In the Public Limelight

[Griet van Vliet]

Perhaps the corporate governance of VPN may be different now that it is publicly traded, but to Griet it's still another day of operating a full-service accounting firm. I wonder how happy are my clients' family lives; all I can go off is the financial picture, but the financial picture is not at all the end of the story, she thought, while picking up the documents in today's client. Already a child support amount is at stake so the life did go sour for her at some point. She worked in the sales department of a publicly traded company. The salary of 93,500 is the starting point, from which 20,000 was deducted as withheld tax, 4,150 was withheld as a contribution to a defined-contribution RPP, and, of course, the other SPP and EI withholdings of 2,564 and 836 respectively. An intensive eight-month Mando'a course costing 3,600 credits, reimbursed by the employer as a taxable benefit, but the textbooks of 150 were to be paid out-of-pocket. And a taxable benefit of 6,500 from a group disability insuance plan, against which to offset three years of yearly premiums at 680, half of which was withheld from her salary. And also the speeder that was provided to her by her employer, that which cost 39,500 credits a year but for which she had to pay for all the operating expenses of 7,240, used 11 months in the year, during which she drove it 34,000 km for work and the remaining 7,000 for personal purposes.

 

[Griet van Vliet]

The mother, aged 68, has no balance owing nor refund since she didn't have taxes withheld on the 13,460 in pension income and she is eligible for the old age tax credit of 7,225 in full and, combined with the base amount of 11,635, the NRTCs at 15% exceed the income tax payable. However, she cannot transfer the amount to anyone but a common-law partner, such as a spouse. But back to the sheep: 450 credits in financial counseling, paid by the employer (taxable), and the prize of winning a sales contest is taxable, too, worth 5,620. And, of course, a convoluted story about stock options: 250 shares at 25 credits (FMV at grant date and grant price), and exercises them at 32 credits/share (so the benefit is 1,750 but 875 can be deducted after net income, since the grant price is equal to the FMV at the grant date). Thus the car benefit is: 2%*11*39,500*7,000/18,337 = 3,317.34 because of her eligibility to the reduced standby charge, but the basic operating cost benefit of 1,750 must be reported, despite the payments made on the car. So, with the taxable 200 credits for search and rescue volunteering, the total net income is 100,000 - 2,040 - 4,150 + 5,620 + 450 + 1,750 + 3,600 + 200 = 105,430. The taxable income is then 104,555.

 

[Griet van Vliet]

The 11-year-old daughter now. That return is pretty staightforward: 6,425 in investment income and no other revenues. No balance owing nor refund. The mother is claiming the 2,150 amount for the caregiver amount, also claimed for the daughter is the dependent tax credit of (11,635-6,425) = 5,210, and the disability amounts of 8,113 + 4,733 transferred to the main return. Tuition for 3,600 and... wait, medical expenses. The list of it all is as follows: 14,600 for an access elevator, thanks to the daughter's disability, 3,465 in prescription drugs, 10,490 in specialist treatments for the daughter, 875 for prescription sunglasses, 2,463 in liposuccion for the mother (disallowed since it's not medically prescribed), and 4,625 in dental fees and dentures for the mother. The first batch of medical expenses is thus (29,430 - 2,268) = 27,162 and the second batch is hence (4,625 - 3%*13,460) = 4,221.20 because the age of the dependent is a factor for computing as much. The SAR tax credit for 3,000 comes in and the total NRTCs are hence, after adding all of that stuff, 60,378.20 which, at 15%, comes in at 9,056.73.

 

[Griet van Vliet]

The ending to this client's file is soon closing in: since the taxable income is below 202,800, the rest of the donations to the Jedi Praxeum attract credits at 29%, and is eligible to the FDSC for 250. So the charitable donations attract deductions for 200*15% + 3,300 * 29% = 987. And, of course, the income tax payable's base liability: (104,555 - 91,831)* 26% = 3,308.24 + 16,300 = 19,608.24. And then came the actual ITP: 19,608.24 - 987 - 250 - 9,056.73 = 9,314.51 and, from there the refund: 9,314.51 - 20,000 = -10,685.49, which means that the family is getting a refund for 10,685.49. And also since there was no taxable supply involved, she was not able to get any deductions for VAT, and the employer wouldn't either. But it seems that she is attracting the heavier taxation cases; hopefully this couple of well-to-do professionals would, in fact, be the calm before the storm. Well, typically people go see accountants for their taxes because they are pretty complicated to file. That typically holds as long as there are actual personal taxes to be paid (although Manpha seemed to be a bit heavy on excise taxes).

