Canadian Accountant Tips

Important changes you need to know before doing 2014 Income tax returns

noreply@blogger.com (A.N.Rajah) — Fri, 09 Jan 2015 22:54:00 +0000

Canadian $2 coin, nicknamed "toonie" (Photo credit: Wikipedia)

Here is the list few changes that may affect your 2014 income tax returns:

GST\HST credit- Going forward from 2014, you don’t have to indicate whether you want to apply for HST Credit. CRA will determine based on your income tax return. If you have a spouse or common law partner then only one of you will receive the credit, but not both of you. The credit will be paid to the spouse or common-law partner whose return is assessed first.
Family Tax Credit- Family Tax Cut is a new non-refundable tax credit of up to $2,000 for eligible couples with minor children based on the net reduction of federal tax that would be realized if up to $50,000 of an individual's taxable income was transferred to the individual's eligible spouse or common-law partner. The credit can be claimed in Schedule 1 line 423.
Lifetime capital gains exemption- For dispositions after 2013 of qualified small business corporation shares and qualified farm and fishing property, the lifetime capital gains exemption limit has increased to $800,000 (line 254). The new limit is indexed to inflation, and the first indexation adjustment will occur for the 2015 tax year
Adoption expenses– The maximum refundable tax credit amount of eligible expenses for each child has increased to $15,000 (line 313)
Children’s fitness amount – The maximum amount of eligible fees for each child has increased to $1,000 (line 365).The increase is only for federal amount

Travel Tips

noreply@blogger.com (A.N.Rajah) — Mon, 30 Jun 2014 14:04:00 +0000

Capital One (Photo credit: Wikipedia)

Travel tips:

I thought I knew about all the deals, discounts but realized I am still learning. Things I learnt last week. I can get rebates for travel booking in via hotel.com, priceline.com or booking.com, expedia.ca etc. if I click through Great Canadian Rebates. I could have earned around $50 rebates on previous booking. But good thing is that I know and I want all of you to know as well.

I also learnt that I can use the Capital One® Aspire Travel™ World MasterCard® points to cover my Presto Card purchase for the Go Train. I added $350 to Presto Card and then redeemed the points to cover $350. With this card, I had to pay $120 fees but Great Canadian Rebates credit covered $75 of that.

My almost free air and hotel booking for upcoming Miami trip

noreply@blogger.com (A.N.Rajah) — Sun, 19 Jan 2014 19:58:00 +0000

English: no original description (Photo credit: Wikipedia)

I love to travel. But sometimes trip costs can be expensive. But who does not like to getaway during winter for few days.Thanks to Amex Canada. I was able to use the points earned from American Express Gold Rewards card and American Express Starwood Preferred Guest credit card and book my air ticket for less than $60 (only paid the taxes) and hotel was 100% free.

American Express Gold Rewards card offers 25K bonus points and it is free for the first year. It is a great card.

You will earn double points for every $1 in eligible travel purchases charged to the card, including flights, hotels, car rentals, cruises, and more.
You will earn double points for every $1 in eligible gas, grocery and drugstore purchases charged to the Card.
You will earn one point for every $1 in purchases charged to the Card everywhere else.

The points from the transactions are posted immediately and you don’t have to wait till the statement. One disadvantages is that it may take little bit of time for them to post the bonus points but they will eventually post. Other disadvantage is that I would like to use this card for groceries as well but Real Canadian Superstore does not take American express. Please also note this is a charge card and you have to pay full balance each month.

Time to time Amex has bonus which will let you transfer the points with 50% bonus to BA – Avios points. (That means 25K will be 37.5K Avios points. You can book return ticket to from Toronto Miami for 20K+ $60 using Avios in points in the American airlines. That is direct flight.

If you like for apply the card, here is the Application Link

I also have an American express Starwood Preferred Guest credit card which I use for my business expenses. This card will earn SPG points on purchases. I am ardent fan of SPG hotels and when I got the card I received 21K bonus points. Unfortunately this card has fee of $120/year. As I use the card for business purposes that fee is deductible. SPG points are well worth for the fee.

You will earn one point for every $1 in purchases charged to the Card everywhere else.
You will receive a Free Weekend Night Award when you reach $40,000 in purchases each year.
You will get an automatic upgrade to Starwood Gold level when you spend more than $30K in a year.

I was able to earn 13K points with transactions I posted to the card. I was able to book Four Points Sheraton in the Miami Beach for 20K points for two days and then Sheraton airport hotel for 14K.

SPG points can be transferred to airline points as well. It provides bonus for transfers to most of the airlines (provide bonus of 5K if you transfer 20K points). I usually keep the SPG points for hotel stay as those are more valuable for me for hotel stay.

If you like for apply the card, here is the Application Link

Voila I have booked air and hotel with out of pocket cost of $60.

