youngandthrifty.ca » taxes

Why I won’t be filling out a T1213 for my Tax Return

young — Wed, 20 Apr 2011 15:15:12 +0000

In case you didn’t know, the T1213 (entitled “Request to Reduce Tax Deductions at Source for Tax Year”) is a form from the Canada Revenue Agency that lets you take back the interest free loan to the government you give them every time you get a huge honkin’ tax return.

If you regularly contribute to your RRSP’s and you also regularly donate in the form of a pre-authorized contribution plan (like I have for my TD e-series funds), you regularly donate to charities or pay for child care costs, you can choose to forgo the big tax return at the end of the year and just get a bigger pay cheque bi-weekly or monthly or whenever you get paid.

Most people would want to get a bigger pay cheque because otherwise you are giving an interest free loan to the government (the government already takes so much, why would we want to give them even more?). If they give you a loan (e.g. if you over-contributed to your TFSA) they ding you like heck, but when they do it to us, they just turn their back. Sigh… C’est la vie

If you are interested in getting less taxes dinged each pay cheque, here are the steps you need to take in order to do so:

Make sure you have a pre-authorized payment plan for your RRSP

Make sure you have all the slips and receipts etc. for your child care costs or your charitable donations that you regularly make, employment expenses you would normally fill out on your T777, interest expenses on investment loans, and even rental losses.

Find out who your human resources/ payroll deductible person at your place of work is, because you will have to give the CRA their contact information and and they can set it up through payroll to deduct less taxes of your paycheque

Fill out that T1213 form and send it in along with the documentation and send it in to CRA

Et voila, you will get less taxes taken off your paycheque in about a few week to months

The reasons why I’m not filling out the T1213:

I think this is a great way to get taxed less throughout the year, but to be honest (and feel free to judge me haha), I really enjoy my big tax refund at the end of the year. I’m not sure why, perhaps it’s some sort of psychological defect of mine. I like to plan how I spend the big tax refund and I like how I can use it to fill up my TFSA contribution room or to fill up my RRSP room for next year. I know that if I got a bigger pay cheque throughout the year, despite my automatic ‘pay myself first’ deductions, I know I would be tempted to adjust things and adjust my budget, and I probably would contribute less to my TFSA and RRSPs (heck, it’s human nature, I suppose).

Another reason is because I’m afraid of commitment. Although I have been contributing regularly to my pre-authorized payment plan for my RRSP for years, I like the idea of just stopping it if need be (or if life gets in the way of my regular contributions)… without having to fill out more paper work or talking to the human resources person again, or being on hold on the phone with the Canada Revenue Agency for eons.

Finally, because I get a lot of investment income slips, it can be unpredictable as to what my interest income is for the year, or my capital gains etc. I don’t want to have to pay the Canada Revenue Agency for this and with the RRSP deduction, it would be a good buffer for all of this non-employment income I get, so I can avoid (God forbid) having to OWE the Canada Revenue Agency come tax time.

So my dear government, enjoy your interest free loan courtesy of me…for now. I know I’m not being financial smart or prudent with this decision, but that’s what personal finance is about, right? It’s personal What works for me may not work for others.

Readers, do you use the T1213 form? I wonder what the percentage of Canadians is that reduce their income taxes is, by this method? Can you list any other pros or cons for the T1213 form completion? Do you enjoy the big tax refund at the end of the year like me, or are you more pragmatic?

How to Get More Money Back from your Tax Return

Last Minute “Blogging as a Business” Tax Tips

young — Mon, 04 Apr 2011 14:45:03 +0000

I finally finished doing my taxes (looking forward to a whopping refund of $1147- wish there was more, but beggars can’t be choosers, now can they?) and I thought I would share with you some tax tips for those working at home. Back in 2009, I shared some last minute tax tips, and this post will talk about work-at-home expenses for your own business, specifically.

