Senior Finance and Tax Advisor
Every year many Canadians pay too much in taxes by failing to file tax returns to their advantage or by not using all the deductions and credits that are available. Perhaps that's because most of us have a love-hate relationship with the tax season: we love our tax refunds, but hate the process we have to go through to get them. We round up receipts at the last minute - if we still have them - or rummage around in the shoe box where we've tossed them all throughout the year. That's where common tax filing errors really began.
Our goals here are to inform and update you on major changes for 2013, and help you focus on important aspects of our Canadian tax system.
Top 10 mistakes new business owners make!
1. Thinking too small or too big
2. Loosing your focus or drive
3. Taking on too much by yourself
4. Sacrificing your personality
5. Not tracking your advertising
6. Investing too much in 1 client
7. Going against your gut instinct
8. Not getting involve in community activities
9. Managing employees poorly
10. Trusting that signed contracts will be honored
For any Business Advice or help for Acquiring New Business, contact Mrs Mahtab Saghafi at firstname.lastname@example.org
Tax updates and changes for 2013
1) 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. You can read more on Revenu Quebec Website
2) 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
3) Quebec announced changes to Quebec's proposed personal tax rate on October 10, 2012. The big news is that there will be no personal tax changes for 2012, retroactive or otherwise. For 2013, Quebec's Parti Qu�becois (PQ) minority government will not proceed with changes to increase the tax rate on capital gains (originally proposed a 75% inclusion rate) or to dividends (originally proposed to cut the dividend tax credit rate in half). However, beginning in 2013, the PQ will introduce a new top tax bracket at 25.75% for income above $100,000. This is an increase of 1.75% from the previous top tax bracket of 24% for income above $80,201.
Top 2013 Quebec marginal rates
As a result of the October 10, 2012 announcement, the new top marginal tax rates for 2013 will be as follows, providing it passes through Quebec's minority Parliament:
- Regular income - 49.97% (from 48.22% in 2012)
- Capital gains - 24.99% (from 24.11% in 2012)
- Eligible dividends - 35.20% (from 32.81% in 2012)
- Non-eligible dividends - 38.54% (from 36.35% in 2012).
As part of the PQ's tax plan for 2013 it will introduce a new progressive health tax contribution. Under the new regime, taxpayers earning more than $150,000 will pay the maximum health tax premium of $1,000 per year (up from $200 per person). Taxpayers whose income is from $130,000 to $150,000 will pay from $200 to $999 and, for taxpayers whose income is between $42,000 and $130,000, the premium will remain unchanged at $200.
Avoiding 8 common tax-filing mistakes:
1) Cash from your home sale: how much of the gain on the sale of my house is taxable? Basically, the selling of your principal house won't generate any taxable income. But here's the lesser known
trap: if you buy and sell those principal residences for profit too often, you could face a significant tax problem. You might lose the principal residence exemption, if the tax department considers you to be in the business of buying and selling homes.
2) The most-missed tax deduction. It's not the largest amount but everyone seems to miss claiming their safety deposit box expense:
Over time, the missed deductions really add up, especially if you are a high income earner.
3) The most lucrative tax deduction. Now this is serious money: qualifying moving expenses (within Canada only) include real estate commissions, which can run well into the five figures in some cases. Again, moving expenses are subject to audit, so keep all receipts. To make the claim you have to move 40 kilometers closer to a new work or business location where active income is earned (sorry EI, pension or investment income doesn't qualify) or as full-time student to get closer to your educational institution. For more information, see the following CRA link.
4) The most lucrative tax credit: In my experience, that's the Disability Tax Credit, claimed by someone who is markedly disabled on a permanent basis, or their supporting individual. Especially vulnerable are those with progressive diseases, like Alzheimer's or cancer.
You need to have a doctor or other qualified healthcare professional fill in form T2201
, Disability Tax Credit Certificate. In many cases the information provided by the healthcare professional may indicate several years of impairment. Previous tax returns can be adjusted for the tax credit for each year that the Disability Tax Credit Certificate has been approved by CRA.
5) The most missed tax credit: Medical expenses. The list is extensive and most everyone has some, so why not find out more about the medical expenses that you are missing. Remember to group your medical expenses into the best 12 month period ending in the tax year. You will need to reduce the total by the lesser of $2,024 or 3 per cent of your net income, so it's usually best to claim them on the return of the spouse with the lower income. An RRSP deduction can help increase this claim.
Here are 10 medical tax deductions that can save you money:
The full list of eligible medical expenses by alphabetical order is on the following CRA link.
6) Missed capital losses: In a post-financial crisis world this is really important. Don't miss reporting your capital losses, even if you have to admit them to your spouse! They could be worth thousands, wiping out capital gains of the current year. If you have no gains, know that you can use capital losses to wipe out taxes on capital gains of the prior 3 years or on future gains, too. That carry forward opportunity, by the way, is indefinite. In the year of death, unused capital losses may be used against all types of income.
7) Give stock to charity: If you are like me, you probably like free money with which to help people, and that's exactly what you get when you transfer securities to your favorite charity. So don't make the mistake of selling your securities first for cash. Pick a worthy cause - lots to choose from -then transfer shares with accrued gains, for a much better after-tax result. You'll avoid paying tax on those gains completely and you'll get a donation receipt too. Check with your charity in advance to make sure that they are set up to receive your gift.
8) Missed babysitting deductions: Claiming the child care deduction can be complicated. Should it be the higher or lower earner who claims it? It depends, actually. Usually it's the lower earner, but if there is a separation during the year, or the lower earner is going to school, or hospitalized, it is possible that the higher earner may make the claim. Accuracy counts as babysitting costs reduce net income, which can increase the size of your Child Tax Benefits. Keep receipts handy, too, in case of an audit.
Please note that we have been offering professional tax and finance advice to individuals and corporations since 1992. We help you reduce your taxes and plan your finances with particular care and accuracy. You will no doubt feel the difference after the first consultation. You can either email us or contact us directly by phone to setup your first appointment.
Mahtab Saghafi, President and CEO
M.I.A.G.E. Business Solutions Inc.
Tel: 514.426.7200 ext 101