the COVID 19 pandemic, there was quite a bit out there that's kind of winding down a little bit. But there's still, you could qualify for some of the new federal wage or rent subsidies they're focusing on the hardest hit type industries. So depending on what your business is, you could still qualify for those new ones that the federal government is offering. And there's also what's called a Canadian Recovery Hiring Program. And so you may be eligible to apply for a subsidy and that would cover your wages as you hire new employees or as you increase your employees, wages or hours.
Hanna Ghadban:
Another one that I recently just came across is a new grant for online presence and adopting a new digital technologies. So it's called the Canada Digital Adoption Program. So you can find that on the Canadian government website and it's to help businesses to get online. Some businesses aren't. I think we take it for granted, but so you could get up to $2,400 in grant. And if you're looking to boost your business operations kind of digitize it. You can get up to anywhere is up to 15,000. So there's money out there to look into and see if you qualify or not.
Al Grego:
So what I'm hearing is a good tax advisor is actually an important part of a small business growing.
Hanna Ghadban:
Yeah, they're a business partner. They're not just tax advice. They're going to know you and your family and your business, and they're going to hopefully give you an end to end service and not just tax, but a full picture of the landscape out there from a finance perspective.
Al Grego:
That's great. Now it's probably also important to know. I mean, a tax advisor, isn't just for small business. I mean, Moneris has tax advisors. We have many firms that we go to. Then one of them we're going to hear from a little later in our ask and expert segment from Ryan ULC is one of our tax advisors.
Hanna Ghadban:
Yeah. So we use, like you said, many accounting firms or tax firms for different variety of reasons. And Ryan is one of those tax advisors or firms that we reach out to sometimes.
Al Grego:
Okay. Well, that's great. Thank you so much for taking time to speak to me today.
Hanna Ghadban:
Absolutely. It was my pleasure.
Speaker 5:
This podcast is brought to you by Moneris. Today has shown us tomorrow has changed. Changed how we'll live, work and do business because now we're more open to what's possible. Open to contactless payments, online bookings, curbside pickups, and more. Open your business to more opportunity with solutions to help you succeed online, in store or on the go. To talk to one of our business advisors, call 1-8-6-6-moneris, or visit moneris.com today.
Speaker 4:
By the numbers.
Al Grego:
I'm joined by Sean McCormick, Director of Business Development at Moneris. Sean, thank you so much for joining me today.
Sean McCormick:
Yeah, my pleasure. Al thanks for having me.
Al Grego:
So Sean, it's a tax season and hot question I'm asking everyone in this episode is what side of the coin do you land on? Are you an early filer or are you a crammer like me?
Sean McCormick:
Right. Well, I haven't got mine done yet. I think as a data guy, I'd have to understand the market a little bit deeper to answer that question and understand what the rest of the population is doing, which I don't, but I can tell you what the trends look like year over year. And let's walk back a little bit and in pre pandemic we saw in 2019, we actually saw people getting to their taxes a bit earlier. And then when the pandemic hit in March. And what happened is in response to that, the government, as you may remember, extended the filing deadline to June 1st. So people definitely took advantage of that. We can see a 25% year over year volume drop in March of 2020 and a 60% year over year volume drop in April of 2020.
Sean McCormick:
So people took that vine and they ran with it. Then what happened the following year in 2021 is people weren't... I think people might have thought that were anticipating that the government was going to extend that deadline again, because what we see in black and white is a surge in transaction volume for tax preparation services in the month of April. So, remember the deadline is April 30th and in April of 2021 tax preparation service spend was up 116% over one year prior. So, people were putting it off, putting it off and then come April 30 days from the deadline thought, "Oh man, we're not going to get that extension." Called their accountant and then got it done.
Al Grego:
Now we're just at the beginning of April now, what does this year kind of look like? Does it look like the same trend?
Sean McCormick:
Yeah, it's interesting. I mean, tax preparation service volume is off from January to March about 13% off of last year. So I think, and I can only look at people around me and I don't know if you're the same way, but I see people getting busier and busier and busier as the economy's ramping up. People are taking vacations again. I just got back a couple of weeks. I was out west doing some skiing with my family. A lot of my friends are taking holidays. So I think what's happening maybe to explain a 13% drop in the first couple of months of this year or the first few months of this year is people aren't necessarily putting off their tax filings, but they just have more stuff to do. So I would think over the next six weeks, you're going to see maybe another year over year bump as people weren't putting it off in anticipation of a deadline extension, but putting it off because they had more exciting things to do maybe.
Al Grego:
What you mean? There are things more exciting than doing your taxes?
Sean McCormick:
Depends who you ask. An accountant might tell you that it's the best thing that ever happened.
Al Grego:
Now and I want to...
Sean McCormick:
Because he's making money off it remember and I have a question for you, Al. What's your guess on the average transaction size for a tax filing? So basically the average spend for an account on a tax filing.
