Canadian Taxes for Non-Residents

Hillbilly’s not in much of a position to wax technical this week as he babysits budding economists in an oil & gas course in London. There’s a story behind why I’m doing that but it’s nowhere near as interesting as the one you’ve just made up in your head so I’ll let that add to the perceived mystique that is my life. (Seriously, the Bahamas isn’t *that* great.)

In any case, I got tired of counting the number of times the instructor would say “consequently” (at last count, eighty-fi–er….eighty-six). So I went trolling through my old blog for something that was worth repeating to a larger audience. Slim pickings, let me tell you. But found one that has some uncharacteristically useful information. I’ve updated it with some recent experiences as well so for those that read the original, don’t forget to pay for the upgrade.

The topic is tax implications of non-residents working in Canada. It’s specific to the Bahamas, which doesn’t have a tax treaty with Canada. So, let’s start off by coverin’ my hillbilly butt

http://codebetter.com/blogs/kyle.baley/archive/2008/06/17/rehash-canadian-taxes-for-non-residents.aspx

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Can I deduct expenses to reduce my tax?
Maybe. My opinion is that you’ll make less waves if you keep it simple. Unless you’re going to be in Canada a long time (in which case, you will be a resident anyway), any “deductions” you think you might be able to claim won’t be worth the aggravation. Plus then you’d need to file a return. Which brings me to…

Do I need to file an income tax statement?
Not sure. Have received conflicting opinions on this. If you think you should be paying more or less than 15%, then yes, you definitely do. Otherwise, I’ve had at least one CRA person claim you need to fill out a regular income tax form just as if you were a Canadian resident. Everyone else says you don’t need to bother. Having said that, the fact that you get a T4 slip at the end of the year suggests otherwise… ** UPDATE ** I’m almost positive you’re supposed to file a non-resident return. It should be pretty straight-forward since you’ve paid exactly what you are supposed to. But I’ve never done it.

What if you come back to Canada and work for a short period during the contract?
Use your judgement. When I come back for a few days or a week, I don’t generally notify the contracting agency. If I’m back for the summer, it’s reasonable to assume I’m hunkering down for a while and should pay the government their due.

http://codebetter.com/blogs/kyle.baley/archive/2008/06/17/rehash-canadian-taxes-for-non-residents.aspx

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The cumulative 6.5-cent increase in taxes means the owner of a $250,000 Wilmington home is on the hook next year for $1,131 in county taxes and $831 in city taxes – a total of $162.50 more than last year.

Council members said the city’s 11 percent tax increase looks more severe than it is. Last year, the county incorrectly included exempt properties such as schools in the tax base, leading the council to set the tax lower than it should have, in effect, giving residents a tax cut.

More than 2 cents in this year’s increase is just making up for that error, which wiped millions of dollars of anticipated revenues from the city’s balance sheet, Councilman Jim Quinn said.

“People should be satisfied that we did the best we can,” he said.

The council also chose to increase taxes to fund a $3.2 million plan to pull city salaries in line with the recommendations of a recent consultant’s report, which found Wilmington wages trailed benchmark organizations by an average of 7.2 percent.

Councilman Jason Thompson was the only member to vote against parts of the budget, which was approved in four ordinances. He said it included too many pet projects and not enough cuts.

“Don’t tell me money is the only way to solve a budget issue,” Thompson said.

In other business, council earned applause Tuesday for approving the consent agenda, usually the least contentious part of their meetings.

The vote marked the first use of electronic voting in place of voice votes. Mayor Bill Saffo said Wilmington is the first city in the state to use electronic voting, which makes it immediately apparent to the audience on television how each member voted.

http://www.starnewsonline.com/article/20080617/ARTICLE/806170363/0/news06

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As part of the effort to fix problems with Porter County’s property tax system, the commissioners endorsed another consulting contract.

The Porter County Council has already appropriated $150,000 for a team of consultants led by Beth Henkel, an Indianapolis attorney and former commissioner of the Indiana Department of Local Government Finance. The consultants are attempting to get Porter County’s tax billing back on schedule, while correcting years of incorrect tax data.