Great Travel Site for Air Travel Booking

noreply@blogger.com (A.N.Rajah) — Fri, 21 Jun 2013 03:45:00 +0000

Image via CrunchBase

I have used expedia and cheapoair to get a quotes for airline tickets but found it does not give me a good price when there is more than one transit. I recently found Momondo is a good site when you have multiple transits. I was able to print the quote and took it to my travel agent to get it matched. Next time, I am actually going to book the tickets via the site.

It is a Danish company and they are in the business since 2006.

Here is more info about the company and some reviews about the company.

Wiki

Reviews

Online Shopping for clothes

noreply@blogger.com (A.N.Rajah) — Mon, 18 Mar 2013 13:30:00 +0000

I used to shop at Amazon and Chapters for books and other things. But I my sister does most of her clothes shopping and her kids shopping online. Recently I started online purchasing for clothes at Land’s end. Initially I was bit nervous about sizes and quality but so far happy with the casual clothes purchases. During November – December they had 30% off and free shipping and I was able to buy fleece tops for $10.00 and no tax or duty or shipping charges. If you are purchasing anything less than $20.00, there will be no duty or sales tax but usually shipping charge will apply.

They have online chat line in case you have question about sizes and the online reviews are also helpful. Once your order, if they have it in stock you will get it in 3-4 days. They also adjust the length or make cuff for free.

Time to time they email discount coupons for 30% off or 40% off. Recently I bought ski jacket with 30% coupon and it is pretty good deal. If you are not satisfied with the purchase you can return it but there will be shipping cost of $7.95 but if the product is defective they will waive shipping charge. I have done around 10 purchases in the last 4 months and only one I returned because the size was not what they indicated. You can also get rebate by going through rebates sites (Great Canadian Rebates, Red Flags Deals or ebates)

All the billing will be done in US dollars. I use amazon.ca rewards visa which provides good exchange rate without additional charge.

CRA treated you unfairly – What is your option?

noreply@blogger.com (A.N.Rajah) — Wed, 23 Jan 2013 15:00:00 +0000

Spring = Tax Headache (Photo credit: Canadian Pacific)

Have you ever had a situation where CRA treated you unfairly? Dealing with CRA can be very intimidating experience and you did not know that you had another option for better resolution. It is Taxpayers’ Ombudsman.

The Taxpayers' Ombudsman is an independent and impartial officer who reviews complaints from people who believe they have been treated unfairly or unprofessionally by the Canada Revenue Agency.

As a tax payer you have following eight basic rights that are included in the Tax Payer Bill of Rights.

· the right to be treated professionally, courteously, and fairly (Taxpayer Bill of Rights, Article 5);

· the right to complete, accurate, clear, and timely information from the CRA (Taxpayer Bill of Rights, Article 6);

· the right to lodge a service complaint and to be provided with an explanation of the CRA findings (Taxpayer Bill of Rights, Article 9);

· the right to have the costs of compliance taken into account when tax legislation is administered (Taxpayer Bill of Rights, Article 10);

· the right to expect the CRA to be accountable (Taxpayer Bill of Rights, Article 11);

· the right to expect the CRA to publish service standards and report annually (Taxpayer Bill of Rights, Article 13);

· the right to expect the CRA to warn you about questionable tax schemes in a timely manner (Taxpayer Bill of Rights, Article 14); and

· the right to be represented by a person of your choice (Taxpayer Bill of Rights, Article 15).

It is Taxpayer’s Ombudsman’s responsibility to ensure CRA actually complies with these basic rights.

Before you file a service-related complaint with the Taxpayers' Ombudsman, follow these steps:

1. Try to resolve the issue with the Canada Revenue Agency (CRA) employee you have been dealing with or phone the number you've been given.

2. If you are not satisfied, speak with the employee's supervisor.

3. If you are still not satisfied with the way your issue is being handled, complete Form RC193, Service-Related Complaint to file a formal complaint. For more information, visit CRA – Service Complaints.

Submit a complaint

If you are not satisfied with the way your service-related complaint was handled by the CRA, submit the details of your complaint to the Taxpayers' Ombudsman using the Taxpayers' Ombudsman - Complaint Form.

Print your complete complaint form and send it along with any supporting documentation by fax to 1-866-586-3855 or by mail to:

Office of the Taxpayers' Ombudsman
50 O'Connor Street, Suite 724
Ottawa ON K1P 6L2
Canada

RRSP contribution refund calculator 2012

noreply@blogger.com (A.N.Rajah) — Tue, 15 Jan 2013 14:30:00 +0000

The refund one would get will depend on the marginal tax rate of that person. But it is not a simple answer as the marginal tax rate will go down when your income less. Therefore you may get less refund.

Here is a calculator by Ernest & Young that can calculate the RRSP refund (please note this is an approximate number).

If you need actual number you need to do the tax return for both scenarios (without RRSP contribution and with RRSP contribution)

Please note the deadline for RRSP contribution for 2012 is March 1^st 2013.