Al Grego:
Well, I mean, I've been doing mine online for a while now, but I'm going to guess just looking back when I was going to an accountant, I'd say I was probably paying a $115 per preparation.
Sean McCormick:
Right. It's a bit higher than that. It's actually $189.82 cents. So just under $200 bucks, it's a lot. It all depends if they're getting you money back though.
Al Grego:
Yeah, exactly. Yeah. Thank you so much, Sean, for your taking time today.
Sean McCormick:
My pleasure Al.
Speaker 4:
Ask an expert.
Al Grego:
I'm joined today by Clyde Seymour. He's the principal of International Income Tax for Ryan. Clyde, thank you for joining me today.
Clyde Seymour:
Thanks Al. Thanks for having me.
Al Grego:
Well, before we begin, can you tell us a little bit about what Ryan does?
Clyde Seymour:
Ryan is a tax specialty firm. All that we do is tax and on a global basis. Our offices are located in Canada, the United States, the Europe and Asia Pacific. And we specialize in areas of compliance of planning and then also of recovery. Our overall mantra is that we certainly seek our clients to pay the least amount of tax with the proper planning and guidance that our firm provides.
Al Grego:
Oh, that's great. Well then you're the perfect guest to have on as an expert today. Before we kind of get into the nitty gritty of the tax, I've been asking all of the other guests on today's episode for filing income tax, would you be in early bird or do you wait until the last minute to file?
Clyde Seymour:
Well, I'll answer that question honestly. I'm an early bird with everybody that comes to me to do their personal returns and I'm last minute on my own return.
Al Grego:
Oh, there you go.
Clyde Seymour:
And that's the truth.
Al Grego:
The housekeeper's house is always the messiest. Isn't it?
Clyde Seymour:
That's exactly it.
Al Grego:
Very nice. So let's talk about filing. I mean the deadline for personal income tax is the end of April.
Clyde Seymour:
That is correct.
Al Grego:
When I spoke to my colleague, Hannah, we talked a little bit about the difference between individuals, sole proprietor and incorporation. Years ago I used to have a sole proprietorship so I'm a little familiar with what the differences are, but can you maybe explain a little bit more those differences?
Clyde Seymour:
Certainly. So under either case, whether you are a sole proprietor, so an individual, or whether you're incorporated, you're running a business. So, to the extent that you are running that business, there's going to be some commonality between those two forms of business. And specifically, if you have employees, you're going to have payroll to manage. If you've exceeded a certain threshold, let's say 30,000 in sales, well then you're going to have federal GST and or HST to deal with irrespective of whether or not you're a sole proprietor or whether you are incorporated. Where the difference then starts to come into play is on the actual income tax side or corporate tax if you're incorporated. If you incorporate on the corporate tax side, then you could certainly enjoy what's known as the small business deduction on the first 500,000 of income and effectively you could be paying a rate around, let's say 12% in the province of Ontario give or take. Versus having not having that small business deduction and paying potentially 26%, give or take in the province of Ontario and a corporation.
Clyde Seymour:
Whereas if you earn the income personally through a sole proprietor, then you're going to be subject to your actual graduated rates. So depending on how much money you make at the end of the day, I mean, that could be as high as potentially 53%. All right. So certainly something to ponder in regards who use of a corporation versus a sole proprietorship. Other aspects too then is use of losses. I mean, you might think, "Oh my goodness, I better go out and get myself incorporated." Well, maybe you'll be in a situation where you're anticipating losses in your business for a while. Maybe it's better to be a sole proprietor and use those losses against other income you might have. So there's different considerations depending on the life cycle of your business and where you are. But at the end of the day, there certainly can be an advantage, at least initially, where you qualify for a small business deduction to have an incorporated structure.
Al Grego:
So, I mean, once I've completed my file, how long do I have to pay that amount?
Clyde Seymour:
It's important as part of your compliance calendar to map out what you owe and when you owe it. Because to the extent that you've been collecting monies, let's say for sales tax, and let's just use a simple example, let's say you're an annual filer. Well, you may be invoicing every week during a year you're collecting sales tax, GST or HST, and now you have a balloon payment at the end of the year. So, you got to make sure you've got that cash to make the payment. So, it's certainly important to map out your cash flow, understand what you have to file and when, and make sure that you have enough cash for those installments, because it's not necessarily always just an annual obligation.
Al Grego:
What sort of records do you recommend people keep for their taxes?
Clyde Seymour:
Well, in summary format, it is going to be important that you maintain certain levels of accounting records, a balance sheet and income statement, something that otherwise consolidates all these bits and pieces of paper that you have for your business. So you can make sure that they're properly reflected on your corporate return, on your sales tax returns, whatever the case may be. Now, obviously those financial statements as we call them the balance sheet and the income statement. Well that's based on these receipts that you keep. And it's important to keep those receipts because there's a period of statute that differs depending on the type of tax that we're dealing with, but that the government will require to the extent that they audit you. And if you do not maintain those records as backup to what you've reported, then you could certainly face the unpleasant situation that an auditor may deny.