 

[Griet van Vliet]

A married couple that lived happily but the Talz female was barren, so they lived as happily as was possible without a child. Here it became a choice of who has the higher taxable income since charitable donations can be split among the couple. The wife's gross salary is 270,000, from which is withheld 50,000 in taxes (these Talz tended to have wildly variable tax withholding rates), and the maximum contributions in SPP and EI, which she knew by now were 2,564 and 836 for the current year. And, of course, 12,450 was withheld for a RPP contribution; the group disability plan premium was non-deductible. Therefore the net employment income is also the net and taxable income as well, 257,550. She was paying 33% on 54,750 and she was paying 46,966 on the first 202,800. Hence her income tax base is 65,033.50. As for the husband, he had 28,600 in interest income, 136,000 in dividends from public companies, and 77,000 in net taxable capital gains, and incurred 12,000 in interest for loans taken out for investments. So the net and taxable income would come out to be 28,600 + 136,000+38% + 77,000 - 12,000 = 281,280. Then he would be paying 33% on 78,480, and his tax payable base is 72,864.40.

 

[Griet van Vliet]

Since both earned more than 75,600, it didn't matter who was declaring the medical expenses. The husband had surgery on Nar Shaddaa and, after accounting for the exchange rate, he spent 70,200 credits doing the surgery, and also 10,800 in travel expenses since the wait time for his back surgery was 2 years on Alzoc III. In that case the travel expenses were claimable. And in post-surgery medications, 4,800, but these were paid for by the wife's insurance. They thus spent a total of 81,000, of which a total of 78,732 was deductible. Lyla should thus claim the medical expenses since she didn't have a dividend tax credit, while the husband did, and for 28,189.09, which was 6/11 of the gross-up. Thus the wife's NRTC base was 11,635 + 2,564 + 836 + 78,732 + 1,178 = 94,945, translating to a reduction in tax liability of 14,241.75. In comparison, the husband otherwise only had the base amount of 11,635, so he could offset 1,745.25 plus the dividend tax credit. Their pre-donation tax liabilities were 50,791.75 and 42,930.06 respectively. Now, the question is, how to distribute the 175,000 donation to the University of Lipsec, which they attended before Lipsec fell under FO control.

 

[Griet van Vliet]

To the extent they each earned over 202,800, it's a no-brainer to apportion those sums, plus the first 200, to each of them. Then the husband will get the remainder; thus the wife could deduct 18,067.50 + 30 = 18,097.50 and the remaining 120,050 was given to the husband, so 30 + 78,480*33% + (119,850 - 78,480)* 29% = 37,925.70. Hence the balance owing of the husband was 42,930.06 - 37,925.70 = 5,004.36. The wife, on the other hand, had income tax payable of 50,791.75 - 18,097.50 = 32,694.25. Yet, there was a 50,000 withheld, so the refund of the wife was, in fact, 17,305.75 and, as is customary among Talz couples, a family's owed balances were paid to the extent that was possible, out of other members' tax refunds. The net refund is therefore 12,301.39. I hope the paddy's notice of assessment proved that there were no major irregularities so he could be knighted, and one would expect Talz to provide notices of assessment, unlike the tax returns I filed as a Jedi in Republican service, which didn't feature a notice of assessment, she thought.

 

[Griet van Vliet]

Maybe this client would be much more straightforward to do. Oh wait, it was one of her own wingmen that survived Skor: Dividend, and now she will understand why Dividend was given such a callsign. Dividend sold shares of a small business that didn't qualify for the Kitsune's lifetime capital gains deductions. Akarui had a very complex fiscal regime, but they try to encourage investment in entrepreneurial ventures, even though these days most of these were funded via debt rather than equity, she thought, realizing that the ease at which commercial loans were granted for such entrepreneurial ventures was almost unnatural. The shares cost 345,000 but the net proceeds of disposition were 78,000, and the loss was 267,000 credits. But he also sold shares of a business that did, in fact qualify for the LCGD (today at 835,716 before any consideration of inclusion rates), and originally cost 187,000, for 480,000 and the selling cost was 4,000, so the gain was 289,000, of which 144,500 was taxable. He also had a cumulative net investment loss of 2,300.