The CRA views income earned through blogging as a business (with you as the sole proprietor of the business if you are not incorporating your blog business), and this amount get added onto your regular income as your total gross income for the tax year, and it gets taxed at your marginal tax rate (unless you incorporate your blogging business). You would use form T2125- Statement of Business or Professional Activities.

2010 was a good year- I have finally started to make some income off my blog. 2009 was a negative year, the $3.42 income for December’s 2009 Google Adsense (ha!) didn’t even get paid out, so I was able to subtract my business expenses of my blog from my regular full time income. Namely, I took advantage of the 100% Capital Cost Allocation for computers (class 52) and got a nice discount on my beloved MacBook Pro courtesy of the tax man (this goodness unfortunately ended in February 2011- so if you bought a computer, keep the receipt!). This however, can’t of course be done consistently as CRA will smell something fishy and assume you’re not actually running a business.

The Canada Revenue Agency understands that all businesses might not get off to a good start and be profitable, but you will eventually have to be making money somehow in a year or two, otherwise that might trigger the tax man’s suspicions, and you might smell an audit coming.

Here are some deductions you can take off from blogging income to lessen the burn from the CRA tax man:

Domain name expenses
Web hosting expenses
At home internet (you need to calculate the % for business use)
Computers (any data processing equipment)- up until February 2011 (from January 2009), you can deduct any computer purchase for 100% Capital Cost Allocation (class 52). If you bought a computer before February 2011, keep your receipt and you will be able to use it for your 2011 tax return next year.
Any depreciable property including an office desk, a printer, a camera that is used for business purposes. Because these are used over a period of time, they are deducted over numerous tax years. CRA’s website explains which these assets should belong to.
Proportion of your home you use for business- you can use a portion of the rent that you pay, or if you own your own home, you can deduct things like the proportion of property taxes, mortgage interest, home insurance, utilities etc. Again you would need to calculate the % that you are using for business use, in terms of square footage for business use/ square footage of entire home

This is what the CRA has to say about how to calculate the amount you can deduct:

“If you use part of your home for both your business and personal living, calculate how many hours in the day you use the rooms for your business, and then divide that amount by 24 hours. Multiply the result by the business part of your total home expenses. This will give you the household cost you can deduct. If you run the business for only part of the week or year, reduce your claim accordingly.”

Advertising costs – Things like spending on gift cards for giveaways hosted on other blogs, buying supplies for giveaways and direct payment for advertising space would be applicable
Office supplies like pens, papers, pencils, highlighters.. any stationary you would use for your blogging business
Legal or Accounting fees- If you pay an accountant to do your taxes, you can deduct the fees associated with this expense.
Travel- For those going to the PF Blogger Conference in Chicago hosted by PT Money, you can deduct the costs associated with that- including the flight, the hotel accommodation and meals. Meals would be deducted at 50% according to the CRA.
Telephone and Utilities- I plan on deducting the data portion of my cell phone bill because it is used for my blogging business (checking my emails, tweeting, getting into wordpress etc.).

Readers, are there any tax tips for bloggers that I might have missed? Big bloggers, do you have sole proprietorship or did you incorporate your blogging business? Who’s going to the PF Blogger Conference (I unfortunately am not).

The most important thing, I think, in terms of tax preparation is be a receipt hoarder and when in doubt, keep your receipts. Remember also that I’m no tax professional, so do your own due diligence!

Weekend Ramblings and PF Blog Love: H&R Block Tax Software Giveaway Canadian Edition (cont’d)

young — Fri, 04 Mar 2011 15:40:45 +0000

I STILL haven’t gotten around to testing the waters to see roughly how much my tax refund (or perhaps tax owing, now that I started a blog!) is for 2010.

Last week, youngandthrifty.ca was giving away an H&R Block at Home Premium Edition (worth $34.95USD) for the neighbours south of the border. I think the only person who signed up was Helly from Heckled Trio. So congratulations Helly! I’ll send you over the codes for your tax filing enjoyment

This week, CANADIANS can rejoice as H&R Block from Canada approached me to see if I was interested in giving away Canadian versions of the H&R Block Do-It-Yourself Tax Software (a $34.99 CAD value).

