Odessey Business Services

Taking wages from your incorporated business.

debbie — Thu, 05 Feb 2009 00:57:39 +0000

There are a few ways an owner can draw wages or withdraw money from the incorporation and they can be combined. The tax consequences vary for personal and corporate taxes depending on the method chosen.

The best option of course is to REPAY ANY LOANS made to the company. This is a tax free way of withdrawing money, as a loan repayment is not considered taxable income. A shareholder does make transactions where the company would owe them for personal purchases. Charging the company for kilometers driven on a personal vehicle, as well as cash purchases and cash influxes, are a few ways a shareholder can accrue credit in the shareholder account to later be paid back tax free.

The next best way to take money out of your company is to be SET UP ON PAYROLL as an employee would be. Source deductions are remitted to the government and a T-4 is issued at the end of the year. The personal tax is already deducted at source so at tax time, there are no tax implications for the owner. The corporation deducts the wages and payroll expenses paid and there are no tax implications for the corporation other than being current on source deduction remittances. This of course is dependant on cash flow and for a new company this may not be convenient and not keeping current could result in penalties and interest.

A less popular way of drawing a wage is through an EMPLOYEE PROFIT SHARING TRUST (EPST). The company must register the Trust through a lawyer and pay a yearly fee to keep the trust active. The wages drawn are not subject to payroll taxes, they are considered a trust withdrawal and fully deductible. At the end of the year, the shareholder (or employee) is issued a T4PS to file with their personal taxes. Since no tax is taken at source, the filer is responsible for the taxes on their personal return, resulting in a balance due. This method however, is not subject to CPP and does not contribute to RRSP room. This may be an issue taking all of wages this way may not be the best way in regards to a personal financial plan.

Shareholders can also take a wage by declaring DIVDENDS. No expense is taken to use against income, so the company pays taxes on the profit made in that fiscal year. If there is profit, this would transfer to the retained earnings account for the new year and the owner may draw dividends out against the retained earnings. A T-5 is issued to the owner to claim on their personal taxes. Again, this type of income does not contribute the CPP earnings or contribute to RRSP room. The dividends do not have tax taken at source and are taxed differently on a personal tax return at a much lower tax rate.

It may be advisable to take wages from the business in one of these ways or a combination of a few of the mentioned ways.

One way that wages have been taken for years is as a management fee. This is usually deducted in the corporation as an expense, as a subcontractor would be. No payroll taxes are taken at source as the shareholder would claim this income as business income on their personal taxes, and pay the income tax and both portions of the CPP then. This has been a popular method of drawing wages for the shareholder by many accountants, especially in a single owner company, up until this point.

Revenue Canada put together a PROJECT in January 2005 and after 3 months of investigating, they have decided to refuse to accept this way of drawing money from your company. Even though the taxes and CPP are paid at the same rate as it would be as an employee, the payable date on these funds is April 30. If wages are taken through payroll and a T-4 is issued, the T-4 summary and the payroll taxes are payable on Feb 28^th.

They are currently reviewing all corporate tax returns showing Management fees and comparing it to the shareholders tax return, looking for Business Income or Other Income claimed. Revenue Canada has reassessed in the tens of thousands of corporate income tax returns back to 2001, in order to collect penalties and interest on T-4’s not filed and paid in full be Feb 28^th of the year due.

So when making a tax plan both personally and corporately, take into consideration all of the ways to draw money from your business and the tax implications of each method.

Proprietors Checklist for Taxes

debbie — Thu, 05 Feb 2009 00:22:23 +0000

Revenue – invoice copies and deposit books to substantiate income (must let me know if revenue includes or does not include GST)

Expenses – copies of receipts and/or cheque stubs (try to get actual receipts to go with credit card and debit receipts). Separate into categories eg. supplies, office expenses, vehicle expenses, casual labour, etc.

- Advertising (can include trade show expenses)

- Bank charges, interest, credit card fees

- Bus taxes, licenses, fees, subscriptions, dues.

- Cost of goods (materials, stock, samples, returns)

- Office (delivery, freight, postage, photocopies, forms, cheques)

- Promotion and entertainment (meals, gifts…these will be a 50% deduction on taxes)

- Promotion 100% ( 5 events/yr, all staff, clients invited, eg> xmas, stampede, open house)

- Professional Fees (legal, accounting, coaching)

- Travel (anything incurred over 40 kms from home base, except vehicle expenses..see below)

- Telephone (cell, pager, long distance, email..not home phone basic charges)

- Wages (casual, contract labour expenses)

Vehicle expenses – GET A MILAGE READING AS OF DEC 31 and this will be the beginning reading for the following year. Determine business use of vehicle by kilometer log kept vs. personal use. Split vehicle expenses into categories.

