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The Goose That Lays The Golden Eggs

www.thefinancialfairytales.com/blog/about/

A great blog on finances from the UK. 

I found this resource when I was searching for the story about taxes and how taxes relates to the care and feeding of the golden goose and how that goose does perhaps eat too much. Jim Rohn spoke about it back 1993 when I first met him.  The text is below and a link to the article that inspired the search of the memory bank. ~ TLR

Jim Rohn on Taxation – The Goose That Lays the Golden Eggs

One of the original Financial Fairy Tales – The Goose That Lays The Golden Eggs tells the tale of a farmer with a steady and reliable stream of passive income. Sadly he gets greedy and ends up killing the source in the search for instant gratification.

In this article, one of my mentors Jim Rohn uses the Golden Goose story to discuss taxation. Here’s what he had to say:-

I realize that the topic of  taxes may seem like a strange place to begin the discussion of creating wealth.  And yet throughout our lives, whether young or old, we must learn the necessity  of paying taxes. And as soon as they have any money at all, our children, too, must  learn that when they spend money they immediately become consumers. And all consumers  of goods and services, no matter how young, must pay taxes. Why?

Because we have all agreed  to live as a society, and for that society to function properly, there are some  things we cannot do for ourselves alone. For example, we cannot each build a piece  of the street. The machinery would be too expensive, and it would take too long  to learn how to use it. So we have a government. And a government is made up of  people who do things for us that we cannot or do not want to do ourselves. Because  the streets, the sidewalks, the police, and the fire department must all be paid  for, we’ve agreed to add some money each time we buy something and give it to the  government.

We then move on to federal  taxes. Here is a good way to explain federal taxes. I call it “The Care and Feeding  of the Goose That Lays the Golden Eggs.” It’s so important to feed the goose-not  to abuse the goose or tear off its wings-but to feed and care for it.

What’s that you say? The goose  eats too much? That’s probably true. But then, don’t we all eat too much? If so,  let not one appetite accuse another. If you step on the scales and you’re ten pounds  too heavy, you’ve got to say, “Yes, the government and I are each about ten pounds  too heavy. Looks like we both eat too much.” No question about it. Every appetite  must be disciplined-yours, mine, and the government’s. Hey, we could all go on a  diet!

My mentor, Mr. Shoaff, urged  me early on to become a happy taxpayer. Now, I must admit it took a while, but I  finally did become a happy taxpayer. Part of this transformation occurred when I  began to understand the function of taxes and that it is right for everyone to pay  his or her fair share.

I finally decided I didn’t  mind picking up my share of the tab for defense. It’s so necessary for our safety  as a country to keep the bullies away. Some people say, “Why bother with all that  expensive equipment? They won’t come over here.” Obviously, those people haven’t  been reading their history books.

Others say, “We’re not about  to pick up the tab for defense.” Well then, I suggest they go to a place which doesn’t  offer defense as part of the package. If one is going to enjoy the benefits, one  should pay a share.

Now, let me add this: Don’t  pay more than you should. By all means take advantage of the incentives. They were  given to you as a reward for channeling your money into areas the government thinks  helps the economy.

All I’m saying is that when  everything has been computed, all legitimate deductions have been taken, and you  reach that last line on your income tax form, whatever the amount, pay it. And pay  with happiness, knowing that you’re feeding the goose that lays the golden eggs-the  golden eggs of freedom, safety, justice, and free enterprise. Some goose! Some eggs.

https://www.fraserinstitute.org/blogs/ten-year-end-facts-canadians-need-to-know

And while here, check out the think tanks other thoughts, I am sure there is some gold nuggets in there !