Cash rebate for online purchases for Canadians

noreply@blogger.com (A.N.Rajah) — Fri, 11 Jan 2013 16:25:00 +0000

Ebates at Blissdom 2012-2127 (Photo credit: BlissDom 2012)

Do you go through cash rebate sites to earn rebate on your online purchases? It is pretty easy, you go through the cash rebate site to your online purchase site (provided your online purchase site offers rebate via cash rebate site) and do your purchase as usual. Your rebate will show in cash rebate site in few days or sometimes in few weeks. Once you reach the threshold amount, you can request a cheque or request to transfer to your pay pal account. The rebate percentage varies from merchant to merchant.

It is great savings for those who do lot of online shopping. I thought it is common knowledge until I found that my sister who does lot of online purchases was not aware it.

To register for rebates sites please click on the links below.

Great Canadian Rebates

RedFlagDeals

Ebates

I have been using Great Canadian Rebates for few years and it is a great site. I have good experience with them except one instance where I was not paid for a rebate for applying American express ($20 rebate). Great Canadian Rebates blamed American Express indicating their tracking system is not accurate but in my view both are at fault. If they don’t have good system to track don’t offer it. Other than that all my rebates over the last two years were posted correctly and they are very prompt in responding to questions.

I have not used the cash rebate option of RedFlagDeals and Ebates. Great Canadian Rebates and Ebates also provide you referral bonus if you refer others but I could not see any referral link in the Red Flag deals. The sites also announce special bonus rebates time to time with increased dollar amount or percentage of the rebate. Ensure to read the fine print clearly before you do the purchase the site may provide rebate based on type of purchase. For example, Gift cards may earn different rebate rate than the product purchase).

Important dates and other information about filing 2012 tax returns

noreply@blogger.com (A.N.Rajah) — Sat, 05 Jan 2013 04:54:00 +0000

Tax Preparation (Photo credit: agrilifetoday)

Personal tax returns (except you or your spouse or common-law partner is self-employed) are due April 30^th 2013 and any balance due has to be paid that day and otherwise interest will be assessed. Tax returns for self–employed and their spouse or common-law partner is due June 15^th 2013 but balance due must be paid April 30^th 2013.
You can file hard copy return or NETFILE or EFILE (EFILE can be done by tax preparer).
TELEFILE option is not available.
If you need a tax package (hard copy) you can order one from CRA and it will be delivered after February 4th 2013. The packages will also available to postal outlets and Service Canada offices from February 4th 2013.
The NETFILE transmission service will be open from February 11, 2013, until November 30, 2013, for the electronic filing of your 2012 personal income tax and benefit return. Tax returns filed via NETFILE must first be prepared using one of the 2012 commercial tax preparation software packages or Web applications certified for NETFILE.
List of certified software for NETFILE can be found here.
You employer has to provide your T4 slips by Feb 28^th 2013.
Your investment provider or banks have to mail your T5 slips by Feb 28^th 2012 and T3 slips by March 31^st 2012.
You can log in to My Account at CRA to find your RRSP contribution limit. RRSP contributions made in the first 60 days of 2013 (i.e. contributions made till March 1^st 2013) can be used in 2012 tax returns).

Interesting information about Phasing out the Penny- Feb 4 2013

noreply@blogger.com (A.N.Rajah) — Thu, 27 Dec 2012 16:18:00 +0000

After Feb 4^th 2013, Royal Mint will not distribute pennies. Businesses will start rounding up or down after taxes for cash purchases. Finance website has a nice diagram (see below) explaining the rounding.

There is no round up or down, if you are paying by other means other than cash (i.e. credit card, debit card etc.).

More information see Finance website.

You may be eligible for Family Care Giver Credit from tax year 2012

noreply@blogger.com (A.N.Rajah) — Wed, 26 Dec 2012 22:00:00 +0000

This credit is available from year 2012 and subsequent years. This is not a standalone credit but enhances some of the other credits if you are eligible. You will get refundable credit of 15% of $2,000.

Here is the list of the credit that can be enhanced.

· spouse or common-law partner amount (line 303 of the Schedule 1, Federal Tax);

· amount for an eligible dependant (line 305 of the Schedule 1, Federal Tax);

· amount for children under age 18 at the end of the year (line 367 of the Schedule 1, Federal Tax);

· amount for infirm dependants age 18 or older (line 306 of the Schedule 1, Federal Tax); and

· caregiver amount (line 315 of the Schedule 1, Federal Tax)

If you are eligible to claim the credit above then you are eligible for the Family Care Giver Credit provided the dependent meets one of the conditions below,.

· For an individual age 18 or older, the individual must be dependent on you by reason of a mental or physical infirmity.

· For a child under the age of 18, the child must have a medical or physical infirmity and as a result of that infirmity is, and is likely to be for a long continued period of indefinite duration, dependent on others for significantly more assistance in attending to the child's personal needs and care when compared to children of the same age.

You can get more information from CRA.

Online access of your account at CRA

noreply@blogger.com (A.N.Rajah) — Mon, 01 Oct 2012 02:10:00 +0000

You can access your account at CRA via My Account. It is a convenient way to check your account information, RRSP & TFSA contribution rooms and amend your tax returns.