- Oil and gas

- Repairs and maintenance

- Licenses and registration

- Insurance (can be determined from bank statements.)

- Lease payments if applicable

- Interest payments if paying on a vehicle loan (can get these figures from the bank)

- Parking and car washes

Home expenses – separate into categories and determine percentage of business use of home (eg 20% average). Submit full amount of home expenses and the percentage will determine the business use percentage.

- rent (if paid, less GST)

- insurance (can get figures from bank statements)

- utilities

- telephone – long distance and features only.

- if home is owned get statement from bank for the following:

-mortgage interest

-property taxes

- repairs and maintenance to the home that affect the home office areas.

- Condo fees

- Security

__________________________________________________________________________________

PERSONAL RECEIPTS

RRSP’S – get hold of me BEFORE Feb 28 to find out if RRSP’s are necessary and how much - provide receipts from bank for contributions or withdrawals.
T’4. T’4E, T’5 etc. - if you worked at all for anyone, wait for T-4 , if you received benefits(eg EI) wait for receipts.
Receipt for interest paid on student loans
Medical receipts for entire family
Stock Summary of Transactions
Transit Tickets for entire family
Day care and Child Fitness receipts
Public Transit passes for entire family
Last years tax assessment from Revenue Canada

Check my calendar for important dates to remember for tax season and business filings!

debbie — Wed, 04 Feb 2009 21:50:26 +0000

Info on the New Home Renovation credit for 2009

debbie — Wed, 04 Feb 2009 19:17:23 +0000

Home renovations can represent a smart investment in the long-term value of a home and generate broad-based economic activity. They can also reduce energy consumption and the long-term cost of owning a home. To support economic growth during these challenging times, Budget 2009 proposes to introduce a temporary Home Renovation Tax Credit (HRTC). The HRTC will provide a temporary incentive for Canadians to undertake new renovation projects or accelerate planned future projects, thus providing timely stimulus to the Canadian economy while boosting energy efficiency and the value of Canada’s housing stock.

How the Temporary HRTC Will Work

The proposed HRTC will provide a temporary 15-per-cent income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The credit may be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, and will provide up to $1,350 in tax relief.

Who Can Claim the HRTC

The HRTC will be family-based. For the purpose of the credit, a family will generally be considered to consist of an individual, and where applicable, the individual’s spouse or common-law partner. Family members will be able to share the credit.

The amount eligible for the credit will be based on the total value of eligible expenditures incurred across all eligible dwellings. A dwelling will generally be considered eligible if it is used for personal purposes. This will include a house, a cottage, and a condominium unit.

It is estimated that about 4.6 million families in Canada will benefit from the HRTC.

Benefits of the Temporary Home Renovation Tax Credit— Examples

The following examples illustrate how homeowners can benefit from the HRTC.

1. Sally and Ed are a couple who have recently purchased a house. To take advantage of the temporary HRTC, they decide to replace their windows and improve the insulation in their home in 2009, instead of waiting, incurring $10,000 in expenditures. After taking account of the $1,000 minimum threshold, a 15-per-cent credit will be available on $9,000 in eligible expenditures, providing tax relief of $1,350.

2. William and Marie are a couple who are planning to purchase a more energy-efficient furnace for their home, and build a deck at their cottage sometime later. To take full advantage of the temporary HRTC, they decide to do both projects in 2009 rather than waiting. They pay $5,000 for the furnace and $3,500 for the deck. They also decide to have the area around the deck landscaped for $2,500, bringing their total costs to $11,000 ($5,000 + $3,500 + $2,500). Marie claims a credit of $1,350 on the maximum allowable amount of $9,000. This credit is in addition to the ecoENERGY Retrofit grant that William and Marie expect to receive for installing a more energy-efficient furnace.

3. Karen and Heather are sisters who share ownership of a condominium unit. They each incur $7,500 in expenditures renovating the kitchen in the condominium, in part to provide access for Heather’s wheelchair. Karen and Heather each claim a $975 credit on eligible expenditures of $6,500 ($7,500 – $1,000). This credit is in addition to the Medical Expense Tax Credit that Heather may claim on the portion of expenses eligible for that credit.

