https://www.investmentexecutive.com/inside-track_/jamie-golombek/year-end-compensation-planning
Year-end compensation planning | Investment Executive
tax planning (14)
Why should I get an appraisal done on my income property ?
1. Subject: Capital Gains Appraisals
"Hi Tim,
I had a couple questions for you regarding capital gains for income properties. Who would request an appraisal for capital gains calculations when it comes to income properties? Would that request come directly from the CRA? Or is that something that is recommended by accountants? Trying to get a feel if these appraisal requests are pretty common. Thanks again."
Typically an appraisal like this is recommended to get a handle on what the potential Capital Gains will be on a property if sold, or if transferred ie, in an estate or tax plan. I could see this being a good market for sure.
Sometimes we want to justify a higher price and sometimes a lower price depending on the goals and objectives of the plan. So having a range is pretty important. CRA typically does not request this unless they are looking for a 2nd or 3rd opinion. Having the info for planning purposes is very helpful when giving advice for this. Sometimes people will get a realtors opinion on it as well, so they could be a potential niche market for referrals, helps them reduce some liability and gets that job off their to do lists.
Those are my main thoughts on the matter, if I can think of anything else I will let you know. Also happy to answer any questions you may have about it, even a sounding board if you like, I would be good for that.
One other thought, it would be great if the appraisal disclosed purchase info of the property, peoples memories are not always the best, if it’s in the appraisal, those mysteries are resolved and helps establish some cost basis for tax purposes, will not be all of them, but a basis just the same. I see that being very useful, as those numbers will reveal clues to how much depreciation may have been claimed in the past, potential mismatches to values on the tax return, etc. and that will be useful and provide confidence in the estate planning process.
Hope that helps
TLR
PS: I am sure there is some great articles writen about this, as I find them, I will post them in the comment section
Todays FAQ was about rsp deductions and the impact of taxes.
"Greetings Tim,
I need your expertise to help me understand how RRSP withdrawals & taxes held back by the government work.
The government website indicates that anyone withdrawing RRSP's over $15000.00 is required to pay a 30% holding tax to the government. How is this tax calculated at the time of withdrawal? i.e. $30,000.00. What would the taxes withheld by the government be on that amount?
When given the figures something didn't sit right with me. Want to make sure prior to signing anything."
******
For RSP withdrawals. The government mandates that taxes be withheld at source. The amount ( percentage) depends on the total gross withdrawn.
For amounts over 15,000, 30% is deducted and sent to CRA and you receive the net amount.
For your example of $30,000 , 30,000 X 30% = 9000 tax , net to you is 21,000.
The 30,000 becomes taxable income in the year you do the withdrawal. So if your doing this now, it would be year 2023. You will then be taxed for your total income in the year and what we call a marginal tax rate would kick in. You will receive a T4RSP tax slip for year 2023 next year usually by end of Feb 2024. Depending on your taxable income you may or may not owe additional taxes. You get credit for the withheld taxes.
I did a quick example, let’s say your income was 30,000 and all the taxes had been paid up. Your income would now be 60,000 and you would get a refund of 1580. If your income was 60,000 before the RSP income you would owe 186
So the withholding tax kind-a protects you from owing a large amount next tax time.
The next thing to consider, is sometimes people want to have a certain amount of money , so let’s say you want 30,000 to be deposited into your account. The RSP issuer would have to redeem 30,000/(1-.3) = 42857.14 , net (42857.14 * 30% = 12857.14 in taxes, ( 42857.14-12857.14) = 29999.998 =30,000 deposit.
In this case, let’s say the income is 60,000, this brings taxable income to 102857 and amount of tax owing = 1014
If your income was 30,000 pre rsp, then your refund = 1475
Hope that helps you in your decision making process.
We provide a family office service at my firm, so we can give guidance on all these matters. Perhaps we can be of service for your future tax and investment needs.
****
"Thank you so much Tim.