With My Account you can see following information:

tax refund or balance owing;
direct deposit;
RRSP, Home Buyers' Plan, and Lifelong Learning Plan;
Tax-Free Savings Account;
NETFILE access code;
tax returns and carryover amounts;
tax information slips – T4, T4A, T4A(P), T4A(OAS) and T4E
disability tax credit;
account balance and payments on filing;
installments;
Canada Child Tax Benefit and related provincial and territorial programs payments, account balance, and statement of account;
GST/HST credit and related provincial programs payments, account balance, and statement of account;
Universal Child Care Benefit payments, account balance, and statement of account;
children for which you are the primary care giver;
Working Income Tax Benefit advanced payments;
pre-authorized payment plan;
authorized representative; and
addresses and telephone numbers.

You can also manage following information:

changing your return(s);
changing your address or telephone numbers;
applying for child benefits;
arranging your direct deposit;
authorizing your representative;
setting up a payment plan;
formally disputing your assessment or determination; and
changing your marital status.

Tax Tip 2011 - Tuition Amount - Examination Fees

noreply@blogger.com (A.N.Rajah) — Thu, 29 Mar 2012 01:18:00 +0000

From 2011 examination fees paid to take an occupational, trade or professional examination that is required to obtain a professional status recognized by federal or provincial statute, or to be licensed or certified as a trades person, to allow the person to practice a profession or trade in Canada can be claimed as tuition amount in income tax return provided it meets the CRA requirements.

In addition to examination fees, related fees given below are also eligible (must exceed $100):

· the cost of identification card

· certain prerequisite study materials

These amendments will not apply to fees in respect of examinations taken in order to begin study in a profession or field, such as a medical college admission test.

Ontario Trillium Benefit

noreply@blogger.com (A.N.Rajah) — Mon, 16 Jan 2012 14:00:00 +0000

Ontario Sales Tax credit (OSTC), Ontario Energy and Property Tax credit (OEPT) and Northern Ontario energy credit (NOEC) are credits for Ontarians earning low and moderate income. These programs will be combined as Ontario Trillium Benefit (OTB) from July 2012. These benefits are now paid quarterly and will be paid monthly from July 2012.

Ontario Sales Tax Credit

You could get up to $265 for 2011 for each adult and child in your family to help with the sales tax you pay on goods and services. This amount is adjusted for inflation each year.

Ontario Energy and Property Tax Credit

If you pay rent or property tax, you could get up to $917 for 2011 to help with the sales tax you pay on energy and the property taxes you paid and qualifying seniors can get up to $1,044 for 2011.

Northern Ontario Energy Credit

Families living in Northern Ontario can get up to $204 for 2011 to help with their home energy costs, as it is often higher in the North due to more severe winters. If you are single, you can get up to $132.

These amounts will be adjusted for inflation each year.

Eligibility:

You must be eligible to at least one of the benefits (OSTC, OEPT or NOEC) to eligible to receive OTB.

Application:

You must complete Ontario Form ON-BEN which is part of the 2011 T1 General Income Tax and Benefit Return package and file it with the Canada Revenue Agency (CRA). If file your individual tax returns later than April 30th may result in delay in receiving OTB payments.

New 2011 Children's Art tax credit

noreply@blogger.com (A.N.Rajah) — Sat, 14 Jan 2012 00:23:00 +0000

You may be able to claim children's art tax credit in 2011 and going forward. Here is a blog post about it from Smart Canadian blog site.
Children's Art tax credit

Federal Budget June 6th 2011- Key measures affecting individuals

noreply@blogger.com (A.N.Rajah) — Mon, 06 Jun 2011 22:35:00 +0000

Finance Minister presented the Federal budget on June 6th 2011. Here is a list of key measures affecting individuals.

