Tips For Non-Profit Organizations to Improve Internal Controls 3 Apr 2025, 8:40 am

Non-profit organizations (NPOs), also referred to as non-profits, function similarly to small businesses in terms of their operational systems. However, unlike businesses that aim to generate monetary profits, NPOs focus on charitable or socially beneficial causes. Despite these differing objectives, both small businesses and NPOs share a critical need for stringent internal controls to ensure financial integrity and operational efficiency.

Why Do NPOs Need Internal Controls?

Nonprofit organizations (NPOs) need internal controls to ensure the integrity and reliability of their financial and operational processes. These controls help prevent fraud, errors, and mismanagement by establishing clear procedures and checks and balances. By implementing internal controls, NPOs can safeguard their assets, ensure compliance with legal and regulatory requirements, and maintain accurate financial records. This transparency and accountability build trust with donors, stakeholders, and the public, which is essential for securing ongoing support and funding. Ultimately, strong internal controls enable NPOs to operate more efficiently and effectively, allowing them to focus on achieving their mission and making a positive impact.

7 Internal Controls NPOs Need to Implement Now

Non-profit organizations can introduce seven internal controls straightaway to strengthen operational efficiency, compliance, and, most importantly, security.

1. Segregation of Duties: Safeguarding the assets and cash of a NPO requires implementing robust internal controls and financial management practices. Key measures include segregation of duties, ensuring that no single individual has control over all aspects of financial transactions. For example, the person who logs incoming checks should not be the same person who deposits them. Additionally, dual authorization for expenditures, such as requiring two signatures on checks, helps prevent unauthorized transactions.  Regular financial audits and/or reviews by an independent party can detect and deter fraud. Keeping cash in a locked drawer and promptly depositing it in the bank minimizes the risk of theft. Finally, conducting background checks on employees who handle money and maintaining transparency with stakeholders builds trust and accountability.

2. Documented Policies and Procedures: Having documented policies and procedures is essential for the smooth and effective operation of a NPO. These documents provide clear guidelines and standards for staff and volunteers, ensuring consistency in decision-making and actions across the organization. They help define roles and responsibilities, streamline processes, and reduce the risk of errors or misunderstandings. By maintaining comprehensive and up-to-date policies and procedures, NPOs can operate more efficiently, respond to challenges effectively, and focus on achieving their mission.

3. Access Controls: Access controls are essential for NPOs to protect sensitive information and financial systems from unauthorized access. Implementing role-based access ensures that only individuals with specific responsibilities can access certain data or systems. For example, financial records should be accessible only to accounting staff and not to all employees. Password protection and multi-factor authentication add layers of security, making it harder for unauthorized users to gain access. Regularly updating passwords and monitoring access logs can help detect and respond to suspicious activities promptly. Additionally, physical access controls, such as locked cabinets for sensitive documents and restricted areas for financial operations, further safeguard assets.

4. Physical Security: Physical security is crucial for NPOs to protect their tangible assets from theft, damage, or misuse.  Access restrictions to areas where sensitive assets are stored, such as using key cards or biometric systems, help control who can enter these spaces. Regular inventory checks and audits can detect any discrepancies early and ensure that all tangible assets are accounted for. Additionally, installing surveillance cameras and alarm systems can deter potential theft and provide evidence in case of security breaches. By prioritizing physical security measures, NPOs can safeguard their assets, ensuring they are available and in good condition to support their mission.

5. Audits: Regular audits are vital for NPOs as they ensure financial transparency, accountability, and compliance with regulations. By systematically reviewing financial records and operations, audits help detect errors, and mismanagement of funds. They provide an independent assessment of the organization’s financial health, which can build trust with donors, stakeholders, and the public. Audits also identify areas for improvement in financial practices and internal controls, helping NPOs enhance their efficiency and effectiveness. Furthermore, maintaining a routine audit schedule demonstrates a commitment to ethical standards and good governance, which is crucial for sustaining long-term support and achieving the organization’s mission   

6. Documentation and Record Keeping:   Proper documentation and record keeping are essential for NPOs to ensure transparency, accountability, and efficient management of resources. Accurate records should be maintained for all financial transactions, including donations, grants, expenses, and in-kind contributions. This involves keeping detailed receipts, invoices, and donor correspondence, as well as documenting the purpose and use of funds. Implementing a systematic filing system, whether digital or physical, helps organize and retrieve records easily for audits and reporting. Regularly updating and reviewing records ensures compliance with legal and regulatory requirements and provides a clear financial picture to stakeholders. By prioritizing thorough documentation practices, NPOs can build trust with donors, demonstrate their impact, and support their mission effectively.

7. Bank Reconciliation: Bank reconciliations are crucial for NPOs as they ensure the accuracy and integrity of financial records. By regularly comparing the organization’s internal financial records with bank statements, discrepancies such as errors, omissions, or unauthorized transactions can be identified and addressed promptly. This process helps prevent fraud and financial mismanagement, providing a clear and accurate picture of the organization’s financial health. By prioritizing regular bank reconciliations, NPOs can safeguard their financial resources and ensure they are used effectively to achieve their mission.

By prioritizing these practices, NPOs can enhance their efficiency, protect their resources, and effectively, achieve their mission.  Additionally, they enhance the transparency and accountability , building trust with donors, stakeholders, and the public.

Contact McCay Duff LLP in Ottawa to Help You Set Up Internal Controls  

Talk to a professional accountant to help set up proper internal controls and prevent your NPO from fraud. At McCay Duff LLP, our accountants and bookkeepers can provide services such as maintaining books, conducting audits, and setting up processes and internal controls to ensure a secure and seamless money flow. To learn more about how McCay Duff LLP can provide you with the best accounting and bookkeeping expertise, contact us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

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5 Ways To Improve Small Business Operating Efficiency 20 Mar 2025, 8:21 am

What, in your opinion, is the best way to help any business grow? Increasing production and sales, expanding your reach to more markets, and reaching the top of the business ladder? While all these things are required, the first step is to improve the operational efficiency of your small business from where it is right now. Operating efficiency showcases how a business effectively utilizes its current resources to manufacture goods or services. These resources include not just financial resources but also technology, manpower, transportation, and every other factor that plays a role in running your business.

By first ensuring your small business is making optimal use of the resources it has in hand right now, you can boost your growth goals and save much-needed monetary resources in the future.

Here are five ways to improve the operating efficiency of your small business while keeping your future goals in mind.

5 Ways to Improve Operating Efficiency

Before implementing the following measures, it is important to conduct an honest and transparent survey of your business to determine which areas need more attention and improvement. You should also review how aligned your business is with the objectives you set when you established it. Having identified these factors, it’s time to work on building operating efficiency to prepare your business for the next level.