On Tuesday, the commissioners endorsed another contract – this one with the Crowe Chizek firm dealing with the implementation of new software and the conversion of old data to the new system.

Harper noted that officials who have been meeting regularly with the tax consultants have determined that the new contract is needed as part of the overall project. Evans remarked that every one of the tax contracts cited added requirements from the DLGF as the reason for the added work.

The contract, for three components of work, ranges from a total of $56,000 to $103,000. The contract is still subject to approval by the County Council.

In a separate but related matter, the commissioners approved an annual contract for Center Township Assessor Susan Larsen to retain a consultant to assess commercial parcels in her township.

Larsen said the contract was reviewed last year by the DLGF, but that at the current time, the DLGF is in flux due to a number of new staff.

Harper said office holders from both political parties are spending a great deal of time trying to determine just what the DLGF wants. “It’s really sort of sad,” he said.

Fireworks Ban

The commissioners approved a request from Expo Center Director John Thorstad to ban parking on Division Road during the upcoming fireworks show.

Thorstad said there has been a recurring problem with people coming to watch the fireworks by parking along the road, instead of paying the fee to enter the Expo Center grounds.

“For me, it’s a safety issue,” he said, noting that people don’t just park along the road, but that they also pull out chairs and sit outside their vehicles.

The “Expo Explosion” fireworks show will be held June 28. With the commissioners’ action Tuesday, parking will be banned along Division Road for one mile east of Ind. 49 from 5 to 11 p.m.

Thorstad noted that a large wedding is also scheduled that night at the Expo, so there will be a great deal of traffic in the area, further necessitating the roadside parking ban.

Building Concerns

The commissioners authorized the removal of the bulletproof glass at the County Treasurer’s office. The heavy glass is causing the shelf under it to bow, in turn causing cash boxes to stick, said Building Maintenance Engineer Joe Lain.

“We need to get rid of that glass,” he said.

The removal will cost $800, but Lain cautioned that it could go up to the $1,200 because the work will need to be done over the weekend.

In another building matter, the commissioners tabled action on a proposal to install a new air conditioning unit for the county’s Print Shop, which has had a persistent humidity problem.

One bid came in at $21,9000 and another at $32,500. Evans said that’s too much money to spend for a single department. Lain suggested delaying the matter until after he talks with the bidders about the large price discrepancy.

http://www.chestertontribune.com/PorterCounty/6183%20ten_hour_work_days_approved_for.htm

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o fix the problem, the city needs to hire more assessors and provide better technology, the consultant said. City officials said that is already being done.

City Assessor Deborah Bunn, who was hired in January, was recently authorized to hire four new commercial real estate assessors.

“That’s a good start,” said Richard R. Almy, of Almy, Gloudemans, Jacobs and Denne, a Phoenix firm hired by the city to review commercial real estate assessments.

Commercial assessments became a hot topic more than a year ago when the Norfolk Tea Party 2, a watchdog group that has pushed for lower taxes, complained of discrepancies between assessments for some downtown office buildings and the prices they fetched when sold.

Almy said his group looked at sales versus assessments and found problems as well.

“The level of assessment was 70 to 80 percent” of what it should be, he said.

His company also studied the Virginia Beach assessor’s office last year. He said that, although he found some problems at the Beach, commercial real estate assessments there were closer to market value.

“The reason for that is simple,” he said. “Virginia Beach had more people” than Norfolk working in the assessor’s office.

Brian Smith, who heads the Norfolk Tea Party 2, said the report “confirms what we’ve been saying all along, that home-owners have been carrying an unfair burden.”

Commercial real estate provides a small percentage of the estimated $203 million in real estate taxes the city will collect in the fiscal year that begins on July 1. Bunn said figures on how much commercial real estate will generate weren’t immediately available.

“It’s unfortunate we’ve lost the revenue we could have gotten the last few years from commercial real estate,” Councilman W. Randy Wright said. “The good thing is that we’re fixing the problem.”

