Julie's Blog

We are pleased to provide a variety of resources on accounting, taxation and other related subjects that we hope will be helpful to both individuals and businesses.

Have a question that isn’t answered here or in our Quick Tools Resources to the right, we can help. Simply contact us by email or give us a call at 705-445-8493. We would be happy to meet with you for a no-obligation consultation.

Tax Time: Foreign Property & Income Splitting

Now's the time to get in touch to start planning for RRSP contributions and laying the framework for a smooth tax season. Here are two particular areas of interest with respect to this year's taxes:

Foreign Property Holdings

Are you required to file form T1135 – Foreign Income Verification Statement?

Two of the most frequent scenarios we are asked about are ownership of a foreign-owned vacation home – ie. the condo in Florida – and securities held in an account with a Canadian registered securities dealer. Firstly to qualify, this form is required only if the total cost of all of your foreign investments exceeds $100,000 Cdn. If you have a foreign investment that is used primarily for personal use (often a home in the sunny south) you are not required to file this form. On the other hand, if it is income producing, we should talk about the particulars to see if this form applies to you.

If you have an unregistered Canadian security account and you hold foreign stocks within the account, you should be aware that if the total cumulative cost of these foreign holdings exceeds the $100,000 Cdn threshold, CRA requires you to file a T1135.

Given that this form is purely an information return submitted to Canada, penalties on failure to file this form are steep at $25/day up to a maximum of $2,500. If you are wondering if you may be required to file, let’s talk.

Family Income Splitting

On October 30, 2014, our government introduced the long-awaited Family Tax Cut. This new legislation is great for families with minor children. Opting for this tax savings allows income splitting between spouses of up to $50,000 and can save families up to $2,000 in income tax. We are really excited to apply this tax credit on the 2014 personal tax filings of all clients who qualify for the program. Everyone loves saving taxes!

 

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Tax Credits & What You Need To Know

Tax season is almost here and with it comes a number of opportunities to maximize your tax savings. We’ve prepared a brief primer on tax credits; but remember our team is here to help you navigate these and other tax-related issues to keep the most money possible in your pocket.

What is a Tax Credit?

There is often some confusion about the difference between a tax deduction and a tax credit. The basic difference: a tax deduction reduces your taxable income, whereas a tax credit is a deduction from tax owing.

Common tax credits include the following, amongst others:

  • Basic personal amount – We all get this tax credit and for 2014 it amounts to $11,138
  • Spousal amount – You can claim your spouse’s basic personal amount or a portion thereof if you have a spouse earning minimal income
  • Equivalent to spouse – If you are a single parent and have a dependent residing with you, you could claim this credit as an alternative to the spousal amount
  • Age Credit – Age amount applies to 65 years of age or older and amounts to a maximum of $6,916 for 2014
  • Public transit
  • Children’s fitness and arts credits
  • Home buyers’ amounts
  • Adoption expenses
  • Caregiver credit
  • Disability tax credit
  • Interest on student loans
  • Tuition expenses or the transfer of children’s tuition credits
  • Medical expenses

All of the above tax credits are then totalled on your tax return and multiplied by 15% and that figure is used to reduce your total federal income taxes payable.

Are Donations a Tax Credit?

Donations also result in a tax credit, but at 15% for the first $200 and then an enriched 29% thereafter. There is also a first-time donor’s super credit of 25% on the first $500 of donations.

How do I know which Tax Credits I am eligible for?

As you can see, with all of the above credits, it is important to ensure your accountant is up to date on all of your individual circumstances. A change in marital status, the birth of a child, medical circumstances, caring for all loved one; all of these events can impact your personal tax credits.

At our office, we encourage all of our clients to complete our annual questionnaire that covers topics that could impact the tax credits claimed on your tax filing. This communication is imperative to make sure you are getting all of the tax credits you are entitled to.

 

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Start planning early for tax time

Preparing to file your taxes shouldn’t start days before the deadline; it should be something you work towards throughout the year. Here are some considerations to make tax time painless for you or your business.

The Importance of Planning

Knowledge is power. It’s far easier to be aware and up to date on tax obligations and potential ways to manage or minimize your tax bill than end up with a surprise at filing time. If you are able to take a look at your tax position prior to the RRSP filing deadline of March 1steach year, an RRSP contribution can help lessen the tax burden.Once that deadline lapses, the ability to consider using RRSP contributions an option to reduce tax liabilities is lost.

If you are aware of how much tax you may owe, you can prepare ahead of time.You can start implementing a savings strategy for that liability immediately instead of falling short on April 30thand having to pay unnecessary interest to CRA.

What Planning Looks Like

Early planning involves discussions with us that include getting an idea of your income, expenses, deductions and tax credits anticipated for the year.Oftentimes, this planning is done late in December or early in January when most of your income and other information for the taxation year is known. We can prepare a draft return for review and discussion in advance of the ultimate filing of your return.

Create Good Habits

Good habits involve organized record keeping.For businesses, using accounting software, a spreadsheet or other method of tracking your revenue and expenses throughout the year helps you track where your income level is relative to previous years and signals you if there are significant fluctuations. Tax rates progressively increase depending upon income levels, so keeping tabs on where you are at in advance helps to prevent any surprises at filing time.

We are always available to help clients organize their information. More organized records help us as well!

How Your Accountant Can Help

An accountant can help navigate the tax waters, including advising on ways to reduce your tax liability.By filing and paying your taxes on time you can eliminate costly interest and penalties charged by CRA. By working with us to establish a great record-keeping system and having open discussions about areas of the year-end preparation you need help with can significantly reduce your accounting fees.

Give us a call to start planning for your tax time today. You can reach us on 705-445-8493 or send us an email

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