Setting and Monitoring KPIs

Key Performance Indicators (KPIs) are quantifiable measures used to evaluate a business’s performance in a specific objective over time. Simply put, it measures the gap, if any, between the benchmark you set for yourself and the actual performance of your business in a specific area like revenue, profit margin, or sales. Just like we set personal goals for ourselves and strive towards fulfilling them, setting strong, focused, and achievable KPIs helps a small business grow steadily. Reviewing and regularly tracking these performance indicators is essential to ensure your business stays aligned with its primary objective and strategy. For this, you must collect, compare, and analyze current data, including sales, costs, and customer feedback. Identify gaps in the performance and tweak your business strategies accordingly.

Optimizing Productivity and Minimizing Risks

It’s incredible to see the difference it makes when available resources are used to their optimal capacity. Be it negotiating for better vendor deals, reducing logistics costs, managing wastage better or even saving on utility bills, the amount of money saved (and production increased) can be sizeable. Dealing with unused inventory and unlocking the potential of every employee can also make a big difference to a small business that always welcomes money for operating costs and a smooth cash flow. While optimization of resources is crucial, so is a well-defined contingency plan to save the day in times of crisis, such as natural disasters, supply chain disruptions, or changing consumer trends. By preparing for risks and optimizing resources, you can enhance the performance of your small business and keep your operations running smoothly.

Investing in Technology

Besides compiling spreadsheets, technology dramatically improves business efficiency. Automating specific tasks such as record keeping, inventory management, invoicing, and employee payroll management gives your employees and you more time to dwell on other important matters that can add value to your business and help it grow. It can also help in the transportation and logistics department, where product traceability is vital. Technology can also give your small business wide exposure to global online markets and suppliers.

Investing in Employee Potential Upgradation

The potential of any business can be gauged from the potential of its employees. Hence, ensuring your employees are at the top of their game is essential to improving efficiency. Proper training for new employees and opportunities for existing employees to develop new skills or upgrade their existing ones to match new, emerging standards are ways to unlock the true potential of every employee. Moreover, regular appraisals, appreciation, clear and transparent communication channels, and other employee-focused strategies make employees feel valued, thus inspiring them to work harder to help the business grow.

Improving Customer Relations

At the end of the day, every business caters to a customer. So, keeping the customer happy and building a relationship of trust and brand loyalty with them is key to the success of a business. The more customers you get, the greater your sales and the resources to improve operating efficiency. Taking regular customer feedback through surveys, maintaining high customer service standards, and understanding their preferences to enhance your product can catalyze your expansion and growth ambitions.

Identifying Opportunities with the Right Business Consultant

While all these steps sound pretty easy, they require much time and undivided attention. Also, making data-driven observations and creating customized solutions requires an in-depth knowledge of the business, the entire industry, and the market. This is where working with a seasoned business consultant can be a game-changer for your small business. The right consultant will help improve operating efficiency in the short term and give you tips for sustaining the same for the long term.

Contact McCay Duff LLP in Ottawa to Help You Improve Business Operating Efficiency  

Talk to a business consultant to understand how they can help you craft an efficiency plan and monitor its progress to achieve a desired outcome. At McCay Duff LLP, our accountants and business consultants can provide services such as analyzing data and developing actionable insights. To learn more about how McCay Duff LLP can provide you with the best accounting and business consultant expertise, contact us online, or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

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Are Your Foreign Income and Assets Taxable in Canada? 13 Mar 2025, 6:58 am

Canada is home to many people who have assets and income in other countries. Some Canadians work abroad, others have foreign pension income, and many have investments outside the country. In this era of globalization, worldwide income is common, and this income needs reporting and accountability.

Who Needs to Report Foreign Income and Assets?

Canadian Residents

The Canadian tax system operates on a residency basis. The Canada Revenue Agency (CRA) has a set of rules that determine whether you are a resident or non-resident for income tax purposes. This residency status can change the way you file income tax returns and pay taxes in Canada. Note that your tax residency status is not necessarily the same as your residency status for immigration purposes.

Canadian residents are required to report worldwide income. This means that any income a Canadian resident receives is likely taxable in Canada regardless of the country the income came from. However, depending on the type of income and the source country, the source country may tax that income first. When income is taxable in a foreign jurisdiction, you can usually claim a foreign tax credit to reduce your Canadian tax liability. For example, if you receive $1,000 of dividends from a US corporation in your non-registered account, $150 of US tax will likely be withheld on that income. This $150 of tax paid in the US will reduce the amount of tax you pay in Canada on those dividends. The tax treaties that Canada has negotiated with other countries determine which country taxes each type of income with the goal of ensuring that the same income is not fully taxed twice. To benefit from the foreign tax credit, foreign income needs to be reported on your Canadian return.

Non-Residents

People who are not residents of Canada will need to pay Canadian tax on certain types of Canadian income. Most income going to non-residents should have tax withheld before it is paid. A Canadian tax return is required to be filed if:

• You have tax to pay for the year
• You want to claim a refund
• The CRA sent you a request to file a return
• You realized a capital gain or disposed of certain types of Canadian property during the year, or
• You want to transfer unused tuition fees or carry forward unused tuition amounts to a future year.

Sometimes even though a return is not required, it is in your best interests to file one. For example, if you own Canadian property that generates rental income, the payer or agent, such as the property manager, must withhold 25% of the gross rental income paid or credited to you. However, you can choose to file a return to elect under section 216 of the Income Tax Act. This return will allow you to claim the expenses relating to the rental property (property maintenance, mortgage interest, etc.) and pay tax on the net rental income instead of the gross. This should yield a lower amount to pay overall. 

Reporting Foreign Income for Canadian Residents

Foreign income refers to any earnings outside of Canada, such as:

• rental income from properties located abroad,
• dividends and interest earned in non-Canadian accounts, and
• wages or salaries earned while working in a foreign country.

Each type of foreign income needs to be reported in the proper section of your Canadian tax return. If some of the income is exempt from Canadian tax under the tax treaty with the source country, then the applicable corresponding deductions should also be calculated and claimed.

Reporting Foreign Assets – Form T1135

In addition to reporting foreign income on your personal tax return, if you own specified foreign property with a total cost of more than $100,000 CAD, the details must be reported on form T1135. This form is due on the same day as your personal tax return and carries penalties from $100-$2,500 if it is filed late.

Specified foreign property includes tangible or intangible property held outside of Canada. For example:

• Overseas bank accounts: Personal or business accounts held in financial institutions located in other countries.
• Investments in foreign stocks, bonds, or mutual funds: Shares in companies or funds based outside Canada (even if they are held in a Canadian brokerage account), or any investments held in a foreign brokerage account. This includes shares in Canadian companies if they are held with a broker located outside the country but excludes investments held in registered accounts, such as RRSPs, RRIFs, and TFSAs.
• Real estate properties outside Canada: Rental properties that earn passive income. It excludes property being used for personal (vacation home) or business use (your office, warehouse, factory) actively.
• Other specified properties: These could include shares of non-resident corporations, interests in foreign trusts, debt owed to you by a non-resident or ownership in foreign insurance policies.

