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Monthly Archives: March 2015

Odette Morin

6 sure ways to get audited by Canada Revenue

It is that time of year when we all have to do the dreaded tax reporting to Canada Revenue.  It is painful for most of us to gather the receipts, fetch the ones missing, enter everything in the tax software, wonder if you got it right and freek out if you owe money.  A refund is for all the ultimate goal.  We do over 400 returns a year at You First and for each one of them, we sharpen our pencil, scratch our head and consult the big tax book to try to get the best refund for all. 

Even if you did everything right or hired an expert to do your return, you can still get in trouble with the tax man. Here are 6 ways you can mess up and attract an audit.
6 sure ways to get audited by Canada Revenu Agency (CRA)
  1. Not entering all T-slips: It is your responsibility to report all of your income.  If you miss a T4 for employment or an investments T3 or T5, CRA will sooner or later pick on it.  The new penalties are harsh. Each year the CRA checks the T-slip information in its database against Canadian taxpayer’s income tax returns to ensure the T-slip income reported matches. Where the income filed by a taxpayer does not match the CRA’s database records, an income tax reassessment is mailed to the taxpayer asking for the income tax due. If the taxpayer is a first time offender, they are just assessed the actual income tax owing and possibly some interest. If this is the second occurrence in the last four years, a 20% penalty of the unreported income is assessed. Fetch ALL of your tax slips.  You can’t afford to miss one!
  2. Ignoring a CRA request for additional information: CRA routinely asks to see your moving expenses, medical expenses and other deductions. Don’t be alarmed.  Since most returns are now EFile, they just ramdomly want to check your legit expenses. But if you ignore the request, if a big no no. Do not leave any CRA letter unopened. Take the time to write a cover letter and attaching your justification receipts.  If we did you tax return for that year, just contact us and we will respond to CRA for you for free!
  3. Reporting a loss for too many years on your business income or rental income.  To be entitled to deduct or write off self-employment expenses or rental expenses, you have to have a reasonable expectation for profit.  If you run a loss for too many years, the red flag will go on.  Only deduct what you are truly entitled and tone down expenses to show a profit if you must. 
  4. Showing little net income from your self-employment, yet posting lots of pictures on facebook of your new SUV, laving vacations and fine dinning meals?  Yes Big Brother CRA is looking at you!  If your net income does not match your lifestyle, be prepared to justify. 
  5. Reporting items for which you received a reimbursement.  If your employer paid for your moving expenses, you can only claim what you did not get reimbursement for.  The same goes for medical expenses reimbursed through your medical plan.
  6. High business percentage of automobile or home office expenses.  Yes we know you work in your living room sometimes or the kitchen but no, you can not claim your whole house for home office expenses.  Also, even if you say you work all the time, if you only own one car, claiming 100% of car expense just does not make sense and will be sure to attract attention.  
A lot of it, is common sense.  Be reasonable with your deductions and responsible with your tax reporting.  That is the sensible way to deal with CRA!  Wishing you all a fabulous refund this tax year!!
Odette Morin
Terry Broaders

Weekly Update March 24 2015

“Pretend Inferiority and Encourage His Arrogance” -Sun Tzu, philosopher & military strategist

 

TSX Climbs On Commodity Prices

Higher commodity prices propelled the Toronto stock market to a solid gain Friday as both the energy and metals sectors finished in positive territory. The S&P/TSX composite index rose 68.48 points to close at 14,942.41, marking a climb of 1.4 per cent over the week. The loonie moved ahead 0.92 of a U.S. cent to 79.50 cents after Canada’s latest inflation figures showed lower gas prices offset higher prices for nearly everything else. In the U.S. the Nasdaq composite index jumped to the highest level in 15 years, nearly wiping out its losses since the end of the dot-com bubble.  The Nasdaq composite advanced 0.7 per cent or 34.04 points to 5,026.42, after coming to within 7 points of its all-time high set in March, 2000.  The loonie moved ahead 0.92 of a U.S. cent to 79.50 cents after Canada’s latest inflation figures showed lower gas prices offset higher prices for nearly everything else. Canada’s annual inflation held steady at 1.0 per cent in February, in line with analyst estimates. Statistics Canada said lower gasoline prices were a major factor and the inflation rate would have been 2.2 per cent if they had been excluded.

