November 14, 2014 National Philanthropy Day in Canada: Highlighting Tax Breaks for Charitable Donations

November 14th, 2014 is National Philanthropy Day here in Canada, and the Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue, was in Vancouver to applaud those Canadians who donate to charities and to remind Canadians to take advantage of the tax credits available for eligible charitable donations.

Receiving special attention was the new temporary donor super tax credit which provides an extra 25% federal tax credit on top of the original charitable donation tax credit which means that eligible first-time donors can get a 40% federal tax credit for monetary donations of $200 or less, and a 54% federal tax credit for the portion of donations that are over $200 up to a maximum of $1,000.

The donor super credit applies to donations made after March 20, 2013, and can only be claimed once between 2013 and 2017.

This is in addition to the provincial credits available.donation

Those who have donated before can still be eligible for the charitable donation tax credit, a non-refundable tax credit which allows taxpayers to claim eligible amounts of gifts to a limit of 75% of their net income.

For a quick estimate of your charitable tax credit for the current tax year, try the charitable donation tax credit calculator, which can be found here.

Minister Findlay also reminded Canadians that only Canadian registered charities and other qualified donees can issue official donation tax receipts.  This is extremely important because if you make a donation to a charity which is not eligible to issue donation tax receipts but they provide one anyways, the CRA will re-assess you for that donation deduction with penalties and interest.  A little due diligence up front goes a very long way.

If it seems too good to be true, it should give you reason for concern…

To find out if an organization is registered, go to the Canada Revenue Agency’s (CRA) website and search their complete list of registered charities in their Charities Listings.

For more information about donating, such as how to calculate and claim the charitable tax credit, go to the CRA’s site for making donations, which is here.

 

Some Quick Facts

  • Two years ago, Canada became the first country in the world to officially recognize November 15 as National Philanthropy Day.
  • There are more than 85,000 registered charities in Canada.
  • The benefit to charities of being a registered charity? Registration provides charities with exemption from income tax.
  • According to Statistics Canada, in 2010 almost half of all Canadians volunteered, giving more than two billion hours of their time. In addition, in 2012, 5.6 million tax filers reported charitable donations for a total of $8.3 billion in donations reported.
  • According to Statistics Canada, in 2012 the average age of charitable donors across the provinces and territories is 53 years old.
  • Follow the CRA on Twitter – @CanRevAgency
  • Follow inTAXicating on Twitter @intaxicating

 

inTAXicating Is 6-Years-Old! Happy Anniversary. Let’s Share Links!

I received a surprising message from WordPress on Sunday, September 21st that this blog, inTAXicating,has celebrated it’s 6th anniversary!

Time flies!

Happy Anniversary inTAXicating.keep-calm-and-happy-6th-anniversary-1

That means it has been 6-years since I have been posting suggestions, tips, and recommendations surrounding the ins and outs of the Canada Revenue Agency (CRA), the IRS, Revenu Quebec and the WSIB.  I have written about these government organizations based on my practical work experience at the CRA and in private industry working closely with all of them.

I have posted some great stories and have so many more to come!

Compliance, Collections, Cross-Border issues, FATCA, Assessments, Liens, Director’s Liability, Audits, Negotiations, Accounting… I’ve done it all, and I’ve shared a lot of inside information that no one else hears about, or knows about.  Having all of this knowledge and wanting to share it is the driving reason behind maintaining this blog, and opening up a tax solutions business at www.intaxicating.ca.

I am also always looking for great Canadian tax content to read and discuss, so if you are a tax blogger, or if you have a different go-to site for Canadian tax information, please either post a comment on this post, or send me an email at info@intaxicating.ca and I will add the site to my blogroll.

The more Canadian tax information we can get together as a community, means we can help Canadian taxpayers that much better!

 

Can You Describe What You Do To A Stranger? Tell People What You Do!

If you have been reading my posts on The Urban Daddy, or on inTAXicating, you will know that I sometimes put on my MBA-hat and question everything about the way we do business.