Whether it is an Indian Bank account, investment property in the United Kingdom, or Chinese stocks, you must disclose these assets if the total cost of all your specified foreign property is over $100,000 CAD.

Suppose you have $50,000 in a UK bank account and invested $51,000 in Indian stocks. Even though none of the two foreign assets cross the $100,000 threshold, you must disclose both assets as they cross the threshold together.

Certain types of personal-use property are excluded from the T1135 reporting requirements. For example, personal vehicles, clothing, jewelry, or artwork outside Canada do not need to be reported, even if their value exceeds $100,000. Similarly, as mentioned above, assets held in registered accounts like RRSPs or TFSAs are not considered specified foreign property.

How Does the CRA Track Offshore Assets?

Wondering how the CRA will know what you earned in the United Kingdom? The CRA uses several tools and international agreements to identify undeclared offshore assets and income. The CRA receives financial information from foreign institutions through the Common Reporting Standard (CRS). For example:

• If you hold a bank account in the United Kingdom with a balance of $150,000, the CRS requires the bank to report this information to the CRA.
• Suppose you earned $5,000 in interest income from this account and failed to report it. The CRA would flag this omission, which would lead to potential penalties.

These agreements enable the agency to uncover undisclosed accounts, ensuring compliance and addressing tax evasion. Failing to report foreign income or assets can lead to severe penalties. Recent legislative changes have expanded the CRA’s powers, allowing it to recover unpaid taxes from foreign assets through international agreements.

Tips for Managing Foreign Income and Asset Taxation

Reporting and filing income tax in one country is complicated, and reporting in more than one country is even more difficult. Hence, it is imperative for taxpayers to

1. Keep Detailed Records: maintain accurate foreign assets and income documentation. It should include all statements, receipts, and tax returns from other countries.
2. Understand Reporting Thresholds: be aware of the $100,000 threshold for reporting foreign assets.

Disclosing your offshore income and assets accurately is critical to avoiding penalties. Misreporting or failing to disclose can lead to significant fines and legal consequences. Diligence and transparency are critical when reporting all income and assets, including those from outside Canada.

Contact McCay Duff LLP in Ottawa for Reporting Foreign Income and Assets

Need help with reporting foreign income? Talk to a professional tax expert to help you understand your obligations. At McCay Duff LLP, our tax experts can provide services, including advice and filing for foreign income and assets. To learn more about how McCay Duff LLP can provide you with the best taxation expertise, contact us online, by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

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How Small Business Owners Can Protect Their Business from CRA Scams 6 Mar 2025, 7:37 am

There is no denying that technology has made life easier and swifter than ever before. Especially for a small business, technological tools can be a big help and save loads of time in crucial areas such as bookkeeping, accountancy, logistics management, and many more. But there is a dark side to this tech boom—the increase in the number of scams and frauds. What’s worse, with technology having dissolved national boundaries, many scams are often orchestrated from countries far away. There has also been an alarming increase in CRA scams in the past few years, where scammers posing as CRA officials trick businesses into paying exorbitant amounts or even stealing sensitive business information.

How does one protect their small business from falling prey to such CRA scams? How can you identify and report such instances? This article is about that.

Types of CRA Scams

Scammers usually try to create a sense of urgency, even fear, to trick you into parting with confidential information or money. With the advent of Artificial Intelligence and advanced web tools, scammers can even replicate official government logos, websites, and letterheads, making all sorts of communication seem genuine. These scams can take many forms, such as:

• Sending links to fraudulent websites that look almost exactly like the CRA site under the pretext of verifying important information about your small business and even yourself
• Extorting money through fake claims of unpaid taxes
• Offering “limited period” discounts or rebates in taxation to gain sensitive information and money from you
• Posing as CRA officials (complete with fake IDs and phone numbers) and forcing payments through threats.

Despite these seemingly hard-to-see-through scenarios, there are a few things you can do to verify if you’ve been contacted by the real CRA or not.

How Can You Protect Your Business from a CRA Scam?

As mentioned above, most scammers create a sense of urgency and fear, so you don’t get the time to verify if they are from the CRA. So, first and foremost, it is important to stay cautious and keep your cool when you get any suspicious call, text, or email claiming to be from the CRA. The following are some ways you can use to identify and verify if the CRA is contacting you:

Knowledge About CRA Requirements

The CRA will never ask for financial information about your business or yourself in a voicemail or email. They will never use aggressive language or threats of any kind or demand immediate payments using cryptocurrency, prepaid credit cards, or e-transfers. And they will never ask you to meet them informally or unofficially in a public place to collect money. Any such requests via any medium – email, text, or phone call – should immediately be terminated and reported.

Verifying Phone Numbers

CRA officials will always identify themselves by sharing their names and contact numbers with you. If suspicious, note down the details and terminate the call. Then, use the Verify Phone Number tool available on the CRA website to check if the number is legitimate. Please do not trust any numbers displayed on the caller ID, and do not, at any cost, share any information before making sure it is the CRA contacting you.

Avoiding Fishy Links

Scammers often send emails from official-looking email IDs to small business owners with a link to fraudulent payment gateways or e-transfer portals. Avoid clicking on such links without verifying if the CRA has tried contacting you. For this, you can always contact the CRA directly from the numbers listed on their website.

Staying Informed

Your ignorance is a boon to the scammer. The Canadian Anti-Fraud Centre and the CRA regularly post updates about the latest scams and what to do if you happen to fall victim to one. Subscribing to such alerts can help you identify scams immediately and report them to the authorities.

Securing your Business Data

Using reliable security measures to keep your data safe and backed up can help reduce the risk of your business data falling into the wrong hands. Invest in a sound security system and protect any passwords to prevent your small business’s financial information from getting hacked.

Hiring a Trusted Accounting Agency

While hiring an experienced and trusted accounting agency to handle your business accounts has many perks, one of the significant advantages of doing this is that these experts can also guide you on protecting valuable financial information from potential fraud. Backed by years of experience and a network of contacts, they can help you with the best and most secure technology for your business. Some financial institutions and accounting firms offer their own fraud monitoring and protection services.

Despite all this caution, if your business does fall prey to any scam, contact the local police, CRA, and Canadian Anti-Fraud Centre immediately. Notify your bank and block access to credit cards or other financial resources to prevent further loss.

No business is ever completely safe from the risk of scams. However, staying vigilant, informed, and in touch with the CRA’s guidelines on financial fraud can minimize the risk of your small business becoming a victim.

