CCA claim and Automobile expenses are a very common claim in the self-employment
and Rental schedules.
Each statement provides charts that contain info on additions, dispositions and ending UCC of the depreciable assets. In the case of T2124 this info is recorded on Page 3 of the T2124 form. Other statements such as T2032, T2121, T2042, T1163, T1273 and T776 have similar sections.
In addition, each statement includes CRA designated lines to claim the normal CCA (Line 9936), Terminal Losses (line 9270). CRA has not provided a specific line for Recapture of CCA but it requires that recapture be reported in one of the other income lines such as line 8230. (As an example, see the T2124 form).
The rules of how this information needs to be reported is described by CRA on the various guides and also on the forms (usually in fine print comments).
The old method - using the CCA charts on the statements
In prior years the program allowed entry of CCA information directly into the statements and the program would transfer the claim from the charts to the lines designated as described above.
Drawbacks: Entering directly on the charts of the statements appears to be simple but it has several drawbacks. The charts do not provide sufficient info to easily handle the CRA requirements.
Most often you have to use overrides to keep the ending UCC properly and also handle terminal losses properly. CRA requires that terminal loss need to be reported on the other expenses line and not on the CCA claim line.
The difficulties get bigger in cases such as:
- An Automobile is used for both personal and business use
- An Asset or Automobile is used by more than one business
- A business started or ended within a year
In the above cases a tax preparer should be very alert as to how the charts
would be prepared and how much CCA, Terminal Loss or Recapture should be
claimed on each statement. This is a very time consuming and error prone
In a lot of cases, an audit of a tax return would easily reveal that the same asset has been reported with different ending UCC if used in several statements, or the ending UCC may be incorrect even for a single statement unless the tax preparer was alert to handle it, usually via an override.
The new method using the Assets form
Due to the above shortcomings of the old method, we redesigned the handling of the CCA.
The objective was to:
- conform to CRA requirements of reporting
- reduce the time required for correct reporting
- handle more complex cases such as splitting the use of automobile or asset among multiple statements
In the T1-2007 version we changed last year's layout of the Assets form
to provide more flexibility, readability and use.
Starting with the Feb. 24, 2007 the program requires that you enter the CCA information on the Assets forms only. The Feb 24 update was re-posted on the web site on March 2, 2008 to identify non-completion of the Assets forms as an error and give you help and links to enter CCA into the Assets form(s). Please re-download the Feb 24 update (if you did not already).
This is a one time transition that requires more effort/time on your part but it provides a better reporting method and keeps the records clean for audit purposes.
To comply with CRA terminal loss reporting requirements, a new line 'Terminal loss' has been added on the expense section of the statements. This line is automatically captured by the program when terminal loss is called for on the Assets forms.
In addition, new buttons have been added to the CCA pages of the statements to jump directly to the Assets or Automobile forms.
To help in this one time transition to the new method, the program provides a new form called CCAList that spells out the class and beginning UCC that needs to be entered on the assets forms. Once you complete the Assets forms, the CCA charts (page 3) and the claim lines are automatically prepared by the program. The UCC of the assets is kept on the assets form and provides the continuity from year to year.
In general you can proceed as follows:
After rollover, or before you enter the assets on the Assets Form:
1. Locate the error message in the Audit Wizard 'E-CCA has not been entered on the assets form'. Click on it and it will show you the CCAList. Print this page and use it as reference
2. Open the Assets form and enter asset description, select the statement, enter 100% (or less) and enter the CCA Class and the date of acquisition. (it does not have to be exact). The rest is done by the program automatically, such as transferring to the CCA section of the affected Business Statement(s) and the actual claim of CCA, terminal loss or recapture.
Click the Next button (blue arrow) if you have more Assets
You need to enter 'Y' on the top of the first page of assets form so the posting will take place.
We are investigating the feasibility of having the program automatically migrate the CCA info from the statements into the Assets forms, so you do not have to enter it manually.