One of the questions I have had for a long time has to do with how businesses choose to identify themselves to the public. We all know that keeping customers is much easier and much cheaper than getting new ones – so they say – which makes the next example even that much more puzzling to me.storefront without sign

Storefronts, in particular, have very limited space to let potential customers / clients know a whole lot about what they do, so that you will use their goods and services, yet many businesses continue to put their brand name on the store, or use an unreadable font which limits their ability to get new customers who are not walking by the store and who have the time to look in the window and walk in.

As I question this, I think back to one of the more complex collections cases that I handled while working at Canada Revenue Agency (CRA) and how after years of being unable to get a cent out of this establishment, I had much different results.  This case had to do with a very large restaurant just North of Toronto which had fantastic food, very positive reviews, incredible decor, and $3,000,000.00 owing in taxes, without a single payment made to arrears in years.

The owners of this restaurant were perplexed at the spiralling debt and their bleak prospects for operating in the future because what started off as a very profitable business venture went south, quickly and at massive costs – both personal and professional.  When their debt grew, they started to cut costs, but it was the wrong costs – like having fresh food on the premises daily, reducing the variety and portion size on their menu and by running out of options at meal time.

Regular patrons became frustrated with the frozen additions or the cutting out of their favourite meal choices and as their clientele dwindled to handfuls of patrons during the day and at night, it only made matters worse.

With their personal assets fully leveraged to keep the business running, they were steps away from bankruptcy and losing everything.  They also were not paying their tax debts, but they were staying current on their filing obligations, and between the threats from previous collectors and their power being turned off all the time, they knew the end was near.  After hearing this, I thought I would need to see it myself, so I took my newly earned MBA and headed out to have a conversation with them about what they had intended to do with these debts.

But I could not find the restaurant.

It was supposed to be 15,000 square feet, and I knew the intersection quite well, but could not for the life of me find their establishment.  I called the owner and while I was circling the plaza on the corner he was frazzled about how I could not see their fantastic place, which I found to be very bizarre.

I ended up parking on the plaza on the corner and walked past a couple of stores before finally seeing what I had been circling for the better part of 20 minutes.  Their restaurant.

The outside of the building looked run-down and there was no name on the building.  I could not even tell where the front door was, and once I got to the door, I didn’t even know if it was open.  There was no sign that even said “Restaurant” or specified the type of food that was in there. There was some very hard to read script writing near the top of the building and near the door, but it looked more like graffiti than it did, a brand name.

Having been there a couple of years, locals knew about them, ate there but to an onlooker, there was no way of knowing there was a restaurant there.  I started to see a pattern emerge.

Upon sitting down with the owners I immediately suggested they perform a search on the business on the Internet (Alta Vista, I believe) and there right in front of their eyes, were people commenting about how they had made reservations but could not find the building, so did not go, or that they arrived but could not tell if the place was open, or where the front door was.  There was obvious frustration.

To me, it was common sense, that this building needed a sign that read “Italian Restaurant”, so at least people would know where they were going, or people who drove by or walked in the plaza would know there was something there.  On a more obvious scale a giant arrow pointing at the building would have been better but this was a very classy place, and that would cheapen the brand, they felt.

Needless to say, I spent 3-4 hours there, we talked about everything relating to their business, their debts – business and personal, and at the end of the day I decided to give them a couple of months to sort things out, reduce some costs, and try to attract more business which they knew they needed.

All of this effort was rewarded when they sent in a cheque for $250,000 at the end of the following month to the CRA.  By the end of the year, they had paid off $1.8 million dollars of their debt, and by the end of the next year, they were fully paid up (including penalties and interest) and business was booming.

Is it 100% a result of something I said? Probably not. Did I afford them the time to make money and pay off the debt, yes I did, but I also went through their options should they have chosen bankruptcy, a proposal, or to ignore the CRA completely and wait for their assets to seized and the directors assessed.