Your explanation is excellent. It really helped me better understand the calculations behind RSP withdrawals & the taxes that are withheld.
Really appreciate that our friend sent me in the right direction.
Thank you for offering your services. Will certainly keep that in mind.
Sincere gratitude & appreciation"
***
FYI
RSRP withdrawals up to 5000, the withholding tax is 10% = 500 on 5000, so you net 4500 ( 20% in Quebec)
Between 5001 to 15,000, the withholding tax is 20% son let's say a 10,000 request woudl be 2000 deducted, yo net 8000 ( 25% in Quebec)
If you wanted 10,000 deposited in yoru account 10,000 / (1-.2) = 12500 total reemption required ( 12500 * 20%=2500, net 12500-2500=10,000
With smaller amounts , depending on your income , you are m,ore likely to owe taxes due to teh marginal tax calculations, expecially if you have a mid to larger income. If your income is lower, not so much.
Hope that FAQ is helpful. If you have a question, please email me at advisor@timothyross.com and will see if we can do up a good FAQ article for you.
Have a blessed day !
Timothy Ross, Family Advisor ©, CEO & Founder,
Brock Shores Financial, Family Office providing Omega Stewardship ©
Mutual Funds offered through PEAK Investment Services Inc. Life & Travel, Insurance, Seg Funds & Banking offered through Financial Horizons Group. Tax Services offered through Timothy Ross & Associates & Brock Shores Income Tax Corp; Planning Services offered through Brock Shores Planning Corp.
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"The beauty of being in business is that your business engages all aspects of your mind, I think that is why you become successful, business challenges you to be more than you are, and that is where the miracle takes place." Timothy Ross, May 2004
I like Winston Churchill, he had the incredible ability to move the English language into action. My mentor Jim Rohn, say's , "Don't be afraid to borrow if someone else has said it well. Winston Churchill said, "The truth is incontrovertible. Malice may attack it and ignorance may deride it, but in the end, there it is." That's so well said. You could stay up all night and not think of that. " ~ Timothy Ross
The year 2022 is coming to a close , and with it the opportunity to bless a charity, support a political cause financially. There is more to giving than money, financial gifts will get you a tax credit that you can use on your taxes , however they have to be made by midnight Dec 31, 2022. I am going to list a few of my favorites, and I welcome you to become a member and share yours in the comment section below. I will also be adding links as resources in the comment section of this postig, so as always check those out.
If you search this platform for Donations & Giving , here is a list of the highlights from the past
https://improvingfutures.ning.com/main/search/search?q=donations
https://improvingfutures.ning.com/main/search/search?q=giving
Some Local, National & International Charities & Foundations
https://www.rotary.org/en/about-rotary/rotary-foundation
https://www.brockvilleandareafoodbank.ca/donate/#Cash
https://www.canadahelps.org/en/charities/the-salvation-army-brockville-community-church/
https://www.yourcommunityfoundation.ca/
https://4-hontario.ca/about-4-h/the-ontario-4-h-foundation/
https://www.eastersealscamps.org/about/camp-merrywood
https://www.eastersealscamps.org/about/wish-list
You may make a year end donation to your home church to support their ministry. You may want to do some extra, so should consider that many of our local church's have beneovant funds, you could donate to one of them with a comment for beneovalant fund, and they will seek out needs in the community with those funds. Search online or attand a service at Christmas or New Years Eve. Note donations New Years Day will not apply for deduction in 2022, but 2023
Political Donations
https://www.newblueontario.com/donate
https://www.peoplespartyofcanada.ca/donate-cc
Other Options
It is getting late in the year for donation of stock, shares, etc. There is some significant tax benefots to do so. These should be planned out with our tax team. You an also setup your own donor advised fund. There are typically donations that one would be considering in the 10,000 plus range. Please contact our office advisor@timothyross.com to discuss how this can be arranged.
https://www.mackenzieinvestments.com/en/services/mackenzie-charitable-giving-program
In the meantime, here is great article to read up on it.