Clyde Seymour:
A certain, let's say expense that you have. So where you have either an accounting system or an accountant that otherwise can assist you. It is important to set a course in terms of how you maintain your books and records. In general cases, we advise clients to maintain those books and records for a period of four to seven years that may otherwise exceed certain periods of statute. But sometimes you come at the situations where maybe you've amended a tax return or something else has occurred that has resulted in an extension to your period of statute.
Al Grego:
I think if we're going to take one thing away from this episode today, the best thing you can probably do for your business is have a tax advisor to help you with this.
Clyde Seymour:
Obviously. Self-serving in my case, but I certainly agree with that comment. Sometimes ounce of prevention is a pound of cure.
Al Grego:
Before I let you go. You want to just let us know where we can find out more about Ryan and your services.
Clyde Seymour:
Yeah, certainly. Thanks Al and our website is accessible to all it's www.ryan, R-Y-A-N.com. And from there you can access the Canadian website, which has our contact information. And we're certainly here to help for those that need it in terms of that proper structuring and planning and minimizing the level of tax that you pay.
Al Grego:
Thank you so much for your time today Clyde.
Clyde Seymour:
Thank you.
Speaker 4:
Save the date.
Al Grego:
Join today by Ella Urquhart. She's a senior communication specialist for our events and ESG team. Thank you for joining me today, Ella.
Ella Urquhart:
Thanks for having me Al.
Al Grego:
So what events does your team have in store for us this month?
Ella Urquhart:
Well, first the eCommerce North Innovator Challenge will be kicking off on April 5th. And that is a six week program for early stage Canadian direct to consumer and marketplace e-commerce founders with a socially conscious product or service looking to learn and experiment with marketing campaigns to fuel growth.
Al Grego:
Oh, very cool. How many companies are participating?
Ella Urquhart:
There will be 30 participating companies and 10 of those companies will have the opportunity to pitch for $5,000 at the finals on May 12th.
Al Grego:
What else do you have?
Ella Urquhart:
We have the Payments Canada SUMMIT. Our own Paromita Sen who is our Director of Data Science and Development will be speaking on April 27th. And she'll be speaking to solving staycation spend, identifying domestic tourism through AI and payments.
Al Grego:
That'll be an interesting presentation. So if I wanted to register for that, where would I get more information?
Ella Urquhart:
You can register at the-summit.ca.
Al Grego:
Very good. Anything else for April?
Ella Urquhart:
Wrapping up the month we'll have National Volunteer Week, which takes place April 24th to 30th. So keep an eye on our social channels. We'll be highlighting some of the volunteer work our employees do, and we'll be shouting out our national charity partners.
Al Grego:
So to recap, we have the eCommerce North Innovator Challenge and that kicks off on April 5th and the finals are on May 12th. Check out ecommercenorth.ca for details on that. We have the Payments Canada SUMMIT and our own Paromita Sen will be speaking on April 27th and to register for that, you go to the-summit.ca and then we have National Volunteer Week and to follow that you should follow Moneris' social channels.
Ella Urquhart:
Exactly.
Al Grego:
Thank you so much for joining me today, Ella.
Ella Urquhart:
Thanks for having me Al.
Al Grego:
That's all we have for this month. I hope you found this episode informative. Before we sign off I'd like to let everyone know that season two of Yes, We Are Open Podcast drops this month. Every Monday for eight weeks, I bring you the story of a different small Canadian business. I tell their origin story, the story of their greatest struggle and how they overcame that struggle. Here's a little teaser for Season Two.
Al Grego:
Coming up on Season Two of the yes, we are open podcast. Eight new Canadian businesses with eight new stories of perseverance.
Speaker 9:
Yes. We're open.
Speaker 10:
Yes, we are open.
Speaker 11:
Yes, we are open.
Speaker 12:
Yes, we are open.
Speaker 13:
Hell, yeah. We're open.
Al Grego:
Subscribe now to, Yes, We Are Open. Available wherever you get your podcasts.
Speaker 14:
(beep) Yes, we're open and we're not going anywhere.
Speaker 15:
I Love it. That's great. Thank You.
Speaker 14:
We're here to stay.
Speaker 15:
Perfect.
Rick Stephan:
If you haven't already, you can subscribe to this in our, Yes, We Are Open Podcast wherever you get your podcast.
Al Grego:
And if you'd like to support the show, share this podcast with your network or review us on Spotify or Apple Podcast. And finally, if you have any payment related questions you'd like to submit to one of our experts. You can email us at podcast@moneris.com.
Rick Stephan:
Join us again next month for more expert insights and data to help you grow your business.
Al Grego:
Rick, thank you so much for co-hosting.
Rick Stephan:
Thank you for having me Al.
Al Grego:
On behalf of Rick, myself and the rest of Moneris. Thank you for listening to Shop Talk. Talk again in May.