With all that information they were able to make an informed decision, the most obvious to me being that they improved their signage, cleaned up the outside, and put a neon sign which flashed “OPEN” on a very visible spot near the sign and near the door (with a classy arrow pointing towards the door).

But how does this apply to you and to me?

I recently took part in a challenge on LinkedIn to say what I do for a living in one sentence. I thought how hard could it be, and I wanted to check out what others had written before me. With over 300 respondents, I would have plenty of samples to review before taking the plunge, but I was shocked by what I saw.

I saw people – people I do not know – in businesses I did not know who wrote things like this;

“I solve all of your problems.”
“I get you want you need at the price you want.”
“I’m what you need.”
Even, “We’ve got you covered.”

I looked further at their business profile to see if I could tell what they did, however their business name, or description was equally as vague.

I read and read and read, almost 100 of them by now, and when I came to a comment by a lawyer, I was dumbfounded when I saw this; “I practice law.”

I immediately thought about what I would do if I came to this networking group for a professional to hire in a very specific area and I saw “I practice law” as someone’s description… Would I contact them to find out what kind of law? Or would I go to the next person.

I went to the next person.

Then the next and the next and the next.

Then I posted challenging people to go back and edit their posts. Be proud of who you are and the services you offer. Tell everyone what you do, be clear, but be brief, and if someone has more questions or wants information, they will reach out to you.

So what about my post?

Now I had a lot to live up to, because I called out the patrons of the group and if my post sucked, boy would I be the biggest hypocrite in the world.

So I posted this;

“My expertise is with the Canada Revenue Agency (CRA), and their Collections / Enforcement division and I use this knowledge to help people and business understand taxes and pay only what they owe, on their terms.

Then I said, “please read this and if you do not know what I do, or if there is feedback – positive and negative – please provide it. I too would love the perfect pitch and I appreciate any input from this fantastic group.

So next time you are looking for a restaurant to take your family and you drive by one which only has a name and not a type of food, think about how much business they could be losing by placing their focus on themselves and not on the service or product their offer.

#Tax

Reminder: If Extreme Weather Conditions Affected your Ability to File or Pay Taxes, the CRA wants you to apply for Taxpayer Relief.

If the recent extreme weather conditions affected your ability to file or pay taxes, the Canada Revenue Agency (CRA) wants you to remember about the Taxpayer Relief program.

From the CRA website, Dated June 27th, 2014.

“The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue, today reminded taxpayers affected by recent extreme weather conditions, as has been seen in recent days in Alberta and Ontario, that the taxpayer relief provisions of the Canada Revenue Agency (CRA) are available to them if they are unable to meet their tax obligations.”

Corporations who are unable to file their T2 returns by the filing deadline of June 30, 2014, due to flooding or other circumstances beyond their control can apply to have interest and/or penalties waived or cancelled using Form RC4288, Request for Taxpayer Relief.

Business owners and self‑employed individuals who are unable to meet their filing and payment obligations may also be eligible for relief.  The CRA understands that natural disasters may cause great difficulties for affected taxpayers whose primary concerns during this time are their families, homes, and communities.

The taxpayer relief provisions provide a balanced approach to assist taxpayers in resolving tax issues that arise due to circumstances beyond their control.   Under these provisions, taxpayers can apply to the CRA to have interest and/or penalties waived or cancelled in situations where they are unable to file a tax return and/or make payments on time because of a natural disaster, such as tornadoes, floods, landslides, hurricanes, or forest fires, or as a result of other extraordinary circumstances.

The CRA will consider these requests on a case-by-case basis and during the time it takes for the CRA to review the application, it is likely that there will be notices sent to the taxpayer / organizations which have a penalty / interest balance.  It is always recommended where possible to pay these amounts owing as soon as possible as doing so stops the interest from continuing to accumulate on the balance.

Paying off the penalty and interest balance does NOT impact the decision made by the Taxpayer Relief group.

Also keep in mind that it can take the CRA upwards of 9 months to complete a review under the Taxpayer Relief program and that full relief of penalties and / or interest are not guaranteed.