H&R Block Do-It-Yourself Tax Software Giveaway

Here is the “411″ so to speak, on the the Do It Yourself Tax software:

Netfile Certified
It allows the user to do up to 16 tax returns on it(you can do it for your whole family.. and friends! You’ll be the most popular guy or girl on the block- guaranteed lol)
includes free Audit Assistance (a $75 value)- basically this means that God forbid if you ever get audited by the Canada Revenue Agency, you just need to bring your documents etc. to the local H&R Block and their tax professionals will deal with it for you (which saves you from the auditing nightmare)
and also includes Canadian Tax Tips for Dummies (I think it’s a PDF version of it, not the hard copy)
It carries forward for you (saves you time next year)
Prepares anything from rental income to investment income etc.
You can choose to print it or do Netfile (I’m print it myself, my accountant in the past said if you use Netfile, you get audited more often)

By now, you should have received all your T4′s so you can get ready for tax season! Who else is as excited as me?

Here’s how you enter for a chance to win ONE of FIVE H&R Block Do It Yourself Tax software codes:

Subscribe to youngandthrifty.ca (either via RSS or email) and comment that you did so (I need your email to send you the codes).
If you already subscribe, thank you! Just comment below and I hope that you win because you are a loyal reader
For an EXTRA ENTRY Tweet: “H&R Block Do It Yourself Canadian Tax Software giveaway ($35 value) via @youngandthrifty http://bitly.com/dKFyJ9″ but you must also comment below that you did so and already be a subscriber to be eligible for the extra entry
Winners will be selected by random.org
Contest runs until next Thursday (to give you enough time to do your taxes, of course) March 10 at midnight PST

GOOD LUCK!

Now onto some PF Blog Love:

KrantCents asks a very good question- How do you measure success? (to me, success is different for everyone)
Retire by 40 is looking for a Fourplex for an investment and he talks about why he thinks its a good real estate investment
Money Smarts Blog does an interview with Derek Foster for his new book The Idiot Millionaire
Yes I am Cheap does her monthly check up on her debt and finances
Eemusings shares her confessions (and I have the same thoughts with more than one of them: name changes and preplanning meals)
Sustainable Personal Finances gives another great moneysaving/ecofriendly tip to use a crock pot to cook (I am so in love with my crock pot!! Chili, pulled pork sandwiches, beef short ribs yum yum)
The Financial Blogger has an updated list of TSX Dividend yields and ex-dividend dates (great to use to load up on your CDN dividend stocks. I’ll be sharing my list of what I bought for my TFSA this year soon)
Echo from Boomer and Echo asks where you get your financial information (and blogs and the internet is high on the list, much to Investors Group’s chagrin)
Dividend Ninja interviews Dan Bortolotti (for those of you who don’t know, he’s THE Canadian Couch Potato!)
Budgeting in the Fun Stuff has a guest post from Squirrelers with 10 Tips to Reduce your Health care Expenses. Crystal also shares her blogging income updates for you voyeurs out there- last month she made $1000 on her blog! (and I thought I was doing good lol)

Flow Through Shares…Explained!

young — Mon, 13 Sep 2010 16:24:18 +0000

I know it’s early to be talking about Canadian tax saving strategies, but I thought I would talk about my experience with flow through shares since it doesn’t seem like there’s much information out there on this topic.

Besides, it’s never too early to be talking about taxes!

So your big question might be, “what the heck are flow through shares? How do they “flow through”? Who gave them that name anyways?”

I can’t answer who came up with the name Flow Through shares, but I’ll try and answer the former two questions.

