Deductions, Deductions, Where Fore Art Thou Deductions?

For those of you who prefer to wait until the last-minute to do your taxes – remember the deadline is May 5th, 2014 this year only – you might be just now looking for items to deduct in order to reduce an amount owing, or just because you have to get that information and now you are wondering if they are deductible.

Or, maybe your tax return has been completed for you and now you are holding the draft of that return and before you sign it – which tells the CRA that you agree with the information in it, so you cannot say I didn’t know what was being filed! – and you want to make sure your accountant / tax preparer did their job and notified you of all the eligible deductions you are entitled to, then this post will be quite useful to you!

The big question: What you can deduct?

When preparing your tax return there are many deductions and tax credits you may be eligible to claim in order to reduce the amount of tax you must pay, if they apply to you.

Any eligible deductions are reported on lines 205 to 485 of your personal tax return.  More specifically, deductions from income and tax credits are reported on lines 205 to 485 and these lines are deducted from line 150 to give you your net income amount (line 236).

Here is a line index from the Canada Revenue Agency website listing the deduction and for more information you will need to follow the link and read the details.

Lines 244 – 260 are deducted from line 236 to give you your taxable income amount (line 260).

Lines 300 – 378 are non-refundable tax credits and reduce your federal tax. However, if the total of these credits is more than your federal tax, you will not get a refund for the difference. Remember to claim the corresponding provincial or territorial non-refundable tax credits to which you are entitled on your provincial or territorial Form 428.

Lines 405 – 485 are your federal and provincial or territorial taxes payable, your federal and provincial or territorial tax credits and your refund or balance owing amounts. The federal and provincial or territorial tax credits reduce your tax payable. If the total of these credits is more than your total tax, you could get a refund for the difference. Claim all available provincial or territorial tax credits on your provincial or territorial form which may be applicable to you.

Complete the provincial or territorial tax and credit forms for the province or territory where you resided on December 31, 2013.

Hope this help!

 

Happy deducting!

 

#inTAXicating

#tax

Be Proactive: 6 Easy Steps to Reduce Taxes for the 2014 Tax Year… in 2014.

I know, I know.

You have not yet filed your 2013 personal income tax returns here in Canada and already some former Canada Revenue Agency Collections Expert (me) is pushing you to think about your 2014 personal income tax filing.

Well, of course I am.  We are 3-months into 2014 and any time is the right time to help taxpayers save on taxes for the current — and future — years.

Here are 6 quick ideas to get you thinking about ways to save taxes in 2014 starting today!

1. Reduce tax deductions at source.

As I have mentioned before, a tax refund is a sign of poor tax planning equivalent to loaning the Canada Revenue Agency (CRA) your hard-earned income for a year only to get it back after filing your tax return, interest-free.  An easy strategy to minimize or eliminate taxes owing for 2014, is to complete CRA Form T1213, “Request to Reduce Tax Deductions at Source.”

The purpose of this form is to ask the CRA for reduced tax deductions at source for any deductions or non-refundable tax credits that are not part of the Form TD1, Personal Tax Credits Return. In order to complete this form, all income tax returns that are due have to be filed and amounts paid in full before sending this to the CRA.

In addition the request to reduce deductions through Form T1213 must be made each year, and the CRA will respond within 6-weeks time to advise if the request has been approved or denied.  Once approved, the CRA letter should be handed over to the payroll department who will then reduce the amount of taxes withheld at source. Deductions and credits which will be claimed upon the filing of the 2014 personal income tax return such as RRSP contributions (other than those made through payroll deduction), support payments or child-care expenses should be accounted for.

By planning ahead, you get your “refund” throughout 2014 and they can use that saving to set up and contribute to a RRSP, RESP, TFSA or other long-term investment vehicles aimed at deferring tax.

2. File on time.

Everything.  Always.  This way you do not start the tax year paying back debt, or penalty and interest, for missing a filing deadline by a day or more.  The CRA offers an online installment reminder service whereby you will get an email notifying you that your installments are due.  Use that, set key dates in your calendar or have your accountant notify you in advance.  Just do not miss filing deadlines.

