Monthly Archives: January 2015

Odette Morin

When to avoid RRSP

For most people, RRSPs are pretty hard to beat however they are a few instances that quickly come to mind when RRSPs are not the way to go.


  1. When you need the money in the short term, you should avoid contributing to an RRSP.  Not only you will owe the tax refund back, but you will also lose your deduction limit. Some tax advisers would recommend a short-term RRSP when your tax rate is high and will drop in the following year to benefit from the tax difference but again, I do not advocate this because eroding your contribution room is quite costly. The tax free compounding is very valuable over the long-term.
  2. When your income is going to be higher at retirement.  This is very rare but if you anticipate your income to be higher at retirement than it is today, you should avoid making an RRSP contribution. Avoid a situation where you obviously have to pay more tax later than the tax saving today.
  3. When you are close to the GIS qualification. If your savings are modest and you anticipate having very low income at retirement, it would be best to avoid RRSPs which could jeopardize qualifying for the Guaranteed Income Supplement.
  4. When you expect a very large RRSP at 71. If you calculate that your RRSP will be so big at age 71 that the minimum annual payment might clawback your Old Age Security (OAS) benefit it would be best to stop contributing to your RRSP.

If you meet one of these situations, you may be best to contribute to a TFSA or make a non-registered investment.

Careful calculations and projections must be made to plan properly.  Make sure to discuss these few points with us at your next annual review meeting.


RRSP or not

Odette Morin

Three main reasons why Markets are volatile

  1. The end of QE in the U.S is in sight. So it’s natural to expect some volatility as this unfolds gradually.
  2. The price of oil dropped unexpectedly in a big way. When unexpected events occur, the markets react.  The price of oil is expected to come back to the more normal level of $80 a barrel within a few quarters.
  3. Global Growth is slowing.  We have seen tremendous growth in the past 3 years following the financial crisis. The recovering economies are still expected to grow but at a more moderate level.  Any type of slow down affects the markets.

Always remember that equity investment returns are closely tied to corporate earnings growth and the price you pay for those earnings. Historically, over the long term corporate earnings have been fairly stable and have grown along with productivity gains and inflation. Stock valuations though are more volatile than earnings since they are influenced by investor sentiment, which swings between optimism and pessimism. Learn to live with market volatility by focusing on your investment earnings yield instead of your investment market value.

Odette Morin
Terry Broaders

Weekly Update January 27 2015

“I Love The Rain! It’s My Favourite Weather ! ” -Kristen Wiig


Energy and Consumer Staples Send TSX Modestly Higher

The Toronto stock market closed slightly higher Friday as consumer stocks advanced in the wake of a strong retail report and energy stocks climbed amid questions about whether the death of Saudi Arabia’s King Abdullah could mean a change in the amount of oil his country is producing.
The S&P/TSX composite index gained 15.37 points to 14,779.35, with the consumer staples section ahead 0.9 per cent as Statistics Canada reported retail sales rose 0.4 per cent to $43 billion in November. Economists had generally expected a decline. Statistics Canada also reported that the effects of the global oil slump weighed on Canadian inflation last month as falling pump prices helped slow the annual rate to 1.5 per cent, a deceleration from two per cent in November. On Friday, Statistics Canada’s latest consumer price index found gasoline prices in December fell 16.6 per cent compared with the previous year, which followed the year-over-year November decline of 5.9 per cent.


Canada Revenue Agency Gets ‘C’ Grade From Small Business

The CRA is getting better, but most small business owners wouldn’t know it, according to the Canadian Federation of Independent Business’ (CFIB) CRA Report Card. The majority of small business owners and tax practitioners surveyed support recent changes at the agency, but still give the taxman a “C” grade. “Paying taxes is not something that anyone looks forward to, but dealing with the CRA can be especially painful for small business owners,” said Corinne Pohlmann, senior vice president, National Affairs, at CFIB. Most small business owners are unaware of the agency’s recent service improvements: liaison officer initiative (8% aware); commitment to honour advice given online through my business account (16% aware); call agents required to provide their i.d. numbers (38% aware).
Overall, 55% of small business owners still feel that CRA treats them like they’ve done something wrong, and 54% think the agency needs to improve the clarity and quality of information it provides. When told about the above service improvements from CRA, an overwhelming majority of small business owners and tax practitioners were supportive (over 80%), suggesting that improved awareness would make a difference in the way small business owners perceive the agency.



Read How This One Small Mistake Can Cost You a Lot of Money

You’ve Got Mail !…………………From CRA !!!!

RRSP, TFSA,  Mortgage. What Should You Focus On This Year?

Defending The RRSP !

Pinch Pennies Without Feeling A Thing


Market Update As Of January 23 2015

 The TSX closed at 14791, up 482 points or 3.37% over the past week. YTD the TSX is up 0.25%.

