If it walks like an employee and it quacks like an employee then it is probably an employee.  That is what the judge ruled in this case.

Full article here

My feeling is that we are soon going to hear that Canada Revenue is cracking down on employees who are masquerading as independant contractors.  One of the factors that the judge considered in this case was the “potential for profit”; an independant contractor has an unlimited potential for profit (in theory, anyway) whereas an employee is limited to his/her hourly wage.

There will be great wailing and gnashing of teeth when Canada Revenue starts to crack down on this.

• RRSP receipts for 1st 60 days 2010 MUST be entered on 2009 tax return. Don’t keep receipts for next spring but they may be deducted in future years.

• If you owe money to Canada Revenue don’t ignore the notices. Send them something. Contact them to work out an arrangement if you can’t pay the full amount now. 

• Don’t forget to include the portion of last year tax preparation fee for the reporting of gains & losses in carrying charges of your 2009 return.

Getting a tax refund?  Before spending it all, read my suggestions below. 

Not getting any refund or not enough of a refund?  Start a monthly RRSP now!  You now have 12 months ahead of you to make this happen.  It is so easy to save for a comfortable retirement and increase your chances of a refund next year.  Just let us know and we will prepare the required forms for when you pick up your tax return. 

Many of you will be getting a tax refund soon.  Before spending your refund remember that a refund isn’t a gift.  It is the return of an interest free loan you made to the Government for overpaid taxes.  Even if advisors like me tell you that the best tax refund is no refund at all, the truth is that it is for most, the best forced saving.  So, now when it comes back to you, think hard before spending frivolously.  Why not spend some and save the rest!

Here are some thoughts on how you can use the refund to better your financial position.

1. Begin or add to your emergency savings plan: If you don’t have a cash emergency fund set aside, put some of your tax refund in a high interest savings account like ING or Dundee savings.

2. Make a 2010 RRSP contribution: Get a head start toward your 2010 RRSP contribution. This way you will add to your retirement fund, have more to spend later in life and get a tax saving for next year!

3. Invest in a TFSA: You can add $5000 a year to a Tax-Free Savings Account.  You can save it short-term or invest it for wealth accumulation and retirement!

4. Add to your children’s RESP: And get the 20% government Grant! You know this will cost you a bundle and an education is the best investment!

5. Reduce the mortgage: Please remember however that with interest rates this low, you will likely be better off investing your refund. More on that in a future Blog post.  Stay tuned!

Every situation is unique, whenever in doubt, just call us. We will review your situation and help you make an appropriate decision!

FYI, Here is a good list of what is and what is not eligible as an expense under the HRTC

Click here to view

The 2010 Federal Budget is optimistic by my financial planning standards, relying on slow growth in government spending and healthy growth in the economy hoping to balance the books by 2014-15.  This year’s budget has very little impact for most people. Here are the highlights pertaining to your personal finances :

What was not changed :

- no extension of the popular home renovation tax credit
- no tax cuts either
- no TFSA and RRSP limits increase either. 

What was changed (with excerpts from the National Post and CBC news)

Stock options relief: relief has finally emerged for many employees who exercised employee stock options and deferred their tax obligations until the date of sale of the underlying shares, only to find that the price of the shares has since plummeted in value. Read more here
For parents with a child with disability: If you have a disabled child and have contributed to a Registered Disability Savings Plan, you’ll be able to carry forward the Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs) entitlements for 10 years as welll as transfer your RRSP to the RDSP upon your death.  These are truly great for parents with disabled children.
No more tax break for Cosmetic procedures: Procedures like liposuction, teeth whitening and Botox injections are no longer covered. However, medically necessary cosmetic procedures will still qualify for a tax break.
Child tax benefit can now be shared: The budget also changes the rules for parents who share custody of a child, when it comes to the child tax benefit and the universal child care benefit. Under current rules, only one parent can receive the benefits each month. Under new rules, both parents can share the benefit if the child lives more or less equally with two parents who live apart.
Tax treatment of the universal child care benefit - that $100 monthly payment for children under the age of six. The payment is currently taxed as income in the hands of the spouse with the lowest income in a two-parent family. That means a single parent may end up paying more tax than a single-income couple even if their respective incomes are the same. Under rules coming into effect this year, a single parent will have the option of including the aggregate universal child care benefit amount received in their income or in the income of the dependant for whom an eligible dependant credit is claimed. The measure will provide $168 in tax relief for single parents with one child under six in 2010, the budget document says.
Prohibiting negative-option billing in the financial sector. A financial institution won’t be able to bill you for products or services unless you’ve agreed to them.
Mortgage penalties: standardization of the calculation and disclosure of mortgage pre-payment penalties. That is so welcome!
Cheques holding period: Reducing from seven days to four, the maximum time a financial institution can hold funds from a cheque you deposit to your account. As well, the institution would have to allow you to access up to $100 from that cheque within 24 hours.
Read the full budget plan here or more info in tomorrow newspapers.

