Actions to take before the New Year

I was reading an article the other day on ten things you need to do before Dec. 31st Here is the short list:

1. Take TFSA Withdrawals - If you withdraw funds from a TFSA, an equivalent amount of TFSA contribution room will be reinstated in the following calendar year, assuming the withdrawal was not made to correct an over contribution.
2. Contribute to an RESP - December 31st is the deadline for 2017. Would you like more information?
3. Charitable donations - contribute now for the 2017 tax year. The first time Super Credit ends Dec. 31, 2017.
4. Postpone any ETF or Mutual Fund purchases until January if the investments are in Taxable Accounts.
5. Review your income and expenses - defer income to next year and pay expenses this year to reduce your taxable income.
6. Review all potential tax breaks.
7. Collect all of your medical expenses. If you have a PHSP or HSA submit your expenses now.
8. Convert Your RRSP to a RRIF by Age 71 - If you turned age 71 in 2017, you have until December 31 to make any final contributions to your RRSP before converting it into a RRIF or registered annuity.
9. Income Splitting - If your private corporation has other shareholders, such as your spouse, partner, or other adult relatives as shareholders, consider whether it makes sense to pay additional dividends to family members who are in lower tax brackets in 2017 to maximize any income sprinkling opportunities before any proposed federal rules could increase the tax rate on such income commencing in 2018.
10. Book an appointment with your Financial Advisor - You can book a call with me if you are not currently working with one. 

2012 Tax Tips

It’s tax time in Canada.  If you are like most people, in March you assemble all of the required pieces of paper so that you can complete your tax filing by the April 30^th deadline.  Most people who expect money back, file early, while those who owe money wait until the end of April.

In order to help you get ready, here is a list of tax tips I’ve put together, based on my readings of the “experts” and information from Canada Revenue Agency (CRA). 

To ensure that you maximize your deductions, you should always get tax advice from a qualified tax practitioner.

1. Ontario healthy homes renovation tax credit. A new refundable tax credit of 15 per cent of eligible expenses is available for Ontario residents over age 65 who spent money to make their home safer. The deduction is also available to those who live with a family member who is a senior.  

The type of eligible expenses includes changes to make a first-floor or secondary suite for a senior. It also includes grab bars and handrails, wheelchair ramps, walk-in bathtubs, no-slip flooring and hands free taps and hand held showers. Wheelchairs or walkers are not deductible, nor are general repairs incurred to increase the value of the home. 

For more information check this link

2. New Family Caregiver Amount. This is a $2,000 bump to the normal credits if your spouse, child, or other adult dependant has a mental or physical infirmity. Verification is required to indicate when the condition started and its expected duration. Make that appointment quickly to file your returns in time, and remember, if the doctor charges you a fee, claim it as a medical expense.

Additional information can be found on the CRA web site 

3. Are you claiming all of the medical expenses that you are eligible for?  They can be grouped into the best 12-month period ending in the tax year. They can be claimed by the spouse with the lower income, but must exceed the lesser of $2,109 or 3 per cent of your net income.

New medical expense claims. For those who travelled out of their local communities for medical care, a “simplified method” of claiming auto expenses is possible. For a full list of eligible items – check the CRA web site   
 
4. Your safety deposit box is an often missed tax deduction. It’s not the largest amount. Check out the eligible carrying charges and interest expenses.

5. Disability Tax Credit is a lucrative tax credit. It is claimed by someone who is markedly disabled on a permanent basis, or their supporting individual. Especially vulnerable are those with progressive diseases, like Alzheimer’s or cancer.  A doctor or other qualified healthcare professional must fill in form T2201, the Disability Tax Credit Certificate. In many cases, the information provided by the healthcare professional may indicate several years of impairment. Previous tax returns can be adjusted for the tax credit for each year that the Disability Tax Credit Certificate has been approved by CRA. 

To obtain a Form 2201 to apply for the Disability Tax Credit – click here 

For more information about programs available to people with disabilities – click here 
 
6. Qualifying moving expenses include real estate commissions, which can run into the five figures are the most lucrative deduction. You have to move 40 kilometers closer to a new work or business location where active income is earned. If your not sure if your eligible   or what expenses you can claim – click here  

A list of tax relief measures for Canadians are listed on the CRA web site – check the list out.
 

CRA is encouraging Canadians to file electronically, so they have stopped mailing out personalized tax return forms. You can still pick the T1 up at Canada Post or Services Canada or call 1-800-959-8281.

Remember if you Netfile, you must keep all receipts for 6 years.