 

Europe Recovery Underway

European Central Bank head Mario Draghi says “a sustained recovery is taking hold” in Europe a recovery he says must be used to complete the 19-country euro currency union and fix its problems for good.  Draghi adds that member countries should use the breathing space given them by the central bank’s stimulus efforts to pass tough structural reforms that would make their economies more business-friendly so they can grow and prosper. Eurozone countries must “stand on their own two feet” because the eurozone doesn’t provide for budget transfers from richer countries — the way U.S. states that suffer recessions can depend on tax transfers through the federal government.

 

Market Update As of March 20 2015

The TSX closed at 14942, up 210 points or 1.43% over the past week. YTD the TSX is up 1.27%.

The DOW closed at 18128, up 379 points or 2.14% over the past week. YTD the DOW is up 1.65%.

The S&P closed at 2108, up 55 points or 2.68% over the past week. YTD the S&P is up 2.43%.

The Nasdaq closed at 5026, up 154 points or 3.16% over the past week. YTD the Nasdaq is up 6.33%.

Gold closed at 1183, up 27.00 points or 2.34% over the past week. YTD gold is up 0.94%.

Oil closed at 46.29, up 1.15 points or 2.55% over the past week. YTD oil is down -12.15%.

The USD/CAD closed at 1.256692, down -0.0216 points or -1.69% over the past week. YTD the USD/CAD is up 7.09%.

 

Sources: Bloomberg; Investment Executive; advisor.ca

Terry Broaders

Weekly Update March 16 2015

“Truth Is Mighty – Mighty Scarce” -Bob Edwards, Publisher

 

Energy Sector Hurts The TSX

The S&P/TSX composite index fell 39.23 points on Friday to 14,731.49 as the TSX energy sector dropped 0.55% and oil prices declined for a fourth day with the April contract down $2.21 to $44.84 (U.S.). Oil prices dropped Friday after the International Energy Agency said U.S. oil production was up 115,000 barrels a day in February. The IEA warned that “behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly.”  The drop in oil came as the Canadian dollar fell 0.53 of a U.S. cent to 78.19 cents after falling below the 78-cent level during the morning for the first time since March 2009.  The move followed a report by Statistics Canada that the economy shed 1,000 jobs during the month and the national unemployment rate rose 0.2 of a point to 6.8%. New York markets also tumbled as traders also looked to the U.S. Federal Reserve’s meeting on interest rates next week. The Dow Jones industrials dropped 145.91 points to 17,749.31, the Nasdaq was down 21.53 points to 4,871.76 and the S&P 500 index shed 12.55 points to 2,053.4.

 

Household Debt Hits New High

The ratio of household debt to disposable income hit a new high in the fourth quarter as incomes increased at a slower pace than consumer borrowing, according to Statistics Canada. The ratio reached 163.3% in the quarter. That means households owed about $1.63 in consumer credit, mortgage, and non-mortgage loans for every dollar of disposable income. BMO chief economist Doug Porter said the increased debt is not surprising given the Bank of Canada’s decision to cut its key interest rate by a quarter of a percentage point in January. However, Porter noted that although debt has been rising, financial assets have too, as stock markets have rebounded and Canadians have been putting more away in their savings accounts. Household net worth rose 0.9% in the fourth quarter. On a per capita basis, household net worth was $233,000 in the fourth quarter.

 

Blog Links

RRSPS Do Not Have To Be Deducted All At Once

 

Market Update As Of March 13 2015

The TSX closed at 14732, down -221 points or -1.48% over the past week. YTD the TSX is down -0.15%.

The DOW closed at 17749, down -108 points or -0.60% over the past week. YTD the DOW is down -0.47%.

The S&P closed at 2053, down -18 points or -0.87% over the past week. YTD the S&P is down -0.24%.

The Nasdaq closed at 4872, down -55 points or -1.12% over the past week. YTD the Nasdaq is up 3.07%.

