5 BULLET FRIDAYS - Tax Mechanic News, Tips, Strategies

Welcome to Tax Mechanic Insights! 📬

Clarifying the CRA’s Approach to the 2024 Charitable Donations Deadline Extension 📢

January 23, 2025 Ottawa, Ontario | Canada Revenue Agency (CRA)

The Canada Revenue Agency (CRA) is committed to providing you with clear and timely information about the taxes and benefits that affect you. 🏦

On December 30, 2024, the Department of Finance announced the federal government’s intention to amend the Income Tax Act to extend the deadline for making charitable donations eligible for tax support in the 2024 tax year. Subsequently, on January 23, 2025, the Department of Finance released draft legislation supporting this proposed change, which will be introduced in Parliament soon. For more details, please visit the Department of Finance website.

The CRA is dedicated to ensuring a smooth transition and is here to assist you through the upcoming tax season. Let’s work together to maximize the impact of your charitable contributions! 💙🤝

Dive deeper into the topic.

Episode 670: AI Tools Revolutionizing the Workforce 🧑‍💼🤖

Issued By: My First Million | Jan 24, 2025

In this episode, hosts Sam Parr and Shaan Puri sit down with Andrew Wilkinson to explore the transformative power of AI tools in replacing new hires. Prepare to delve into cutting-edge strategies and insights that are reshaping the business landscape. 🌐🚀

Show Notes:

Key Highlights:

• AI Transformations 🧠- How AI tools are reshaping administrative roles, freeing up valuable time and resources.

• Economic Insights 💡- A deeper understanding of the K-shaped economic recovery and its implications for various sectors.

• Efficiency Boosts 🚀- Advantages of employing 24/7 AI agents to maintain business continuity and efficiency.

• Investment Strategies 📈- Insights into Andrew Wilkinson's AI hedge investments and strategies for future growth.

• Market Decisions 🔄- Rapid-fire investment insights to guide you on whether to buy, sell, or hold.

This episode is packed with actionable insights and expert advice for entrepreneurs, investors, and professionals looking to leverage AI for competitive advantage.

📋 Tax Debt Resolution & Financing Program

For Tax Debts under $100K

💼 Legal Fee: The Cost of the Buy-down of the Interest Rate to less than 10% + Service Fee (i.e., % of Total Financing Sought)

How the Program Works

📝 Initial Consultation & Assessment

• Free Initial Consultation: Evaluate the client's tax debt situation (individual or business), assess CRA notices, and devise the optimal resolution strategy.

• Eligibility Review for Financing: Collaboration with the Tax Mechanic to assess client eligibility for the 0% interest financing option.

🔍 Engagement & Financing Agreement

1. Service Engagement: Once deemed eligible, the client signs a retainer agreement with the law firm.

2. Financing Application: Assistance provided to the client in completing a financing application with the partner financing company.

3. Immediate Payout: Upon approval, 100% of the legal fees, including the total tax debt amount, is deposited directly into Lawlignment's trust account.

⚖️ Legal and Financial Management

🔧 Comprehensive Tax Debt Resolution Services

• Debt Analysis & Negotiation: Development and execution of a tailored legal strategy (e.g., negotiating installment agreements, filing objections, or exploring offers in compromise).

• Ongoing Legal Representation: Representation of clients in dealings with the CRA, ensuring compliance and favorable outcomes.

💳 Client’s Repayment to Financing Company

This program offers a structured and efficient approach to resolving tax debt, ensuring clients receive comprehensive support from initial consultation to final repayment. By leveraging professional legal and financial management, clients can achieve favorable outcomes and clear their tax debts with confidence. 💼

Changes to Rules for Eligible Deductions from Short-Term Rental Income 📢🏠

January 22, 2025 Ottawa, Ontario Canada Revenue Agency

What’s New 🔄 Changes to the income tax rules now deny income tax deductions related to non-compliant short-term rentals after 2023. If you rented out a residential property for short periods, these changes may affect you. ⚠️

What is a Short-Term Rental? 🏘️ A short-term rental is a residential property that is rented or offered for rent for a period of less than 90 consecutive days. 📆

What is a Residential Property? 🏡 A residential property includes all or any part of a house, apartment, condominium unit, cottage, mobile home, trailer, houseboat, or other property located in Canada, used for residential purposes under the applicable laws of the province or municipality.

What is a Non-Compliant Short-Term Rental? ❌ A non-compliant short-term rental:

• Is located in a province or municipality that does not permit short-term rentals to operate at that location; or

• Does not comply with all applicable provincial or municipal registration, licensing, and permit requirements for operating a short-term rental.

Expenses 💵 When calculating a taxpayer’s income from a business or property, the Income Tax Act generally permits the deduction of reasonable current expenses incurred in the ordinary course of earning that income. However, for tax years after 2023, the new rules do not allow the deduction of a non-compliant amount. 📉

Non-Compliant Amount 📊 For tax years after 2023, if a short-term rental is non-compliant for any portion of the tax year, the non-compliant amount for that year is determined by multiplying (A) by (B), and then dividing that total by (C).

• (A): Total amount that would otherwise be deductible for the residential property when used as a short-term rental in the tax year.

• (B): Number of days in the tax year that the property was a non-compliant short-term rental.

• (C): Number of days in the tax year that the property was a short-term rental.

For additional details, visit T4036 Rental Income. 📑

2024 Transition Relief Exception 📅 If a short-term rental complies with all applicable provincial or municipal registration, licensing, and permit requirements by December 31, 2024, it is deemed compliant for the entire 2024 tax year. This applies to persons and partnerships for the 2024 tax year.

Example:

An individual owns a condominium unit in a city that requires all residential properties rented for less than 30 consecutive days to be licensed. The unit was offered for short-term rent throughout 2025 and rented for 300 nights at $250 per night. The individual obtained a license on July 1, 2025, after renting the unit for 181 days. They incurred $60,000 in expenses for the 2025 tax year. 📆🏢

Non-Compliant Amount Calculation:

If compliant throughout 2025, deductible expenses would be $60,000, resulting in a profit of $15,000. 💰

Dive deeper into the topic.

The Cost of Tax Evasion: A Real Case Study in Canada 🛑💰

Issued By: Tax Mechanic

In our latest video, Fraser unravels a dramatic real-life story about the dire consequences of tax evasion. It's a cautionary tale that underscores the importance of staying compliant with your tax obligations. Let’s dive in.

Real Story Unveiled

🚨 Tax Evasion: Over $100,000 and Jail Time 🚨 Evading over $100,000 in taxes and ending up in jail? Yes, it happened right here in Canada! Meet Derek Kwasney, former CFO of Lake Louise Ski Resort. He thought he could ski past the law by swindling over $350,000 in 2015 and 2016 and evading more than $100,000 in taxes.

Consequences 📉 The CRA caught up with him faster than a downhill run—resulting in 12 months in jail and a $106,000 fine. In Canada, you can't escape the consequences of tax evasion. ⚖️

📊 Key Takeaways

• Integrity Matters: Always be truthful and compliant in your tax filings.

• Consequences Are Severe: Non-compliance can lead to significant fines and imprisonment.

• Expert Assistance: Leverage professional help to navigate complex tax regulations.

Protect Your Future ⚠️ Stay legal and safe by letting Tax Mechanic handle your taxes. Our experts are here to ensure you stay compliant and avoid any legal troubles.

👉 Connect with Tax Mechanic today and safeguard your future. 📞✨