Bonus ... Goose or Eggs https://www.youtube.com/watch?v=xjF2SvzlOm0&list=PLhhVyaUmOQupT95UiO_74c0-wATcRxceV&index=15

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Sleepless Govenor

https://www.wealthprofessional.ca/market-talk/these-are-the-biggest-fears-for-the-canadian-economy-235530.aspx Things that keep the govenor awake at night One thing he said was that young people just starting need jobs and without those jobs they can get stuck right from the Get go. I had an idea, stewardship thought moment. The government should make a job for every young person for their first job, give them the experience of having a job, limit it to at least a year, and have a lot of young people with a good first job, launch them into the world with a good foundation, bring the age down for the permanent positions to make room for our young people and redeploy these people into industry and other services. Stabilize, Train, Encourage, Launch A little utopia idea , I think it could have merit and would increase the value for society as a whole - TLR
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Rewire The Brain

https://www.theglobeandmail.com/report-on-business/small-business/sb-growth/how-complaining-rewires-your-brain-for-negativity/article31893948/ A great article on the effects of negative thinking and talking. Interesting the bridges that are laid down for the bad or the good. Reminds me of some Jim Rohn says. Look for them in the comment sections going forward. A merry heart is the ticket to a good life. Have a blessed day! Tim
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Year-end planning for RRSPs and TFSAs

Year-end planning for RRSPs and TFSAs (December 2017)

"Wolters Kluwer's insider tips for year end planning, worth reviewing the little details that might apply to you" ~ TLR

For most Canadians, registered retirement savings plans (RRSPs) don’t become top of mind until near the end of February, as the annual contribution deadline approaches. When it comes to tax-free savings accounts (TFSAs), most Canadians are aware that there is no contribution deadline for such plans, so that contributions can be made at any time. Consequently, neither RRSPs nor TFSAs tend to be a priority when it comes to year-end tax planning.

Notwithstanding those facts, there are considerations which apply to both RRSPs and TFSAs in relation to the approach of the end of calendar year. Failing to take those considerations into account can mean the permanent loss of contribution room, a loss of flexibility when it comes to making withdrawals, or having to pay more tax than required when funds are withdrawn. Some of those considerations are outlined below.

When you need to make your RRSP contribution on or before December 31st

While most RRSP contributions, in order to be deducted on the return for 2017, can be made anytime up to and including March 1, 2018, there is one important exception to that rule.

Every Canadian who has an RRSP must collapse that plan by the end of the year in which he or she turns 71 years of age – usually by converting the RRSP into a registered retirement income fund (RRIF) or by purchasing an annuity. An individual who turns 71 during the year is still entitled to make a final RRSP contribution for that year, assuming that he or she has sufficient contribution room. However, in such cases, the 60-day window for contributions after December 31st is not available. Any RRSP contribution to be made by a person who turns 71 during the year must be made by December 31st of that year.

Make spousal RRSP contributions before December 31

Under Canadian tax rules, a taxpayer can make a contribution to a registered retirement savings plans (RRSP) in his or her spouse’s name and claim the deduction for the contribution on his or her own return. When the funds are withdrawn by the spouse, the amounts are taxed as the spouse’s income, at a (presumably) lower tax rate. However, the benefit of having withdrawals taxed in the hands of the spouse is available only where the withdrawal takes place no sooner than the end of the second calendar year following the year in which the contribution is made. Therefore, where a contribution to a spousal RRSP is made in December of 2017, the contributor can claim a deduction for that contribution on his or her return for 2017. The spouse can then withdraw that amount as early as January 1, 2020 and have it taxed in his or her own hands. If the contribution isn’t made until January or February of 2018, the contributor can still claim a deduction for it on the 2017 tax return, but the amount won’t be eligible to be taxed in the spouse’s hands on withdrawal until January 1, 2021. It’s an especially important consideration for couples who are approaching retirement who may plan on withdrawing funds in the relatively new future. Even where that’s not the situation, making the contribution before the end of the calendar year will ensure maximum flexibility should an unanticipated withdrawal become necessary.

Accelerate any planned TFSA withdrawals into 2017

Each Canadian aged 18 and over can make an annual contribution to a Tax-Free Savings Account (TFSA) – the maximum contribution for 2017 is $5,500. As well, where an amount previously contributed to a TFSA is withdrawn from the plan, that withdrawn amount can be re-contributed, but not until the year following the year of withdrawal.

