Personal Accounting Services Archives - Page 4 of 8

3 Misconceptions About Accounting & Accountants

Accountant wearing a yellow shirt working on a computer

We see it all the time from corny comic strips, bad movies, and hacky stand-up comedians– if you need a boring job to make fun of, go after the accountants! Most people perceive accounting as a dull ocean of cubicles, filled with bespectacled pencil pushers that love nothing more than using an abacus. In truth, accountants are as diverse and multifaceted as professionals across all industries. Keep reading for three of the most common stereotypes about accounting and accountants, then educate yourself with the truth from the pros here at Liu & Associates.

I know math– I can do it all myself!

First of all, accounting is more than just math! While arithmetic skills are essential to a good accountant, the real strength of financial professionals is organizational skills, analysis, and logic. In fact, complicated maths like calculus are rarely, if ever, used in the industry. Additionally, beware the promises of do-it-yourself accounting services and software– they can give you a false sense of security that might lead to costly errors or omissions.

Accounting is expensive, only big businesses can afford it

The fact that big businesses all have accountants means one thing: they understand the importance and value of proper finances. Anyone can benefit from accounting– no matter the size, scope or scale of your needs. While it is true that not every accountant is right for you, that is why there is such a wide range of services available. From affordably basic to fully custom-tailored, there is a financial professional that suits you!

Accountants only fill-in spreadsheets and file taxes

As with most of these misconceptions, there is a grain of truth to the myth. Yes, spreadsheets are critical to accounting and any good accountant knows their way around a tax return. Ultimately though, spreadsheets are just a tool– only the talent and skill of a financial professional makes them sing. Likewise, filing taxes is merely a cherry on the top of the long list of intricate finance and business decisions influenced by accountants’ advice.

You may have believed some of the misconceptions and myths above, but hopefully, this article has helped clear the air. Questions? Concerns? Contact us at Liu & Associates today!

How to Choose an Accountant for Taxes

how to choose an accountant for taxes

While many people may choose to do their own taxes, there are a number of reasons why someone would opt to hire an accountant. Whether your taxes are particularly complicated, or you feel overwhelmed or uncomfortable by the very thought of taxes, an accountant can help everyone. There are a number of different factors to consider when search for a tax professional. Here are a few things to consider in your search for a tax accountant.

What type of tax professional is best for you?

During tax season, you will probably notice a number of pop-up tax preparation chains in everywhere from the mall to a university campus. While convenient, these chains don’t always offered the most seasoned professionals. Here are the different types of tax professionals you should be aware of:

Certified public accountants have passed rigorous testing and certification requirements in order to obtain their title. They are also able to represent you in the event of an audit or collections. CPAs have a tonne of other financial experience as well, so they can help with other financial situations as well. Not every CPA is an income tax expert, so be sure to ask about their experience.
Enrolled agents also much pass testing and background checks in order to gain their title. Unlike CPAs, they are specialized specifically in taxes, including complex tax situations. They even need to take a test every three years to ensure they are up-to-date in all of the latest tax regulations. Like CPAs, they can represent you in the event of an audit or collections.
Tax attorneys are lawyers specialized in tax law. They are most often used for highly complex tax matters such as estate tax returns of if you need representation in Tax Court.

Experience

Not all accountants are tax experts. If you’re shopping around, it’s important to ask accountants about their previous tax experience and areas of expertise. This is crucial if you need an accountant with experience in certain areas such as home businesses or other circumstances that could complicate taxes. Any licenses or accreditation that help to support their skills and knowledge are also beneficial.

Fees

Cost is top of mind for most people, so be sure to ask about fees! Find out the hourly rate and get an estimate for how long the return will take. Not every firm will charge the same rate, so be sure to ask. Talk to potential accountants to learn if there are things you can do in order to keep the fees down (i.e. organizing documents). Finally, be sure to ask what is and isn’t included in their fees. Find out the costs for “extra” or additional services so that there are no surprises when you get the bill.