If the initial request is denied, the CRA will send a letter indicating why, and what information is missing.  Taxpayers have another opportunity to apply for relief before considering whether a 3rd review – judicial review – is required.

 

For all your tax needs, contact inTAXicating at info@intaxicating.ca.

The Elevator Pitch! How Important Is It?

The elevator pitch, otherwise known as your ability to tell someone what you do for a living in 15-20 seconds without leaving out any critical details.

Wikipedia calls it this; “An elevator pitchelevator speech, or elevator statement is a short summary used to quickly and simply define a person, profession, product, service, organization or event and its value proposition.”

The name “elevator pitch” reflects the idea that it should be possible to deliver the summary in the time span of an elevator ride of around 30 seconds.

The term originates from a scenario of an accidental meeting with someone important in the elevator where after the brief pitch, the other party is interested in learning more. thus continuing the conversation after the elevator ride or through en exchange of a business card or smart phone details.

As a tax consultant, I thought I had the perfect elevator pitch that went something like this; “I help people who have problems with the Canada Revenue Agency (CRA).  I worked in the CRA for over 10-years – pretty much out of university – and worked my way up through the collections division until leaving for the private sector.”

I found it to be too long, and open for interruption so much that I would add details, such as that I completed 3-years of my accounting (CGA) designation and a 3-year MBA before leaving, or that I spent a significant part of my time at the CRA training the staff, handling the most complex accounts in the office and helping improve processes.

Then it became an elevator pitch for a 65-story building ride… To the top and all the way back down to the bottom.

Then I found an article in Forbes magazine which provided 6 alternatives to the elevator pitch so I tried them out to see if they worked better for me.  The list is below:

1. The One-word pitch – for me, it is “TAX”.  Then I watch their eyes gloss over.

2. The Question pitch – “Have you ever had (or have clients who had) problems with the Canada Revenue Agency (or Revenu Quebec, or the IRS, or WSIB, or the CRTC?)

3. The Rhyming pitch – Could not even try this.

4. The Subject line pitch – like sending an email to someone – mine would read something like “Former CRA collections officer helping people with CRA problems.”

5. The Story form pitch – I have thousands of stories… Literally.  I usually break into one of these after my introduction.

6. The Twitter or 140 character or less pitch #WhatIAmAllAbout.   I like this because it’s like using Twitter except that you really cannot tell someone that you “hashtag” Help People.  But it does give you the opportunity to state your case in a brief number of words.

So practice your pitch – no matter which method you choose – and practice them out on people to see if it gets across the message you want it to.  If not, maybe you would benefit from a different pitch or by adding or removing information to your existing pitch.

As for me… “I’m a former CRA officer who knows the CRA collections process, policy and procedures better than they do.  I help people with a variety of tax issues including but not limited to negotiation, payment arrangements, liens, RTP’s assessments, and getting them current and out of debt.  If there is a CRA issue, I have already seen it, and I know how to fix the problem.”

#x-taxer

Others make promises.  I fix problems.

If the conversation continues I explain my services are for individuals, businesses, and professional organizations who cannot proceed further with a client due to their tax issues – ie/ getting a bank loan, renewing a mortgage, confirmation of actual amounts owing before filing for bankruptcy, wage garnishments on employees, or cleaning up past tax issues for separation agreements or divorce.

#inTAXicating

Free consultation.

info@intaxicating.ca

416.833.1581

 

 

 

Congratulations to inTAXicating for finishing 2nd in the 2013 Canadian Blog Awards!

I recently received word that this blog, inTAXicating, finished 2nd in the Legal / Professional category of the Canadian Blog Awards.2013 Canadian Blog Awards

The Canadian Blog Awards is an annual event on the Canadian Blogosphere in which Canadian Bloggers and Blog Readers vote to decide which blog is the best – either overall or within a category.