Consequently, it makes sense, where a TFSA withdrawal is planned within the next few months, perhaps to pay for a winter vacation or to make an RRSP contribution, to make that withdrawal before the end of the calendar year. A taxpayer who withdraws funds from his or her TFSA before December 31st, 2017 will have the amount withdrawn added to his or her TFSA contribution limit for 2018, which means it can be re-contributed as early as January 1, 2018. If the same taxpayer waits until January of 2018 to make the withdrawal, he or she won’t be eligible to replace the funds withdrawn until 2019.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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Dec Steps for Tax Planning

Year-end tax planning – some steps to take before December 31st (December 2017)

"Some great advice from my CCH partners" ~ TLR 

As the 2017 calendar year winds down, the window of opportunity to take steps to reduce one’s tax bill for the 2017 tax year is closing. As a general rule, tax planning or tax saving strategies must be undertaken and completed by December 31st, in order to make a difference to one’s tax liability for 2017. (For individual taxpayers, the only significant exception to that rule is registered retirement savings plan contributions. Such contributions can be made any time up to and including March 1, 2018, and claimed on the return for 2017.)

While the remaining time frame in which tax planning strategies for 2017 can be implemented is only a few weeks, the good news is that the most readily available of those strategies don’t involve a lot of planning or complicated financial structures – in many cases, it’s just a question of considering the timing of expenditures which would have been made in any case. Below is a list of the most common such opportunities available to individual Canadians.

Charitable donations

The federal government and all of the provincial and territorial governments provide a tax credit for donations made to registered charities during the year. In all cases, in order to claim a credit for a donation in a particular tax year, that donation must be made by the end of that calendar year – there are no exceptions.

There is, however, another reason to ensure donations are made by December 31st. The credit provided by each of the federal, provincial, and territorial governments is a two-level credit, in which the percentage credit claimable increases with the amount of donation made. For federal tax purposes, the first $200 in donations is eligible for a non-refundable tax credit equal to 15% of the donation. The credit for donations made during the year which exceed the $200 threshold is, however, calculated as 29% of the excess. Where the taxpayer making the donation has taxable income (for 2017) over $202,800, charitable donations above the $200 threshold can receive a federal tax credit of 33%.

As a result of the two-level credit structure, the best tax result is obtained when donations made during a single calendar year are maximized. For instance, a qualifying charitable donation of $400 made in December 2017 will receive a federal credit of $88  ($200 × 15% + $200 × 29%). If the same amount is donated, but the donation is split equally between December 2017 and January 2018, the total credit claimable is only $60 ($200 × 15% + $200 × 15%), and the 2018 donation can’t be claimed until the 2018 return is filed in April 2019. And, of course, the larger the donation in any one calendar year, the greater the proportion of that donation which will receive credit at the 29% level rather than the 15% level.

It’s also possible to carry forward, for up to 5 years, donations which were made in a particular tax year. So, if donations made in 2017 don’t reach the $200 level, it’s usually worth holding off on claiming the donation and carrying forward to the next year in which total donations, including carryforwards, are over that threshold. Of course, this also means that donations made but not claimed in any of the 2012, 2013, 2014, 2015, or 2016 tax years can be carried forward and added to the total donations made in 2017, and the aggregate then claimed on the 2017 tax return.

When claiming charitable donations, it’s possible to combine donations made by oneself and one’s spouse and claim them on a single return. Generally, and especially in provinces and territories which impose a high-income surtax – currently, Ontario and Prince Edward Island – it makes sense for the higher income spouse to make the claim for the total of charitable donations made by both spouses. Doing so will reduce the tax payable by that spouse and thereby minimize (or avoid) liability for the provincial high-income surtax.

This year, there is an additional last-chance incentive for Canadians who have not been in the habit of making charitable donations to make a cash donation to a registered charity. In the 2013 Budget, the federal government introduced a temporary charitable donations super-credit. That super-credit (which can be claimed only once) allows individuals who have not claimed a charitable donations tax credit in any tax year since 2007 to claim a super-credit on up to $1,000 in cash donations made during the year. The super-credit works by providing an additional 25% credit for cash donations. Consequently, when the super-credit is combined with the regular charitable donations tax credit, the total credit claimable is equal to 40% (15% + 25%) of donations under $200 and 54% (29% + 25%) of donations over the $200 threshold. This year (2017) is the last year for which the super-credit can be claimed, and only in respect of qualifying donations made before the end of the year.