Children’s Art Tax Credit: The budget proposes a new 15% non-refundable Children’s Art Tax Credit for eligible expenses up to $500. The credit will be available in respect of a child who is under 16 years of age at the beginning of the year who is enrolled in an eligible artistic, cultural, recreational or developmental activity. This credit will be structured in the same manner as the existing Children’s Fitness Tax Credit. The credit will apply to eligible expenses paid in the 2011 and subsequent taxation years, and will be able to be claimed by either parent, or shared by both parents.
Family Caregiver Tax Credit: A Family Caregiver tax credit is proposed for a caregiver of a dependent person who has a mental or physical infirmity. The credit will be integrated into the existing dependency-related credits and will be based on an amount of $2,000. The credit will apply beginning in 2012.
Medical Expense Tax Credit cap removal: The Medical Expense Tax Credit in respect of a dependent relative (other than a child who has not reached the age of 18 years before the end of the taxation year) is proposed to be amended to remove the current $10,000 limit on eligible expenses that can be claimed. This measure will apply to the 2011 and subsequent taxation years.
Increased Flexibility with Registered Education Savings Plan (RESP) allocations: The budget proposes to allow for greater flexibility with respect to the allocation of RESP assets among siblings by expanding the ability to transfer between individual RESPs for siblings, without tax penalties or triggering the repayment of Canada Education Savings Grants, to individuals who are not connected by blood or adoption, such as aunts or uncles. This proposal will apply to asset transfers that occur after 2010.
Tuition Tax Credit expansion: The Tuition Tax Credit is proposed to be amended to include certain occupational, trade or professional examination fees and ancillary fees and charges as eligible fees for the credit. This amendment will apply to eligible amounts paid in respect of examinations take in the 2011 and subsequent taxation years.
Tuition, Education and Textbook Credits amendment: The Tuition, Education and Textbook Tax Credits, as well as eligibility for Educational Assistance Payments (EAPs) from an RESP, are proposed to be amended to accommodate the fact that many programs at foreign universities are based on semesters that are shorter than 13 weeks. The minimum course duration for these purposes is proposed to be reduced from 13 weeks to three consecutive weeks. This amendment will apply with respect to tuition paid for courses taken in the 2011 and subsequent taxation years and to EAPs made after 2010.
Changes to RRSP rules to limit abuses: The RRSP rules are proposed to be amended to address certain perceived abuses, a number of which involved accessing RRSP without a corresponding income inclusion. Measures similar to those recently implemented in respect of TFSAs are proposed to be introduced for RRSPs. Subject to certain exceptions, these measures are proposed to apply to transactions occurring and investments acquired after March 22, 2011. (For these purposes investment income earned after March 22, 2010 on previously acquired investments will be considered a transaction occurring after March 22, 2010.)
Clarification of Pension Tax Rules for Lump Sum Payments: The Canada Revenue Agency (CRA) will clarify the application of the pension tax rules with respect to the tax treatment of lump sum amounts received by former employees in lieu of their rights to health and dental coverage from employers who have become insolvent and whose underfunded pension plans were wound up. These amounts will not be treated as income for tax purposes in relation to insolvencies arising before 2012.
New Volunteer Firefighters Tax Credit: A new 15% non-refundable Volunteer Firefighters Tax Credit is introduced. This credit is based on an amount of $3,000 and is proposed to be available to individuals who perform at least 200 hours of volunteer firefighting in a taxation year. Volunteer service hours will not qualify if the firefighter also performs non-volunteer services to a particular fire department. An individual who claims this credit will not be eligible for the current $1,000 tax exemption for honoraria paid in respect of firefighting. This credit will apply to the 2011 and subsequent taxation years.
Child Tax Credit modification: Eligibility for the 15% non-refundable Child Tax Credit (based on an indexed amount - $2,131 in 2011) is proposed to be modified to eliminate the restriction that only one credit may be claimed per domestic establishment. This will ensure that where two or more families share a home, each eligible parent will still be entitled to claim the credit. This measure will apply to the 2011 and subsequent taxation years.
Charitable Donations Tax Credit or Deduction clarification: The budget proposes to clarify that the Charitable Donations Tax Credit or Deduction is not available to a taxpayer in respect of the granting of an option to a qualified donee to acquire a property of the taxpayer until such time that the donee acquires the property that is the subject of the option. The taxpayer will be allowed a credit or deduction at that time based on the amount by which the fair market value of the property exceeds the total amount, if any, paid by the donee for the option and the property. This measure will apply in respect of options granted on or after March 22, 2011.
Renewal of Two EI Pilot Projects: The government intends to renew two EI pilot projects for one year. The Working While on Claim pilot project, available across Canada, will allow EI claimants to earn additional money while receiving income support. It will be renewed until August 2012. The Best 14 Weeks pilot project, which allows claimants in 25 regions of higher unemployment to have their EI benefits calculated based on the highest 14 weeks of earnings over the year preceding a claim, will be renewed until June 2012.

Courtesy: Deloitte

Ten Basic Facts about Tax Free Savings Accounts (TFSAs)

noreply@blogger.com (A.N.Rajah) — Mon, 16 May 2011 13:30:00 +0000

Tax-Free Savings Account (TFSA) is a new registered general savings vehicle that was introduced in 2008 federal budget that allows Canadians to save money in the account tax-free throughout their lifetime. The income and earnings in the TFSA plan accumulate without any tax implication. The ten basic facts about eligibility, contribution, withdrawals, effects of marriage breakdown and beneficiary designation of the TFSA plan.

Who is eligible to open a TFSA?

An individual who is 18 years or older and has a Canadian Social Insurance Number is eligible to open a TFSA account. Some provinces and territories have age of majority as age 19 (British Columbia, New Brunswick, Nova Scotia, Newfoundland, Northwest Territories, Yukon and Nunavut) and financial institutions in those provinces may not open a TFSA for individuals who not yet 19 years old. But the contribution room accumulation will start at age 18. There is no limit to number of accounts a holder can open but there is a limit how much a holder can contribute

What is the contribution limit and who can contribute?

Contribution limit for TFSA is $5000 each year for 2009 to 2011. But will remain $5,000 in 2012. The limit for the future years will be increased based on inflation and rounded to nearest $500.