Expenditures Eligible for the HRTC

It is proposed that the HRTC be claimed for renovations and alterations to a dwelling or the land on which it sits that are enduring in nature.

For example, homeowners will be able to claim expenditures for major renovation projects such as finishing a basement, renovating a kitchen, or building an addition. Costs associated with such projects will be eligible for the credit, including permits, professional services, equipment rentals and incidental expenses. Routine repairs and maintenance normally performed on an annual or more frequent basis (e.g. cleaning, lawn fertilization, and snow removal) will not qualify for the credit. The cost of purchasing furniture, appliances, audiovisual electronics and construction equipment will not be eligible. Individuals will need to keep receipts for expenditures, and may claim the HRTC when filing their income tax returns for 2009.

The HRTC will complement support provided by the Government for Canadians to undertake energy-saving improvements to their homes. Federal grants paid through the ecoENERGY Retrofit program will not reduce the value of claims made for these expenditures under the HRTC. Eligible renovation expenditures claimed under the Medical Expense Tax Credit may also be claimed under the HRTC.

Deb: Keep reading for the eligible and non eligible expenses. I know everyone is going to have questions that try to break these outlined eligibility requirements. As the year goes on, more details will come out, but for now, keep EVERYTHING to do with a reno. This is not a HUGE deduction, it is like medical expenses in that you only get 15% of the actual costs of the reno, but hey, for one year, take advantage. Next question, don’t know if you can use it for a second home, mentions personal use, so sounds like a second home, but definitely not a rental property. So don’t even try!

Examples of HRTC-Eligible and Ineligible Expenditures

Eligible

• Renovating a kitchen, bathroom or basement

• New carpet or hardwood floors

• Building an addition, deck, fence or retaining wall

• A new furnace or water heater

• Painting the interior or exterior of a house

• Resurfacing a driveway

• Laying new sod

Ineligible

• Purchase of furniture and appliances (e.g. refrigerator, stove, and couch)

• Purchase of tools

• Carpet cleaning

• Maintenance contracts (e.g. furnace cleaning, snow removal, lawn care, and pool cleaning)

Deb: I do have some trades in my contact list, so if you want some names here are a few.

General renos: Rob Hitchcock (403) 277-3355 or email hitchcocks99@yahoo.ca

General renos and landscaping (decks, etc) Jeremy Ennett (403)870-3282 zotrain@shaw.ca

General Renos : Zimmer Construction – Darcy Zimmer ( 403) 948-1366 or email zimcon1@telus.net

Electrical : SOS Electric (403) 243-8558 Talk to Scott, Don or Chris soselectric@shaw.ca

And don’t forget you are going to have to get new furniture and stuff for your new room, yard etc.The Consignment Gallery has everything you need at 403-253-7880. www.consignmentgallery.ca

So if you had plans to do a reno, keep those receipts and use them to bring your taxes down next year. It looks like a one time deal, so lets take advantage.

The 2009 Budget breakdown and how it may affect you.

debbie — Wed, 04 Feb 2009 18:59:37 +0000

Well the new Canadian Economic Budget was released and there is a lot of reading in it. I saved you the time and this is to let you know some key points that will affect you, the basic taxpayer for your 2009 tax filing. So keep scrolling, till a headline catches you.

Tax Relief for Canadians

Budget 2009 proposes significant new personal income tax relief that will provide immediate benefits, particularly for low- to middle-income

Canadians. Specifically, Budget 2009 will increase the basic personal amount and the top of the two lowest personal income tax brackets by 7.5 per cent

above their 2008 levels, effective January 1, 2009.

• The basic personal amount will be increased to $10,320 in 2009 from $9,600 in 2008, allowing individuals to earn more income before paying

federal income tax.

• The top of the first personal income tax bracket will be increased to $40,726 in 2009 from $37,885 in 2008, allowing more income to

be taxed at the lowest 15-per-cent rate, rather than the 22-per-cent rate.

• The top of the second personal income tax bracket will be increased to $81,452 in 2009 from $75,769 in 2008, allowing more income to

be taxed at the 22-per-cent rate, rather than the 26-per-cent rate.

Deb: So higher income can be earned and taxed lower and if you RRSP down to the lower bracket, even higher income can be made.This will be a relief to some people who have been sitting on the edge of a tax bracket.