Almy said computing assessments for commercial properties is more difficult than for residential, which is based on sales. Many commercial assessments are based on business income, and for that, the city must rely on businesses to honestly report income data.

Mayor Paul Fraim said the city has asked Attorney General Bob McDonnell whether it can require businesses to turn over federal tax return information.

http://hamptonroads.com/2008/06/norfolk-council-says-city-losing-millions-commercial-taxes

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For folks who deal with sales tax on a regular basis, we would normally recognize the consequences of selling taxable property with non-taxable property or non-taxable services for a single price. Most state, whether by statute, rule, or policy, have held for years that such a combination will be treated as a taxable transaction.  Some states have set various thresholds before they tax the entire transaction.  I’ve seen examples in some states where such a transaction would be taxable only if the taxable portion represented 15% or more of the total value.  New York, on the other hand, has no such provision and is notorious for treating as taxable these types of transactions if even an insignificant component was taxable.  As a consultant, I have advised clients for years that there is great risk in bundling taxable and non-taxable items for a single price.

Leave it to California to create confusion in this area.  Back in January 2008, the California Court of Appeal  in a case involving Dell Computer held that Dell had over taxed its customers in transactions where a computer(taxable) was sold with an optional warranty (non-taxable) for a single price.  Traditional wisdom would tell me and apparently Dell, that the full amount of the sale it taxable since there was no breakout between the two items.  The State Board of Equalization also argued in court that the sale was fully taxable.  This may be the only time I’ve ever seen a taxpayer argue in Court that a transaction is taxable.

In deciding the case, the Court found that there are 4 different kinds of transactions in California.  These are:  Sales of property, Sales of pure service, sales that involve an inseparable combination of property and services sold for one price (Bundled Transactions), and sales that involve a combination of products and services that can be separated even though they are sold for one price (mixed transactions).   In California, there apparently  is no rule or statute that provides that when a non-taxable service is combined with a taxable product sale that the entire amount is taxable.

As such, the Court held that where you can clearly separate a non-taxable service from a taxable product that only the product is taxable even though they are sold for one price. This is a “mixed transaction”.  I had never considered that this was an option, especially in California.  A “bundled” transaction is one where the taxable and non-taxable items are so interconnected that they cannot be separated.  Because the optional warranty was separately priced when people bought their computers on-line, the Court determined that this service was not connected with the sale of the computer and was not integral to the value of the computer.

This case has clear implications to all industries.  I would expect the California legislature to correct the problem, however.  There could be a temptation to shift value in a “mixed transaction” to the non-taxable service and away from the taxable product.

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Just about every month, a glitzy tower rises somewhere in the country, boasting the latest in “green” design and technology. To many people, that is an encouraging trend, especially when considering that commercial buildings account for more than 60 percent of the nation’s electricity consumption, according to government estimates, and generate 30 percent of all greenhouse gas emissions.

Yet these buildings represent a small fraction of the nation’s estimated 4.5 million commercial properties, many of which were erected decades ago before sustainable, or green, designs became de rigueur. This vast stock of older buildings presents a much bigger opportunity to cut down on energy consumption and carbon emissions that contribute to the warming of the planet.

The real estate industry has recently begun to turn its attention to “greening” existing buildings. The United States Green Building Council — whose Leadership in Energy and Environment Design, or LEED, program has become the de facto standard for sustainable building — has guidelines that address older buildings. Called LEED for Existing Buildings, or LEED-EB, the three-year-old program provides a laundry list of steps that building owners and managers can take to operate and manage their properties more efficiently. See story

With rising energy costs and with many commercial buildings exceeding 15 years in age, many business owners and landlords may be considering significant updates to enable more economical operation. Sec. 179D provides an immediate deduction for the cost of energy-efficient improvements to commercial property. If your company owns or leases commercial buildings including residential buildings with four or more stories above grade and you have installed or retrofitted the property to be more energy efficient, you may be eligible for a deduction for part or all of the costs associated with the installation or retrofit. In other words, instead of capitalizing and recovering through depreciation over 27.5 years or 39 years this allows for potential immediate expensing of costs.