3. Donate funds “in-kind

Consider donating appreciated publicly-traded shares, mutual funds or segregated funds “in-kind” to a registered charity or foundation throughout the year, and not just at year end in order to claim a deduction.  The tax receipt received for these types of donations are equal to the fair market value of the shares or funds donated, and the payment of taxes on any accrued capital gains are avoided.

4. Clear up all balances owing (with the CRA and elsewhere)

Along the lines of point number 2, if at all possible, clear up any amounts owing to the CRA as quickly as possible.  You save money by not paying interest which the CRA compounds daily at a rate around 10%, plus the reduction in stress is well worth it.  Also take into consideration that a debt with the CRA can harm your credit or business relationships, whereas a consolidation loan paying back a bank improves your credit.  Same outcome, but different treatment.

5. Consider Income – splitting loans.

As of January 1st, 2014, the prescribed rate has dropped back down to 1% 1. In a typical income-splitting loan strategy, a high-income spouse (or partner) loans funds at the prescribed rate to his or her lower-income spouse. The investment returns minus the tax-deductible interest on the spousal loan can then be taxed in the lower spouse’s hands. The advantage of advancing a loan when the prescribed rate is low is that under the tax rules, clients need only use the prescribed rate in effect at the time the loan was originally extended to avoid the income being attributed back to the higher income spouse so if the loan is establish during the first quarter of 2014, when the prescribed rate is 1%, they can then use that rate for the duration of the loan, which could be unlimited if there is no fixed term and it’s simply a demand loan.

6. Find a great accountant and investment planner who care about you and your family.

One of the most common questions I get asked is how to know if your accountant or investment adviser are meeting your needs, and the way I answer that is to ask you when the last time you spoke to their professionals about you.  When was the last conversation you had with them about you, your family, your work, dreams, goals, aspirations, and about the kids, any side business you have or want, or even about how you get to work or who pays the mortgage of private school tuition for the kids.

If you have never had this conversation then you must be 100% on top of all new legislative changes to be sure you are taking advantage of all deductions and tax credits available and when you hand over your file at tax time, be comfortable knowing that what you are getting is a tax return.  No more, no less.

A  good accountant and a good investment adviser take the time to know you and advise you, send you suggestions, recommendations and tips on ways to save money, invest, reduce taxes, and can help guide your financial future.  You should want to call your financial professionals when you are looking to make a decision that could impact your finances and don’t be alarmed if they don’t know the answer right away.  A well researched answer is much more valuable than an off the cuff opinion.

 

These 6 things should help you get moving in the right direction in 2014 and as always, should you have any questions, concerns or comments, all you need to do is send me an email to info@intaxicating.ca or comment on a blog post here, or at http://www.intaxicating.ca and an answer will be coming your way.

If you wish to inquire about our services. you may do so via the above email address or by call 416.833.1581 and let us guide you through your tax problem, right to its resolution.

inTAXicating.  Where experience counts!

 

I am Writing a Book to Help Canadians Deal With Tax Problems. Preview Inside.

I have always wanted to write a book to help Canadians deal with tax problems, or tax debts with the Canada Revenue Agency (CRA).

There is no better time than the present, so here is a preview;

Chapter 1.

Call me!

Chapter 2.

If you have a tax debt, tax problem, are behind on filing, made errors on your return, missed deductions or slips or if you owe money and cannot pay. You need a straight shooter who can tell you what to do and do so without costing you an arm and a leg.

Welcome to my company.

It is my goal to help each and every Canadian who has a tax problem through either a free 15-minute consultation, a one-hour meeting or through engaging my services.

I’m going to tell you what you need to know and not what you need to hear. If you are exposed to the CRA, I will tell you. If you are not legally required to pay a debt, I will tell you that too.

What I won’t do is mislead you into thinking that the CRA spends all day searching your keywords looking for you, unless you have done something criminally wrong, then I am recommending you speak with one of Canada’s top tax lawyers who will treat you in the same no-nonsense manner.

I also won’t lead you to believe that I have an army of former CRA staff at my disposal or that the CRA likes being referred to as the “taxman”. They do not.  My network of CRA tax experts is vast and reside all over Canada.  I have friends still working in the CRA and many who have left.  I firmly believe that knowing what questions to ask is much more valuable than the answers given.  I know what questions to ask, and I will ask them for you.