Contact McCay Duff LLP in Ottawa to Help You Protect Your Small Business from Scams

A professional accountant can be your point of contact if ever you face a CRA scam. You can always cross-verify the details with the accountant and leave the CRA communication to them. At McCay Duff LLP, our accountants and tax advisors can provide services such as handling taxes and representing you in CRA inquiries. To learn more about how McCay Duff LLP can provide you with the best accounting and taxation expertise, contact us online, by telephone at 613-236-2367, or toll-free at 1-800-267-6551.

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6 Mistakes To Avoid To Make The Most of TFSA Tax Benefits 20 Feb 2025, 4:23 pm

Planning your investments for short—and long-term financial goals requires an understanding of investment instruments like stocks, bonds, ETFs, and GICs. However, most people make the common mistake of not considering the tax implications when making investment decisions. Then, the Canada Revenue Agency (CRA) claws back a significant portion of their investment income. A Tax-Free Savings Account (TFSA) is a tax-efficient way to generate wealth and meet long-term financial goals. However, small planning mistakes could reduce its tax benefits.

In this article, we will discuss common investment planning mistakes and how to avoid them to maximize your TFSA. 

Mistake 1: What Is Your TFSA Contribution Room?

The first step in TFSA planning is contributing money. The CRA sets an annual contribution limit. For 2025, it’s $7,000. However, your contribution room can be higher than $7,000 if you haven’t used last year’s contribution and/or made withdrawals in the past year.

For instance, John made a TFSA contribution of $5,000 in 2024. On January 1, 2025, a fresh contribution limit of $7,000 was added to his TFSA, and the $2,000 unused 2024 contribution was added to the 2025 contribution room. John can contribute $9,000 in 2025.

Take another scenario. John contributed $7,000 and exhausted his 2024 contribution room. However, he withdrew $3,000 before December 31, 2024. His 2025 TFSA contribution will be $10,000 ($7,000 + $3,000). Note that withdrawals in 2024 will increase your contribution room from January 1, 2025. You can time your withdrawals to make the most of the contribution limit.

Mistake 2: Failing to Verify the TFSA Contribution Room Mentioned on My CRA

You can check your TFSA contribution room on My CRA account. However, this information might not be updated in the year’s initial months as financial institutions file their TFSA informational returns by the end of February. If your contribution room shows $10,000 in January and you contribute the entire $10,000 in January itself without verifying your updated limit, there is a chance you might overcontribute.

Solution: If you realize that you have over-contributed, withdraw the excess amount immediately. The CRA charges a 1% penalty per month on the surplus amount.  

Tips: You can avoid overcontributing by following two easy steps:

• Do your calculations. Maintain a ledger that shows when and how much you contributed and withdrew. Tally your calculated contribution room with the CRA’s contribution room and verify it with the TFSA account statement (withdrawals and contributions). In case of any discrepancy, seek advice from a tax expert who can review the calculations and approach the CRA to get it rectified.
• Avoid making lump sum investments. You can consider spreading your investments through monthly contributions. For instance, a $7,000 contribution limit can be divided into 12 monthly contributions of $583. And if you want to invest over and above $583, make it a habit to check the TFSA contribution room. A monthly investment will help you make the most of stock market volatility, will not be rough on your pockets, and reduce the chances of over-contribution. 

Mistake 3: Opening Too Many TFSA Accounts 

The CRA sets the TFSA contribution limit for every Canadian. The $7,000 TFSA contribution limit for 2025 is for a single taxpayer. Even if you open four TFSA accounts in four different banks, your combined contribution limit is $7,000. If you open multiple TFSA accounts, tracking your investments and withdrawals could be difficult. Maintaining your records and verifying your TFSA contribution room is better, as CRA’s data may not be updated. Multiple TFSA accounts could lead to more paperwork and increase the risk of over-contribution.

Tips: You could consider opening only one or two TFSA accounts. And if you open multiple accounts, ensure you record every contribution and withdrawal.

Mistake 4: Making Unqualified Investments

Every tax benefit comes with its eligibility. The TFSA tax benefit only applies to qualified investments, which include money and securities listed on a designated stock exchange.

Examples of qualified investments: Stocks, ETFs, REITs, trading on the Toronto Stock Exchange and New York Stock Exchange, bonds, mutual funds, GICs, and more.

Examples of non-qualified investments: Cryptocurrencies like Bitcoin and Dogecoin, non-fungible tokens (NFTs)

However, you can still invest in crypto through the TFSA by purchasing cryptocurrency ETFs traded on the NYSE and TSX.

Penalty: If you accidentally invest in non-qualified investments, the CRA will charge you a penalty of 50% of the fair market value of that investment. Moreover, the tax benefit will not apply to these investments, which means the capital gain on these investments will be taxable.

Solution: You could consult a tax advisor to verify your TFSA investments are qualified. You could also consult them before making any future investment.

Mistake 5: Trading in Your TFSA

The CRA introduced the TFSA to help Canadians save money for the long term. However, if you make frequent securities transactions or trades (quickly relinquish securities ownership) through TFSA, the income will be categorized as business income, not investment income. Business income is taxable even if it is earned through TFSA.

Those who demonstrate extensive knowledge of or experience in securities markets and spend significant time studying the market could be under the CRA’s radar for using TFSA to carry out business. Even if you are an amateur investor, you can still come under the CRA’s radar if they find your transactions suspicious.

Solution: Consider making less frequent withdrawals by selling securities. If you want more frequent TFSA payouts, consider investing in dividend stocks or term deposits with interest-paying options. It is better to consult a tax advisor when planning your investments. They can represent your case to the CRA in case of scrutiny or tax audits. 

Mistake 6: Failing to Designate a “Successor Holder” for Your TFSA

In your TFSA account, you have the option to designate your spouse/common-law partner as a “successor holder” to whom the TFSA funds could be transferred tax-free after your demise. Your spouse or common-law partner can retain their TFSA contribution room and also receive TFSA funds tax-free

If no successor holder is appointed at the time of the original TFSA holder’s death, the fair market value of the TFSA can be transferred to a beneficiary’s TFSA as an exempt contribution, provided it is done before December 31 of the year following the original holder’s death. Any income earned after the date of death of the original holder of the account is taxable.

If there is no successor holder or beneficiary designated in the TFSA contract or will, the TFSA property becomes an asset of the deceased holder’s estate and distributed in accordance with the terms of the deceased’s holder’s will.

Contact McCay Duff LLP in Ottawa to Help You with Tax Planning

Taxes can get complicated. A professional tax consultant is well-versed in tax laws’ grey lines and subjectivity. At McCay Duff LLP, our tax consultants can provide services such as tax planning and guidance on making tax-efficient investments and transactions. To learn more about how McCay Duff LLP can provide you with the best tax planning expertise, contact us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

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What Does Break-Even Analysis Tell Small Business Owner?  6 Feb 2025, 9:36 am

The first milestone of every business is to break even. The break-even is when the company makes enough revenue to meet its cost. It’s a no-profit, no-loss stage. It is the bare minimum a business must achieve to stay afloat. A business unable to break even is only burning cash, which is not sustainable in the long run.

