Tips for Navigating your Taxes & Estate Planning| According to a Tax Lawyer

How you should be strutting through tax season, but I hear you... tax preparation can seem super daunting. 

Prior to starting my own business, every year that tax time came around I ended up in the same messy process. This mostly included drowning in receipts (what do we even have to keep?),  trying to decipher my homemade spending charts and even mourning over my Excel "budget" that I never seemed to follow. 

In light of the new government tax deferrals, as well as government loans and income packages as a result of the covid-19 pandemic, I knew I wanted to speak on this topic. Unsure of where to begin and also not having the appropriate tools in my toolkit to truly help you guys, I texted my good friend, Alexandra Ormond, to pick her brain on pro-tips from the tax-pro herself.

I met Alexandra during a summer abroad program in Italy while we were in our early 20s. We became instant friends, as her warm demeanor and infectious laugh were so captivating that it was impossible not to have a great time with her. We spent the entire summer studying international relations in Siena, Tuscany and wine tasting throughout the majority of Italy. I soon learned that she not only had inner and outer beauty, but she also had brains! She now practices as a tax, trusts and estates lawyer for a large accounting firm in Canada's largest city, Toronto, and is the ultimate girl-boss in all aspects of her life. 

Q 1: You work on tax law day in and day out. In your opinion, when does it make sense to do your taxes yourself and when should you hire a professional?

A: It depends on the complexity of your situation and your comfort level with respect to filing your taxes on your own. Generally, if you have basic income, such as employment or investment income, and you feel confident filling out the necessary paperwork, then you can probably file your own taxes. However, if your financial situation is multifaceted and you want to ensure accuracy, I recommend that you seek professional assistance. 

Q 2: In light of the current COVID-19 pandemic, the government has made some changes when it comes to taxation. Can you tell us about some changes that have been made that may affect us and how we can navigate them? 

A: As a result of COVID-19, the deadline for filing and remitting taxes for the 2019 taxation year has changed; the new filing due date for the 2019 taxation year is June 1, 2020, and the new payment due date for the 2019 taxation year is September 1, 2020. If you owe taxes, penalties and interest will not be charged if the deferred payment requirements are met by September 1, 2020. 

On April 22, 2020, the Ontario government amended an emergency Order allowing the virtual witnessing of Wills and Powers of Attorney, which provides that they can now be witnessed in counterpart. Consequently, Wills and Powers of Attorney can now be executed remotely, giving immediate validity to the documents. If you were hesitant to reach out to your professional advisor to do your estate planning a result of COVID-19, you can now do so while still complying with social distancing requirements.

Certain employers will be able to apply to receive the 75% Canada Emergency Wage Subsidy starting on April 27, 2020. This temporary subsidy, which is available to qualifying employers that have lost revenue during COVID-19, generally provides an amount to employers equal to 75% of employees' remuneration paid, up to a maximum of $847 per week per employee, from March 15, 2020 to June 6, 2020. The CRA notes that employees who have been laid off must be rehired and paid before they can be included in the subsidy calculation.

Q 3: Doing your accounting and work from home can be demanding on our bodies and mental health. Do you have any tips for staying healthy during COVID-19?

It is so important to promote and maintain your physical and mental health during this time. I have been working out every day and having the following green smoothie daily:

Try it at home!

Recipe:

~Banana

~Celery 

~Cucumber 

~Fresh basil 

~Squeeze of lemon

~Water

~Good Goddess Circutonic Anti-Inflammatory Turmeric Tincture | Link to shop

Blend + Enjoy.

Q 4: Do you have any planning tips that owner-managers of private corporations can consider in light of the COVID-19 pandemic? 

An estate freeze allows you to transfer future growth in the value of your business to future generations. Typically in this type of transaction you lock-in or “freeze” the value of appreciating assets by exchanging common shares of your business that have growth potential for fixed-value preferred shares of your business. A properly implemented estate freeze will allow you to defer the taxes payable on any accrued gains on the shares of your business, transfer future growth to your successors, and fix your tax liability on death.

A proper valuation of the shares or assets being frozen is critical to a successful estate freeze. If the value of your business has decreased after an estate freeze instead of appreciating in value, as expected, you may be able to undertake a re-freeze at a lower value. The re-freeze is done by implementing an estate freeze of your fixed-value preferred shares at the new lower value, which will lower the value of your estate and reduce your capital gains tax owing on death. Assuming that the value of your business increases after the re-freeze, any future growth will then pass to the next generation.

If you have previously implemented an estate freeze and, due to recent economic and business conditions, the value of your business has since decreased, now is a good time to consider implementing a re-freeze to ensure that you can lock in your tax liability at a lower value on death or at the time the shares are ultimately disposed of. Once the re-freeze is implemented, and your business recovers from the current economic conditions, any increase in value of your business will be deferred to your successors.

Happy Tax Planning!