Don’t be afraid to ask questions, take notes, and compare your options. Above all else, be sure that you are comfortable with the accountant you choose. Whether you need help with a simple return or you have a complicated tax issue, contact Liu & Associates today!

3 Common Student Tax Questions and Answers

Post-secondary students of any age are busy people! Between studies, exams and everyday life– it can become overwhelming to even think about taxes, let alone be familiar with all the ins and outs of the Income Tax Act. Keep reading for our advice for students and answers to three common questions about taxation.

DO STUDENTS NEED TO FILE TAX RETURNS?

The short answer: yes! All Canadians who earn income should file a tax return every year, even if they do not owe an amount to the Canada Revenue Agency (CRA). Filing a tax return means you could be eligible for a Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit. It also increases the allowable amount of future contributions to a Registered Retirement Savings Plan (RRSP). Additionally, becoming familiar with taxation as a student will prepare you for further obligations when you enter the professional world.

2. WHAT EXPENSES CAN STUDENTS CLAIM FOR TAX CREDIT?

Whether you are a student exclusively or you work in addition to your studies, there are numerous reasons to claim certain tax credits. The costs of child care, moving, public transit, textbooks and tuition can all be claimed as tax credit– up to a certain amount, as outlined by the CRA. There are also provisional “education amounts” that count towards credits for each month you were enrolled. Even if you did not earn enough in a year to use this credit, much of it can be carried forward indefinitely and it can even be transferred to a spouse to reduce their taxes.

3. SHOULD STUDENT DEBT BE CONSOLIDATED?

Once you have graduated, it may be very tempting to combine the debt you accumulated as a student into one payment at a more affordable interest rate. In fact, there is no shortage of financial institutions and lenders that have a variety of consolidation programs. The downside of these offers is that you will no longer be eligible to claim the interest paid on student loans as a tax credit. If you can afford to, it is almost always best to keep your student loan debt separate.

The above answers are only a summary of the many ways students can take advantage of Canadian tax rules and regulations. If you have any questions or concerns, whether you are a student or know one, contact or visit Liu & Associates today!

4 Tips For Working With An Accountant

4 Tips for Working With an Accountant

Like any professional relationship, it is key to understand that an accountant who works with you is more valuable than an accountant who simply works for you. Hiring an accountant does simplify certain financial realities and complications, but adding a small amount of effort on your part can lead to exponentially better results. Keep reading for Liu & Associates’ favourite tips for working efficiently and courteously with an accountant.

#4 Meet and greet.

Like any product or service, it is important to determine the quality and fit of a financial professional before you invest in anything long-term. Build a list of potential accountants or bookkeepers by reading reviews or asking for recommendations– narrow this list down based on the size of your needs and any shared values. The best candidate should be happy to have your business while prioritizing your needs and acting in your best interest.

#3 Buyer beware.

Sometimes the first meeting with your first choice will go very well. And other times, it does not. It is important to know that if you are paying for accounting or bookkeeping services, you are not obligated to continue past that first appointment. Beware of high-pressure approaches and anything that seems “too good to be true.”

#2 Sharing is caring.

Financial records contain sensitive information, but encryption and privacy standards mean the entire industry has embraced the digital age. Not only is private cloud storage convenient and secure, but up-to-the-minute access to your data means a skilled accountant can compile, classify and coordinate your finances on the fly.

#1 Money talks.

Open and honest communication is a great tool in any relationship– financial professionals are no exception! If you have any questions or concerns about your finances, bring them up as soon as possible with your accountant so they can customize their services to your needs. Do not be afraid to offer constructive criticism, as long as it is delivered in a thoughtful and respectful manner.

While the tips above are useful, there are many more aspects to building an in-depth relationship with a financial professional such as a bookkeeper or accountant. Whether you are a small business client or a large-scale employer, do not hesitate to speak with Liu & Associates for guidance with your finance. Questions? Concerns? Contact us today!