Increases to the National Child Benefit Supplement and Canada Child Tax Benefit

Budget 2009 proposes to apply the new upper limit for the 15-per-cent tax bracket for income testing the National Child Benefit supplement (NCBs) and

the Canada Child Tax Benefit (CCTB). As a result, low-income families will be able to earn an additional $1,894 and still receive the maximum NCBs.

Families will also be able to earn an additional $1,894 before their NCBs is fully phased out or before their base benefit under the CCTB begins to be

phased out. These increases will result in additional benefits for families with income in the current benefit phase-out ranges—up to $436 for a low-income family

with two children, and up to $76 for a middle-income family with two children.

Deb: Essentially, now families can have a higher family income and still qualify for Child Tax Benefits. For 2 parent working families, this has been an issue up till now, as the cost of daycare doesn’t go down with two incomes, but child tax benefits did. This should help more families qualify for the benefit.

Targeted Tax Relief for Seniors

To provide further tax relief to seniors, the Government is proposing to increase the Age Credit amount by $1,000 for 2009 and subsequent

taxation years. This increase will provide tax savings to about 2.2 million seniors in 2009. With the $1,000 increase, the Age Credit amount for 2009

will be $6,408 and provide tax relief of up to $961 for eligible seniors. The Government will also be proceeding with the proposal announced in

the November 2008 Economic and Fiscal Statement to reduce the required minimum Registered Retirement Income Fund withdrawal for 2008 by

25 per cent. This will provide one-time tax relief of $200 million to seniors, in recognition of the impact of the deterioration in market conditions on

retirement savings.

Deb: This has been a pet peeve of mine for some time now, watching seniors have to make installments or constantly owe money. This increase will help out, especially for seniors who make income from outside investments or pensions that put them in higher tax brackets. The relief for RRIF withdrawals is nice to see also, as many seniors lost a lot of value in their RRIF’s this past year and drawing the higher required amount was sure to drain some retirement funds quicker.

An Extra Five Weeks of EI Benefits

The EI program exists to provide financial support to Canadians who have lost their jobs. Accordingly, the Government will increase

all regular benefit entitlements by five extra weeks to a maximum of 50 weeks for the next two years at an estimated cost of $1.15 billion.

This five-week extension effectively makes available nationally an enhanced version of the current five-week pilot project that until now has only been

provided in regions with the highest unemployment rates. This will provide all regular EI clients with the reassurance that they will

have financial support for a longer period while they find new employment, should it be required. It will also provide additional income support to

unemployed Canadians who would otherwise have exhausted their benefits.

Long-Tenured Workers

As the global economic slowdown has unfolded, a number of communities across the country have been particularly hard hit. Individuals who have

spent years working in one industry or for one employer now face the prospect of unemployment and the need to retrain for a new job, possibly

in an entirely different industry.

Deb: See below comment. Hate to hear of long term employees turfed in favour of newbies who know nothing..tsk tsk.

Strategic Training and Transition Fund

Not all Canadians are eligible for EI training. Examples include the self-employed,or those who have been out of work for a prolonged period of

time. These individuals also often require a broader range of programs than EI can provide.

Budget 2009 is providing $500 million for the Strategic Training and Transition Fund to be invested over two years to support the particular

needs of individuals whether or not they qualify for EI. This two-year fund will help to ensure that all Canadians will be able to

access the training and other assistance they need, and should benefit 50,000 more people.

Deb: ABOUT FRICKEN TIME!!! Finally we overachieving self employed are going to have access to some benefits while we are retraining or upgrading. Let’s take full advantage of this.

Apprentices

Changing demographics mean that the current shortages of skilled labour in certain parts of the country are expected to continue and potentially expand,

presenting a challenge to maintaining productivity and economic growth. The Government has put in place key initiatives to begin addressing this

challenge. The Apprenticeship Job Creation Tax Credit encourages employers to hire new apprentices and the Apprenticeship Incentive Grant

encourages young people to pursue careers in one of the Red Seal skilled trades.

To build on these measures and further respond to skilled labour shortages, Budget 2009 is providing $40 million a year to launch the Apprenticeship

Completion Grant. Apprentices who complete their certification in any of the Red Seal skilled trades will be entitled to receive a taxable grant

of $2,000. This grant will provide an additional incentive for young Canadians to finish their training and launch rewarding careers in the skilled trades. It will

benefit an estimated 20,000 apprentices each year.

Deb: Note to businesses, hiring kids and putting them through apprenticeship programs promotes loyalty, people with the most updated skills and now a tax credit for the business who hires them.