Where to Find Help with Your Canadian Tax Return

Questions about deciphering the Canada Revenue Agency’s forms? Wondering when you will get your income tax refund or your GST credit? Here is the contact information you need, including toll-free phone numbers, to get the answers you want:

CRA Web site 

•      Have an income tax question? Call  1-800-959-8281     
•      Wondering where your refund is? Call   1-800-959-1956   
•      Waiting for your GST credit? Call     1-800-959-1953   
•      Waiting for your Canada Child Tax Benefit or Universal Child Care Benefit? Call  1-800-387-1193 

Updates to Group Insurance

Group Insurance Plans

2012 has seen a number of changes to your group insurance plan that you should be aware of.

Taxation

Disability premiums have been an employee paid benefit (or a taxable benefit if paid by the employer) for many years.  In 2012, the CRA changed the rules for Life and AD & D (Accidental Death and Dismemberment) benefits.  They are also now a taxable benefit if paid by the employer. However, the health and dental premiums still are not a taxable benefit.  That is why if the employee and employer share the cost of the benefit, the employee pays the life, AD & D and disability premiums and the employer pays a larger percentage of the health and dental premiums. 

For more information  check out this publication on the CRA web site on taxable benefits.  

If you are an employer, bookkeeper or accountant pages 40 and 41 includes a table that summarized all the information, including which benefits you need to deduct CPP and EI or include the GHT / HST and what code to use on any T4s that you need to issue.

Travel Insurance

In December 2012, Manulife and Desjardin clarified  the rules for out of province travel insurance and many of the other insurance companies will be making similar clarifications to their plans in the future.  The issue is pre-existing conditions and whether they are stable.

Individual travel plans have a clause that states that pre-existing conditions are covered if they are stable for 90 to 180 days (depending on the age of the client).  Snowbirds are aware of this clause and see their doctors as soon as they arrive back home, so should there be a change in their medications, they qualify for travel insurance the next winter. 

The insurance companies consider a condition to be not stable should there be any change to the medications you use or should you visit the doctor because of an issue related to that condition.  Note – you would be covered for anything not related to that condition.

Until recently, if you were on a group plan that had travel insurance coverage, you were exempt from that stability – but that is changing.  If you plan to travel and have had any changes to your medications, you should check witn your insurance company to see if you are covered.

The Toronto Star ran an article on travel insurance just before Christmas.  In November 2012, they also ran an article on 10 things you need to know about travel insurance that you may want to read as well.

More Year End Tax Tips

Giving gives back!
Your donations to CRA registered charities generate a 15% – 29% tax saving. Make sure to ask for an official receipt as you will not be refunded without it.

Public Transit pays off!
If you use public transit to get around, you and any eligible dependents that you have may be entitled to a 15% non-refundable tax credit. Environmentally friendly AND financially rewarding, public transport is taking you places!

Keep your receipts
No need to send your receipts when you NETFILE your tax return, although the CRA may send you a request later for:
• Medical expenses
• Charitable donations
• Child care expenses
• Spouse or child support payments
• Moving expenses
Use a big envelope or shoe box as your "official tax slip holder" and keep all tax related information there.

Save for retirement and save on your taxes!
If you invested in your RRSPs in 2011, your contributions are exempt from taxation as long as they stay in the plan. Invest early in the year to gain tax free interest on your investment and make your money work for you.

Important tax dates for tax season 2011
• Feb 13, 2012 – NETFILE Services are open
• Feb 29, 2012 - RRSP Deadline
• April 30, 2012 – Tax Filing Deadline
• June 15, 2012 – Self Employed Tax Filing Deadline
• September 30, 2012 – NETFILE services close for tax season 2011

Keep on top of your money

Back in May 2009, I came up with a "Tweet" of a Financial Plan - Control debt. Review insurance to protect lifestyle. Monitor spending. Save. Be tax smart. Develop & audit plan. Update will. Review planRecently, I saw an article in the Toronto Star - Improve your finances in just 30 minutes.

Both can be summarized the same way - be organized, have a system in place and stick with it. We'd all like life to be easy and not have to think about money and the "what ifs", but unfortunately, that's not reality. So the real question is how do you take care of your finances for both the planned and unplanned expenses in life without the planning getting out of control.

The system I recommend is to set aside some time every week or month to do these tasks. When you receive your mail, put all of the financial related items into an envelope or file folder. Similarly, take all the receipts out of your pockets and wallet and put them into the envelope as well.

