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Ontario Mortgage Agent Loses Appeal of Gross Negligence Penalty

In a recent income tax appeal court case, a self-employed Ontario mortgage agent over stated expenses on her 2010 and 2011 tax returns

In a recent tax court case, a self-employed Ontario mortgage agent over stated expenses on her 2010 and 2011 tax returns. Her gross income was $148,000 and $146,000 and reported expenses of $138,000 and $145,000 in 2010 and 2011.

This left the Ontario mortgage agent with about $10,000 and $1,000 in net income for tax years 2010 and 2011. Due to the excursiveness  of expenses, this set off some red flags for the tax man.

The tax man re-assessed the mortgage agents taxes in 2010 and 2011 and refused quite a bit of her business expenses. Then the tax man assessed her with a gross negligence penalties on top of back taxes and penalties.

The Ontario mortgage agent objected to the penalty and appealed her case to the Federal Tax Court of Canada.

She lost her case, due to unsubstantiated legal fees, lots of restaurant meals with little or no detail about whom she met and what was discussed as business and business use of home expenses. The business use of home expenses were denied because the Ontario mortgage agent had rented commercial space in addition to the business use of home expenses.

Commercial space and business use of home expenses are allowable tax deductions, however to claim both is not allowed. It has to be one of the other.

Gross Negligence Penalties

This penalty is for a taxpayer that knowingly made an untrue statement on their income tax return.

Even though the Ontario mortgage agent used allowable expenses, it was the amount of the expenses that the tax man had an issue with.

Lessons Learned

The first lesson that can be learned is to make your expenses within say a 10% to 20% range from year to year would be a good rule of thumb.

All expenses have to be “reasonable”. This a loose definition of reasonable however, one must ask themselves “is this a reasonable expense to get business?”.

Some receipts can be saved for the next tax year. This is particularly true of big ticket items, like fridges, stoves and equipment. A good way is to amortize the purchase over a few years rather than all at once.

It looks better for the profit and loss statement and the tax return, so there is no big swings in earnings from year to year.

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Do You Hate Doing Online Payroll?

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Online payroll services is a weekly nightmare for many small business owners. Imagine spending a minimum of 2 hours per week ensuring that payroll is done.

Then you have to submit a payment to the Government for the payroll deductions taken off each employee’s paycheque.

Worse, when an employee leaves, a record of employment must be given to the employee within 7 days!

That is on top of answering customer inquires, dealing with suppliers and other administrative tasks.

Wouldn’t your time be better spent with your customers and not doing payroll?

Whether you pay employees by the hour or by commission, payroll is one of the biggest challenges faced by the small business owner.

Most online payroll services make you jump through hoops and are laden with jargon only an accountant can understand.

Give this laborious and time consuming task to someone else before you waste another minute of your precious time.

Give it to someone else who has the time to do payroll for you.

If you would rather spend more time with your customers, let MRJ Financial Solutions take this time consuming task off your hands!

Isn’t spending time in front of your customers, time well spent? That is the reason you went into business, isn’t it?

Will your customers enjoy being showered with extra attention? Of course they will! That is the reason you should pick up the     phone and call us today.

One client just came to us because of a mistake he made that cost him $12,000 in back payroll taxes! Read the full blog post by clicking on the link. in a new tab)

Call  289.500.1978 today for a no-obligations 15 minute consultation.

Our proven bookkeeping and tax preparation services can take a weight off your shoulders, and help manage all your business financials.  Call us today

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Feel Like  You Pay Too Much 2020 Taxes?

 You want to pay less in taxes 2020, don’t you?

 When you hire MRJ Financial Solutions to prepare your taxes, we  make sure that you get all the tax deductions you are entitled to.  

We make it our mission to find all the tax deductions that will make your tax bill shrink.  Your money is better off in your pocket, isn’t it?

Our team of tax professionals always strives to get the biggest refund for our clients.  We take longer to do your taxes so we can find more deductions.

You would want to keep more of what you earn, wouldn’t you?

Tax software is not going to tell you about all the deductions that will help you pay less in taxes 2020.  You want all the taxes 2020 savings you can  get, don’t you?

Call Us to Find Out More 

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