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Category Archives: Tax Planning

Odette Morin

The New RRIF withdrawal rules

Federal Finance Minister Joe Oliver tabled the 2015 federal budget on April 21, 2015. This commentary summarizes the changes in the new budget that affect retirement income and savings. Budget changes that do not relate to retirement income and savings have been covered extensively by many accounting and tax advisory firms and will not be covered in this commentary.

Main Change – Minimum Withdrawal Factors for Registered Retirement Income Funds (RRIFs)

The main retirement-related change introduced in Budget 2015 is to adjust the RRIF minimum withdrawal factors that apply in respect of ages 71 to 94, as follows:

Age (at start of year) Existing Factor New Factor
% %
71 7.38 5.28
72 7.48 5.40
73 7.59 5.53
74 7.71 5.67
75 7.85 5.82
76 7.99 5.98
77 8.15 6.17
78 8.33 6.36
79 8.53 6.58
80 8.75 6.82
81 8.99 7.08
82 9.27 7.38
83 9.58 7.71
84 9.93 8.08
85 10.33 8.51
86 10.79 8.99
87 11.33 9.55
88 11.96 10.21
89 12.71 10.99
90 13.62 11.92
91 14.73 13.06
92 16.12 14.49
93 17.92 16.34
94 20.00 18.79
95 & over 20.00 20.00

 

The existing factors were determined on the basis of providing a regular stream of payments from age 71 to 100 assuming a 7% per annum nominal rate of return and indexing at 1% annually with factors capped at 20% for ages 94 and over. The new factors were determined assuming a 5% per annum nominal rate of return and indexing at 2% annually with factors capped at 20% for ages 95 and over.

Minimum withdrawal factors for ages 70 and under remain unchanged and continue to be determined by the formula 1 / (90 – age). Note that at the time of establishing the RRIF, individuals also have the option to base the minimum withdrawal amounts on the age of their spouse or common-law partner.

Similar rules will apply to those receiving annual payments from a defined contribution registered pension plan (RPP) or a Pooled Registered Pension Plan (PRPP).  These new factors will also apply to minimum payments from an Individual Pension Plan (IPP) after age 71 for members who are controlling shareholders or related persons.

The new RRIF rules have not been formally.  Stay tuned.  We will update you.

Odette Morin

New $10,000 TFSA limit approved

TFSA

 

 

 

 

 

 

 

BREAKING NEWS
The CRA has come out and confirmed that the TFSA increase to $10,000/year is effective immediately (before budget gets passed into Law).  You can top up your limit now.
The total maximum contribution from all previous years to date is $41,000.  If you have maximized every year, and have already made your $5500 contribution this year, you can now add $4500.
Contact us if any questions or wish to make your top up TFSA contribution now. email hidden; JavaScript is required

Odette Morin

2015 Federal Budget Highlights

Joe's Budget shoes

 

 

 

 

The Federal Government delivered its “New Balance” budget today offering lots of goodies for everyone. Here are the most important announcements affecting your financial planning:

  • No new tax cuts.
  • TFSA limit is being increased from $5500 to $10,000 per year effective immediately. This happens as soon as the budget is passed and approved. We will let you know as soon as we hear.
  • The RRIF (Registered Retirement Income Fund) MAP (Minimum Annual Payment) is being lowered. Under the current rules, a 71-year-old would have to withdraw 7.38 per cent of his or her RRIF in the first year, escalating all the way to 20 per cent by age 94. Under the new rules outlined in the budget, those limits have been ratcheted down to 5.28 per cent to start, and down to 18.79 per cent by 94. This truly is excellent news for retirees.
  • EI premiums to be reduced by 21% in 2017
  • EI compassion benefit (to take care of a sick family member) increased from 6 weeks to 6 months.
  • Small business tax reduced from 11% to 9% by 2019.
  • New government initiative to help Women owned businesses.
  • More financial help for Young entrepreneurs.
  • New retirement income benefit for veterans.
  • New home accessibility for seniors and people with disabilities. Starting this tax year, homeowners who spend up to $10,000 on renovations such as wheelchair ramps, walk-in bathtubs, non-slip flooring and grab bars can get a tax deduction for up to $1,500.
  • There is something for students too. Canada Student Grants eligibility will drop from 64 to 34 weeks.
  • The government is also changing the student loan program. Under current rules, any dollar over $100 a week that a student earns from a part-time job while studying reduces the loan amount they’re eligible for. The budget proposes eliminating that “penalty” from now on, which the government says would help 87,000 students a year.
  • 4 Billion surplus this year
  • Total overall debt $617Billion

More in tomorrow’s newspaper. Make sure to check our blog often. We will be commenting on these new government initiatives in the weeks ahead.

Sources: CBC news, CTV News, National Post, Globe & Mail

Odette Morin

10 ways to waste your tax refund

I read this article this week about ways to waste a valuable tax refund.  Here is the link below.

Just remember that a refund is not free money.  It is tax you overpaid from your paycheque or other source of income.  Don’t fool yourself.  It is not a true windfall. If you spend this money on frivolous things, it is wasted.

Consider the balanced approach I always favor to avoid feeling deprived. Be responsible with most of the tax refund and spend a little of it as well. The awesome feeling of doing the right thing for your future and rewarding yourself a little is priceless!

Here is the link to “10 ways to waste your tax refund”

waste money

Odette Morin

Do you own foreign assets of more than $100k?

This is a question you must answer on your tax return.  If you say yes, you have to complete T1135 which outlines the value of the foreign property and the income derived from them.

Failure to report your worldwide income and assets will trigger a hefty penalty. The penalty for a late filed T1135 is $25 per day to a max of $2,500.  Ouch!

If you haven’t and should have filed a T1135, you can make a voluntary disclosure and beg for forgiveness by asking for the penalty to be waived.

Here is the link to the voluntary disclosure form.

Good Luck!

disclose

Odette Morin

Is it a problem to write off expenses when my self-employed income has been so low?

Here is a question we got this week along with Anthony’s reply.  We get this type of question regularly, so I thought I would include it on our blog.

Dear Anthony,

I dropped off the paperwork for my income tax. As you’ll see, this is the second year in a row that I’ve made peanuts from my freelance work. I did very little freelance work in those years because I became a mother. My question: Is it a problem to write off expenses when my self-employed income has been so low? I believe someone once told me it’s ok to operate at a loss for only two or so years. My 2015 earnings are already up, and I’m collecting GST, so there won’t be a third year of such low income. I’m just paranoid and want to be sure I’m not doing anything that will flag me for an audit.

Also, thank you for your efficiency with my returns last year.

Anthony’s reply was:

You are allowed to have business losses for a few years while starting a business.  CRA understands this.  There are no black and white rules for how many years, or how big of a loss.  The strongest guidance I can give you is to apply a reasonable link between your revenues or expenses, in the context of what you do.  For example, for most people in your line of work it could be reasonable in the early years to have $3000 in expenses but only earn $500 in income.  On the other hand for most people in your line of work, it’s probably not reasonable to spend $40,000 so you can earn $500.  And always remember it’s not us you have to justify this to, it’s CRA.  They’re the ones who would contact you to document and explain why you had X amount of losses, and you need to be able to explain why.  Always imagine sitting in a living room with a CRA employee having to explain your expenses.  That’s how I look at it.

When we start work on your file, we’ll take a look at your situation.  If we believe your expenses are too high, we’ll contact you.

tax advice