Flow Through Shares

Basically an investment that has intense tax advantages (which means you get a big refund come tax refund time)
Primarily involves investments in the Oil and Gas Industry, the Mining Industry, and the Wind Power Industry
The investment is 100% tax deductible against your income
After a certain period (usually 1-2 years) your shares will roll over into a mutual fund which you can sell at any time
It turns fully taxable income into future tax advantaged capital gains
You have to look at the Marginal Tax Bracket you’re in to see how much money you will get back come refund time
The higher your pay (the more taxes you pay), the more you’ll get out of this

Here’s how it works:

Let’s pretend you bought $10K worth of flow through shares. Let’s pretend you make the big bucks, and your Marginal Tax Bracket is 43.7%.

When you get your tax refund- if you work as an employee, you will get $4370 back, meaning you will have tax savings of $4370.

This works by multiplying $10,000 x 43.7%= $4370.

(It’s just like an RRSP- whatever you contribute, you get a tax savings of your marginal tax bracket)

However, there’s a catch.

When you sell your flow through shares- let’s assume for simplicity’s sake that you neither make nor lose money on the $10,000 you invested, the adjusted cost base is $0- so the capital gain is considered $10,000.

So that tax you would have to pay when you sell is:

$10,000/2=$5000x 43.7%=$2185.

So you got $4370 back from the government, but when you sell, you have to pay a capital gains tax of $2185. Therefore, the net income advantage is $2185.

Again, since I haven’t done a PROS and CONS list in a long time, I’ll do one now:

FLOW THROUGH SHARES PROS:

It’s a nice tax shelter from the government (as we know, there are few tax shelters!)
If you’re in a high tax bracket, it’s one way to not have to be gauged in paying taxes
You help stimulate the Canadian economy, eh?

FLOW THROUGH SHARES CONS:

When you sell, the adjusted cost base is $0, so whatever you have is considered a capital gain
They can be super risky
They are often sold at a premium
It would be supportive of the oil and gas industry, mining.. I guess that’s what Canada is all about, but if you have issues with it in terms of the environmental consequences of supporting exploration companies, then it might not be for you
Doing the taxes for flow through shares is complicated. You’ll probably need to get an accountant involved (which might incur extra costs)

My own experience with flow through shares:

Check out my post on my “other” investments. As you know, initially in my personal finance journey, I was tax savings hungry and all I cared about was getting nice fat tax refund. One shouldn’t just jump into an investment for the tax refund (as I have now learned, lol). I had bought $5000 worth of flow through shares in 2005. I received approximately $1500 in a tax refund which I later reinvested into something else. However, the current value of my flow through shares is $1800 (note that I had invested $3500 initially). So if I were to sell it (which I plan to do soon), I would have to pay about $270 in capital gains tax. So I had actually received $1230 in a tax refund, were I to sell it at its current pricing. So I am down a net of $1930.

So as you can see, flow through shares have not been good to me (hey that rhymed!).

Tips on buying flow through shares:

It is recommended that Flow Through shares are not to exceed 5-10% of your portfolio since they’re so risky
They can be bought buy your local financial adviser (mine kind of pushed them on me)
They are usually sold at certain times of the year (“offerings”) and are often sold at a premium
Try and time your flow through shares purchase well
Make sure you understand that your money won’t be accessible for at least a year or two- so don’t buy it if you’re planning to save up for a large purchase
Don’t be like me and just get it for the tax advantages (though very tempting, I know)

I hope that helps clarify the confusion! Any readers out there have flow through shares in their portfolio?

TaxWiki.ca – One Stop for your Canadian Tax Questions

young — Mon, 09 Aug 2010 18:53:50 +0000

Professor Benjamin Alarie who is an associate professor of the University of Toronto Faculty of Law (shout out to the T-dot lol) recently launched, with the help of his law students, a new non-commerical website (read- no ads!) called TaxWiki.ca which aims to provide accurate tax information to the Canadian public. It’s a FREE resource that aims to answer tax questions accurately of all kinds, including information about donations and official receipts, to questions about principle residence.