What You Need to Know About Foreign Assets

Foreign assets, if done right, can be a very practical way to manage your finances. If you have or are considering, foreign investments it pays to chat with an accounting professional to make sure you know how to properly manage your new assets. Read on for a few of the many things to keep in mind if you own foreign assets.

What Counts as a Foreign Investment?

The following are considered foreign investments, and therefore need to be reported to the Canada Revenue Agency appropriately:

Funds and bank accounts held abroad
Real estate
Shares of Canadian corporations
Debt securities issued by a non-resident
Other tangible and intangible properties located outside of Canada

Offshore Bank Accounts Are Legal – So Long as You Follow The Rules.

There are actually some scenarios in which you might be advised by your planner to consider an offshore bank account. As long as you follow the appropriate reporting rules, you’ll have nothing to worry about! Consider the following examples:

Example of the RIGHT way to use an offshore bank account: You own a vacation property in Florida, so you set up a U.S. bank account to make purchases easier.

Example of the WRONG way to use an offshore bank account: You earn money in the U.S. from renting out your vacation home when you’re not using it and keep those earnings in a U.S. account to avoid declaring the rental income on your next Canadian tax return.

Countries Are Starting to Share More Tax Information.

Canada has signed a number of “tax information exchange agreements”, which increases the amount of tax information flowing between countries such as the U.S, Switzerland and the British Virgin Islands. So if you were looking for ways to evade the taxman (your options are dwindling).

A Failure to Properly Report Foreign Investments Comes Along With a Penalty

If you have more than $100,000 in foreign investments, there is a specific form you’ll need to complete your next tax return (form T1135 if you’re curious). Failure to properly report your investments can subject you to a penalty of $25 a day, with a maximum of $2500 a year, plus interest.

Questions about foreign assets? Contact the team at Liu & Associates to book an appointment with a member of our expert team.

How to Prepare Financially for a Divorce

Going through a divorce is rarely an easy process. A marriage is an emotional and financial partnership, so it can be difficult to separate all the pieces. Being prepared is the best way to ease the stress around the financial portion of a divorce. Read on as Liu & Associates highlights a few steps that will help you through this process.

Make a List of All Assets & Liabilities

When preparing for divorce, the first step is to figure out exactly what you and your partner own and owe, both as an individual and as a couple. Gather copies of any and all important documents relating to your assets and liabilities and keep them in a safe, centralized location so you’re not scrambling to find information. Examples of assets may include:

Bank accounts (joint and separate)
RRSP’s
Insurance policies
TFSA’s
Employer pensions
Your home

It’s also important to note your liabilities as well, which may include:

Loans
Credit card debt
A mortgage
Student loans

Overall, the better you understand your current financial situation, the better position you’ll put yourself in when negotiating a settlement.

Check Your Credit

It’s a good idea to know your credit going into a divorce so you know what you can expect after everything is finalized. There’s nothing worse than trying to start your new life and not being able to get a loan due to poor credit. It’s not uncommon to be held responsible for debts incurred by your spouse, so by knowing your situation ahead of time, you can seek the appropriate help moving forward.

Ensure Beneficiaries Are Updated

It’s a good idea to go over and update your beneficiaries after any life-changing event, divorce included. Make sure you update any retirement plans, insurance policies, estate documents, etc. to reflect your new situation. Failure to remove your ex-spouse as a beneficiary can result in your ex-spouse receiving benefits even though you’re no longer together.

Inform the Canada Revenue Agency

After everything is finalized, be sure to let the Canada Revenue Agency (CRA) know. Changes in marital status may affect what tax benefits and credits you are eligible for on your next return.

Talk to a Financial Advisor

There are many moving parts to deal with in a divorce, so it can be useful to seek the help of a professional. An accountant or financial planner can help you to understand the financial and tax implications of a divorce and can help navigate you through the process.

Still have questions? Contact the team at Liu & Associates and book an appointment with a financial planner today.