Calculating and analyzing the break-even point (BEP) can help small business owners make some of the most critical decisions, from pricing to costing to business expansion. The BEP analysis can answer whether a business venture or a new product is worth it. Even banks and investors look at BEP before investing in the business.

Now that the significance of break-even is established let’s understand how to calculate this figure, analyze it, and use it in business planning.

Calculating The Break-Even Point

Every business has a fixed and variable cost and a selling price. The BEP formula uses these three elements.

Break-Even Point = Fixed Costs ÷ Contribution Margin

Contribution Margin = Revenue per Unit – Variable Cost per Unit

Fixed costs include rent for storefronts, factories, computers, software, and fees paid to advertisers. It is that cost which will remain fixed whether you produce 10 units or 100 units. For instance, whether you bake 10 cookies or 100, the cost of the oven and equipment will be the same. 

Variable costs include labour, materials, sales commission, shipping, and utilities. This cost will change depending on the units you produce. For instance, the cost of sugar, flour, electricity bill, and packaging will vary if you bake 10 cookies and if you bake 100. 

After deducting the variable cost to cover the fixed cost, the contribution margin tells you the amount from the selling price left. For instance, you sell 100 cookies for $100, and the variable cost is $40. Your contribution margin is $60, which you can use to cover fixed costs.

A higher fixed cost increases your break-even point. Hence, a new baker might consider renting an oven instead of buying it. A lower fixed cost can help him achieve break-even faster. Only when you have a higher contribution margin can you consider the capital expenditure of buying an oven?

If variable costs are higher than sales revenue, the BEP will also be high, as in the case of software businesses where salary expense is high. The BEP is different for different types of companies and even works differently for them.

Using Break-Even Analysis in Business Planning

As we stated at the start of the article, a business strives to break even. A BEP can tell you how many units you need to sell to break even, but it cannot help you sell that many. Once you have your BEP and the number of units your business needs to sell is unrealistic, it is time to return to the drawing board and work out the price and cost structure.

Even then, if things don’t add up, maybe now is not the right time to launch the product.   

Determining If the Business Is Worth Pursuing

A small business owner can use the BEP to devise a sales strategy to achieve the volume that can help it break even. The business owner can set a time frame to break even and accordingly accumulate sufficient reserves to fund its losses till then. This time frame may vary according to the business type.

For instance, a business may set a target to break even in three to five years and arrange for funds to meet five years of business expenses. If the company doesn’t reach BEP in three years, it could be a warning sign, and if it doesn’t reach BEP even after five years, the owner might instead pursue a different venture. Even investors use BEP to determine how long they want to hold the investment before deciding to invest more or exit.

Determine Cost Strategy

Going back to our example, if the business finds it difficult to break even after three years, the business owner could consider reducing its costs by using cheaper alternate materials without compromising on quality. A baker could also minimize packaging costs and opt for a more affordable alternative. It could outsource some of the work, such as home deliveries, if demand picks up, thereby reducing the cost of hiring an employee.

Many companies calculate the impact on BEP when hiring a new employee, opening a new store, or buying equipment. They want to know when a new employee, store, or equipment will pay off the cost and turn profitable. The answer could alter the decision of hiring a new employee or opening a new store.

Determine Pricing Strategy

A BEP analysis can also help you determine if your prices are too low or too high. However, your pricing strategy is not solely based on BEP but also on the market rate as you want to stay competitive. If the price is way below market price, you have room to increase prices. However, if rising prices are not an option, you could consider offering discounts provided lower prices boost volumes enough to break even. Note that price discounts may only work if fixed costs are high, as you can achieve economies of scale.

Limitations of Break-Even Analysis

While break-even analysis is a good starting point, it has limitations. Break-even analysis cannot help you forecast demand and supply or prepare for long-term goals and market uncertainties. A business owner must do budgeting, forecasting, financial planning, and much more alongside break-even analysis to run the business smoothly.

Contact McCay Duff LLP in Ottawa to Help You with Break-Even Analysis

A business consultant can help you perform forecasting and break-even analysis to devise strategies backed by data. At McCay Duff LLP, our accountants and business consultants can help you make your business cost-efficient through stringent tracking and monitoring of financials. To learn more about how McCay Duff LLP can provide you with the best accounting and business consulting expertise, contact us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

The post What Does Break-Even Analysis Tell Small Business Owner?  appeared first on McCay Duff LLP.

How Can Business Consultants Help Maximize Returns 30 Jan 2025, 9:37 am

Several times during its lifetime, your business might come to a difficult crossroads or to a complete standstill, unsure of what the next step should be. This could be due to an unexpected problem or even uncertainty about taking your business to the next level after achieving much success locally. It is at such crucial point that the need for a business consultant is felt. And rightly so a business consultant’s main objective is to provide solutions to problems that require innovative solutions. Hiring an unbiased specialist who has a bird’s eye perspective on your business from the outside can work wonders for your business and its potential.

How does a business consultant help your business?

A business consultant has a specialized skillset that aims at understanding and navigating industry-related and market-related roadblocks while staying true to the business’s main goals and vision. They are well-equipped to provide customized solutions to specific problems and find innovative ways to enhance the operational and technological efficiency of the business. A business consultant can:

1. Provide strategic guidance by identifying new opportunities and alerting business against hidden threats.
2. Streamline business processes and boost productivity by improving operations at the workplace.
3. Give insightful input regarding financial issues, including budgeting, cost-cutting, cash flow management, and investment opportunities.
4. Assist in the smooth transition of changes at the management level or hiring fresh talent.
5. Advise new ways of integrating your business with the latest technology to enhance productivity, operations, security, and brand recognition.
6. Innovate and integrate ways to attract more customers and expand the business beyond the local or even national markets.

But yes, all these benefits of hiring a consultant come with a hefty fee attached. As the business owner, it is also your responsibility to first see if investing so much in an expert’s fees will give you an agreeable ROI (Return On Investment). So, is it worth investing in a business consultant at all?

The Worth of a Business Consultant

The simplest answer to this question is yes if you hire the right consultant at the right time.

Most business owners think of roping in a consultant only when their business faces a challenge the company’s management is not able to resolve by itself. Having only limited time to study how your company operates and understands its strategic goals, it often becomes difficult for the consultant to provide instant solutions in a moment of crisis. Then there is also the question of convincing your employees and even senior management to trust and cooperate with the consultant, whom they might view as an outsider and thus hesitate to share information with. This gap in communication and the undercurrents of urgency can backfire and lead to unintended consequences, making you, the business owner, feel like hiring the consultant was not the best decision.

However, this problem has an easy solution. Hire a consultant not just when you are in the midst of a crisis but when the going is good.