Everyone knows that the Canadian Revenue Agency (CRA) website is confusing and not updated very well (heck, even the Officer of the Auditor General of Canada admits it!), so this new intiative is unprecedented. I think it will change the way Canadians see taxes. Taxes won’t be so scary anymore, and hopefully people will feel confident enough to do their own taxes well. They will feel empowered with tax information at their fingertips… instead of resorting to Googling “taxes Canada student loans” or something.

The content is CRA material, except that it is edited and updated by a panel of tax experts, including tax students, tax accountants, tax lawyers, tax academics to reflect the current taxation law. They consult the Income Tax Act, the Tax Court of Canada, the Federal Court of Appeal, and even the Supreme Court of Canada. You know that the information you’re getting is as good as gold.

Professor Alarie details the launch of the Taxwiki.ca website here on the University of Toronto blog. He plans to add information on GST/HST on there too in the future.

I’ve already bookmarked the site and am looking forward to using it (a lot) when I do my taxes again next year. Hope you find it useful as I do!

Good Debt vs Bad Debt

young — Mon, 19 Jul 2010 13:24:18 +0000

Yes.. I mentioned the “D” word. Debt. Just letting that word roll off your tongue makes you feel like you have halitosis.

Well, get that tongue scraper and Listerine out, because as surprising(and somewhat crazy) as this may sound, there is such thing good debt AND bad debt. And you might want to keep the good debt around longer (that means instead of paying off the good debt first, pay off the bad debt first) because there are some benefits to good debt unseen by the naked eye.

What can good debt do? Good debt can help you decrease your taxes you owe to the government, and it’s especially better for you if you’re in the higher tax brackets. If you’re not taxed to the nines by the government, then good debt is not as fantastic as if you were in the 46% tax bracket.

What does bad debt do? Nothing. It just gives you a bad feeling and an ulcer. It just sits there, grows interest while you tread the deep end trying to keep up with the payments.

Here are some examples of good debt.

Student loans from the provincial or federal government
Mortgage on an investment property
Lease payment on a car (max $800/month as per the CRA) that you use for work (by that I mean that you can claim capital cost allowance on your car- you need to HAVE to use your car for business)
Interest on any money you borrowed to generate income (can be for investment income too)— but note the key word GENERATE INCOME. If you’re borrowing at a rate of 7% and your stock market returns are only 5% then… that’s not called generating income.

Here are a few examples of bad debt.

car payments if you only use your car to commute/ can’t write your car off for tax purposes
principal residence mortgage (many people think this is good debt, but if it doesn’t really do anything for you, then it’s not good, really… and you can’t bank on the home value to rise consistently)
credit card debt (always a bad debt, no ifs, ands, or buts!)- it’s 18-21% interest– YUCK!

Okay here’s an example of how it might look:

Let’s say you just graduated school one year ago and have $10,000 in student loans to repay. Let’s also say that you netted a nice job as a fresh graduate making $50,000 (in the marginal tax rate of 29.70% in B.C.). If you don’t pay any tax because you don’t have a high paying job yet, then ignore all this stuff about good debt, because good debt only gets you tax back. If you don’t pay tax, you don’t need to get any tax back. You also have a car loan to pay off (about $500 a month), but because the $10,000 is such a big number and you want to get rid of your student loans, you try to pay that down first.

Scenario 1: Pay down student loan first by paying $1000 a month- let’s hypothetically say the interest was $100 a month, and paying $500 to car payment. Let’s say the yearly interest paid hypothetically for the car loan was $200.

So the yearly interest paid for the student loan is $1200. Because the interest is tax deductible, at a marginal rate of 29.6%, then you are really getting back: $1200x 29.70%= $356 > $200.

So you will get $355 back from the government. If you pay the car loan off slower than the student loan, then you are slowly letting the government keep more of your money.
Scenario 2: Let’s say you pay down your student loan slower, only $800 a month, and you paid off your car faster. If you have a yearly student loan interest of $1500, then $1500 x 29.70%= $446. You’ll have $100 more back from the government, and you’ll pay less interest on your car because you are paying it off faster. Win-win situation if you are in a higher tax bracket.