IN SICKNESS AND IN WEALTH: How Marriage Affects Your Taxes

Being married, or having a common-law partner, impacts your tax situation in a number of ways. The good news is that many are beneficial to you and your spouse. Married and common-law couples may be eligible for a number of additional tax benefits that can help them save money on their next return. Join Liu & Associates as we highlight a few of the ways being married can help you out come tax time.

Spousal Tax Credit

If your partner has a lower income, you may be eligible for a non-refundable tax credit which can help to reduce the amount of income tax you’ll pay. To qualify, your partner must have a net income of less than $11,474.

Combine Charitable Donations

You get a non-refundable tax credit when you donate to registered charities. By having one spouse claim all of the donations for the year, you and your partner can get a larger tax credit. Note: there are some donations you cannot claim. Learn more about what donations are eligible to claim here.

Spousal RRSP Contributions

If one partner has a much larger amount of money in an RRSP, it means they will have to pay more tax when they decide to withdraw it. By divvying up RRSP contributions, you can help balance your incomes when you retire, which means that both you and your partner will get taxed at a lower rate.

Combine Medical Expenses

You are able to claim medical expenses for your spouse or common-law partner. When filing your taxes, consider having the person with the lower income claim all of the medical expenses for the couple. Why? The tax credit for medical expenses is based on a percentage of your income, which means you’ll probably get a bigger tax credit!

Common Medical Expenses

The Government of Canada has an excellent list of what medical expenses can be claimed, and whether or not you need any supporting documents in order to claim them. Check out the full list here.

Taxes Are Hard – Liu & Associates Can Help!

Our expert accountants will help you get the most out of your tax return. Give us a call to book an appointment today!

Tax Implications Of Divorce

While divorce and separation have bad reputations, they actually can lead to happier and better functioning families overall. Every case is unique, so there is a lot to consider when embarking on this difficult and emotionally challenging process. As with marriage, there are financial consequences to divorce or separation— most importantly when it comes to taxation. If you are undergoing or planning to divorce or separate, consult Liu & Associates’ guide below to the tax implications of this very common life change.

UPDATE CRA

First things first, you should update you and your spouse’s status with the Canada Revenue Association. It may seem like paperwork that can be put off for later, but it can actually benefit your economic standing. For tax purposes, a marriage or common law union is considered over after 90 days of living apart. Following this, certain credits and benefits can increase because CRA no longer calculates based on a joint income.

SPLITTING ASSETS

In most divorces and separations, assets of the family are added together and split down the middle for redistribution. Often it makes more financial sense for one partner to keep investments such as Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TSFAs) because cashing them in to split the funds means the entire amount is taxable. Keeping them invested and allowing the other partner to hold other assets like the family home can mean less tax paid by both parties. If you own two properties, each party can claim the principal residence exemption and avoid taxes on the sales of the properties.

SUPPORT PAYMENTS

Family law is intricate, but there is a general rule of thumb when considering the taxes on support payments due to divorce and separation. Firstly, the recipient of spousal support pays taxes on it and the payer can use the amount as a deduction against their taxes owed. Child support is different: the recipient is not taxed on the amount and the payer cannot use it as a deductible.

DEPENDENT CREDITS & BENEFITS

Unfortunately, children and other eligible dependents are often caught up in divorces and separations. While this can lead to a better life for the individual, it does complicate the credits and benefits received from the government for their care. Regardless of shared custody, only one spouse can claim the eligible dependent tax credit– on the other hand, the Universal Child Care Benefit (UCCB) can be split between both partners.

As you can see, there are many taxation issues to consider when tackling the financial outcome of a divorce or separation. Family law and tax law are independent fields, but the accountants here at Liu & Associates are prepared to answer your questions with our years of professional experience. There are exceptions to every rule, so make sure you contact or visit us today!