This year (2013), the Canadian Blog Awards are being operated by Jonathan Kleiman, a Toronto Small Claims Court Lawyer and Toronto Business Lawyer.

The first Canadian Blog Awards were held in 2004, by Robert McClelland of MyBlahg.  He hosted the awards for 2005 and 2006 before handing them over to a coalition of bloggers and business owners keen on recognizing Canadian blogging talent.

Aside from being thrilled at the nomination, I am excited and content with the 2nd place finish because it means that not only is there plenty of room for improvement, but that people understand that in order to help themselves save taxes, or fix tax troubles, they need to read online to see what the experts are recommending.

With the CRA moving more and more online in everything they do, it only makes sense that you, the taxpayer, keeps up to speed as well, or at the very least, read and learn from people who were on the inside… For a long time… And who grew up in that space, trained the staff in that space and led staff in that space.

Thank you for voting for this blog and for dropping by for tips, suggestions and recommendations on how to best handle your tax questions or tax problems.

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Make sure to visit http://www.intaxicating.ca but what you really want to do, is contact us at info@intaxicating.ca or by phone at 416.833.1581 to have your questions answered or to have your tax problems solved.

#x-taxer

Thursday Thirteen: 13 Tax-Related Things That Confuse Canadians.

I came across this interesting article from the Globe and Mail newspaper called “10 Tax Related Things that Leave Canadians Stumped”, and while I suggest you read the original article, I have used this article for inspiration to provide 13 Tax-Related Things that Confuse Canadians.

  1. Why can’t spouses file joint income tax returns as they can do in the US?
  2. Why are parents only allowed a transfer of $5,000 of their child’s unused tuition, education and book credits?  The parent is often the one who paid the costs of tuition, should they not be able use all of it?
  3. If I received an actual dividend of $1,000, why do I report $1,380 on my tax return ($380 is called a “dividend gross-up” and the purpose of grossing up a payment is to bring the dividend back up to the amount of money the corporation earned before it paid corporate tax.
  4. Why must child care expenses be claimed by the lower-income spouse?  Understanding that the motivation behind this child care deduction is to get people with children back to work to help drive the economy, but the way this deduction is written it is claimed by the lower-income spouse based on 2/3rds of their income.  By doing this, the deduction is constrained by that spouse’s income.  Should it not be based on the higher-earning spouse so that the family could often get a larger child care claim to offset the costs and since it’s being paid, why are they not allowed to claim it in full in each and every case?
  5. When one spouse has a tax refund and the other owes money, why can’t you net the refund and tax payment against each other? Again, this would simplify our tax system and reduce the administration and paper work for the CRA, but the privacy rules are cited for this not happening. but should the situation be different – a spouse with a debt – and they are all over that!
  6. Why do people hold on to their investments too long before converting them, resulting in a capital gain becoming a capital loss?  Yes, the tax on capital gains is 23% but paying tax on a gain is much better than losing money, isn’t it?
  7. How is it that the CRA never knows when people move when they are looking for missing filings or returns but they always know where I am when they need to send a legal warning letter or register a lien against a property.?
  8. Why do people pay no attention to the RRSP contribution limit information on their income tax assessments when planning their contributions for the year, usually at the last-minute in March? An individual’s RRSP contribution limit for the upcoming year is printed right on the Notice of Assessment for the prior year and can be found through the “My Accounts” section of the CRA website.
  9. Why can self-employed people claim mortgage interest as a home-office expense while employees cannot? If you have an employer that requires you to work from home and they sign a T2200 form saying so, why should an employee’s deductible expenses be restricted in comparison to a self-employed person’s?
  10. Why can I deduct my car expenses when I drive directly to my client’s office from my home – but when I drive to my own office to work with the client via teleconference or telephone, why is the mileage considered personal?
  11. Why is the maximum childcare expense set at $7,000, when the monthly child care cost far exceeds $1,000 in many cities? It drops to $4,000 for children aged 7 to 16.
  12. If the CRA send me a refund cheque in error – their error – and whether I cash it or not, they charge me penalties and interest when they recover it?
  13. How a CRA audit deemed to be a “random” audit where the auditor states that they are not looking for anything, always has something behind it which caused it.  Why can’t they just say, “You’ve been snitched on”, or “You claimed an expense with a fake invoice” or even “You took cash from your business and deposited it into your personal account.”  That way, knowing the gig is up, the auditor could transfer all like issues over and assess and give the person a warning that will have meaning.