We don’t know if it is true or not but we have heard that sometimes people do not always open all the investment statements that they receive in the mail.  Naw, that can’t be true!  We respectfully remind you that at this time of year it is more important than ever to check your mail to make sure you do not discard any valuable documents. Mutual Fund companies are now mailing out RRSP receipts that you will need when completing your 2009 income tax returns in the spring of 2010.  For RRSP investments made in 2009 you will receive receipts up to December 31, 2009. For RRSP investments made in 2010 you will receive “First 60 Days of 2010” receipts which must be entered on your 2009 tax returns even if you are not planning to deduct the entire amount for 2009 and are planning to carry some over to 2010 tax year.

Also mutual fund companies, banks and other financial institutions will soon be issuing T3 and T5 receipts reporting your 2009 investment income of interest, dividends and capital gains.  Alas, should you not receive an expected statement or should you misplace a receipt for an investment or RRSP arranged through us please just contact us and we will obtain a duplicate for you. Spring is coming and that means another wonderful and exciting tax season will soon be upon us. Make sure you have all your documents in order so you don’t miss any of the fun!

We’ve reached the 1st anniversary of the Tax-Free Savings Account and this means another $5,000 in eligible contributions (bringing the total to $10,000).  We’ve talked about TFSA strategies before, but there are so many key money-saving tips associated with this account, that they are definately worth mentioning again.

Below are two articles you must read on how and when to best utilize the TFSA.  They discuss ideas such as:

-TFSA vs. RRSP - Which should we use? When to use both? At what age, income level, and tax rate is one better than the other?

-Placing the refund of an RRSP contribution into a TFSA

-Which highly taxable assets should be placed in a TFSA?

-Using the TFSA as a homebuyer’s or emergency fund

-Income earned or withdrawals from a TFSA do not affect eligibility for income-tested government benefits and credits (important for retirement planning).

-Using the TFSA to supplement RESP savings.

Both articles explain these strategies in simple terms.  If you have any questions or would like to open a TFSA (if you haven’t already done so), please let us know.

Article 1: RRSP strategies from Advisor.ca

Article 2: RRSP strategies from Morningstar.ca

Ok, so what’s this Federal Government Home Renovation Tax Credit all about anyway?

Let’s begin by reviewing what is NOT eligible!  New appliances such as big screen TV’s, refrigerators, furniture, throw rugs, appliances, electronics, stereos and tools such as electric saws, drills et cetera are NOT eligible.  Also, routine maintenance repairs such as small paint jobs, cleaning the gutters, power washings are not covered.

Well what is eligible?

Essentially, repairs of a major or permanent nature would be eligible. These would include major structural renovations, new carpeting, major interior or exterior painting, new deck, new floors, new windows, new doors, major landscaping, new furnace, new roof, new plumbing or bathroom fixtures, et cetera would be eligible items.  Also, the expenditures have to be for your personal property. So your home, cottage or Canadian vacation property would qualify. Renovations for a rental or investment condominium or renovations to a basement apartment that you are renting out are not eligible for the credit. Renovations have to be done between January 27, 2009 and January 31, 2010. Remember that there is just one allowable claim per family.

How much is the credit worth?

The credit is 15% of renovation expenses between $1,000 and $10,000. If you spend $1,000 then you get zero. Between $1,000 to $10,000 you get 15% or $1,350.  So if your total cost was $15,000 you would get the maximum credit of $1,350. If your total cost was $7,000 you would get a credit of $900.

How exactly do I get the credit? Does the Canadian government send me a cheque?

You will claim the credit when you file your 2009 income tax in the spring of 2010.  Let’s say you spent $7,000 and therefore your credit is $900. On your 2009 tax return the income tax that you would otherwise owe will reduce by $900. So essentially, if you are due a refund then your refund will increase by $900. If you owe taxes then your tax bill will reduce by $900. If you have a modest income for 2009 (under $10,000) you would not enjoy the credit because you would not owe any tax anyway. You do not have to send receipts in with your tax return but you must be able to provide them should Canada Revenue request them as part of their routine review request.

How can I get more information?

Canada Revenue has an explanatory website feature at this address below.

http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhmrnvtn-eng.html#q6