I do, however, have 10-years of experience at the Canada Revenue Agency – as a collector – and as a resource officer, field officer, team leader, and I have significant experience in fairness / taxpayer relief, managing the Director’s Liability and s.160 inventory, and for 5-years, I trained the collections staff at Canada’s largest Tax Services Office how to do their jobs.  I cannot and will not list all the areas of the CRA that I worked in, because I wanted to learn, experience and help taxpayers while working there and I still want to do the same now that I am on the other side of the negotiating table.

Common sense tells me that if you have a tax, collections, or enforcement problem, you do not need a trustee, or a tax lawyer, or an accountant, but you need a former CRA collections expert to steer you clear of trouble.

Don’t let the CRA or other “tax” firms decide that you need to go bankrupt. You decide!

If you need forms filed with the CRA, or tax returns prepared for individuals or businesses, I work with the best accountants and accounting firms who share my philosophy of putting you first.  Together we make sure your past filings are accurate and that you have claimed the correct amounts legally allowed.  We don’t add things or make up deductions because that is what gets you in trouble.

My firm is Toronto-based, however accessible throughout Canada and around the world – as my clients have found out.

I’m not going to pull out a horse and pony show and try to entice you with fancy expensive ads which I will need to charge you extra to pay for – but I’m going to listen, process, and advise you what to do based on my experiences and based on 17-years of handling matters with the CRA, IRS, Revenu Quebec and with WSIB and the CRTC.  I spent the majority of my time at the CRA working on the corporate side, so GST/HST, payroll, corporate tax and personal taxes are all in my areas of expertise.

I will tell you what the CRA is doing, and what they will be doing next. It’s nice to be a step ahead!

And throughout this whole process, you have to understand that the CRA will be working with us to resolve your tax matter and not working against us. It’s what they get paid to do. The only difference is they do it with us and not against us.

Conclusion:

So, why reach out to me? Why not!

I can be reached at info@intaxicating.ca, or by phone at 416.833.1581.

Get the Largest Tax Refund Possible! Fast! Yikes!!!

After spending close to 11-years working in the Canada Revenue Agency (CRA), I have a pretty good idea what gets people into tax trouble.

Okay, I know exactly what gets people into tax trouble, and while it’s nearly impossible to list all of the reasons, I can tell you that there are ways to get you out of tax trouble which many of the people I come across on a daily basis have never considered.

I can honestly say, without any prejudice that I believe a main part of the problem has to do with targeted advertising this time of year, towards tax filing season and which is aimed at people who equate getting their money back fast through the quick, cheap filing of tax returns.

The ads go something like this;

“Get the Largest Tax Refund Possible”.

“Get the Most Back.”

“Get the Most You Are Entitled To.”

“Get your Money Back Now!”

Just hearing those advertising slogans scare me, and it should scare you too.

Getting money back from the government at tax time, does not mean what you might think it does. You are not getting money from the government because you fell into a threshold, but what you are doing is getting your money back from the government. Your money that you overpaid (or were over-deducted at source) which the government kept during the year – held interest-free in fact – which you are asking for back.

Amazing.

It’s akin to lending someone money for a year – they use it, or invest it and make money off of it – and then a year later you ask for it back and you get it, while they made money off of it.

So how does this tied into tax debt?

History has shown me that people do not wake up in the morning and decide that they want to start carrying a balance owing to the Canada Revenue Agency.  Nobody wants to worry when they go to use their debit card that there might not be funds there as a result of a CRA bank garnishment, or when they go to sell their home find out that there is a lien on it.

Tax problem occur over time and as the time passes and interest accumulates, people find their ability to deal with it declines and before you know it, the amount owing is massive and the CRA is breathing down your neck.

So imagine if after rushing to have your tax return completed – so you can get back a couple of hundred dollars – you find out that you owed money instead.  Now you have a tax problem.  A tax problem that you have not budgeted for.  Now in collections, you have time find a way to pay off this amount owing, and fast, before the CRA takes legal actions.  You can ask friends and family for money, or consider a second job to pay that off.  It can be done, it can take time, or it can snowball and you become a chronic tax debtor in the eyes of the CRA.

