The federal government is proposing to eliminate the ability for designated professionals \u2014 including doctors, lawyers and accountants \u2014 to elect to use billed-basis accounting in this year’s budget.<\/p>\n

Taxpayers are generally required to include the value of work in progress in computing their income for tax purposes. However, accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors have had the option to exclude the value of work in progress in computing their income.<\/p>\n

This option effectively allows income to be recognized when the work is billed (billed-basis accounting), enabling the taxpayer to defer taxes by permitting the costs associated with work in progress to be expensed without the matching inclusion of the associated revenue.<\/p>\n

“My view is that this change is another way [for the government] to clamp down on how small business corporations are used by professionals,” says Debbie Pearl-Weinberg, executive director of tax and estate planning with Canadian Imperial Bank of Commerce’s wealth-strategies group in Toronto.<\/p>\n

Read: Budget 2017<\/a><\/strong><\/p>\n

Watch: Changes to tax structures on private corporations <\/a><\/strong><\/p>\n

The proposed measure will apply to taxation years that begin on or after Budget Day.<\/p>\n

To mitigate the effect on taxpayers, a transitional period will be provided to phase in the inclusion of work in progress into income.<\/p>\n

For the first taxation year that begins on or after Budget Day, 50% of the lesser of the cost and the fair market value of work in progress will be taken into account for the purposes of determining the value of inventory held by the business under the Income Tax Act.<\/p>\n

For the second, and each successive, taxation year that begins on or after Budget Day, the full amount of the lesser of the cost and the fair market value of work in progress will be taken into account for the purposes of valuing inventory.<\/p><\/p>\n","protected":false},"excerpt":{"rendered":"

Doctors, accountants, lawyers and others will now be required to include the value of work in progress when filing their income taxes<\/p>\n","protected":false},"author":38954,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4829,5007,2312,2313],"tags":[3138],"yst_prominent_words":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/267400"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/38954"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=267400"}],"version-history":[{"count":1,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/267400\/revisions"}],"predecessor-version":[{"id":359062,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/267400\/revisions\/359062"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=267400"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=267400"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=267400"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=267400"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}