As mentioned above, a business consultant brings to the table industry-specific expertise, technological knowledge, and solutions in the areas of human resources, finance, and operations. He or she comes not as an outsider but as an ally of the company. By properly orienting your staff and managers about the role the consultant will play in helping the business, much of the communication and trust issues can be resolved right at the beginning, giving the consultant an acceptable environment to work in.

By sharing all necessary information about the company’s history, vision, code of ethics, product specifications, and, most importantly, growth plans and financial ambitions, you can equip the consultant with all the resources they need to design the best possible roadmap for the business’ growth.

Maximizing Returns with the Right Business Consultant

The true value of a business consultant is unlocked when their services and expertise are used to enhance your present business momentum. The consultant can come up with creative and budget-friendly ways to further boost productivity with the available financial structure while further reducing costs and other specific pressure points of your business. They can also suggest better investment options or marketing techniques to improve sales. They can also put you in touch with reliable partners for your business’s technological needs, which are crucial in today’s world for expansion and growth.     

All these tips and strategies ultimately aim at helping your business unlock its true potential and gain higher returns for the same amount of effort and investment. Thus, hiring the right business consultant at the right time can prove to be a game-changer for your business in the long term.

Contact McCay Duff LLP in Ottawa For Business Consultancy Services  

Talk to a professional business consultant who has expertise in your line of business and the solution you seek. They can crunch the numbers and draw an executable roadmap to help you achieve your objective. To learn more about how McCay Duff LLP can provide you with the best business consulting expertise, contact us online, or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

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Tax Planning for People with Disabilities: Maximizing Benefits 23 Jan 2025, 9:54 am

Navigating the world of taxes can be challenging, especially for individuals with disabilities and their families. However, understanding the various tax credits, deductions, and savings plans available can significantly ease the financial burden.  

Reviewing the Fundamentals of the Disability Tax Credit (DTC)

The first credit available is the Disability Tax Credit (DTC). We discussed the core elements of the DTC in detail in a previous article here. As a recap, the Disability Tax Credit (DTC) is a non-refundable tax credit designed to help individuals with impairments by reducing the amount of tax they need to pay.

To qualify for the DTC, an individual must have a severe and prolonged impairment that markedly restricts their ability to perform basic activities of daily living. If an individual does not have a severe impairment, they might still qualify for the DTC if they have two or more significant restrictions.

A medical practitioner must certify the impairment or restrictions using Form T2201, Disability Tax Credit Certificate. This form can be submitted to the Canada Revenue Agency (CRA) either electronically or on paper. CRA will review the application and send a notice of determination.

Claiming the Disability Tax Credit

Once CRA has approved the DTC, the credit can be claimed. For 2024, the federal disability amount is $9,872. The amount of actual tax savings varies by province. In Ontario, the total in 2024 is approximately $1,987.

If the person with the disability is under 18 years of age at the end of the year, a supplemental credit of up to $5,758 may be available. This credit could be reduced if childcare or attendant care expenses for the person with the impairment have been claimed. The supplemental credit could translate into additional tax savings of about $1,159 in Ontario in 2024.

Transferring the Disability Tax Credit

If the person with the disability does not need the full amount of the DTC to reduce their taxes to zero, the unused portion can be transferred to a supporting family member who provides some or all of the basic necessities of life including food, shelter, and clothing. Supporting family members include:

• their spouse or common-law partner
• their child or grandchild
• their parent, grandparent, brother, sister, uncle, aunt, niece, or nephew
• a child or grandchild of their common-law partner
• a parent, grandparent, brother, sister, uncle, aunt, niece, or nephew of their spouse or common-law partner

Other Tax Deductions and Credits

Disability Supports Deduction

Individuals who have an impairment may be able to deduct expenses they paid to be able to work, go to school, or do research for which they received a grant. Eligible expenses include attendant care, certain job coaching services, and specific assistive technologies and support services. A full list of eligible expenses is available on CRA’s website.

Attendant Care Expenses

If the person with physical or cognitive challenges requires attendant care or resides in a nursing home, these expenses are eligible for the medical expense tax credit.

Home Accessibility Tax Credit

If renovations are made to the home where the person with the impairment normally resides, up to $20,000 of these expenses may be eligible for the Home Accessibility Tax Credit.

Multigenerational Home Renovation Tax Credit

Starting in 2023, this credit is available for expenses incurred to create a secondary unit within the existing dwelling or on the property. One of the people living in the new unit or on the existing property must be an “eligible individual”, which means someone who is:

• either 65 years of age or older, or
• be 18-64 years of age and be eligible for the DTC.

Since only one of the eligibility criteria above needs to be met, this credit is available for individuals over 65, even if they are not eligible for the disability tax credit.

The total amount of costs that can be claimed is $50,000, generating a maximum refundable credit of $7,500. Only one qualifying renovation can be claimed for each eligible individual in their lifetime.

Note: Mortgage insurance reforms were announced in the Fall 2024 Economic Statement that should make it easier for homeowners to access the equity in their home to finance the construction of a secondary suite.

The Canada Caregiver Credit

This credit is available for people supporting a spouse or common-law partner or a dependent with a physical or mental impairment. The credit calculation is affected by the spousal and eligible dependent credits and is eroded as the income of the person with the impairment increases but could provide modest tax savings in some situations.

Potential Benefits from Other Programs

Canada Pension Plan Disability Benefits

If the person with the impairment is unable to work and was previously contributing to the Canada Pension Plan (CPP), they may be eligible for disability benefits through that plan. If the person with the impairment is eligible for CPP, their children may also be eligible for benefits if the children are under 18, or between 18-25 and in full-time attendance at a recognized school or university.

Child Disability Benefit

The Child Disability Benefit is available to parents who receive the Canada Child Benefit for children eligible for the Disability Tax Credit. The benefit is calculated using the same information used to process the Canada Child Benefit, so it is important to make sure that information is up to date.

Provincial Programs

Eligibility for provincial programs is often based on income and assets but could be worth investigating further depending on the circumstances of the person with the impairment.

Special Savings Plans Available

Registered Disability Savings Plan (RDSP)

The RDSP is a savings plan intended to help parents and other qualifying family members save for the long-term financial security of a person under the age of 60 who is eligible for the Disability Tax Credit. Contributions to an RDSP are not tax-deductible, but investment income earned in the plan grows tax-free until withdrawn.

Canada Disability Savings Grant – This government program matches contributions to a Registered Disability Savings Plan at rates of 300%, 200%, or 100%, depending on the beneficiary’s adjusted family net income and the amount contributed. The maximum match is $3,500 or $1,000, also depending on these factors. Grants are available until the beneficiary turns 49.

Canada Disability Savings Bond – This program for low-income families will provide up to $1,000 per year for the beneficiary’s RDSP regardless of how much is contributed.