Anyone with the contribution room can contribute to TFSA without any penalty or interest. Only the account holder can contribute to the TFSA (i.e. no spousal plans similar to RRSP) but an individual can give money to his\her spouse or common law partner for contribution without any attribution rules. TFSA contributions are not tax deductible.

How is TFSA contribution room determined?

The TFSA contribution room is made up of:

TFSA contribution limit for the year ($5,000 per year plus indexation, if applicable);
any unused TFSA contribution room from the previous year; and
any withdrawals made from the TFSA in the previous year, excluding qualifying transfers or specified distributions.

Example: Rosa opened in TFSA account in 2009 and contributed $2000 and did not make any contribution in 2010. Her contribution room for 2011 is $13,000 (Carry forward of $3000 from 2009 and $5000 from 2010 and $5000 from the current year).

You can find TFSA contribution room from Notice of Assessment (NOA), calling CRA or by logging in to My Account at CRA. If you have filed tax returns early the NOA may not reflect the correct contribution room and best way find the limit is by calling CRA or logging to My Account.

What happens if I have over contribute for the year?

A penalty will be assessed by Canada Revenue Agency (CRA) of 1% per month on your excess contribution

What investments can I hold in the TFSA?

Cash
Guaranteed Income Deposits
Bonds
Mutual funds
Stocks listed in designated exchange

Can I transfer TFSA from financial institution to another without tax implications?

TFSA in one institution can be transferred to another as qualified transfer without any tax implication.

Example: Edward has a TFSA account with Royal bank and balance of that account $7500 and would like to transfer it to TD bank. He has to go to TD and complete a transfer form requesting the transfer and then TD will request.

Can I withdraw from TFSA?

Funds in the TFSA can be withdrawn without any tax implications and the withdrawal amount will be added to the contribution room of the following year except for certain exceptions.

Example: Hillary contributed maximum to TFSA each year and withdrew $2000 in 2011. Her contribution room for 2012 will be $7500 (contribution room added for replacing the withdrawal $2000 plus contribution room of $5500 for 2012).

Will I receive any tax slips from CRA for income or withdrawals?

There will not be any tax slips for income, withdrawal or transfers except some situations.

What happens if there is a marriage breakdown or common law partnership?

When there is a breakdown of marriage or common-law partnership, TFSA assets can be transferred from the holder to the spouse or common law partner’s TFSA without affecting either holder’s contribution room. To do this, following conditions must be met:

§ you and your current or former spouse or common-law partner are living separate and apart at the time of the transfer; and

§ you are entitled to receive the amount under a decree, order or judgment of a court, or under a written separation agreement to settle rights arising out of your relationship on or after the breakdown of your relationship

Can a beneficiary designated for TFSA?

Beneficiary can be designated in the plan (except in Quebec) or in the will. If the spouse or common law partner is designated as successor holder then after holder’s death spouse becomes holder of the account without any tax implications and it will not affect spouse or common law partner’s contribution room. The transfer must be made directly between the TFSAs.

Here are the other posts I have written about TFSA:

TFSA and tax slips

Contingent beneficiary for RRSP, RRIF and TFSA

Is inheritance taxable?

Being green and saving money on laundry

noreply@blogger.com (A.N.Rajah) — Sun, 08 May 2011 19:29:00 +0000

Image via Wikipedia

My husband is a green freak and I am a frugal person. Some time this combination does not work well but we try our best to be frugal and environmentally friendly. Here is what we have learnt from our experience of being frugal and environmentally friendly in doing laundry.

Buy front-load energy star washing machine: These machines use less water and energy. Front load machines may cost more than top load machines but in the long run, it will save money. If you are replacing your washing machine consider buying a front load energy star machine.

Buy washing machine with auto sensor: These machines sense the load size and adjust the water accordingly. That means less water usage and less heating cost.

Use cold water to wash: When you wash in the cold water you not only save energy but it is also good for the clothes. I use cold water wash for most of the time and but time-to-time wash the whites in warm water.

Use green or environmentally friendly laundry detergents: I use Sunlight Green Clean. This does not have Chlorine or artificial dyes. There are other environmentally friendly laundry detergents available in Canada. Here are few other examples: Green Works laundry detergents, PC Green Laundry detergents and Seventh Generation laundry detergents.

Buy laundry detergent on sale and use coupons: Laundry detergents are expensive but those go sale frequently. Recently, I have seen sales for laundry detergent almost every week. You can keep laundry detergent for 1-2 years and so buy when it is on sale and keep it for future use. Coupons for laundry detergents are available through manufacturer website, flyers, store coupons etc. I have found Sunlight coupons in milk bags recently and used it to buy few bottles of Sunlight Green Glean. The retail price of this detergent (32 loads) is around $7.50 and it was on sale for $4.00 and use $2.50 coupon and bought it for $1.50 (less than 25% of the retail price).

Wash during off peak hour: In Ontario you are charged lowest hydro rate during off peak hour. Do your laundry after 9.00 pm or before 7.00 am on weekdays or weekends and holidays to save money.

