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.

A public company option is usually taxed in the year of exercise and appears on the T4 whether or not shares were sold. Restricted share units are generally taxed as employment income on vesting. Each sets the cost base for the later capital gain, the figure most often wrong on a return. We reconcile the T4, brokerage records and grant documents so nothing is counted twice.

Founders who own the company

Salary appears on a T4, dividends on a T5, and a shareholder loan not repaid within one year after the company’s year-end generally becomes personal income. On a sale, qualifying small business corporation shares may be eligible for the lifetime capital gains exemption, but only if the conditions are met in the years before the sale. See the lifetime capital gains exemption update, and corporate tax in Kitchener-Waterloo for the company side.

Dividends create no RRSP room, so owners ask whether to take enough salary to contribute. The answer depends on other income, the company’s plans and whether a research claim needs salary in the wage base. RRSPs versus dividends works through it; a spouse who works in the business can be paid like 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

Personal farm income is usually on the cash method, and year-end choices, including the optional inventory adjustment, can smooth income between years. Losses can be restricted where farming is not the family’s main income. Qualified farm property can pass to a child on a rollover or be sheltered by the capital gains exemption. Farm accounting in Waterloo Region covers more.

How Ontario tax sits on the return

Ontario tax is calculated on the same T1 as federal tax; there is no separate provincial return. Ontario adds a surtax, calculated on provincial tax once it passes set thresholds, and the Ontario Health Premium, its own line based on taxable income. Dividends make both more visible, because the gross-up raises taxable income. 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

Many Waterloo Region students work co-op terms in different cities in one year, which can mean several T4s, rent in two places and tuition slips. Unused federal tuition credits carry forward, and filing every year keeps credits and benefits in order. A simple return like this is where the $125 starting fee applies.

Remote, and there is no Kitchener-Waterloo office

EverStone works online, and prepares Kitchener-Waterloo returns remotely. You send slips and receipts through a secure upload link, we authorize 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 firm that prepared it.