Tax Deduction Eligibility:
The person or organization that makes the expenditures for construction is generally the recipient of the allowed tax deductions. This is usually the building owner, but for some HVAC or lighting efficiency projects, it could be the tenant. For government-owned buildings, the building or system designer may take the deduction.

Government-Owned Buildings:
If the property is a Federal, State, or local government or a political subdivision, the owner of the property may allocate the section 179D deduction to the person primarily responsible for designing the property. For example, a designer may include the architect, engineer, contractor, environmental consultant or energy services provider.

Energy Efficient 179D Tax Deduction Certification:
Before a taxpayer may claim the section deduction, the taxpayer must obtain a certification (not to be confused with LEED certification) with respect to the property. The certification must be provided by a qualified individual and satisfy the requirements of section 179D(c)(1).

A qualified individual must be properly licensed as a professional engineer or contractor in the jurisdiction in which the building is located, not be “related” to the taxpayer taking the deduction (as defined by the IRS), and represent to the taxpayer in writing that he or she has the requisite qualifications to provide the certification. The certifier must also use IRS qualified computer software. Software must be on a list of products approved by the U.S. Department of Energy.

The Energy Tax Incentives Act greatly encourages commercial building energy conservation. If you think you qualify for this deduction and want to increase your cash flow, contact your accounting professional or an Energy Efficient Green Building 179D Certifier today who can help you realize the benefits of your energy-efficient commercial building.

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Investing in real estate is a major decision for every individual. Therefore, what you need is a real estate investing guide to help you choose the right deal, which is suitable for you and guarantees a positive result in future. Real estate investment is an opportunity for you to gain equity and generate cash flow in a rational investment method.

Whether you want to opt for a long term or short-term investment depends on your intentions. You might want to purchase a property, repair or improve it for making a quick sale. Decide whether you want to keep the property for other purposes such as rent or go in for a long-term investment.

Long-term real estate investment has always exhibited a consistent growth in value even while other investment choices were less or not as stable. A helpful tip from the real estate investing guide would be an added help to ensure an appreciation in your property value. All you have to do is increase your equity in the property and you can add it to your net worth.

A good real estate investing guide helps in for long-term investment planning particularly if you buy a property in good condition that can be rented at high rates. Most real estate investing guides tell of the tax advantages that you can enjoy with long-term real estate investment. To get more real estate investing guidance you can consult a tax consultant or a legal professional so that your situation can be affected.

A real estate investing guide could be helpful for making good investment choices on a short-term basis. This is simply because the numbers are so large. The percentage of returns is high. In case of short-term real estate investments, a decent rate of return can mean big profits for you. The property though should be in an area where property values are stable.

Acting on the advice of your real estate investing guide you can use short-term means or connections to get your repairs done at an affordable price. You should have sufficient time and be organized enough to refurbish the property quickly. Another advantage is that your tax situation can withstand any possible capital gains hit. For any other type of real estate investing guide you can consult a real estate professional.

http://www.oisv.com/press/817/

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Unforseen Consequences

By admin • Jun 18th, 2008 • Category: editorial

by William Hatch

With many decisions and actions of various people and groups, there are often unforseen consequences that can have disastrous effects. One group that has had a monumentally negative impact upon American society is the radical environmentalist anti progressives. They are found in every corner of the nation and in predominantly rural areas, small communities and sparsely populated lands and are basically against any kind of economic progress that will disturb the serenity and peacefulness of their living conditions or the nearby terrain. For example, in Coos County, Oregon there have been concentrated efforts to halt progress in at least a dozen different proposals for over 15 years ranging from opposition to residential developments, siting of a steel mill, opening of a mine, establishing a container port, and building an LNG terminal just to mention a few. The opponents are generally older, mostly retired, financially stable, and often non native Oregonians. A hard core can be found uniting in protest to virtually every progressive economic action proposed. Their rationale for opposing economic development tends to fall into the categories of decline in safety, traffic congestion, destruction of the environment, and increased crime. To this, we might add an anti capitalist bias. They make the salient point that they want to maintain the area as it is and that many had moved away from larger areas where the problems associated with progress had enveloped them. And this is typical of the anti progressives everywhere.