Trusts

Trusts can be useful in a situation where a loved one wants to provide a larger sum for a person with an impairment. With all trusts, a trustee is appointed to manage the funds. If the funds are meant to provide for the person with the impairment, then they would become the beneficiary of the trust. Trust law in Canada varies by province, and trusts must be structured properly to meet objectives while complying with the rules. Therefore, obtaining proper legal and tax advice is essential.

Henson Trusts

A Henson Trust can be useful in a situation when preserving eligibility for asset or income-tested government benefits is a priority. With this structure, the trustee has absolute discretion in distributing income and capital to the beneficiary as they see fit. Because the beneficiary cannot legally demand payments from the trust, they are not considered to own the trust assets, which helps protect their eligibility for government benefits.

A Henson Trust can be created while the person funding the trust is still alive, or as part of their will.

Qualified Disability Trust

This type of trust can only be established as part of a will. The advantage of this type of trust is that it can access low marginal rates as long as it remains eligible, whereas other trusts created by an estate only have access to lower tax rates for up to three years. To receive this preferred tax treatment, an election must be filed within certain time limits, so it’s important for the trustee to seek professional advice on a timely basis.

Other Trust Structures

Other trust structures that are sometimes used in situations where the beneficiaries don’t have an impairment might also fulfill the objectives of planning for someone with a disability.

The preferred beneficiary election is another tool that can be used in some cases to allow the income to be taxed in the hands of the beneficiary with an impairment, without the requirement of paying the income out to that beneficiary. Both the beneficiary and the trustee need to meet certain criteria for this option to be available, so it’s important to discuss the details of your situation with professional advisors before the trust structure has been finalized.

Trust considerations

Trusts can be extremely useful when providing for an individual with an impairment, but they do have some pitfalls if they are not set up properly. Obtaining legal and tax advice is essential when establishing any kind of trust structure.

McCay Duff LLP in Ottawa provides comprehensive tax solutions and support

At McCay Duff LLP, our trusted team of Chartered Professional Accountants provides high-quality tax and business advisory services to Ottawa and surrounding businesses. We assist corporations in achieving maximum profitability, minimizing tax obligations, and staying compliant with tax laws through expert tax planning, preparation, and advice. Don’t hesitate to contact your McCay Duff LLP consultant if you are considering a trust or have questions regarding tax planning for people with disabilities so that we can advise you on the potential implications for your situation. Contact us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

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Could You or a Loved One Qualify for the Disability Tax Credit? 16 Jan 2025, 10:51 am

As we usher in the new year, it’s a time for reflection and taking stock of various aspects of our lives, including our health. For many, this period of introspection may reveal changes in physical or mental health that could impact daily living. If you or a loved one has experienced such changes, it might be worth exploring the Disability Tax Credit (DTC). This non-refundable tax credit can provide significant tax relief for individuals with severe and prolonged impairments in physical or mental functions.

Overview of the Disability Tax Credit

The Disability Tax Credit is designed to help reduce the amount of income tax that individuals with disabilities, or their supporting family members, may have to pay. The idea behind the credit is to recognize that there are additional costs and challenges faced by those with disabilities and provide some relief. The total value of the credit varies slightly from province to province, but in Ontario, the credit on its own is worth about $1,987 in tax savings for the 2024 tax year. 

If you or your loved one are paying for a retirement home, long-term care facility, or other type of attendant care, getting the necessary medical certification could be worth much more than that – tax savings of up to 20% of the attendant care fees paid. This would be instead of, in addition to, or as a partial combination with the disability tax credit depending on the circumstances. Your McCay Duff LLP consultant will choose the option that results in the highest credit for your situation.

Criteria for the Disability Tax Credit (DTC)

To qualify for the DTC, an individual must have a severe and prolonged impairment in one of the categories listed below, or a significant limitation in two or more categories.

Vision: The individual is considered blind if, even with the use of corrective lenses or medication, both eyes meet at least one of the following criteria:

1. Visual acuity of 20/200 (or worse)
2. Greatest diameter of the field of vision is 20 degrees or less

Speaking: Difficulty speaking so as to be understood by a familiar person in a quiet setting.

Hearing: Difficulty hearing so as to understand spoken conversation with a familiar person in a quiet setting.

Walking: Difficulty walking without help or taking 3 times longer than someone else of the same age who does not have an impairment.

Eliminating (Bowel or Bladder Functions): Difficulty personally managing bowel or bladder functions.

Feeding: Difficulty preparing food or feeding oneself, including chewing and swallowing.

Dressing: Difficulty dressing oneself, excluding activities like identifying, finding, or shopping for clothing.

Mental Functions Necessary for Everyday Life: Difficulty performing mental functions necessary for everyday life, such as adaptive functioning, attention, concentration, goal setting, judgment, memory, perception of reality, problem-solving, regulation of behavior and emotions, and verbal and non-verbal comprehension.

Life-Sustaining Therapy: Therapy that supports a vital function, is needed at least two times per week, and requires an average of at least 14 hours per week. Examples include dialysis, insulin therapy, oxygen therapy, chest physiotherapy, and others.

How to Apply for the Disability Tax Credit

If you think you might meet the criteria, it could be worth applying for the Disability Tax Credit. Applications do not need to be made every year. Depending on the circumstances and the age of the applicant, the application might only need to be submitted once to be approved indefinitely.  If the application needs to be resubmitted in a future year, CRA will advise to that effect. Also note that if the impairment started before the 2024 tax year, prior year returns can be adjusted.

Applying for the DTC involves filling out form T2201. This can be done electronically or on paper.

Applying Electronically for the Disability Tax Credit

The Canada Revenue Agency (CRA) has introduced a new digital application portal to streamline the process of applying for the Disability Tax Credit. This portal allows both parts of form T2201 to be completed digitally, which should shorten the amount of time it takes for an application to be reviewed.

Step 1: Applicant

The person with the impairment or their family member fills out Part A of the digital application form. This can be accessed by signing in to My Account at: https://www.canada.ca/en/revenue-agency/services/e-services/digital-services-individuals/account-individuals.html

Scroll down to Benefits and Credits section, then choose “Benefits and Credits”.

Select the “Apply for DTC” button to open the digital form and complete the information.

It is also possible to submit a digital application over the phone by contacting Canada Revenue Agency and speaking with one of their agents at 1-800-959-8281.

Important: At the end of step 1, you will receive a reference number. Do not lose this as you need to provide it your medical practitioner.

Step 2: Give reference number to medical practitioner

The medical practitioner will need the reference number to complete Part B of the digital application form. The last name and date of birth that they enter must also match what CRA has on file.

Step 3: Medical Practitioner

The medical practitioner completes Part B of the application, which can be found here: https://apps.cra-arc.gc.ca/ebci/uisp/dtc/entry

The CRA may contact the medical practitioner’s office to verify the source of the application.

Once the medical practitioner completes their portion, the application will be reviewed by the CRA.