Use cloth racks to dry the clothes: I dry our clothes in the cloth racks in side house during winter and outside in summer. It dries in a day.

Clean the dryer vents: Cleaning the vents improves efficiency and reduces fire risk.

Don’t use fabric softeners. Fabric softener contains chemicals. According to Environment Health Association of Ontario, it is the most toxic product produced for daily household use. It has been found to be associated with numerous illnesses and chronic conditions. I use dryer balls instead of fabric softener. I know some people use vinegar but I have heard that it may be bad for rubber parts inside the washing machine.

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Spousal RRSP withdrawal Rules

noreply@blogger.com (A.N.Rajah) — Sat, 07 May 2011 22:45:00 +0000

When you withdraw funds from your RRSP, the amount is taxable income for you for that year and the financial institution that is holding\held your RRSP will issue T4RSP in your name and you will include in your income for that year. But the rules are different for spousal RRSPs. The income may be attributed to the contributor in certain scenarios.

o If a contribution is made in the year the annuitant of the withdrawal, or in the two years prior years before the withdrawal, the contributing spouse is required to include in his or her income the lesser of,

· The amount withdrawn, or

· The amount contributed by the contributing spouse for those years (that is, the year of withdrawal plus the two preceding years).

o the same rule applies if the withdrawal and contribution are made in the same year but the contribution is made after the withdrawal.

o If the contributing spouse made no contributions in the year of the withdrawal or the preceding two years, the withdrawal is taxable in the hands of the annuitant.

o The attribution does not apply in the event of:

· Marriage breakdown

· Death of the contributing spouse

For example David and Hilary are married couple and opened a spousal RRSP in Hilary’s name (Hilary is the annuitant and David is the contributor) in 2010 at TD bank. David contributed $2000 in 2010 and Hillary withdrew $1500 in 2011 March. TD bank will issue T4RSP slip in Hilary’s name in early 2012 for year 2011 for $1500. Even though, the T4RSP tax slip will be issued in Hilary’s name the amount is taxable income for David and should be included in David’s 2011 income.

How to get better mortgage rate?

noreply@blogger.com (A.N.Rajah) — Fri, 06 May 2011 13:30:00 +0000

A good friend of mine asked whether I knew how to get better mortgage rates. Here is what I did when I applied for mortgages.

I usually call couple of banks and couple of mortgage brokers and get a quote. I was up front and told them that I was shopping around. I don’t provide any personal details for them to make an application or do a credit check But give them the mortgage amount and ask what would be their best rate and terms of the mortgage (prepayment limits, penalty calculation for breaking the mortgage). There will be some who would say that they can’t give you exact without the application, I exclude them because there are plenty of choices in the market. I also read the forums to find more information.

Here are few tips I have found:

You can get a mortgage even from a bank branch in a different town. When I bought my first home I found from my sister that a Scotia bank branch in different town was offering better rate. I spoke to the officer faxed application form and she sent the documents to a branch in my town to sign the documents.

When I bought my current house, I found a broker who said he will the beat the rates offered by any other bank. But I made a better deal with him because my sister and I bought new houses at the same time. So I asked him to give better deal since he will be getting commissions on two mortgages. We both applied separately and got our approvals separately but we got better rate. So if you have a family member or friend looking for a mortgage at the same time you may be able to negotiate better rate with your mortgage broker.
When it was time to renew the mortgage again, I found that I can actually have mortgage under the secured line of credit. That means no application, no discharge fee etc. I currently have my mortgage at TD bank under secured TD line of credit at 2.45 % even though my line of credit interest rate is prime+1%.

Consumer Rights

noreply@blogger.com (A.N.Rajah) — Fri, 15 Apr 2011 13:30:00 +0000

I came across the Canadian Consumer Handbook website. This was produced by joint collaboration of federal and provincial governments. It has lot of useful information for the consumers..

Your rights as consumer are protected under provincial Consumer Act. For example, your rights as a consumer in Ontario are protected under Consumer Protection Act of Ontario. The Consumer Protection Act governs most common consumer transactions in Ontario. But there are other legislation that provide protection to the consumers as well. For example if you are buying a motor vehicle , your rights are covered under Motor Vehicle Dealers Act in Ontario as well.

Ontario Ministry of Consumer Services website provide lot of information. It has information on consumer rights and how to report complaints etc. Here are some of the interesting points that may be useful.
.

Door to door sale

§ If you sign a contract in your home, you may cancel within 10 days by giving notice of cancellation. Provide this notice by e-mail, fax or registered letter or by hand delivering it (try to obtain a signature upon delivery). Be sure to keep a copy of your letter. The company has 15 days to return your money and is responsible for picking up the product or paying for the cost of sending it back if the company wants its product returned.

§ If your agreement contains an estimate, the final price cannot be more than 10 per cent above it, unless you agree.