Now the fun starts.  Visits to your house, your employer and notices to your bank or clients all run the risk of causing you long-term embarrassment.

If only there was a solution available to help out the repayment.

Well, there is.

This scenario could be completely different if you have taken the time to speak with an accountant, or a reputable tax firm and knew in advance that you might owe and together you had the opportunity to determine the best way to handle this impeding debt by placing money into your RRSP, or applying for, and claiming deductions to reduce your amount of taxes owing at year-end.  With a good accountant, your tax planning is not just for the current year, but also for future years.  

Wouldn’t that make more sense?

One of the first questions I ask a prospective client, or anyone who comes to me for tax advice, is who completed your tax return and what are their credentials.  It’s important because I have taken tax returns which owned $3000, $4000 or $5000 each year and turned them in to $4000 and $5000 credit returns just by claiming deductions and tax credits available to those taxpayers.  Nothing illegal and nothing which would cause the CRA to reject the claim.

So instead of rushing to have your return completed for $40 or $50, think about spending the extra money this year and take advantage of an accounting firm which will sit with you, determine how to minimize your tax expenditures for this year and for future years.  Pay what you owe and not a cent more, and if you’re getting money back every year find out why.  Learn which deductions you may be eligible for and start keeping your receipts.  Take control of your year-end tax filing and stop sending the CRA penalty and interest revenue.

If you already have a tax problem, you need to have tax experts review your prior year tax returns to look for missed deductions and credits.  With a simple amending of the return, your balance could be reduced or wiped out completely.  This really is the best way to start paying back / down a tax debt!

It’s what I do.  For you.

It’s worth the money!

If you are looking for an alternative, please feel free to reach out to me here in the comment section, or email me at intaxicatingtaxservices@gmail.com.

Reminder: T4’s and T4 Summaries are due February 28th to the Canada Revenue Agency (CRA)

I’m worried.

Not for me, but worried for you. I’m worried that you have forgotten to prepare the T4 for your employee, or nanny, and that you will not be able to submit the T4 with the T4 summary to the Canada Revenue Agency (CRA) by the February 28th deadline.

If you have not completed the T4 or T4 summary yet and are weighing your options, I have some information you need to consider.

First, provided you have been making regular remittances to the CRA, you already have the information you need to submit to the CRA.

Secondly, if you have been making regular remittances the CRA will have sent you a code which allows you to complete the T4 and T4 summary online and which allows you to file online.

Third, if you let the deadline slide by, you are going to pay a penalty.

Say what you will about the Canada Revenue Agency, but they ask and they listen. If you have had the opportunity to attend a CRA information session (or be on a panel as I have) you know that the CRA wants to know what bothers people and how they can improve things. They really do.

In the good old days, when I worked at the CRA, late filing of a T4 was a minimum $100 penalty (plus interest) and late filing of a T4 summary was a minimum $400 penalty to a maximum of $2500.

The CRA has instituted a new administrative policy that applies to certain information returns to ensure that late-filing penalties are charged in a manner that is both fair and reasonable for small businesses. The penalty is the greater of $100 or a penalty determined as follows:

Relieving administrative policy – penalties
Number of information
returns (slips)
Penalty (per day) Maximum penalty
(100 days)
1 – 5 Not applicable $100 flat penalty
6 – 10 $5 $500
11 – 50 $10 $1,000
51 – 500 $15 $1,500
501 – 2,500 $25 $2,500
2,501 – 10,000 $50 $5,000
10,001 or more $75 $7,500

Of course, if you have to get it done by the 28th and you are close on figures, you can always send them your best estimation and amend the return at a later date.  You won’t get hit with the late filing penalties unless your figures are WAY off from the real figures and the CRA feels you sent these numbers to in some way circumvent the rules.  Interest will continue to apply.

Hope you filed on time.