Home Renovation Tax Credit

Home renovations can represent a smart investment in the long-term value of a home and generate broad-based economic activity. They can also reduce

energy consumption and the long-term cost of owning a home. To support economic growth during these challenging times, Budget 2009 proposes

to introduce a temporary Home Renovation Tax Credit (HRTC). The HRTC will provide a temporary incentive for Canadians to undertake

new renovation projects or accelerate planned future projects, thus providingtimely stimulus to the Canadian economy while boosting energy efficiency

and the value of Canada’s housing stock.

How the Temporary HRTC Will Work

The proposed HRTC will provide a temporary 15-per-cent income tax credit on eligible home renovation expenditures for work performed, or

goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The credit may

be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, and will provide up to

$1,350 in tax relief.

Who Can Claim the HRTC

The HRTC will be family-based. For the purpose of the credit, a family will generally be considered to consist of an individual, and where applicable,

the individual’s spouse or common-law partner. Family members will be able to share the credit.

The amount eligible for the credit will be based on the total value of eligible expenditures incurred across all eligible dwellings. A dwelling will generally

be considered eligible if it is used for personal purposes. This will include a house, a cottage, and a condominium unit.

It is estimated that about 4.6 million families in Canada will benefit from the HRTC.

Benefits of the Temporary Home Renovation Tax Credit— Examples

The following examples illustrate how homeowners can benefit from the HRTC.

1. Sally and Ed are a couple who have recently purchased a house. To take advantage of the temporary HRTC, they decide to replace their windows

and improve the insulation in their home in 2009, instead of waiting, incurring $10,000 in expenditures. After taking account of the $1,000

minimum threshold, a 15-per-cent credit will be available on $9,000 in eligible expenditures, providing tax relief of $1,350.

2. William and Marie are a couple who are planning to purchase a more energy-efficient furnace for their home, and build a deck at their cottage

sometime later. To take full advantage of the temporary HRTC, they decide to do both projects in 2009 rather than waiting. They pay $5,000

for the furnace and $3,500 for the deck. They also decide to have the area around the deck landscaped for $2,500, bringing their total costs

to $11,000 ($5,000 + $3,500 + $2,500). Marie claims a credit of $1,350 on the maximum allowable amount of $9,000. This credit is in addition to

the ecoENERGY Retrofit grant that William and Marie expect to receive for installing a more energy-efficient furnace.

3. Karen and Heather are sisters who share ownership of a condominium unit. They each incur $7,500 in expenditures renovating the kitchen in

the condominium, in part to provide access for Heather’s wheelchair. Karen and Heather each claim a $975 credit on eligible expenditures

of $6,500 ($7,500 – $1,000). This credit is in addition to the Medical Expense Tax Credit that Heather may claim on the portion of expenses

eligible for that credit.

Expenditures Eligible for the HRTC

It is proposed that the HRTC be claimed for renovations and alterations to a dwelling or the land on which it sits that are enduring in nature.

For example, homeowners will be able to claim expenditures for major renovation projects such as finishing a basement, renovating a kitchen, or

building an addition. Costs associated with such projects will be eligible for the credit, including permits, professional services, equipment rentals and

incidental expenses. Routine repairs and maintenance normally performed on an annual or more

frequent basis (e.g. cleaning, lawn fertilization, and snow removal) will not qualify for the credit. The cost of purchasing furniture, appliances, audiovisual

electronics and construction equipment will not be eligible. Individuals will need to keep receipts for expenditures, and may claim the

HRTC when filing their income tax returns for 2009. The HRTC will complement support provided by the Government for

Canadians to undertake energy-saving improvements to their homes. Federal grants paid through the ecoENERGY Retrofit program will not reduce the

value of claims made for these expenditures under the HRTC. Eligible renovation expenditures claimed under the Medical Expense Tax Credit

may also be claimed under the HRTC.

Examples of HRTC-Eligible and Ineligible Expenditures

Eligible

• Renovating a kitchen, bathroom or basement

• New carpet or hardwood floors

• Building an addition, deck, fence or retaining wall

• A new furnace or water heater

• Painting the interior or exterior of a house

• Resurfacing a driveway

• Laying new sod

Ineligible

• Purchase of furniture and

appliances (e.g. refrigerator,

stove, and couch)

• Purchase of tools

• Carpet cleaning

• Maintenance contracts (e.g. furnace cleaning, snow removal, lawn care, and pool cleaning)

Deb: I do have some trades in my contact list, so if you want some names here are a few.