The DOW closed at 17673, up 161 points or 0.92% over the past week. YTD the DOW is down -0.90%.

The S&P closed at 2052, up 33 points or 1.63% over the past week. YTD the S&P is down -0.29%.

The Nasdaq closed at 4758, up 124 points or 2.68% over the past week. YTD the Nasdaq is up 0.66%.

Gold closed at 1293, up 15.00 points or 1.17% over the past week. YTD gold is up 10.32%.

Oil closed at 45.44, down -3.69 points or -7.51% over the past week. YTD oil is down -13.76%.

The USD/CAD closed at 1.243073, up 0.0447 points or 3.73% over the past week. YTD the USD/CAD is up 5.92%.


Sources: Bloomberg; Investment Executive;; CFIB

Terry Broaders

Read How This One Small Mistake Can Cost You A Lot of Money !

Did a missing tax slip such as a T3 or T5 or T4 show up in your mail box after you filed your taxes last spring? Did you find a forgotten one in a drawer?  You must file that tax slip with the Canada Revenue Agency (CRA) right now !


Thinking that CRA will simply pick it up and reassess? Think again. You will be shocked to know that a retired tax payer was recently imposed a $3,600 penalty by CRA for failing to include a T5 slip.  This penalty was on top of the interest and tax owed on the income.


Here is an example. In 2011 tax year you forget to report a $50 T5 slip from the ABC Financial Institution.  OK, no big deal; Canada Revenue picks up on it, reassesses you later and charges you about $15 tax on that $50 of income you forgot to report.  But you have used up your “strike one”.  Now in 2013 tax year (which you report in the spring of 2014) you have an $18,000 T5 slip that you forget to include. Canada Revenue will assess you the tax owing on that $18,000 which results in a surprise tax bill of about $5,400 plus interest.  But on top of that they will assess you a 20% penalty of the amount of income you failed to report or an extra $3,600.   So you pay the $5,400 tax you owe on that $18,000 plus a further $3,600 penalty !


If two T-slips in a four-year period are not reported you may face this 20% penalty.  It is 20% of the T-Slip income not reported, not of the tax owed.  This penalty is very steep and means that you need to make sure that you include all T-slips even if the amount is very small.  If you realize you have forgotten a T-Slip from 2013 or from a prior year  bring it in to us so we can prepare a T1-adjustment.

Please note that it is ultimately the tax payer’s responsibility, not the tax preparer.  As you know, we make every effort to cross reference with the previous years and with your investment accounts to ensure that all your T-slips are indeed reported.  But again, you are ultimately responsible for giving us all documents needed to prepare your declaration.

Terry Broaders

You’ve Got Mail ! ………….. from CRA !!

In early 2015 the Canada Revenue Agency (CRA) will be sending approximately 33,000 letters to selected taxpayers in early 2015.  In 2010, the Canada Revenue Agency (CRA) began a letter campaign to inform selected taxpayers about their tax obligations and to encourage them to correct any inaccuracies in their past income tax and benefit returns.The CRA will send about 33,000 letters to randomly selected taxpayers who claim business or rental losses or are employees who claim employment expenses on line 229 of their tax return. First of all if you receive a letter don’t panic, don’t be upset and don’t take it personally. Don’t leave the letter there unopened. That won’t help anything. Most taxpayers such as you are honest but inevitably CRA has to send a lot of letters to honest people first before they find a minority of those who were not so innocent.

If you are a You First client just contact us as we can advise you as to how to properly respond to the letter and will in most situations be able to take care of preparing the reply for you.  In most cases CRA is simply looking for documentation to substantiate your claims or to determine the reasonableness of your expenses. For example if you are depreciating the cost of a new car on your business expenses surely CRA is justified in determining whether or not you actually bought a new car. Or maybe you claimed over $5,000 in meal and entertainment expenses for your business even though you had only $20,000 of income. On the surface this may seem excessive but perhaps your business is the type that requires the cultivation of a great many prospects. Canada Revenue merely has the duty to determine that the expenses claimed on your tax return are legitimate.

On a personal note and from 23+ years of preparing tax returns we have seen only one single letter that required more than just the basic amount of verification to Canada Revenue. This was a situation of a client who had reported a $2,186 rental  loss on a new  apartment in his house.  While not overly complicated the response to the letter required the client to provide information on the size of the apartment in relation to the overall house; the name of the tenant; a projection as to when profitability would be achieved; and they asked for copies of the maintenance receipts. That was all that CRA wanted. A few weeks later the client received another letter from CRA to say that all was fine and then that was the end of it. See nothing to worry about.

So if you receive one of those CRA letters don’t worry.  They just want to see how honest you are !