 

[Griet van Vliet]

On top of his salary of 100,000 credits, Dividend was withheld 17,000 credits in taxes on his salary, and the maximum amounts on SPP and EI. He also earned 42,000 (after a 17% gross-up) in dividends from private companies. Hence the dividend tax credit is 4,419.10 since it's 21/29 of the gross-up. But there was one drawback from using the LCGD: the amount already used would be disallowed from any calculations of allowable business investment losses. They are called allowable since they were allowed to be deducted against all sources of income while the taxpayer lived (otherwise they would need to wait until the taxpayer dies to do so). So Dividend already used up 29,500 in LGCD eight years ago and 49,000 five years ago, and 78,500 would then be disallowed from the 267,000 when computing the ABIL. Hence 188,500 was the gross BIL, and 94,250 was the ABIL, with 39,250 being an ordinary capital loss. He also had a capital loss carry forward of 3,400 and said capital loss carry forward would be used instead. She could feel that, once the LGCD was calculated, the rest would be much, much simpler, but the net income for tax purposes was 142,000 + 144,500 - 94,250 - 39,250 = 153,000.

 

[Griet van Vliet]

Now came the hard part: the LGCD. The allowable amount was 417,858 - 39,250 = 378,608. The annual gain limit was thus the capital gain on qualified property, minus the capital losses incurred, BIL or not, minus the carry forward used, minus the CNIL = 144,500 - 133,500 - 3,400 - 2,300 = 5,300. The taxable income was thus 144,300. Thus he was taxed at 29% on 1,947 = 564.63 and the base tax liability is 30,000.63. Now, with the tax credits at 15%, that was (11,635 + 2,564 + 836 + 1,178)*15% = 2,431.95 that could be taken off, and also 4,419.10 in dividend tax credits = 23,149.58 was his income tax payable. Hopefully he had an idea of how to pay up the balance owing of 6,149.58 since that was his balance owing. He also noted that one year he paid that balance owing in installments, while the following year he would not have enough of a balance owing to pay by installments, thanks to installments being deducted the following year. (And typically same went with any overpayments in taxes in one year: they would be deductible the following year as installment payments).

 

[Griet van Vliet]

Here it seems pretty... happy, and maybe even deceptively simple. The first one is someone who earned 32,000 from employment, got 1,584 withheld for the SPP, 4,000 for income taxes, and 531.20 for EI. And it's the first time in that person's lifetime that it is using the LGCD since it's the first sale of qualified property, and the person made a 412,000 profit, of which, as per usual, only half is taxable, 206,000. And the home relocation loan deduction of 500. So, under the regular income tax, she would be taxed on just 31,500, and the net tax liability prior to any refund would be on the remaining 16,571.80 at 15%, so 2,485.77. Yet, this seems to be a case where the alternative minimum tax could kick in, with a 40,000 exemption. So she would need to add in 124,100 to the regular taxable income, since two of the eight items that would be added in would need to be accounted for. That is, 30% of the excess of capital gains over capital losses and the home relocation loan deduction. Yet, because of the 40,000 exemption, the AMT is assessed on 115,600, so 17,340 would have to be the new liability, and after the requisite deductions are made, she still owed 10,677.53 under the AMT.

 

[Griet van Vliet]

The second client didn't seem to be as likely to be subjected to the AMT; he earned 149,000 from employment, of which 63,000 came from stock-options, got withheld 20,000 in income tax, 2,564 in SPP' 836 in EI, had 12,000 in taxable capital gains, incurred 17,000 in rental losses (he couldn't take CCA in the first place, since CCA on rental properties can only be taken until there is no revenue left and cannot be used to create or increase a loss, but he did pay 15,000 in interest) received 41,000 in dividends from public companies prior to any gross-up, and, because the stock-options were more expensive than fair market value at the grant date, he could deduct 31,500. Also, because he had lots of unused RRSP deduction room, after going to the Metrobig Grand Casinoscam, he decided to immediately contribute to his RRSP for 32,000. The regular taxable income would come out to be 137,080 and its associated income tax payable is (137,080 - 91,831)*26% + 16,300 = 28,064.74. The benchmark to beat to consider the AMT is therefore that liability over 15% plus 40,000 = 227,098.27.

