M.I.A.G.E. Tax Newsletter
Tax specialists since 1992
Happy New Year!
On behalf of our staff and partners, we wish you a safe and happy year with full of health, joy and $$$!
Are you ready for 2013?
For many people, the end of the year brings with it an opportunity to reflect on the year that was. As tax advisors, however, we also spend the final days of each year looking ahead to the new tax changes that will impact our customers. This past year was an eventful one, with many new tax changes being announced in 2012. In this newsletter, we will discuss about year-end tax planning checklist and the significant new tax changes that may affect you or your business in 2013 and much more!
IN THIS ISSUE:
Year-End Tax Planning Checklist
New tax changes for 2013!
RDSP (Registered Disability Saving Plans) and government grant
Senior Tax Advisor
Year-End Tax Planning Checklist:
The year-end is generally a good time to take into the account your income and deductions and to make decisions about your overall tax position for 2012. This is due to the fact that Individuals are taxed on a calendar year basis so December 31, 2012 generally represents the last date for transactions that affect 2012 taxes. There are other "tax deadlines" that fall around this time (such as the last day to dispose of marketable securities to have it included in your 2012 tax year) or early in the new year (such as the Registered Retirement Savings Plan: RRSP contribution deadline).
Even though you should monitor actively your overall financial and tax situation throughout the year, there are still a number of steps you can take early in the new year to minimize your taxes for 2012.
In this tax newsletter, we summarize many of these tax planning ideas, such as:
- Employment income:
- Pay interest on low-interest employee loan from your employer by January 30, 2013, as your interest payment within 30 days of the end of the calendar year will reduce the taxable benefits for 2012 generated by this type of loan.
- Reimburse personal operating costs on employer-provided automobiles before February 14, 2013. This will reduce the taxable benefits generated by personal kilometer driven by employer's car.
- Business income:
- Consider incorporating your business and take advantage of tax deferral, especially if you currently have sufficient income to reach the top marginal tax rates in personal side.
- Owner-manager considerations:
- Pay dividends from your corporation to split income with family members.
- Establish your salary/dividend/shareholder loan mix from the corporation.
- Purchase older automobiles from your corporation: this will ensure that you won't be taxed on a large automobile benefit next year. As the standby charge benefit included in your personal income is based on the original cost of the automobile, no matter how old the car is.
- Investment income:
- Consider delaying mutual fund purchases, as the distribution of income and capital gains related to these funds is once a year in December. Deferring the purchase until after the mutual funds distribution will ensure that you won't be allocated taxable income for 2012.
- By reviewing your outstanding debt, make your interest expense deductible to the maximum extend possible. To be deductible, interest expense must relate to debt incurred to earn business or investment income. So where possible, pay off non-deductible debt (such as personal loans, personal mortgages or personal car loans) as quickly as possible. Where you have a choice, always borrow for investment or business purposes over personal uses.
- Saving for retirement:
- Make a contribution to your RRSP for 2012: Your RRSP contribution must be made on or before March 1, 2013 to be deductible for 2012. Refer to your 2011 notice of assessment from CRA to find out about your maximum RRSP contribution limit.
- Delay RRSP Home Buyers' Plan (HBP) withdrawals until after year-end: this will extend your time period for purchasing your principal house and repaying the amounts withdrawn by one year. The home must be purchased by October 1 of the year following the year of withdrawal. Amounts withdrawn must be repaid to RRSPs in 15 equal instalments, starting with the 2nd taxation year following the year of withdrawal.
- Remember to make your required Home Buyers' Plan repayment by March 1, 2013: if you participated in the HBP prior to 2011, you have a repayment due in the 2012 taxation year. A repayment made on or before March 1, 2013 will be considered to have been made in the 2012 taxation year.
- Deductions and credits:
- Consider the following items for your 2012 income tax as eligible credits and deductions if they are paid prior to December 31, 2012:
- Alimony and maintenance
- Child care expenses
- Charitable donations
- Medical expenses
- Investment counsel fees
- Professional dues
- Political contributions
- Other year-end planning:
- Make sure to meet your tax advisor in January and February, so he or she can assist you in determining the best possible strategy for reducing your 2012 income tax. Or you can reach our professionals directly by email at firstname.lastname@example.org or by calling at 514.426.7200 ext. 101 to set an appointment at your earliest convenient time.
| New tax changes for 2013!|
Payroll source deductions increased starting January 2013:
- QPP increased to 5.10% (for employee & employer each) from 5.025% (in 2012)
- QPIP remain the same as 2012 i.e. 0.559% (employee) and to 0.782% (employer) BUT the maximum insurable earnings increased to $67,500 (from 66,000 in 2012) and the annual maximum employee contribution increased to $377.33 via employer maximum contribution of $527.85
- EI increased to 1.52% (employee) and to 2.13% (employer) from 1.47% and 2.06% respectively (in 2012)
You can see the details and more at the following link: Payroll Rates
Changes to the QST System in 2013:
Significant changes to the QST system will take effect on January 1, 2013:
the QST will be calculated on the selling price not including GST. However, to ensure the total taxes payable remain the same, the QST rate will be increased to 9.975%.
Make sure that your cash register and your invoices show the proper tax rate for QST starting January 2013. You can read more information on Revenu Quebec Website
Changes to HST (Harmonized Sales Tax) for BC (British Columbia) and PEI (Prince Edward Island):
- On April 1, 2013 the 12% HST will be replaced by the 5% GST.