General renos: Rob Hitchcock (403) 277-3355 or email hitchcocks99@yahoo.ca

General renos and landscaping (decks, etc) Jeremy Ennett (403)870-3282 zotrain@shaw.ca

Electrical : SOS Electric (403) 243-8558 Talk to Scott, Don or Chris soselectric@shaw.ca

And don’t forget you are going to have to get new furniture and stuff for your new room, yard etc.The Consignment Gallery has everything you need at 403-253-7880. www.consignmentgallery.ca

Yes, these are nods to my clients. It is my newsletter after all!

Enhancing the Energy Efficiency of Our Homes

Promoting energy efficiency and conservation is an effective means of reducing energy demand. The ecoENERGY Retrofit program provides

home and property owners with grants of up to $5,000 to offset the costs of making energy-efficiency improvements. Grants apply to a variety

of measures that reduce energy consumption from increasing insulation to upgrading a furnace.

Building on the success of the existing program, Budget 2009 provides an additional $300 million over two years to the ecoENERGY Retrofit

program to support an estimated 200,000 additional home retrofits

Deb: Being the save the planet nut I have become, I love this benefit. Every little bit helps. It would also qualify you for the 1 Million Acts of Green.

http://green.cbc.ca/

So all in all, a lengthy budget but there are things we can all benefit from in it.

Of course most of this will be tweaked as the year goes on, but at least you know what to watch for.

Deb

Info on the new Tax Free Savings Account (TFSA)

debbie — Wed, 04 Feb 2009 18:40:30 +0000

In the Budget of 2008, the Tax Free Savings Account was introduced and took effect Jan 1, 2009. The TFSA will allow Canadian resident individuals to earn investment income, including interest, dividends, and capital gains, on a tax-free basis. Contributions to the TFSA will not be deductible, but the income in the account will not be subject to tax, either while in the account or upon withdrawal. Everyone over 18 has a beginning contribution level of $5000/yr for 2009. This is set to be increased $500/yr for inflation. It is a government tracked savings account that grows any way you want it too, without tax consequences.

Starting January 1/09, you can put money into a high interest savings account, mutual funds, stocks, etc. grow it, get interest, makes gains. All of the different agencies will have different growth vehicles for this money, such as banks, investment firms and stock brokers. CONTRIBUTIONS ARE NOT TAX DEDUCTIBLE LIKE AN RRSP, but, when you take this money out it will not be taxed.

Furthermore, unlike an RRSP, there is no time limit at which the TFSA must be wound up or converted into another investment vehicle. Thus, the TFSA can be used to fund pre-retirement years or post-retirement years, and there are no limits on either withdrawals or the use of the withdrawn funds.

Upon death, the value of the TFSA is not included in income (unlike an RRSP or RRIF), although any income that accrues after death will be subject to tax. To retain the tax-free status of the account, it may pass to the deceased’s spouse or common-law partner, or the assets of the account can be transferred to a TFSA of the spouse or common-law partner.

One very nice feature, any balance WILL qualify as an asset and may be used as collateral for a loan. Also, this money, grown and withdrawn, will not affect government benefits such as Child Tax Credit, GST tax credit, guaranteed income supplement for seniors, or EI benefits.

For instance, if you have money in an ING bank account, it grows and accumulates interest and you get a slip to claim the interest as income on your taxes. Also, if you trade stocks outside your RRSP, when you sell them, if you made any gains, you pay tax on half of them at your current tax bracket.

This account is set up so that anything you make is yours.

This is a REGISTERED account, which means it will be tracked…you will see your limits and activities in this account on your tax assessment, like you see your RRSP contribution room after you file.

Any withdrawals you make, will give you back that room to contribute. Any room you do not use, will carry forward every year, the way RRSP room does. So if you only put in $2000 in 2009, in 2010, you will have $3000 in carry forward room, plus the $5000 from 2010.

Why would you use this?

For example, when you buy a house, instead of pulling out RRSP’s for a down payment and having to repay or claim 1/15 of that amount every year on your taxes, this is your money, and you don’t pay tax on the withdrawal.

Another idea, if it is used as a vehicle for retirement savings, you can make your RRSP savings last longer by taking less, which means take less taxable income, and subsidize yourself with the savings and growth you made in them. No tax consequences.

