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Category Archives: Tax Planning

Odette Morin

New “family tax cut” announced

The Harper government has announced new family tax cut measures to fulfill his promise for income splitting and other tax relief for families during the last federal election. Here is a brief outline of the changes:

  • The Universal child care benefit will be raised from $100 per month per child to $160 per month per child up to age 6.
  • A new credit of 60 per month for children aged six to seventeen years is also being introduced.
  • The new tax measures will take effect on January 1st, 2015 but will only start being paid in July 2015 with a retroactive cheque of $420 per child under age 18.
  • A new “Family Tax Cut” will allow an eligible taxpayer to transfer up to $50,000 of income to his or her lower income spouse in order to collect the new non-refundable federal tax credit.  The new tax break will be capped at $2000 per year.
  • The government will allow families to take advantage of this tax break in the current 2014 tax year.

More details later when we find out exactly how the new “Family Tax Cut” and credit will work for typical taxpayers.

Stephen Harper;  Laureen Harper

Terry Broaders

Should I Delay CPP ?

Beginning in 2012, anyone who paid into CPP and reached the age of 60 could choose to begin receiving CPP benefits regardless of employment status. Previously, in order to qualify for retirement benefits one had to cease employment. There are significant financial incentives for delaying CPP.   Under the new rules, the monthly penalty for taking the CPP early (before 65) will increase gradually from 0.5% in 2012 to 0.6% a month by 2016 and the monthly benefit for delaying CPP increased from 0.5% a month to 0.7 % a month in 2013. Taking CPP early at 60 will mean you will receive 36% less than if you take it at 65 and you’ll get 42% more if you start taking it at 70 instead of 65.The maximum CPP payment for 2014 is $1,038.33, or 12,459.96 a year.

Deciding when to take CPP benefits is best based on each individual’s circumstances, but there are a number of factors to consider.  One has to do with your marginal tax rate.  If you are in a high marginal tax rate from age 60 to 65 but will be in a significantly lower rate after age 65 it may be best to delay CPP beyond age 65.  Another consideration is your life expectancy and what is known as the cross over date. This is the age you need to attain to get the benefit of delaying receiving the benefits to get the larger amount. For example, if you delayed taking CPP at 65 and took the enhanced benefit at 70, the cross over age is 80.2 years.  You need to live beyond 80 to compensate for not taking any CPP benefits at age 65.  If you’re in good health and longevity is in your family, it may be a good idea to delay because you may have a better chance of reaching that cross over age. On the other hand, if you need the cash benefit or are in questionable health it may make sense to begin receiving reduced early benefits and take the after-tax proceeds and invest them in a Tax Free Savings Account.  Also keep in mind that if you are retired and are collecting your CPP then you have to take less withdrawals from your other investments, leaving your money there to grow.   

While generally speaking we suggest taking the CPP early and potentially reinvesting it completely or partially there is simply  no one answer that fits all.  We can help you analyze your specific  situation to determine what is best for your circumstances.

Anthony Sabti

Clarifying TFSA contribution rules

If you maximized your TFSA contribution each year, you would have contributed $31,000 to the account for 2014.

Now let’s say that your investments in the TFSA have grown in value to $50,000. You then withdraw the full $50,000 from your TFSA at the end of 2014.

How much is added back to your contribution room at the start of 2015? $31,000 or $50,000?

The answer is $50,000. In 2015 you can contribute $50,000 to your TFSA plus your annual contribution amount of $5,500.

The formula for determining your contribution room the following year is as follows:

Unused TFSA contribution room to date + Total withdrawal made in this year + next year’s TFSA dollar limit = TFSA contribution room at the beginning of next year

A few more examples from Canada Revenue Agency (CRA):

 

Odette Morin

Monday is tax return drop off deadline for April 30th filing

taxtime

How busy we are at tax season depend a lot on how late Easter Monday falls on the calendar.  Clients often wait until after this long weekend to start their tax returns. 

Unfortunately, this year Easter Monday falls on April 21, 2014, giving clients only 9 days to meet the April 30, 2014 tax filing deadline. 

Given this circumstance, we strongly encourage all clients to bring their records to us by this Monday morning April 14.

As much as we’d like to accommodate everyone, we can’t guarantee completion – provided you have given us all required information – of any tax returns brought in after April 14, 2014. 

Filing your return even one day late will result in an automatic penalty of 5% of the unpaid tax balance.  The penalty rate will also increase the later you file your return or if this is not the first time you have filed late.

Here are the tax checklist you must complete as well.

http://www.you-first.com/client-centre/tax-return-checklist/

Thank you for dropping off your Tax documents by this coming Monday!

Odette Morin

We’re not Burger King (and that’s good).

Do you remember the Burger King ads that ran years ago? They always ended with “Have it your way”. It was a positive message that conveyed the importance of client satisfaction.

Fast-forward to today and the You First tax checklists (I bet you didn’t see that coming!). Despite all appearances, asking you to complete these lists our way also represents a desire to satisfy our clients.

After all, the less time we spend asking questions and trying to organize your information, the less it will cost you, and the more likely you’ll benefit from our below market tax preparation rates.

In addition, those clients who complete the checklists as required benefit from a 20% discount on their total. Those who don’t will have to pay full price.

So, while Burger King might hold the lettuce, we’re holding onto our outstanding value.

When you complete the checklists as instructed, we’re able to enter the data into our tax software and in the order which the system requires. It’s efficient and cost-effective.

However, even the slightest discrepancy can result in extra time for us.

We’ve had clients deliver organized, colour-coded and exceptionally detailed information. Yet, because it differed from our software’s system, the time we invested increased, as did our cost.

The fact is, we want to spend all of our time saving you money and making you money. Nevertheless, if you want us to spend time on you unnecessarily, then have it your way (but it will cost you!)

You can find all the checklists here.

Thank you for preparing our Tax checklists :)

Odette and the You First Team

Burger

 

 

Odette Morin

Bragging about your tax cheats is now risky business

Terry and I were at a dinner recently and someone in business at our table was bragging about the meals and entertainment and car expenses he was fully deducting.  It was clear that not all of these should be deducted and of course the chances of him being caught are very slim as very few tax returns are actually verified.  That is unless someone calls CRA’s new snitch line.

Tax slackers beware. Tax tips took on new meaning this year when the Canada Revenue Agency’s “snitch line” went live. Informants can use it to report tax evaders.  There is even a finder’s fees of 5% to 15% of tax collected if a tip brings in $100,000 more than the CRA could find on its own. So play safe.  There is enough legitimate deductions to reduce your taxes anyway.  Get a good accountant or talk to us.  We provide sound tax tax advice with your tax preparation.

'How can it be tax evasion when they caught me?'