Both debts can be bad though, but one type (good debt) is less toxic to your personal finance than the other. If you’re going to have debt (and yes, we all do), then it better be good debt… unless of course (as I mentioned about and want to mention it again), you don’t pay taxes OR you’re paying really low taxes, then in which case, all sorts of debt isn’t good. Though the Canada Revenue Agency says you could defer claiming your student loan interest for the next five years.

Of course, debt is not good… PERIOD, but if we have to deal with it (which the majority of us do, unless we won the Lotto Max), then might as well figure out which one is somewhat advantageous.

Do you agree or disagree with my categorization of good debt and bad debt? Do you have any other ‘debts’ that you would like to add to this list?

Canadian 2010 Budget and What it Has to Do with Implants

young — Wed, 17 Mar 2010 13:12:31 +0000

Recently good ol’ Jim picked out his new shoes for the 2010 budget. As you may well know, our tax payer money pays for the Finance Minister’s new shoes… it’s tradition. One year (2006) our British Columbian finance minister Carol Taylor picked out a nice pair of $600 GUCCI shoes but that was when we were all flush with cash and BEFORE the depression recession, I suppose. But I digress.

The Canadian Federal 2010 Budget was underwhelming, to say the least. Canadians were very hopeful for an extension to the popular Renovation Tax Credit, but they didn’t give it to us. Our national deficit is $53.8 Biilllliioooon dollars (insert Austin Powers impression here). They decided to cut corporate taxes some more to make Canada a foreign-investor friendly place. Nothing really changed that would affect the average Canadian, it seems.

Except if you are the average Canadian who is into cosmetic surgery! Jim Flaherty closed the loophole that would allow people to claim their Botox injections, breast augmentation, nose jobs, teeth whitening and liposuction surgeries as medical expenses. Jim didn’t even give those people a chance to ‘Botox till you drop’ until the new rules kick in, because the new rules kicked in the day the budget was announced. This is supposed to save the government $40 million dollars because people in the past could claim for a 15% tax credit if the medical expenses exceed 3% of your net income or $2024 (whichever is less).

What do you think about this? I have never done any cosmetic augmentation and don’t think I ever will, but I guess if anyone did, it would be nice to get some cash-back from the government, way to milk the system, right? My American friends, does your tax system allow you to deduct the costs of cosmetic or medical procedures?

I love blogging about Jim Flaherty, our Canadian Finance Minister. You can now follow him on twitter! @FinanceCanada LOL the GOVERNMENT is even using social media. Is that a good thing or is it slightly disturbing?

How to Get More Money Back from your Tax Return

young — Mon, 15 Feb 2010 14:05:00 +0000

It’s that time of year again! TAX TIME! If you didn’t get a chance to implement any of my 16 Tax Tips for Year End, don’t fret, my friend, there’s still time to get more money back from your tax return!

NOTE: These suggestions are for the Canadian Tax system. If you are claiming your taxes in the US, then sorry, this post ain’t for you!

I started filing my own taxes last year. Before that, I hired an accountant to do my taxes (my taxes were really simple) and paid about $125 for his services. He gave me a few good tips which I carried on to use for the next year, when I learned to do it myself. I decided to do my own taxes because:

I didn’t want to pay someone else $125 when I could do it myself
I didn’t have my own business so I couldn’t deduct my accountant expenses
You care about your own money the most (using an accountant is kind of akin to hiring a financial adviser, right?)
I wanted the challenge

One thing that I would recommend you possibly NOT do is go to H&R Block. They can charge exhorbitant fees if your tax return is complicated and the people doing your tax returns are not accountants. They have taken H&R Block’s tax return course (and likely paid $350+ for it) in hopes of working for H&R Block. I saw the H&R Block ad in the paper for the course and was interested in going to it…I do hear that it is helpful in preparing your own returns though. That said, there are good experienced people who work at H&R Block and people who are inexperienced.