Put it this way, if you and your spouse put away the $5000/yr, which works out to a direct payment from your bank account of $417/mo for 2009, for 10 years, you would have minimum $100,000 saved. Ten years isn’t that long really, and yes, you could pay down your mtg, or make those lump payments every year, go on a sweet trip every year without worrying about the saving, or use it to live on when times are tough, start a business so you can work part time in retirement or you could buy a treehouse in Costa Rica..lol.

Anyways, talk to a financial guru, I have two I use, why put all my treehouses in one basket!

Laurie Tregaskis of Quiet Wealth, is a financial planner who can work out a personal plan for you and your family to invest and grow that $5k/yr based on where you are financially now and where you want to be..never too early to make a plan! ltreg@telus.net or call her at 403-290-0940.

Darren Harrold works with Blackmont Capital and can set up a portfolio for you, to trade in any stock in any world market, as well funds, REIT’s and too many other options to mention, to grow that $5K/yr. dharrold@blackmont.com or call him at 403-260-6839.

So start to save, roll your coins and put your lottery winnings in here. Now you can spend that ‘Rainy Day” on the beach, in a new car, new neighborhood, or your favorite high end store. Enjoy.

Tax Changes for 2008

debbie — Fri, 19 Dec 2008 21:22:54 +0000

Here is your yearly tax update.

Personal tax rates:

Federal:

For 2008, the year just closing, the lowest tax level is $ 37,885. The income equal to and less than this amount will be taxed at 15%. The next level to get yourself under is $ 75,769 which means that the first $ 37,885 is taxed at 15% and the amount between $37,885 and $75,769 is taxed at 22%. Next bracket after that is $ 123,184 which is at 26% and anything over that is taxed at 29%.

The personal exemption amount for 2007 was $9600. This is what is earned before taxing kicks in. The spousal and equivalent to spouse amount is also $9600. So single parents, you make $19,200 before you start getting taxed.

The age amount is $5,276. Anyone over 65 gets to earn this amount also with no tax, so seniors, with a spouse not working who is also over 65, you can make $ $ 29752, before the taxing kicks in. Nice! Also a note for seniors, if you receive CPP and OAS as well as other income, check to see if there are taxes coming off these govt payments. You can get tax to come off, they just don’t voluntarily do it, and I hate to see seniors making installments because the govt is lazy. Let me know, I can get you the paperwork.

CPP rates are 4.95%, and most people don’t need that number for anything, but self employed, remember, we pay double that, so 9.9% CPP on taxable earnings. So even tho you may not owe taxes, you may very well have a balance due that is CPP only.

Public transit passes. This now includes weekly passes, so hopefully everyone kept receipts of transit fares.

Note to transport employees: Truckers, rail etc. Meal expenses have increased from 60% to 65%. This will be further increased to 80% over the next 5 years. This is for Long Haul transport employees, which means overnight trips. Nice to see.

For all the employees who can write off vehicle expenses and the self employed group who are incorporated, the km rate for 2008 was .52/km for the first 5000 kms and .46/km after that.

AND SPEAKING OF KMS!! ON NEW YEARS DAY, GO CHECK YOUR KMS AND EMAIL THEM TO ME, SO I HAVE IT ON FILE!!! REMINDER REMINDER!!!!

I’m sure most of you have heard of the restrictions the government is trying to put on naturopathic medical services, and even though that nasty bill has not been passed yet, it has already affected the medical claims you can use on your taxes. On medical expenses and purchases made after Feb 26,08 only those that are prescribed by a recognized medical practitioner, or recorded by a pharmacist are eligible. (Small rant here). Also to note, Alberta does NOT consider massages as a viable medical expense for deduction…lalalala…I can’t hear them. :)

** The biggest news that came out this year, but really won’t affect anyone’s taxes until 09, is the Tax Free Savings Account(TFSA). Everyone over 18 has a beginning contribution level of $5000/yr. This is set to be increased $500/yr for inflation. It is a government tracked savings account that grows any way you want it too, without tax consequences.

Starting January 1/09, you can put money into a high interest savings account, mutual funds, stocks, etc. grow it, get interest, makes gains. All of the different agencies will have different growth vehicles for this money. IT IS NOT A TAX DEDUCTIBLE CONTRIBUTION LIKE AN RRSP. But, when you take this money out it will not be taxed.

For instance, if you have money in an ING bank account, it grows and accumulates interest, you get a slip to claim the interest as income on your taxes. Also, if you trade stocks outside your RRSP, when you sell them, if you made any gains, you pay tax on half of them at your current tax bracket.