Sit down regularly to go through this package and to ensure:
· There are no mistakes / unexplained charges on any of your bills
· Have a file folder for receipts you need to keep - items you'll declare as expenses on your taxes, warranty items, bills for repairs, etc.
· Once you've matched receipts to your bills for items like groceries, discard them

I use software to keep track of my expenses. I download my statements directly from my financial institutions and categorize everything. This way, at tax time, I can run a report and have summary numbers for all of my expenses.

At the same time as you are reviewing your statements, pay your bills. Most on-line banking systems let you date a payment for the future. If you pay by check, write it out and have it ready for when you want to send it out.

At the same time, set up a monthly rotation to review ongoing expenses such as your home and car insurance, life insurance, saving plans (RRSP, RESP, TFSA, etc), budget, etc.

Using a system ensures that you use a minimum amount of time for these tasks, and that you don't have to worry again.

Looking to save money on Drug Prescriptions?

As you know, the cost of your prescriptions is made up of two components – the dispensing fee and the cost for the medication. There is a large variation in the cost of having your prescription filled.

One way to save some money is to select a pharmacy with lower filling fees. A recent study by Emergis was done on the average cost of dispensing fees in Ontario between July and December 2008. The results are as follows:


Pharmacy Average Dispensing Fee Submitted


Average for All Pharmacies $9.70


Costco $4.11
Pharmex (mail order) $6.69
Walmart $8.60
Zellers $9.07
Loblaws $9.22
Dominion / Miracle Mart $9.31
IDA $9.77
Pharma Plus $9.79
Shoppers Drug Mart $11.01

Health and Dental Options for Self Employed

The recent outbreak of H1N1 (Swine Flu) has received a lot of news coverage, and many of us have decided to take precautions to remain in good health.

In times like these, self-employed people may be especially concerned. Without the sort of comprehensive health and dental coverage that many employees receive from their employers, small business owners are right to worry about what would happen should they, or their families, ever require expensive medication or treatment that isn't covered by their provincial plans.

Private health insurance isn't nearly as expensive as you might imagine. Depending on your age, health, the level of coverage and the insurance company, you may be able to obtain both drug and dental insurance for yourself, your spouse, as well as a child, for as little $165 a month (based on two non-smoking 40-year-old adults, with a 15-year-old child).

The best part is that you may be able to write off the entire amount as a business expense. In 1998, the federal government made these premiums tax deductible for self-employed individuals!

If you'd like to discuss the various health and dental plans available in the Canadian marketplace, I hope you won't hesitate to contact me at the number above. I'd be happy to shop around and find a plan that's right for you.

Be Tax Efficient

Medical Expenses

Most people are unfamiliar with the many medical expenses that can be claimed beyond dental bills, prescription drugs and living aids, such as prescription glasses and wheel chairs. You are able to include any medical expenses not paid for by a provincial or private plan. In fact, even if you have private coverage, the premiums you pay are eligible medical expenses.


Canada Pension Plan (CPP)

If you are retiring early, it’s generally better to begin taking your CPP as soon as you are eligible (i.e. age 60) versus waiting until age 65. The extra five years between age 60 and 65 when you haven’t made CPP contributions may mean that you won’t receive the full amount even if you do wait. Because you will receive benefits, even though reduced, for an extra 60 months, you could be in your 80’s before you start to reap the benefits of waiting.

Focus on Family

Some tax credits can be claimed by either spouse. Medical expenses and charitable donations are two examples. Generally, it is almost always better for the spouse with the lower net income (provided he/she is in a taxable position) to claim medical expenses because the credit reduces by a percentage of net income. The credit for charitable donations is a two-tiered federal credit of 15 per cent (2008) on the first $200 and 29 per cent on the balance (plus provincial credits). Spouses are allowed to claim the other’s donations and to carry forward donations for up to five years. By carrying forward donations and then having them all claimed by one spouse, the first $200 threshold with the lower credit is only applied once.


Optimize Holdings Inside and Outside Your RRSP for Tax Efficiency
Consider tax efficiency as one factor when deciding which investments to put inside your RRSP and which to keep outside. Consider putting funds inside your RRSP that generate interest, or have a history of large taxable distributions. Keep funds outside your RRSP that you expect will pay relatively fewer taxable distributions or that generate more dividend and capital gains returns.

Salaries to Family Members

One effective income-splitting technique for individuals with a business is to pay family members a salary or wages for any services they provided in the year. The services must have genuinely been provided and the salary or wages must be reasonable. A family member could also be a director for a corporation and receive reasonable director’s fees. This also generates RRSP contribution room for your family members.