On the Fence about FATCA? Canada and U.S. Sign Intergovernmental Agreement on Foreign Account Tax Compliance Act

Ever since  I caught wind of  the Foreign Account Tax Compliance Act, back in 2010, FATCA has been near the top of my radar.  For those of you who are unaware what FATCA is, The Foreign Account Tax dept of financeCompliance Act (FATCA) requires citizens of the United States (present, past, those with citizenship who do not live there, those who worked there a specific number of day, and those who received “accidental” citizenship through birth), to report their financial assets held outside of the United States to the Internal Revenue Service (IRS).  If providing that information means that the IRS would be taxing you and you have been trying to hide these assets, FATCA requires foreign financial institutions to report your information to the IRS.  The intent of FATCA was to combat offshore tax evasion and to recoup federal tax revenues.   FATCA is a portion of the 2010 Hiring Incentives to Restore Employment (HIRE) Act.

As the tax manager at Computershare Investor Services and the Assistant Vice President of Tax for CitiGroup (CitiFund Services) I got to know FATCA very intimately and at one point or another became the Canadian lead on information dissemination and compliance.  After almost 11-years of interpreting legislation at the Canada Revenue Agency (CRA) deciphering this text came second nature and thus taking the FATCA regulations and translating them into English was not a difficult task, but more something that I had to do in order to teach myself the requirements so I could pass along that knowledge to my employers and to my clients.

The interesting thing about FATCA from a Canadian side was that with over a million “US Persons” here in Canada (probably much more now) I don’t believe the IRS understood that the majority of them were paying taxes in Canada and since the Canadian tax rate is higher than the US rate, there was some hesitation on the Canadian side to provide all this data to the IRS for no net gain.  Other countries rushed to sign intergovernmental agreements with the IRS to meet deadlines which have now been pushed out again as a result of the July 2014 start date for FATCA, but Canada did not.

The Canadian government was hesitant to force Canadian financial institutions to provide the very detailed information on Canadian citizens for fear that they would be double taxed, something the Canada-US Treaty strove to avoid.   In addition, the Canadian side wanted the Canada Revenue Agency included so that information could pass through secure channels and potential breaches of security and privacy could be avoided.  There was even talk that Canada refused to sign an agreement with the IRS, instead forcing the IRS to seek their own tax cheats from their own side of the border.

Then something changed.

The IRS began ramping up their search for US Persons via every mean possible – whether it was checking Facebook accounts to see where people are born, cross-checking it with school records – or by allowing people who had no previous knowledge of FATCA some amnesty when catching up on their delinquent tax returns, but then hammering them on their filing of the Report of Foreign and Financial Assets to the tune of $10,000 per late return – with no maximum.

People became scared, and when scared you have two choices to make.  Either flee or fight.  In this case it’s either comply or pray.

Those who chose to file had to wade through unclear rules and regulations and a lot of unclear information floating around on the Internet.  Is there penalty, is there not?  Will I be charges criminally, or will the IRS understand that I was not aware of my obligations.  Do I have to file 3-years of past-due returns or 10 years?  When are FBAR’s due?  Should this cost me $10,000 or $100,000?

Many questioned the over-reach on the US side while others commented that as an US citizen, the requirements were there and you should have known.

But with all that being said, on February 5th, 2014, Canada and United States announced that they have reach an agreement on Foreign Account Tax Compliance Act (FATCA).

The intergovernmental agreement lays out the details of how the US will be using FATCA to track down the Canadian financial activities of US persons to make sure they are paying required taxes to the IRS.

Under the terms of the agreement Canadian financial institutions will send some of the information they collect on their US clientele to the Canada Revenue Agency and the CRA will transmit the information to the IRS.

The agreement can be read in it’s entirety on the Canadian Department of Finance website.

My take from reading the release is that the Canadian government realized their hands were tied, however they were not going to allow the IRS to demand information which violates Canadian privacy laws and thus allowed the IRS to pursue their legitimate tax-base with the assistance of the CRA much in the same way the CRA and IRS work together to collect tax debts – through information sharing and not the actual collecting of debts for the other country.

Kerry-Lynne D. Findlay, the Minister of National Revenue said; “This is strictly a tax information-sharing agreement. This agreement will not impose any U.S. taxes or penalties on U.S. citizens or U.S. residents holding accounts in Canada. The CRA does not collect the U.S. tax liability of a Canadian citizen if the individual was a Canadian citizen at the time the liability arose. This includes dual Canada-U.S. citizens. That will not change under this agreement.”