This account is set up so that anything you make is yours.

This is a REGISTERED account, which means it will be tracked…you will see your limits and activities in this account on your tax assessment, like you see your RRSP contribution room after you file.

Any withdrawals you make, will give you back that room to contribute. Any room you do not use, will carry forward every year, the way RRSP room does. So if you only put in $2000 in 09, in 2010, you will have $3000 in carry forward room, plus the $5000 from 2010.

Why would you use this?

Another idea, if it is used as a vehicle for retirement savings, you can have your RRSP savings last longer, take less, which means take less taxable income, and subsidize yourself with the savings and growth you made in them. No tax consequences.

Put it this way, if you and your spouse put away the $5000/yr, which works out to a direct payment from your bank account of $417/mo for 2009, for 10 years, you would have minimum $100,000 saved. 10 years isn’t that long really, and yes, you could pay down your mtg, or make those lump payments every year, go on a sweet trip every year without worrying about the saving, or use it to live on when times are tough, start a business so you can work part time in retirement, buy a treehouse in Costa Rica..lol.

Anyways, talk to a financial guru, I have two I use, why put all my treehouses in one basket!

ltreg@telus.net or call her at 403-290-0940.

dharrold@blackmont.com or call him at 403-260-6839.

Childrens fitness tax credit. I hope everyone kept receipts for the childrens sporting ventures for 08. You can claim up to $500/child that you paid out for childrens athletic activities. There are some stipulations. They program must be 8 weeks in duration, with at least one hour/week of activity that raises the heart rate. Camps, such as hockey schools etc, must be 5 consecutive days, not 3.

Anyways, that’s the scoop. I already have a working copy of the 08 tax program, so I can have a look come RRSP time to see where you are at if you want. Not going anywhere tropical this Jan so youa re all stuck with me and I am available if you have any questions. So arrange your receipts in category order, or if you are so brilliant to tally them in excel, I have templates I can send out. Please arrange medical expenses by date, keep everything, including Dec 31 paystub showing what you contributed to your company medical plan for extended health and dental, and premiums for private plans, just not provincial health care.

Make sure you have all your slips, EI comes late, T3 and T5 slips don’t have to be issued till March 31..these are usually latest.

Have a great holiday season, have a big xmas party and write it off 100% you self employed folks! But you MUST invite your tax lady!

Talk to you all next year! Deb

Provided by Odessey Business Services, for your holiday reading pleasure.
403-816-5098

Getting Ready for Tax Season

debbie — Tue, 15 Jan 2008 18:00:47 +0000

Getting organized for taxes always sounds like such a big undertaking, but if started now and done in small doses, your business receipts will be done in lots of time for your tax preparer.

First organize receipts by category and if you use a spreadsheet program, you can enter receipts in there to get some totals. Vehicle expenses and home office expenses should also be together in categories so that when the personal percentage is determined, the totals for the tax return are easily calculated. The start of the vehicle expenses deduction of course is checking your total km reading in your vehicle as of Dec 31. This gives you the base number to work from for the year.

By getting your paperwork in order, you can also determine if you might need to register for GST this year, if you haven’t already reached that 30k threshold of gross income.

Also this is the best time of year to do some tax planning and review changes in your life that have affected your tax position. Did you move, get married, have a child, get divorced, go to school, become or assist someone who became disabled? Many useful deductions from personal income are missed because people don’t know they are available to use.

Medical receipts are tax deductible, including premiums paid to a third party health care provider such as Blue Cross or Liberty Health, but Alberta Health care is not deductible. Seniors benefit from these medical deductions most because of their lower income bracket, but families may find that these deductions really add up. Even if you paid into an extended health plan, any portion of a medical expense that was not covered by the plan (eg, the 20% paid personally) can be used. There is also a deduction available to people caring for aging relatives.

Have you made an appointment with the bank to top up your RRSP’s for the year?

Many people thing that if they trade stocks but come out even with losses and gains that they don’t have to claim the trading on their return. Wrong, Revenue Canada is starting to clamp down on people not claiming their trading activities. The brokers who deal with your transactions report to Revenue Canada so all they are waiting for is your return.

Keep your families receipts for public transit, as this is a deduction now since 2007.

Also, receipts for sports and fitness for children under 16 is still a deduction, so keep those as well.

Having your receipts organized is not just so you know what you have to claim, but also so you know what you may have missed that you can claim.