There is so many other worthy causes. Find one that means something to you and bless them this holiday season.
The Lord loves a cheerful giver.
Be Blessed this holiday season.
TLR
“I have found that among its other benefits, giving liberates the soul of the giver. ...
“Always give without remembering and always receive without forgetting. ...
“Giving does not only precede receiving; it is the reason for it. ...
“It's easier to take than to give. ...
“No one has ever become poor from giving.
“Don't Just"
Don't just learn, experience.
Don't just read, absorb.
Don't just change, transform.
Don't just relate, advocate.
Don't just promise, prove.
Don't just criticize, encourage.
Don't just think, ponder.
Don't just take, give.
Don't just see, feel.
Don’t just dream, do.
Don't just hear, listen.
Don't just talk, act.
Don't just tell, show.
Don't just exist, live.”
― Roy T. Bennett, The Light in the Heart
Should a Business Incorporate?
To incorporate or not incorporate, that is the question… a very common question that small business owners ask their trusted advisor. There are so many variables that come into play in this decision, so the answer is, it depends! Read on as we consider the factors to consider with a small business owner. Only then should the transition from sole proprietor or partnership to a Canadian Controlled Private Corporation (CCPC) be taken.
https://www.knowledgebureau.com/index.php/site/kbr/should-a-business-incorporate
RSP/LIRA account holders who will turn 71 years old before December 31, 2021
In accordance with the requirements of the Income Tax Act (ITA) requirements, all RRSP and LIRA accounts must be transferred to a Registered Retirement Income Fund (RRIF) or a Life Income Fund (LIF), by December 31 of the year during which the client turns 71.
Important Take Aways from Dale et al. v. The Queen
Tax results are sometimes determined by laws outside of the Income Tax Act or the findings of the Tax Court. How and whether a legal transaction is recognized for tax purposes often turns on the terms of any agreements and whether the common law and legislative provisions of the jurisdiction in which the transaction is made find the transaction to be valid. If the legal transaction is valid and properly documented under the laws under which it was affected, the CRA is required to also find the legal transaction valid unless it has statutory authority to find otherwise.
Implementing a Section 85 rollover does not require the share consideration to be issued at the time the property is transferred, or even within the same tax year. The rollover does require that there be sufficient evidence of the obligation to issue the shares and that the shares be issued within a reasonable period of time given the circumstances.
Lastly, this case is a reminder that previous errors are not always fatal to a taxpayer's situation. Depending on the nature of the error, our experienced Canadian tax lawyers can implement strategies to correct outstanding errors.
This situation may have turned out well for Bernard and Paul Dale, but getting that positive result required years of litigation, expense and stress which could have been avoided if the shares had been properly issued in 1985 as intended.
With over 30 years of experience as both a lawyer and chartered professional accountant, he has helped start-up businesses, cryptocurrency traders, resident and non-resident business owners and corporations with their tax planning, with will and estate planning, voluntary disclosures and tax dispute resolution including tax audit representation and tax litigation. Visit www.Taxpage.com and email David at david@taxpage.com. Read the original version of this article on Taxpage.com.
http://www.canadian-accountant.com/content/practice/tax-topics-we-re-thinking-about-this-fall
"The Liberals have indicated they would continue to move forward with plans to allow Canadian controlled private corporations to immediately deduct up to $1.5 million of "growth investments" announced in their 2021 budget (see here for a budget commentary).
The Conservatives propose providing a 5% investment tax credit for any capital investment made in 2022 and 2023, with the first $25,000 to be refundable for small businesses and a 25% tax credit on amounts of up to $100,000 that Canadians personally invest in a small business over the next two years.
Both the Liberals and Conservatives also propose additional tax credits/incentive to encourage investment in green technology and businesses.
As a result, 2022 may be a good year for businesses to consider making significant capital investments, especially "green" ones. Businesses may be able to take advantage of this by planning their own capital expenditures or by selling their products and services to clients who are making capital expenditures."