Accountant’s Fees Explained

When individuals or business owners consider hiring an accountant, they are likely trying to save money. Often the question arises: if I want more funds, why should I spend my limited budget on an accountant? This could lead to the incorrect assumption that accounting services are only for wealthy people or large corporations. Liu & Associates is here to set the record straight! Read on for our breakdown of typical accountancy fees and why they are worth your investment.

What am i paying for?

This is a common question when looking into an accounting service, especially when you are quoted a specific amount. The “sticker price” could be shocking if you do not know what to expect – but it can be easier to accept once you understand the full contribution of accountancy. More than just a bookkeeper who records necessary numbers, a good accountant will offer financial advice, guide your investments and help avoid costly fees and penalties. Typically you are paying for the accountant’s labour, experience and overhead, as well as the peace of mind that your finances are in good hands.

WHAT SHOULD BE INCLUDED?

Here are some of the services you offered to individuals or businesses by quality accounting firms:

Pricing, inventory and workspace advice;
Cash flow and budget management;
Finance report consultation;
Application of financial strategies;
Tax returns and prioritizing your taxation obligations;
Aid with corporate structure issues (sole proprietorship, partnership or corporation);
Help with savings, investments and other methods of building capital.

IS IT WORTH IT?

Unfortunately, this question can only be answered by the individual or business themselves. There are a wide variety of accountants, accounting firms and similar services, but they are not made equal! A good accountant will consult your needs and advise the level of service necessary in your specific situation. For some, a bookkeeper may be enough – while others may require a full suite of accountancy services to ensure their finances are handled properly.

If you are unsure about what you or your business requires, contact or visit Liu & Associates today! Your first consultation will be comprehensive and hassle-free, no matter what your needs. Our friendly staff will help guide you to an appropriate level of service, while keeping your financial future as our first priority.

Should I File My Own Taxes or Hire A Professional?

When it comes to the question of whether or not it’s better to hire a professional to handle your taxes versus doing it yourself, unfortunately, there is no single right answer. Read on as Liu & Associates discusses some key factors that will help you determine what path you should take next tax season.

When to DIY

Your Taxes Are Simple

If you have had only one job in the past tax year, have no dependants and no investments, consider filing on your own by using a free online tax software.

Your Financial Situation Hasn’t Changed

When you purchase property, get married, or have a child, new deductions and credits become available to you and it can be beneficial to have a professional to help inform you of these. If you haven’t made any big changes in the past tax year, you probably are aware of the deductions and claims already available to you and can stick to the DIY route.

It’s Not in the Budget

Doing your own taxes will absolutely save you money. There are lots of free online tax filing softwares that will guide you through the process.

You’re Willing to Do Research

If you’ve done a great job of keeping everything organized over the year (receipts, forms, etc.) and you enjoy doing a bit of research, you can learn a lot about the different deductions and claims that you are eligible for. While time consuming, if you enjoy learning about these things it’s a great way to save some money!

When to Hire a Professional

Your Taxes Are Anything but Simple

If you are a business owner, are holding multiple investments, doing freelance work, etc., you will benefit from hiring a professional. The reason being is that there are lots of deductions associated with these areas, and a tax professional is going to be able to help you identify these and ensure you’re getting the most out of your return.

Your Financial Situation Has Changed

Any big changes in your life (marriage, divorce, purchasing property, etc) will open up new deductions and claims for you to take advantage of. Again, having a professional on your side will allow you to maximize your return and make sure you are utilizing what is available to you.

You’re Willing to Pay

A tax professional’s prices can vary between $70-$200. Depending on your return, the initial investment may be worth it!

Yuu Don’t Want to Do the Research

Many people simply don’t want to spend their time researching tax laws, and that’s okay! Passing the work along to a professional can allow you to spend time on other, more enjoyable things.

Looking for Tax Help?

If you’re looking for help on your next personal or corporate tax return, contact the team at Liu & Associates. Let our tax experts get you the most out of your return while you rest easy knowing your return is in knowledgeable hands. Get in touch today!