Changes to the FATCA legislation under this agreement include, but are not limited to;

  • Certain accounts are exempt from FATCA and will not be reportable, including Registered Retirement Savings Plans (RRSP), Registered Retirement Income Funds (RRIF), Registered Disability Savings Plans (RDSP), Tax-Free Savings Accounts (TFSA), and others yet to be released.
  • Smaller deposit-taking institutions, such as credit unions, with assets of less than $175 million will be exempt from FATCA compliance.
  • The 30 percent FATCA withholding tax will not apply to clients of Canadian financial institutions, and can apply to a Canadian financial institution only if the financial institution is in significant and long-term non-compliance with its obligations under the agreement.

This intergovernmental agreement is only the beginning.  Recent G-8 and G-20 commitments agreed upon in September 2013, intended to fight tax evasion globally and to improve tax fairness, provide for an automatic exchange of tax information as the new global standard.  This agreement signaled an intention to begin exchanging information automatically on tax matters among G-20 members by the end of 2015.

So like it or not, FATCA is just the beginning of a world-wide crack down on tax evasion.

Still on the fence?

inTAXicating Tax Services works with several Canadian tax-preparation firms who specialize in US taxes, and FATCA compliance.  If you wish to get caught up, please feel free to reach out to us at info@intaxicating.ca.  If, you have further questions and wish to discuss your requirements, you can email, or call us at 416.833.1581.  If you wish to comment, you may do so below.

The Rickey Henderson Effect: The Value of a Wink.

The Rickey Henderson Effect: The Value of a Wink.

I hope you are able to, and take the time to, read this post on the importance of acknowledging others – in business and in life.

In this specific article linked above, the author describes how as a young child, Rickey Henderson – then an outfielder with the New York Yankees – winked at him as he was leaving the baseball field in between innings.  That wink alone led the author to become a huge fan of Henderson’s and the author detailed how his mother purchased Henderson products and how he influenced his friends to purchase products and the net effect of that wink was money in Henderson’s pocket (he receives a share of items purchased in his name or his likeness).

Fast forward to 2014, and the author comments on the importance of a wink, or ;) in social media and how it can also have the same impact on people.

I completely agree.

The most effective way to interact with people is to, well, interact with people.  Saying hello, nodding, winking, waving, or in today’s cyber-society with a wink, or a smiley face or even by personalizing emails through the adding of terms like; “Hope you are well”, “Warm Regards” or “All the best”.  These little additions tell the person on the other side that they are being acknowledged and by taking the time to do that you have an ally.

To that point, a personal story.

I had been working at the Toronto North Tax Office of the Canada Revenue Agency for 2 1/2 years and had become accustomed to putting my head down as I walked through the building as others do.  I have always been great with faces but terrible at remembering names, and it was easier to pretend there was no one there or that I was distracted so I didn’t have to say hello or remember a name.

Then one morning as I left the subway and walked towards the office, someone walked by me and said, “Good morning Warren!”,

Much to my surprise – and I am nowhere near shy or introverted – I looked up, did not recognize the face, but said hello back and then out of my mouth came this; “I’m sorry.  Normally I am great with faces but I cannot remember where I know you from.”

He responded; “I’m Mark.  You trained us last week on Director’s Liability.  Great class.  I learned a lot.”

It was that moment when I decided that I needed to acknowledge people too.  Stop walking with my head down.  Stop looking busy.  I needed to learn people’s names and a fact or two about them to show them I care and help bring the office closer.

From that morning on, I saw and addressed each and every person I came across by their name (or what I suspected was their name).  If I called them by the wrong name, they would just correct me, right.  :)

For the next 9 years, I became that guy at the CRA.  The guy who knew “everyone”.  The guy people came to with questions, and for advice.  The guy who liked the people he worked with because he took the time to get to know them and as I moved into leadership roles, I was best able to get the most out of all my staff because I knew their strengths and weaknesses, likes and dislikes.  I wanted what was best for the CRA, but also best for the employees and if there was a dispute, there was that trust that I was not going to steer them wrong and it would benefit them in the end.

I took the time to wink.  Just like Rickey Henderson did, and it paid off exponentially.

Today, take the time to say hello to people you would not normally talk to.  Not too long, but just enough to let them know you care.  Or send an email that is a little less impersonal and a little more warm.

You will feel great and so will they!

;)