Are Business Owners' Affairs In Order?
As indicated above, the Liberals certainly, but also even the Conservatives, are talking about increasing CRA scrutiny, especially of the "wealthy." As detailed here, starting this year there are increased reporting requirements for trusts, and as detailed here, there is a general trend towards additional corporate disclosure requirements. All this suggests scrutiny of businesses and their owners at a higher level than ever before.
Tax legislation has also changed significantly over the last decade and the last two years have been chaotic, resulting in many business and personal changes.
Given all of the above, we suspect that many corporate structures and estate plans may now be dated and due for a review.
Hope your holidays have been going well, and my prayer is that 2021 is full of joy and peace for you, your family and the organizations that you care for.
As Bob Dylan once said, “May God Bless you all with peace, tranquility and good will.”
Cheers
Tim
https://improvingfutures.ning.com/blog/merry-christmas-2020
https://improvingfutures.ning.com/blog/holiday-schedule-year-end-2020
https://improvingfutures.ning.com/blog/your-tv-interview-with-tim-2020-year-end-tax-review
https://improvingfutures.ning.com/blog/meet-tim
Your TV Interview with Tim 2020 Year End Tax Review
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DIVIDEND TIME YEAR END 2020
It's that time of year to check out estimated Dividends. I started looking at over the last couple months at the trends to get some perspective of the tax burden we will be facing, it's going to be more than 2019, It's Dividend Time !
Common theme I am seeing in communications from our portfolio managers and fund companies, Q: Why are the estimated distributions relatively high ?
Well, volatility, and many companies have been profitable during the plandemic. So trading creates capital gains dividends, profits create income type dividends. We will see higher dividends this year, depending on your asset class and type of portfolio, 2-4% will not be uncommon in many portfolio's. If you have done a lot of trading or your manager has, expect taxable capital gains, if these are significant, some planning may be in order, or at a bare minimum a resolve to be a happy tax payer, I know a couple who are. This is brief update, everyone will be different. Just a "Heads Up", thankfully it's been a good year for peoples investments for the most part. Around the world, it's been a little rough lok at Spain and Russia, US pretty good , Canada not even on the list. This link I found gives a bit of perspective.
https://luckboxmagazine.com/trends/best-and-worst-global-stock-markets-in-2020/
Remember, celebrate dividends, means business was good for the most part, only downside, you will need to share some of them with the government and they need the money, also remember dividends have already had taxes paid on them by the companies owned, so there is some tax advamatges of receiveing income that has been pretaxed, not going into the details, that will be a whole new topic, I will probably find a few articles that explain it so much better than I can. The important thing here is to be aware.
So, Perhaps will dive a little deeper on this topic going forward. Search the site at the top right corner for keyword Dividends for other posts in the past and in the future.
Also check the comment section for articles regarding the topic
As a member , if you come across a relevant article , please post in the comment section, so we can all benefit
Thank you
TLR
Peak Disclosure - Click Here Please
One of my esteemed thought leaders that I know posted this early this morning.
"understand that taxes will be the largest expense during your lifetime
understand the tax code and rules
and get a good tax planner, not a tax preparer (Know the difference)
tax planning is part of financial planning"
It's so true, it's one of the reasons we run a family office, it gives us the full picture of a clients financial life, plus important insights in other aspects of their life as well. We are able to make sure all the pieces of the puzzles fit and a big part of this is to maximize the tax efficency's that my be possible, everyone's sitution is different.
For many, taxes are number one, even those with modest incomes will find that they are paying a lot out in various taxes, even if there personal federal and provincial taxes is nil or minimal.
Taxes are part of our Mission, Vision and Core Values , incase anyone ever wonder , we get it
Will expand on this topic in the future.