Can anyone answer any of these?

 

Time will tell.

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!

 

Get Ready to File your Personal Income Tax Return (T1). Make Sure You Have All Your Slips Accounted For!

Ready to file your Personal Tax (T1) Return here in Canada to the Canada Revenue Agency (CRA)?

Are you chomping at the bit to get your refund?

Before you push forward and get that return in, make sure to check that you have received all the tax slips you should be getting?

Then check again.

If you forget a tax slip – T3, T5, T4, T4A, etc – the CRA does not accept the argument that you just “forgot it”, but rather they believe that you have willingly omitted the slip in order to reduce the amount of income that you are reporting, so you end up paying less taxes.

The penalty for missing slips can be quite steep.

Forget to include slips year over year and the penalty increases.

At inTAXicating, we encourage our clients to keep track of slips expected and slips received through a spreadsheet, or a program such as QuickBooks  based on the slips received in the previous year, and any transactions in the current year which will result in the generating of a tax slip.

In the inTAXicating Personal Tax Spreadsheet, we take tax slip tracking a little bit further by identifying which member of the family the slip belongs to, when it was received the previous year and which institution produced the slip.

Remember that slips produced by institutions are also sent to the Canada Revenue Agency (CRA) so they know what you should be filing before you do unless you keep track.

Then take this list, and staple it to a box or file folder which is kept in the house / place of business for all potential tax-related materials for the year.  At tax time, it’s an easy checklist to make sure all is in order and that when filing, everything is included.

If, however, you have forgotten to include a slip, the Canada Revenue Agency (CRA) will eventually use their copy of the slip notify and re-assess you if you have not had the time to amend your return.

If you don’t get to the CRA first, the next thing you know, you likely will have a balance owing and along with the penalty for missing the slip, the debt is accruing interest.  It can easily escalate from there!

A little organization will reduce the amount of penalties and interest paid to the CRA.  As the Tax Manager for Computershare Trust Company of Canada / Computershare Investor Services, I was responsible for the preparation, filing and submission of tax slips to the millions of investors Computershare kept track of, so I understand more than anyone the importance of getting slips out to the holders on time, and accurately, and then to the government on time and without penalty.

Here is a list of the slips you could receive and the date they have to be mailed to the holder and to the CRA.

RRSP – If you were one of the many who used the March 1st deadline to make your contribution for the previous year, then you would be receiving that slips beginning March 15th.  All other RRSP contributions which were made prior to the 60-day extended period saw their tax slips mailed beginning at the turn of the calendar.  They are T4RSP slips and RL2’s for residents of Quebec.

T5 / RL3 and NR4’s begin to get mailed around January 15th.

T4RIF / RL2 withdrawals from a RRIF, are mailed the 3rd week of February.

T5/RL3 for investment interest income coming from a mutual fund are mailed the 3rd week of February.

T3 / RL16 reporting dividend income from mutual funds are mailed by the 3rd week of February.

Receipt of contribution from an estate rolling over funds to a spouse produce a T4RSP / T4RIF / RL2 – issued for receipt of contributions from an estate rolling over funds to a spouse – sent  out the first week in February

T4A / RL1 are issued for RESP withdrawals and are produced and mailed the first week in February.

NR4’s showing income for non-residents of Canada are mailed the 3rd week in February.

If during the year you received Employment Insurance (EI), Old Age Security (OAS) or Canada Pension Plan (CPP) payments, you can follow this 3-step process from the government website to make sure everything is in order and get your tax slips online directly from Service Canada.