Timing of medical expenses

There are an increasing number of medical expenses which are not covered by provincial health care plans, and an increasing number of Canadians who do not have private coverage for such costs through their employer. In those situations, Canadians have to pay for such unavoidable expenditures – including dental care, prescription drugs, ambulance trips, and many other para-medical services, like physiotherapy, on an  out-of-pocket basis. Fortunately, where such costs must be paid for partially or entirely by the taxpayer, the medical expense tax credit is available to help offset those costs. Unfortunately, the computation of such expenses and, in particular, the timing of making a claim for the credit, can be confusing. In addition, the determination of which expenses qualify for the credit and which expenses do not isn’t necessarily intuitive, nor is the determination of when it’s necessary to obtain prior authorization from a medical professional in order to ensure that the contemplated expenditure will qualify for the credit.

The basic rule is that qualifying medical expenses (a lengthy list of which can be found on the Canada Revenue Agency (CRA) website at http://www.cra-arc.gc.ca/medical/#mdcl_xpns) over 3% of the taxpayer’s net income, or $2,268, whichever is less, can be claimed for purposes of the medical expense tax credit on the taxpayer’s return for 2017.

Put in more practical terms, the rule for 2017 is that any taxpayer whose net income is less than $75,500 will be entitled to claim medical expenses that are greater than 3% of his or her net income for the year. Those having income over $75,500 will be limited to claiming qualifying expenses which exceed the $2,268 threshold.

The other aspect of the medical expense tax credit which can cause some confusion is that it’s possible to claim medical expenses which were incurred prior to the current tax year, but weren’t claimed on the return for the year that the expenditure was made. The actual rule is that the taxpayer can claim qualifying medical expenses incurred during any 12-month period which ends in the current tax year, meaning that each taxpayer must determine which 12-month period ending in 2017 will produce the greatest amount eligible for the credit. That determination will obviously depend on when medical expenses were incurred so there is, unfortunately, no universal rule of thumb which can be used.

Medical expenses incurred by family members – the taxpayer, his or her spouse, dependent children who were born in 2000 or later, and certain other dependent relatives – can be added together and claimed by one member of the family. In most cases, it’s best, in order to maximize the amount claimable, to make that claim on the tax return of the lower income spouse, where that spouse has tax payable for the year.

As December 31st approaches, it’s a good idea to add up the medical expenses which have been incurred during 2017, as well as those paid during 2016 and not claimed on the 2016 return. Once those totals are known, it will be easier to determine whether to make a claim for 2017 or to wait and claim 2017 expenses on the return for 2018. And, if the decision is to make a claim for 2017, knowing what medical expenses were paid and when, will enable the taxpayer to determine the optimal 12-month waiting period for the claim.

Finally, it’s a good idea to look into the timing of medical expenses which will have to be paid early in 2018. Where those are significant expenses (for instance, a particularly costly medication which must be taken on an ongoing basis) it may make sense, where possible, to accelerate the payment of those expenses to December 2017, where that means they can be included in 2017 totals and claimed on the 2017 return.  

Reviewing tax instalments for 2017

Millions of Canadian taxpayers (particularly the self-employed and retired Canadians) pay income taxes by quarterly instalments, with the amount of those instalments representing an estimate of the taxpayer’s total liability for the year.

The final quarterly instalment for this year will be due on Friday December 15, 2017. By that time, almost everyone will have a reasonably good idea of what his or her income and deductions will be for 2017 and so will be in a position to estimate what the final tax bill for the year will be, taking into account any tax planning strategies already put in place, as well as any RRSP contributions which will be made before March 2, 2018. While the tax return forms to be used for the 2017 year haven’t yet been released by the CRA, it’s possible to arrive at an estimate by using the 2016 form. Increases in tax credit amounts and tax brackets from 2016 to 2017 will mean that using the 2016 form will likely result in a slight over-estimate of tax liability for 2017.

Once one’s tax bill for 2017 has been calculated, that figure should be compared to the total of tax instalments already made during 2017 (that figure can be obtained by calling the CRA’s Individual Income Tax Enquiries line at 1-800-959-8281). Depending on the result, it may then be possible to reduce the amount of the tax instalment to be paid on December 15 – and thereby free up some funds for the inevitable holiday spending!


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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