Applying for the Disability Tax Credit Using the Paper Form T2201

Step 1: Download the Paper Form

The form can be found at this link: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2201.html

Step 2: Applicant

The person with the impairment or their family member fills in the identification sections of the form and then passes it along to the medical practitioner.

Step 3: Medical Practitioner

The medical practitioner completes the medical information section of the form and returns it to the applicant.

Step 3: Submit the Application

If you have a PDF or scanned version of the completed application form, it can be uploaded to the CRA by signing in to My Account and then selecting “Submit Documents”. Your McCay Duff consultant can also upload it to CRA on your behalf.

Alternatively, the application can be mailed to the CRA at one of the addresses listed on the paper version of the form. We recommend that you keep a copy for your records.

Processing Time for the Disability Tax Credit

According to their website, the CRA’s goal is to review applications within 8 weeks. Ideally applications would be submitted in early January to give CRA time to review them before your personal tax return needs to be filed.  

The new year is an opportune time to assess your health and determine if you or a loved one might be eligible for the Disability Tax Credit. With the introduction of the CRA’s new digital application portal, applying for the DTC has become more accessible and efficient. If you believe you meet the criteria, consider reaching out to your medical practitioner to begin the application process and take advantage of the tax savings available to you.

McCay Duff LLP in Ottawa provides comprehensive tax solutions and support

At McCay Duff LLP, our trusted team of Chartered Professional Accountants provides high-quality tax and business advisory services to Ottawa and surrounding area businesses. We assist corporations to achieve maximum profitability, minimize tax obligations and stay compliant with tax laws through expert tax planning, preparation, and advice. If you need assistance maximizing your pension income tax credit, contact us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

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What is An Executor’s Role in Managing an Estate? 9 Jan 2025, 9:23 am

Wealth is everyone’s dream, but wealth brings a lot of administrative work. Earning wealth is more straightforward than preserving it, as you must maintain it from the tax claws of the Canada Revenue Agency (CRA) and creditors. You may know the complexities of your finances, but what happens when you pass away? Many individuals open a trust to efficiently preserve and grow their wealth tax, and some write a Will. In either case, the onus falls on the estate executor to carry out all the work, from collecting and distributing assets and liabilities to funeral rights.

The Role of an Executor in Managing an Estate

The executor wears several hats of an accountant, lawyer, financial planner, debt negotiator, and asset manager. Hence, when you choose an executor, look for someone you trust (friend, family, or professional). Given the complexities involved, even if you choose a friend or family, they might seek professional help to carry out the responsibilities of an estate executor.

What are the duties of an executor, and why is a professional a better option if your estate is complex?

The executor’s job begins when the owner of the estate passes away. The executor then acts on the owner’s behalf to manage his/her assets and execute what is written in the will.

Find the Will and Apply for Probate

The first step is to find the latest Will of the deceased and apply for probate in the court to get a Certificate of Appointment of Estate Trustee. The probate gives the Will its legal validity and the executor the authority to perform all tasks to close the deceased’s accounts and distribute the assets. The estate has to pay probate fees on the value of the assets, which are subject to probate.

Communicate with Beneficiaries

Once the Will is found, the executor has to identify beneficiaries of the estate and send in writing (email or physical copy) a notice of his or her intention to probate the Will along with a copy of the Will. The executor must also inform the beneficiaries of the status of executing the Will and present detailed accounting. We will get to the accounting part later.

Identify and Value the Estate and Liabilities

From here begins the most tedious part for the executor. An estate is a person’s lifetime earnings dispersed in various forms. One may have a real estate property, boat, jewelry, or bank account in and outside Canada. Then there are retirement accounts, government pensions, salary, insurance, and other investments like Tax-Free Savings Accounts (TFSA) and interest in business. The executor has to assemble all these income sources in liquid and non-liquid form and ascertain the estate’s value.

The executor has to identify and account for all the secured and unsecured liabilities. It includes mortgages, personal loans, pending taxes, credit cards, and other related agreements.

The executor will identify assets and liabilities, prepare an account, and develop a strategy to pay the debts while preserving assets for beneficiaries. This requires financial planning as the executor has to prioritize debts that may entail penalties and have sufficient liquid assets to pay off these debts. The executor also has to negotiate with creditors and, if needed, sell illiquid assets to pay off liabilities. That also requires good negotiation and knowledge of taxes, as the sale of a property will attract capital gains tax.

Safeguarding the Assets 

Until all the liabilities are paid and assets are distributed to the beneficiaries, the executor is responsible for preserving the asset and its value. And, if possible, even enhance the value of the estate. The executor has to regularly inspect and maintain houses, cars, boats, and other tangible assets and ensure they have adequate insurance policies. In the case of investments like stocks, bonds, and other such accounts, the executor has to wear the financial planner’s hat and optimally manage these investments until they are transferred to beneficiaries.

Closing the Accounts

Once the executor pays off all the liabilities and taxes of the deceased, he or she has to close all accounts and get a certificate that proves there is no outstanding liability. If the executor fails to obtain such certificates, they must bear that liability from their pocket. Here is a small checklist of the most common accounts the executor may have to close for the deceased:

• Close accounts or a safe deposit box in banks, trust companies, or other financial institutions. Cancel credit cards and other subscriptions.
• Cancel government-issued cards such as the person’s driver’s license, passport, and health card.
• Empty and clean the house, change the locks, and, if needed, sell the property either to pay liabilities or because the Will says so.
• Close digital assets such as social and digital accounts like email, Linkedin, and Facebook to ensure they are not vulnerable to misuse.

Distribution of Assets

Whatever is left of the estate after paying liabilities and taxes is distributed to beneficiaries per the instructions stated in the Will. The Will should state the proportion of distribution if there is more than one beneficiary and even specify how to distribute assets if the beneficiary passes away before the estate owner. The executor has the authority to distribute these assets.

Maintaining Accounts of the Estate Execution

The executor has to properly account for all the receivables and payables and make them available to beneficiaries. He or she also has to safely keep invoices of all the expenses and certificates of liabilities paid off and any other supporting document to prove the transaction occurred. If the beneficiary is unsatisfied, they can send the executor’s accounts for review in the Court. And if there is anything that the executor cannot account for, he will have to bear the loss from his pocket.

The executor takes the risk and performs the above tasks in return for a fee, even if he is a friend or family. The fee could be a percentage of the estate value or an amount discussed before.  

Contact McCay Duff LLP in Ottawa to Help You Manage and Execute Your Estate

The executor has to be a trustworthy person who can navigate through all legal and financial dealings smoothly. A professional accountant is better positioned to handle the administrative and accounting complexities of the estate. At McCay Duff LLP, our accountants and tax consultants can provide services such as managing the estate and executing the Will. To learn more about how McCay Duff LLP can provide you with the best accounting and tax expertise, contact us online, or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.

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