Happy filing.

inTAXicating Tax Services for all your tax needs and specializing in providing solutions to your tax problems.

info@intaxicating.ca

 

Happy 2014! Here are 14 things you can do right now to reduce your tax burden, or increase tax credits, on your 2013 taxes.

Happy New Year!  May 2014 bring you wealth, happiness, prosperity and great health.  May it also bring you debt-free (should you need to be) and also allow you to be one step ahead of the taxing authorities.

With the changing of the calendar, many are already working on their new years’ resolutions, but you should also review the list below to see if there are any actions you can do now to reduce your 2013 taxes owing or to increase the amount of refund you will get this year, or in future years.  It’s never the wrong time to thing about tax savings – we do it all the time here at Intaxicating, and want to pass along some tips for you.

Here are 14 easy strategies you can still take advantage of which impact your 2013 taxation year;

 

1.  Make your installment payments as required, or if you have fallen behind, catch up with one lump sum payment right away.

The Canada Revenue Agency (CRA) charges interest on missed installment payments, but if you catch up in one fell swoop, then they begin to reduce the amount of interest they charge you.  Ssshhh.  It’s a secret.

 

2.  Make sure you file on time and pay in full while doing so.

So how does this impact the 2013 taxation year, you might be asking and why is it so high up the list?  It is because many Canadians are shocked with the amount of money they owe at year-end and it’s the worst time of the year to discuss ways to reduce taxes with your accountant or tax preparer because they are so unbelievably overwhelmed they cannot spare 2 minutes to talk to you, let alone review your return for possible deductions you failed to mention to them. You are not the accountant!  Nor the tax professional.  So take time now to speak to someone who knows about what you do for a living and see if there are areas where you may be entitled to a deduction or credit and then go get that supporting documentation.  Also use the time to run your year-end situation through a free tax program to see how much you owe and what it will take to reduce that, or make it go away completely.

If, however, you are stuck owing a balance to the CRA or MRQ, make sure to set aside the funds to pay it in full with the filing of your tax return.  Heck, you could even send in the money now if you have it, but do not wait until even a day later than the deadline or interest starts accumulating.  The CRA charges 10% interest compounding daily, so it can add up rather quickly.

 

3.  Contribute to your Registered Retirement Savings Plan (RRSP).  

The deadline to contribute to your RRSP for 2013 is March 3rd, 2014.  If you need to know how much you are eligible to contribute to your RRSP. check your 2012 CRA Notice of Assessment.  Or, check online using the CRA’s “My Account” service.  Your contribution limit for 2013 is going to be 18% of your 2012 earned income (to a maximum of $23,820) less your 2012 pension adjustment, if any, plus any RRSP room carried forward from prior years.

 

4.  Contribute to a Registered Education Savings Plan (RESP).  

The Canada Education Savings Grant (CESG) program was initiated by the federal government to assist families saving for their children’s post-secondary education.  As an added bonus, the government tops up your annual contribution by 20%, up to a maximum of $500 ($2,500 contributions x 20%) per beneficiary per calendar year, to a lifetime maximum of $7,200. 

 

5. If you turned 71-years-old, you must collapse your RRSP.

If you turned 71-years-old by December 31, 2013, you must collapse your RRSP by the end of the year. At that time, you have 3 choices to make; either pay tax on the fair market value of the plan’s assets, transfer your RRSP into a Registered Retirement Fund Income Fund (RRIF), or purchase an annuity with the proceeds.  No tax is paid at the time of the purchase of the annuity or at the time of conversion into a RRIF.  You may still be able to contribute to your spouse’s RRSP under certain conditions.

 

6.  Make your Home Buyers’ Plan repayment before it is included in your income for the year.

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plan (RRSP) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year.   

Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount to your RRSP, for 2012, it will have to be included in your income for that year.  The deadline is

March 3rd, 2014.