 

[Griet van Vliet]

So one would need to add 18,900 because of the 60% stock-option clause, as well as 15,000 of interest expense on rental properties (for AMT one would need to add CCA taken, too, should there be a net rental revenue), and deduct the gross-up of 15,580. One would need to add 18,320, which is not enough to trigger the AMT, since he did not make the threshold of 227,098.27 (for AMT purposes, he was earning 155,400). Then the dividend tax credit is 8,498.18 and the regular tax credits are as follows: 2,431.95. The income tax payable is thus 17,134.61 and, combined to the 20,000 in withholdings, he still got a refund for 2,865.39. Not bad...

 

[Griet van Vliet]

These clients have families, and the lawyer specializing in entertainment law clearly doesn't trust DIY tax software, she thought, while realizing that there are kids in the mix, whose part-time jobs were courier gigs that didn't pay much but didn't qualify for EI or SPP because they were minor. And they didn't withhold tax at the source, so these two were done in short order. Thir incomes were 2,300 for the younger and 3,600 for the older, 11 and 14 years old respectively. No balances owing. The husband had a salary of 66,500, of which 10,000 is withheld at the source, 2,300 is deducted in RPP contributions (the employer matches it, but his RRSP limit is based on defined benefits, rather than defined contribution, so it's not as simple as a pension adjustment of 4,600, which would be it in a defined contribution), and, of course, the maximum amounts for the SPP and EI: 2,564 and 836 respectively. And the union dues of 460. Plus a taxable vehicle allowance of 8,400 (since it is not based on mileage) but the travel allowance of 3,800 is reasonable, which caused it to be non-taxable but couldn't claim actual expenses against it either. So the total employment income was 72,140.

 

[Griet van Vliet]

I don't know why the wife is telling anything about the rhinoplasty, the rhinoplasty, costing 9,350, is not tax-deductible, even if it did more than double the revenue from last year, she thought, while reading the tale of a failed rhinoplasty two years ago, which forced her to re-do one. Said revenue is 411,000 credits for this year, and the other expenses are 29,400 for building upkeep, 53,200 in salaries and wages (withholdings included), 21,800 in other office costs, but 4,300 for meals with clients since the other 4,300 is not deductible, while deducting 3,600 out of the 4,200 on the speeder since 6/7 of the mileage on that car was driven for business purposes, for a total of 112,300 in eligible expenses prior to taking any CCA. Speaking of CCA, the building is in a separate Class 1 at 6% since the building is 100% used for commercial purposes, and its UCC at the beginning of the year is 433,521, while the original capital cost of the building is 500,000, with 175,000 for the land. 26,011.26 taken up for that class, and the new UCC is 407,509.74. There were several other transactions involving CCA, on top of the building.

 

[Griet van Vliet]

Such as the speeder, which originally cost 53,000, but on which she can only claim CCA based on 30,000 and, thanks to the half-year rule, she took 4,500 for this. Office fixtures were in the catch-all class 8, the new fixtures costing 67,000 and the old ones were sold for 13,000, with the original UCC being 13,594. So 8,118.80 in CCA was taken on the fixtures, and the final UCC is thus 59,475.20. Similar CCA calculations on the client list, costing 23,000 (at 5%), a laptop at 1,400 (at 55%), and application software for 3,600 (at 100%) yield CCA of 575, 385 and 1,800 and UCCs of 22,425, 1,015 and 1,800 respectively. The total CCA is 41,390.06, which brought the net business income down to 257,309.94. Yet, since she didn't remit the SPP and EI employer contributions, her balance owing would include 7,821 in SPP liabilities and 2,908.37 in EI liabilities. Investments were straightforward: 12,750 in capital gains (6,375 is taxable because there are no losses carried forward), 6,300 in interest income and 11,500 in dividends from public companies, grossed up to 15,870 (and the tax credit is 6/11 of the 4,370), for a total income of 285,854.94.