Big ticket items;

§ Deliveries must be made on time. If the company doesn’t make delivery or start service within 30 days of the date stated in the agreement, you can cancel the agreement at any time before delivery or start of service. You lose the right to cancel if, after the 30-day period has expired, you agree to accept delivery or allow the company to start services. If the agreement does not state a date, the 30 days run from the date the agreement was signed. Again, you lose that right if you accept delivery or start of service after the 30 days

T4A for Registered Education Savings Plan (RESP)

noreply@blogger.com (A.N.Rajah) — Thu, 07 Apr 2011 14:34:00 +0000

Here is a question from Pam.

I contributed to my daughter’s RESP for 10 years and I was told RESP contributions are not tax deductible. My daughter started college in 2010 Sept and she withdrew some money from RESP for college expenses. She has received a T4A. Why does she has to pay taxes on the withdrawal as I did not get any deduction when we contributed?

Answer: Yes, you are correct that RESP contributions are not tax deductible. She is not paying taxes for withdrawing the contribution you made. She is paying taxes on withdrawing Canada Education Savings Grant(CESG) and income earned (income earned on grant and contribution) over the years.

Lets look at a simple example. Father contributed $2,000 to son’s RESP and received $400 CESG. Over the years that contribution and grant earned $500 income. When the son decided to withdraw funds from the plan, the balance was $2,900 ($2,000 contribution+$400 CESG +$500 income). Son withdrew the full balance and he will receive a T4A for $900.00 (CESG+ income earned). Usually beneficiary’s income level is low and in addition beneficiary will have tuition and education credits and will not pay any tax on the income from T4A.

Which tax package should I use?

noreply@blogger.com (A.N.Rajah) — Mon, 04 Apr 2011 13:30:00 +0000

I received a question from one of my friends last week and thought of sharing my response here. He has worked in two provinces during the year and wanted to know which tax package he should use.

In general you determine the tax package of the province or territory you lived on Dec 31st of the year. But if you had residential ties in more than one province or territory on December 31^st, you should use the province or territory where you had most important residential ties.

Residential ties include where your home (owned or rented) and personal property are and where your spouse or common-law partner or dependants reside. Other ties that may be relevant including social ties, driver's license, bank accounts or credit cards, and provincial or territorial hospitalization insurance.

Here are some other exceptions.

§ If you are filing a return for a person who died in during the year, use the package for the province or territory where that person resided at the time of death

§ If you emigrated from Canada during the year, use the package for the province or territory in which you resided on the date you left.

§ If you lived outside Canada on December 31, but maintained significant residential ties with Canada, you may be considered a factual resident of Canada. Use the package for the province or territory where you kept your residential ties.

Dissolution of Parliament: what happens next?

noreply@blogger.com (A.N.Rajah) — Thu, 31 Mar 2011 20:33:00 +0000

I thought of sharing what I read from Deloitte weekly highlights:

As a result of the dissolution of Parliament on March 26, 2011, all incomplete business in both the House of Commons and the Senate was terminated, including government bills. There were no government tax bills on the order paper at the time of dissolution. The legislative proposals contained in the March 22, 2011 budget also “died”, but they may be reintroduced by the next government. It is noteworthy that the future federal corporate tax rate reduction to 15% as of January 1, 2012 remains intact at this time as this amendment was already enacted at dissolution. Outstanding draft tax amendments published by the government but not yet introduced into the House of Commons are not affected by the dissolution of Parliament. However, the decision as to whether to proceed with those proposals (as well as with the corporate rate reduction) will be made by the next government.

Courtesy: Deloitte weekly tax highlights

Tax deduction for qualified home buyers - Home Buyer’s amount

noreply@blogger.com (A.N.Rajah) — Tue, 22 Mar 2011 04:23:00 +0000

Image via WikipediaAre you a first time home buyer? You may be able to get a non refundable tax credit for 5K for your home purchase.

If you meet the following qualifications, you can claim the 5K tax credit in your tax return.

you or your spouse or common-law partner bought a qualifying home; and
you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).

The amount can be claimed in Schedule 1 (line 369) of your tax return. The amount can be shared but the total amount cannot exceed $5K.

Here is the definition of Qualifying home from CRA website

A qualifying home must be registered in your and/or your spouse's or common-law partner's name in accordance with the applicable land registration system, and must be located in Canada. It includes existing homes and homes under construction.

The following are considered qualifying homes:

single-family houses;
semi-detached houses;
townhouses;
mobile homes;
condominium units; and
apartments in duplexes, triplexes, fourplexes, or apartment

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Which tax package should I use?

In general you determine the tax package of the province or territory you lived on Dec 31st of the year. But if you had residential ties in more than one province or territory on December 31st, you should use the province or territory where you had most important residential ties.

Here are some other exceptions.

§ If you are filing a return for a person who died in during the year, use the package for the province or territory where that person resided at the time of death

Dissolution of Parliament: what happens next?

Tax deduction for qualified home buyers - Home Buyer’s amount

In general you determine the tax package of the province or territory you lived on Dec 31st of the year. But if you had residential ties in more than one province or territory on December 31^st, you should use the province or territory where you had most important residential ties.