Personal tax accountant in Kitchener-Waterloo

Stock options and share units from a tech employer

Many people who work for the region’s software companies are paid partly in equity, and the tax depends on what kind. An option from a Canadian-controlled private corporation, granted to an employee dealing at arm’s length, generally is not taxed when it is exercised. The employment benefit waits until the shares are sold. An option from a public company is usually taxed in the year of exercise, and it shows on the T4 whether or not any shares were sold to pay the tax. Restricted share units are different again, generally taxed as employment income when they vest. Each of these also sets the cost base of the shares for the capital gain later, and that figure is the one most often wrong on a return. We reconcile the T4, the brokerage records and the grant documents so the benefit is not counted twice.

Founders who own the company

A founder’s T1 is the other half of the corporate plan. Salary appears on a T4, dividends on a T5, and a shareholder loan that is not repaid within one year after the company’s year-end generally lands on the personal return as income. If the company is ever sold, shares of a qualifying small business corporation may be eligible for the lifetime capital gains exemption, but only if the conditions are met in the years before the sale, not just on the day. See the lifetime capital gains exemption update, and corporate tax in Kitchener-Waterloo for the company side.

Owners also ask whether to take enough salary to make RRSP contributions, since dividends do not create RRSP room. There is no single answer; it depends on the owner’s other income, the company’s plans and whether a research claim needs salary in the wage base. RRSPs versus dividends works through the trade-off, and a spouse who genuinely works in the business can be paid for it on the same terms as anyone else.

Self-employed, and the June 15 date

Consultants, trades people and contract developers who are not incorporated report the business on form T2125 inside their T1. The filing deadline moves to June 15, but the balance does not: it is still due April 30, and interest runs from then. If net tax owing passes $3,000 in the current year and in either of the two previous years, the CRA expects instalments on March 15, June 15, September 15 and December 15. Home office, vehicle and equipment claims need records that would stand up to a review. Self-employed tax returns covers what to keep.

Farm families in the townships

Farm income on a personal return is usually calculated on the cash method, and the choices made at year-end, including the optional inventory adjustment, can move income between years to smooth it out. Where farming is not the family’s main source of income, losses from it can be restricted. And when the land or quota is passed on, qualified farm property can be transferred to a child on a rollover or sheltered by the capital gains exemption. Farm accounting in Waterloo Region covers these in more detail.

How Ontario tax sits on the return

Ontario personal tax is calculated on the same T1 as federal tax; there is no separate provincial return. Ontario adds two things people do not always expect: a surtax, which is calculated on the provincial tax itself once it passes set thresholds, and the Ontario Health Premium, which appears as its own line based on taxable income. Dividend income makes both more visible, because the gross-up raises taxable income before the dividend credit brings the tax back down. The Ontario Trillium Benefit is applied for on the same return.

Provincial tax follows where you lived on December 31. Someone who moved to Waterloo from another province for a job in the autumn is taxed as an Ontario resident for the whole year, and someone who left in December is not. Moving expenses may be deductible against income earned at the new work location, and the receipts should be kept from the start.

Ontario rates and thresholds sit on the Ontario tax facts page.

Students and new graduates

Waterloo Region has a large student population, and many students work co-op terms for employers in different cities over a single year. That can mean several T4s, rent in two places and tuition slips from the school. Federal tuition credits that a student cannot use carry forward, and filing every year, even with little income, keeps the credits and the benefit payments in order. A simple return like this is where the $100 starting fee applies.

Remote, and there is no Kitchener-Waterloo office

EverStone works from Abbotsford, British Columbia, and prepares Kitchener-Waterloo returns remotely. You send slips and receipts through a secure upload link, we authorise through the CRA to see your records directly, and you sign by e-signature. A question after the return is filed goes to the same CPA who prepared it.