- On April 1, 2013 PEI will follow the provinces of Ontario, Nova Scotia, New Brunswick, and Newfoundland and Labrador in replacing its PST with the HST. The combined HST rate in PEI will be 14%, of which 5% will represent the federal part and 9% the provincial part.
for more information, go to CRA website link
Minimum wage increase:
In Quebec, the minimum wage will increase as of May 1, 2013 to $10.15 from $9.90. The rate for liquor servers will increase to $8.75 from $8.55.
Limit on tax-exempt Car allowances paid by employer:
The limit increased to $0.54 per KM for the first 5000 KM and to $0.48 per KM for any additional KM.
Increase to the TFSA annual contribution limit:
Beginning in 2013, you will be able to contribute an additional $500 to your Tax-Free Savings Account (TFSA), raising your annual contribution limit to $5,500.
Option to defer the Old Age Security:
Voluntary deferral of the Old Age Security (OAS) program was introduced as part of the 2012 federal budget as a means of improving both flexibility and choice for those individuals who may wish to consider working beyond the age of 65. Starting on July 1, 2013, you will be able to defer the start of your OAS pension for up to 5 years. By taking advantage of this new deferral option, you may postpone the receipt of your pension to a later time in
exchange for receiving a higher, actuarial adjusted pension.
| Registered Disability Saving Plan (RDSP)!|
By opening an RDSP account, you may be able to receive up to $18,000 in free government grants. Read on to find out more!
The Registered Disability Savings Plan (RDSP), is a tax-deferred savings account created by the Canadian Government. It's purpose is to help build long-term financial security for disabled persons. Where the RDSP truly accelerates savings is in its ability to receive Government grants that match up to 300% of the owner's contributions. By opening an RDSP, you may be able to receive up to $4,500 per year in government funds. Let's learn more about the RDSP:
Who qualifies for the RDSP?
You qualify to be an RDSP beneficiary if you are eligible for the Disability Tax Credit as per CRA, you are a resident of Canada, less than age 60, and have a valid Social Insurance Number.
How contributions are made?
Contibutions to the RDSP can be made by the account holder or by any person the account holder has authorized. The account may also be opened on behalf of a disabled beneficiary. The lifetime contribution is $200,000 and contributions can be made up until the age of 59. So, speak with one of our advisor to work out a contribution plan that benefits you most.
Taking advantage of government help:
Canada Disability Savings Grant (CDSG)
CDSGs are matching grants that the Government will deposit into the RDSP to help accumulate savings. The Government provides matching grants of up to 300%, depending on the amount contributed and family net income. Unused CDSGs can also be claimed for previous years. If you are just now opening an RDSP, you may be eligible to receive these amounts dating back to 2008.
So, just give us a call and take an appointment, so we can help you go through the whole process easily or email us simply at email@example.com
RRSP Planning (Registered Retirement Savings Plan)!
What is a RRSP?
A RRSP is a personal savings plan that allows you to save for the future on a tax-sheltered basis.
Who Should Have a RRSP?
Every individual who works, files a Canadian income tax return, and looks forward to secure retirement should consider having an RRSP.
- People who earn income through their employment or self-employment, can reduce their annual tax bill while saving for their future through an RRSP.
- For people who have a company pension plan, RRSPs add extra comfort that their retirement needs are met; for those that don't have company pension plans, RRSPs may be the foundation for funding their retirement.
- Married couples where one spouse earns more income than the other can reduce their combined tax burden through a spousal RRSP. At retirement, an income-splitting strategy can be applied to reduce overall tax when the funds are withdrawn.
- If you are planning on purchasing your first home or are interested in continuing your education, you can contribute to your RRSP, then use these funds as a source of financing.
- If you anticipate fluctuations in your income because of maternity leave, career change or employment interruptions, the funds in a RRSP are always available to you.
What Are the Benefits of RRSPs?
While designed specifically as a retirement vehicle, an RRSP has benefits throughout your lifetime.
- By contributing to an RRSP throughout your working career, you'll realize immediate tax benefits at a time when your income is generally highest. The total amount of your annual contribution can be deducted from your gross income at tax time, reducing the amount you pay in income tax that year.
- The income earned in your RRSP is not taxed until it is withdrawn. While your investments sit in your RRSP, their growth is tax sheltered and so the total value may grow more quickly.
- By the time you begin to withdraw the funds at retirement, you will probably be in a lower tax bracket than during your earning years. Funds withdrawn at that time will benefit from this lower tax rate.
- Special features of RRSPs allow you to do further tax planning or use your RRSP to fund specific life events:
- Home Buyer's Plan:
The Home Buyer's Plan allows you to borrow funds from your RRSP to pay the downpayment of your first home with no tax implications (some conditions applies)
- Lifelong Learning Plan
The Lifelong Learning Plan allows you to pay for training or education with RRSP funds with no tax implications (some conditions applies)
The deadline for the contribution to your RRSP is March 1, 2013. The contributions made in the first 60 days of the calendar year, can be apply against your 2012 or 2013 income tax which ever suit you the best.
You can take advantage of our valuable tax planning strategies to minimize your 2012 taxes prior to March 1. So, just call us TODAY at 514.426.7200 to set your appointment as early as possible with one of our tax specialists or simply email us at firstname.lastname@example.org
Mrs. Mahtab Saghafi
Senior Finance and Tax Advisor
Tel: 514.426.7200 ext 101
Use this coupon when you are doing your Tax Planning with us prior to March 1, 2013.
One coupon by taxpayer.
Including FREE consultation with Professional Advisor to evaluate your investment objectives.
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|Offer Expires: March 1, 2013|