 

7.  Pay the interest on low-interest loans related to income-splitting.

If you have entered into an income-splitting arrangement with family members and have loaned funds to either a spouse or a child at the interest rate set (quarterly) by the CRA, make sure that the interest on these loans are paid before January 30, 2014, or the loans will be subject to the attribution rules which taxes the income earned by your spouse or child in your hands.

 

8.  Pay the interest on an employer-loan to avoid it becoming a taxable benefit.

If in 2012, you received a low-interest loan from your employer you will want to ensure that interest is paid on that loan before January 30, 2014 in order to avoid a deemed taxable employment benefit. This benefit will be calculated at the CRA’s prescribed rate for the period that the loan was outstanding (which increased from 1% to 2%, effective October 1, 2013) less any interest actually paid.  This is not to be confused with a loan taken out as a result of shares owned.

 

9.  Reduce your business income by paying your family members who work for you.

As a business owner, it is beneficial to pay your family members a wage consistent with a wage you would pay to a complete stranger in order to reducing the amount of income in your business.  Also ensure that you are remitting to the CRA the CPP, EI and tax amounts on these payments.  You will need to issue them a T4, and file a T4 summary with the CRA by February 28th, 2014.

 

10.  File any T4’s and the T4 summary before the CRA deadline of February 28th, 2014 in order to avoid any penalties and interest.

If you are short on remitting for any employees, take advantage of the January 15th remittance – the last one for 2013 – and also consider the Payment on Filing (POF) option to top up amounts with the filing of the T4 summary.  Keep in mind, if you use the POF option to catch up on a considerable amount of funds, the CRA will still charge you maximum penalties.  

 

11.  Pay back any personal operating costs on employer-provided cars.  

If your employer provides you with a company car, you already know that it is a taxable benefit and it will be included on your T4.  Did you know that the actual benefit is made up of two parts; The first part is a standby charge based on a percentage of the original cost or the monthly lease payments for the car, and the second part applies if your employer pays the automobile’s operating expenses.  In 2013, this benefit is equal to 27¢ per personal kilometre driven.  The standby charge and the operating benefit are reduced by the amounts you pay to your employer.  For a standby charge reduction, your payment must have been made during 2013.  For an operating benefit reduction, your payment must be made by February 14, 2014.

 

12.  Has the tax burden from previous years got you considering bankruptcy?  

You are not alone!  In Canada 55% of bankruptcies are CRA related.  Before you speak with a trustee, speak with your trusted tax professionals at Intaxicating Tax Services, who can tell you whether or not the debt is fully collectible, and if there are other options available to you which will not ruin your credit for 7 years.  Even if the CRA is breathing down your neck, they are not allowed to tell you to file for bankruptcy and they like to think they understand when someone is insolvent, but we have the expertise, and the network to help you out of debt or, if you decide to proceed with a bankruptcy, or proposal, get you the best deal possible. 

 

13.  Google your tax problem!

You might have heard that it can be dangerous to Google  that you have a tax problem, however nothing can be further from the truth.  The CRA has all their tax information online and there are a plethora of tax-related resources available to help you determine if you should go it alone or if additional help is needed.  Make sure when you are doing your research that the information you are reading matches with the CRA website, does not sound too good to be true or is written in such a way to scare you into thinking you need to pay for a service you may not.  Most reputable firms will offer a free consultation, or a nominal fee for an hour meeting followed up with a written report to help you decide what to do.  Don’t rush into something until you have all the facts.

 

14.  Don’t be afraid to ask for help!

Speak with your accountant / tax professional about any deductions that you may be entitled to such as the public transit tax credit or for working at home.  If your accountant has not already asked you about what you do in detail then it’s up to you to determine if you need to brush up on the tax act yourself, or find a new tax team to help you pay the least amount of tax possible, like the tax professionals at Intaxicating Tax Services.  If, on the other hand, you are having issues with collections, then we are the only place to go based on our hands-on experience on both sides of the negotiating table.

 

Happy 2014.

 

We are:

InTAXicating Tax Services

@intaxicating

info@intaxicating.ca

416.833.1581.

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