 

[Griet van Vliet]

The husband had an Earned Income for RRSP purposes of 48,000, which translates to a limit of 8,640 prior to any adjustments for pensions. His employer reported 4,100 in pension adjustment, but the new CBA forced his employer to increase the pension adjustment, thanks to the change from 1.75% to 2% of pensionable earnings being applied retroactively to the past two years. During the years involved, he earned 79,000 in pensionable earnings, and the rules for reporting pension adjustments in the defined benefit case is that, for each dollar in future benefit, one would need to multiply it by 9 for the purposes of pension adjustments. Which comes out to 1,777.50 that is gone. Since he contributed 4,500, she crossed her fingers to see whether or not the unused deduction room is enough. He had 2,762.50 left before any talk of unused deduction room, of which he had 5,500. So he can deduct the full 4,500 and the net and taxable income is therefore 67,640, with 3,762.50 in remaining contribution room. His base tax liability is (67,640-45,916)*20.5% + 6,887 = 11,340.42.

 

[Griet van Vliet]

The last accountant that the family had was not very good and hence switched to VPN; the one source of negligence was to not designate any refunds to the home buyer's plan, which allowed to withdraw a certain amount from one's RRSP to buy a home, once every five years, and one also needs to repay the RRSP within five years, and it has been three fiscal years since the 18,000 was withdrawn. She had 8,800 in undeducted contributions and 14,500 for this year's contributions, so she designated the full amount of 18,000 as repayment, leavng 5,300 as the actual deduction. She could, technically, on the back of an Earned Income of 116,000, have room for 20,880, combined to the existing 6,500 unused deduction, and the deduction of 5,300, for next year, that would go to 22,080 in deduction room. The wife's actual net and taxable income is thus 280,554.94, with the resulting tax liability of (280,554.94 - 202,800)*33% + 46,966 = 72,625.13, alleviated only by a paltry 1,745.25 from the base 11,635 and 2,383.64 from the dividend tax credit, and to this, one would need to add the liabilities for unpaid SPP and EI: the wife's preliminary balance owing is 79,225.61.

 

[Griet van Vliet]

Medical expenses that were, on the other hand, permissible, included 625 for prescription glasses, 1,475 in physiotherapy fees for the kids, 8,560 in dental braces for the older kid and 2,450 in psychotherapy for the younger kid, for a total of 13,110, from which he had to deduct 3% of his net income of 67,640, so 11,080.80 is deductible. Plus since he volunteered 225 hours as a firefighter, he is eligible for a 3,000 tax credit, and, of course all that other stuff that came with his job: 1,178 as a base employment deduction, 2,564 for SPP and 836 for EI. And the 11,635 base amount, for a total of 30,293.80 at 15% so 4,544.07. Which made his net tax payable 6,796.35 and, given his 10,000 taxes withheld at the source, he had a refund of 3,203.65, which, as per customs, is applied to the wife's balance owing. By now the final balance owing of the wife is 76,021.96, which will force her to pay installment taxes for the next year. Well, better pay by installments than never, she thought, while satisfied by the final outcome of this family's tax returns under the circumstances.

 

[Griet van Vliet]

Poodoo. The estate of someone who was killed on Skor during the First Order attack on the planet just submitted the final tax file to the firm, from which to prepare the final tax return. And the rest of the Hikaido family, too. Erika is survived by her husband, Okami, and also one daughter, Eruru. Okami has spent much of his adult life volunteering. During the year, he had employment income of 2,100 from his wife's Loth-cat boutique, and 1,700 in interest income. Since, for unincorporated businesses operating as sole proprietorships, the proprietor's death creates a deemed year-end and, for tax purposes, the net income from that Loth-cat boutique is 69,400. At the time of her death, the boutique's assets were worth 5,900 more than the sum of their UCCs. The will bequeaths the boutique to Okami. Meanwhile, the daughter received a rental property that yielded 46,300 gross and non-CCA expenses of 31,400, which was bought for 312,000, of which 210,000 was allocated to the building and 102,000 for the land. On the latest property tax bill, the total value of the property was 355,000, of which 243,000 was for the building and 112,000 for the land. Its UCC was 174,795.