Tim
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Helping Families Achieve ... Life's Major Goals
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6. Meaningful Legacy
Home Office can mean potentially some nice tax deductions, check in with me and we can discuss your situation and perhaps save you a few grand every year and protect it from CRA should they question yet, plus a Hst Rebate that many miss
Great article on Home Office Decorating and Setup sourced from Dave Wilson a great local realtor / broker in the Brock Shores area. I seen this article on his Linked In feeds and it inspired me to work on this blog. It reminded me of the importance of having this deduction if possible and what qualifies.
https://freshome.com/rooms/office/
Now the basics ......
Looking ahead to 2018 (December 2017)
"Some tips from support at Cantax, be proactive this year and get your forms done up in advance and if your doing some extra tax stuff, use the T1213, Request to Reduce Tax Deductions at Source", links are noted below ~ TLR
Planning for – or even thinking about – 2018 taxes when it’s not even mid-December 2017 may seem more than a little premature. However, most Canadians will start paying their taxes for 2018 with the first paycheque they receive in January, and it’s worth taking a bit of time to make sure that things start off – and stay – on the right foot.
For most Canadians, (certainly for the vast majority who earn their income from employment), income tax, along with other statutory deductions like Canada Pension Plan contributions and Employment Insurance premiums, are paid periodically throughout the year by means of deductions taken from each paycheque received, with those deductions then remitted to the Canada Revenue Agency (CRA) on the taxpayer’s behalf by his or her employer.
Quick Download for Federal Form TD1 & respective Provincial Forms
Of course, each taxpayer’s situation is unique and so the employer has to have some guidance as to how much to deduct and remit on behalf of each employee. That guidance is provided by the employee/taxpayer in the form of TD1 forms which are completed and signed by each employee, sometimes at the start of each year, but certainly at the time employment commences. Each employee must, in fact, complete two TD1 forms – one for federal tax purposes and the other for provincial tax imposed by the province in which the taxpayer lives. Federal and provincial TD1 forms for 2018 (which were recently posted on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms.html) list the most common statutory credits claimed by taxpayers, including the basic personal credit, the spousal credit amount, and the age amount. Adding amounts claimed on each form gives the Total Claim Amounts (one federal, one provincial) which the employer then uses to determine, based on tables issued by the CRA, the amount of income tax which should be deducted (or withheld) from each of the employee’s paycheques and remitted on his or her behalf to the federal government.
While the TD1 completed by the employee at the time his or her employment commenced will have accurately reflected the credits claimable by the employee at that time, everyone’s life circumstances change. Where a baby is born, or a son or daughter starts post-secondary education, a taxpayer turns 65 years of age, or an elderly parent comes to live with his or her children, the affected taxpayer will be become eligible to claim tax credits not previously available. And, since the employer can only calculate source deductions based on information provided to it by the employee, those new credit claims won’t be reflected in the amounts deducted at source from the employee’s paycheque.
Consequently, it’s a good idea for all employees to review the TD1 form prior to the start of each taxation year and to make any changes needed to ensure that a claim is made for any and all credit amounts currently available to him or her. Doing so will ensure that the correct amount of tax is deducted at source throughout the year.
Where the taxpayer has available deductions which cannot be recorded on the TD1, like RRSP contributions, deductible support payments or child care expenses, it makes things a little more complicated, but it’s still possible to have source deductions adjusted to accurately reflect the employee’s tax liability for 2018. The way to do so is to file Form T1213, Request to Reduce Tax Deductions at Source (available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1213.html) with the CRA. Once that form is filed with the CRA, the Agency will, after verifying that the claims made are accurate, provide the employer with a Letter of Authority authorizing that employer to reduce the amount of tax being withheld at source.
Of course, as with all things bureaucratic, having one’s source deductions reduced by filing a T1213 takes time. Consequently, the sooner a T1213 for 2018 is filed with the CRA, the sooner source deductions can be adjusted, effective for all paycheques subsequently issued in that year. Providing an employer with an updated TD1 for 2018 at the same time will ensure that source deductions made during 2018 will accurately reflect all of the employee’s current circumstances, and consequently his or her actual tax liability for the year.
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.