Certainly the anti progress radicals can’t be faulted in their desire to maintain the serenity of under developed areas, but there are unforeseen consequences in this negative position. One that stands out, is the increased cost in taxes to pay for the fire, police, and other necessary services. As the people want greater and more services, they will be paying higher property taxes for there are less businesses enterprises to bear a large portion of the tax burden which will then fall increasingly on the individual property owner. Is this element quite sure that the desired serenity of pristine areas will compensate for the higher taxes? Of course these opponents of progress tend to be in a wealth position where increased taxes have little impact on them but what is the effect on the less wealthy?.

Another unforseen consequence brought on by the decline in economic growth fostered by the antis is increasing business failure and relocation. In an area of an aging population, which most of the smaller communities are, the retired tend to spend less money than a younger population as their needs and wants are so much less. This leads to existing businesses closing and discourages new business from coming in. Have residents walked thru the business sections lately and seen the number of businesses closing down every month? And how satisfied are the remaining residents with the quality of and variety of shopping in the area. Of course we can always take a trip to the larger cities for better shopping experiences, that is if we want to spend the time and pay the cost of gasoline. Again the anti progressives, who have the greater wealth and are mostly retired, have no problem in following this course of action.

With an aging population, there is a greater demand for health services especially doctors. Rural areas are experiencing a severe decline in doctors and nurses. Of course, the escalating costs of maintaining a practice are not being covered by the economic growth of the area and doctors are leaving for greater opportunities in progressive cities. How many doctors were lost recently and how difficult was it to find another locally? Also hospitals are cutting back on services as the costs are increasing faster than income in relation to the demand for services. Increasingly patients are being sent to the more economically successful regions for specialized care, and even for routine care in better staffed and equipped medical facilities that local medical services cannot match with stagnant revenues.

Education presents another consequence as a result of the lack of economic progress. This gets back to the tax situation. Property taxes, without business carrying the load, can’t produce the revenues to provide the educational programs demanded in a modern society. Nor can it provide nor retain the top teachers. As parents’ jobs disappear and new ones don’t materialize, parents leave with their children so student enrollments decline further impacting a school’s ability to perform. An adjunct to education is school athletics which provides much of the spirit that welds a smaller community together. But if the young families are driven away thru lack of jobs, the young school age athlete becomes a missing commodity in this equation. Just ask the coaches in the schools with declining enrollment what the loss of top athletes is doing to competitiveness. Sports are then curtailed or eliminated altogether and often times a series of noncompetitive years dampens the community enthusiasm and spirit.

Finally, the realty of a lessening of philanthropy as a community’s economy lapses into a no growth mode is a significant unintended consequence. A growing business economy will produce more opportunities to enhance the philanthropic and charitable organizations. Businesses are usually the biggest factor in private giving to charities and other non profit groups. But businesses can only make a difference for these group as they prosper in a strong and growing economy.

http://www.citizencaucus.org/?p=1492

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John McCain and Barack Obama have starkly different philosophies about tax policy – how to raise the revenue needed to support government programs, spur growth and ensure economic fairness.

According to a report released recently by a nonpartisan policy group in Washington, D.C., the common assumptions most people make about the plans of McCain, the presumptive Republican nominee, and Obama, the Democrats’ pick, are not wildly off-base.

McCain: The average taxpayer in every income group would see a lower tax bill, but high-income taxpayers would benefit more than everyone else.

Obama: High-income taxpayers would pay more in taxes, while everyone else’s tax bill would be reduced. Those who benefit the most – in terms of reducing their taxes as a percentage of after-tax income – are in the lowest income groups.

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