Gold closed at 1156, down -10.00 points or -0.86% over the past week. YTD gold is down -1.37%.

Oil closed at 45.14, down -4.53 points or -9.12% over the past week. YTD oil is down -14.33%.

The USD/CAD closed at 1.278289, up 0.0171 points or 1.36% over the past week. YTD the USD/CAD is up 8.93%.

 

Sources: Bloomberg; Investment Executive; BMO; advisor.ca

Odette Morin

Tax tip: RRSPs do not have to be deducted all at once

Itax tip 1f you made a large RRSP contribution, you may be best to defer some of the deduction to a future year. You would want to do this if your tax bracket will be higher in a future year. Look for the carry forward line in your tax software and play with the numbers to see the impact on the refund or tax owing, or ask us when you drop off your tax documents. We can figure this out for you!

Terry Broaders

Weekly Update March 2 2015

“I Thought I Was Pretty Good Until I Saw Hendrix” -Brian May, Queen Guitarist & Astrophysicist

 

TSX Declines As Oil Prices Rise

The Toronto stock market pulled back slightly Friday amid soft U.S. economic data despite rising resource and financial stocks. The S&P/TSX composite index closed down 6.82 points at 15,234.34. The Canadian dollar gained 0.15 of a U.S. cent to 79.98 cents. New York indexes were also lower following a report that U.S. gross domestic product grew at an annual rate of 2.2% in the fourth quarter, weaker than the 2.6% first estimated. A bigger surprise was a glum reading on the manufacturing sector in the U.S. Midwest, which fell to a 5 1/2 year low and into contraction territory in February. Analysts says they believe there is something unusual in the Chicago Purchasing Managers Index reading and think it will be treated with skepticism by traders. The Dow Jones industrials lost 81.72 points to 18,132.70, while the Nasdaq gave back 24.36 point to 4,963.53. Oil prices gained $1.59 to US$49.76 a barrel.

 

Charitable Canadians

The amount of charitable donations reported by tax filers increased in 2013 over the previous year, while the actual number of donors fell 1.0%. Total donations rose 3.5% to $8.6 billion, with gains in every province and territory except the Northwest Territories, where donations were 2.7% lower. The largest increases were in Prince Edward Island +7.5%, Manitoba +6.0% and Alberta +5.9%.

In 2013, 21.9% of all tax filers claimed charitable donations, compared with 22.4% in 2012. Manitoba 25.3%, Prince Edward Island 24.1% and Saskatchewan 23.4% had the highest percentage of tax filers declaring a donation. Nationally, the median donation was $280 in 2013, meaning that half of those claiming a donation gave more than $280, while the other half gave less than $280.  Although Nunavut had proportionately fewer donors than other provinces and territories, it had the highest median charitable donation of $500 among tax filers claiming charitable donations. In descending order here are the median donation amounts for each province and territory: Nunavut $500; Alberta $420; British Columbia $400; Prince Edward Island $400: Manitoba $390; Yukon $390; Saskatchewan $380; Newfoundland & Labrador $350; Northwest Territories $350; Ontario $340; Nova Scotia $320; New Brunswick $310; Quebec $130.

 

Market Update As Of February 27 2015

The TSX closed at 15234, up 63 points or 0.42% over the past week. YTD the TSX is up 3.25%.

The DOW closed at 18133, down -7 points or -0.04% over the past week. YTD the DOW is up 1.68%.

The S&P closed at 2105, down -5 points or -0.24% over the past week. YTD the S&P is up 2.28%.

The Nasdaq closed at 4964, up 8 points or 0.16% over the past week. YTD the Nasdaq is up 5.01%.

Gold closed at 1215, up 14.00 points or 1.17% over the past week. YTD gold is up 3.67%.

Oil closed at 49.33, down -1.59 points or -3.12% over the past week. YTD oil is down -6.38%.

The USD/CAD closed at 1.251377, down -0.0024 points or -0.19% over the past week. YTD the USD/CAD is up 6.63%.

 

 

Sources: Bloomberg; Investment Executive; advisor.ca