Doing taxes by yourself is actually kind of fun (yes, I know I sound lame… but maybe I really was an accountant in my past life) but I would only say it is fun if you use a tax software program. Calculating everything by hand with a calculator and a pencil and eraser would likely drive anyone batty.

On the other hand, if you have your own business (for example, you have rental or investment property) it can be helpful to hire an accountant because knowing what you can deduct and how can be kind of complicated.

Alright my friends, so here are some ways to Get More Money Back from Your Tax Return:

One key thing to remember is that you really need to KNOW what you can deduct IN ADVANCE, or else you won’t be aware to collect them for your deduction!! (e.g. receipts, transit passes) So you kind of have to embody the accountant mindset anyways, in order to reap the rewards.

Contribute to your RRSP before March 1: The RRSP deadline is March 1– so hurry up fill yours! You can find how much you’re allowed to contribute on your Notice of Assessment (you know, that form that sent with that cheque?) You’ll be able to receive a tax refund equal to your marginal rate, that you can later then contribute to your TFSA! (Hey, two birds with one stone– not bad, I say!)

It is important to remember though, that if you make about $36,000 or less, then you should contribute to a TFSA instead, because you’re not getting taxed to the nines. When you get taxed to the nines, then contribute to an RRSP because then you can receive a larger tax refund. Having said that, if you have enough dough to contribute to both a TFSA and your RRSP, you can contribute to your RRSP BUT hold off on using it as a tax deduction until future, more income-generating years (use Schedule 7 for this).

Keep your Transit Passes: You can get a tax credit of 15%. If you’re a student, keep your monthly pass because you can deduct the cost you pay for it on your taxes. If you have a monthly transit pass you can claim those as well (don’t lose them or throw them away! They’re worth something even after the transit pass expires). The transit passes have to provide detailed information (e.g duration of use, transit authority, amount paid) and are good for a Federal Tax Credit (GOOOO CANADA GO!)
Tution Credit: If you’re a recent grad (congradulations!) you can wait to claim your tuition credits for later on, when you’re earning the big bucks. I made the mistake of using up my tuition credits when I wasn’t making anything way back when I was in school. NOTE: there is NO limit to the amount of time that you want to carry forward this credit over…so you can keep your tuition credit and use it later when you’re making the big buckeroos.
Claim your Student Loan Interest: Yes, having student loans looming does have it’s minor minor silver lining- that is, you can claim the interest that you are charged on your student loan.
Claim Medical Expenses: Keep your receipts for any prescriptions and medical or dental expenses that weren’t covered by your Health Benefits Plan. If you plan to get laser eye surgery (which can be upwards of $1000) for example, you should make sure you keep other expenses you incurred within any 12 month period (it doesn’t have to match the tax year– e.g. it can be from April 2008 to April 2009 instead of January 2009 to December 2009) as long as you hit the magic number: 3% of your net income OR about $2000 (for tax year 2009). If you live common law or are married, you can add up your expenses for both of you and claim it against the person with the smaller income.
Utilize Dividend Tax Credits: THIS is why Canadian corporations that pay dividends are best kept in a non-registered account. The taxes on dividends are much lower and almost favourable if you are in the lower income tax bracket.
Claim your cell phone bill: The tip my accountant gave me was that you can deduct a reasonable amount of your phone bill (e.g. 50)% if your employer regularly uses it to call you to obtain work (this works for example, if you are a ‘casual’ employee and they usually call you to see if you can come in to work). The percentage used should be traced back to your airtime.
Donate: Oftentimes charitable organizations that are approaching you personally (for example, I had a colleague at work who was asking for donations for a worthy cause in the local community she was representing) may be able to change the date on the tax receipt to the 2009 year. She offered to write to date of the donation for the 2009 tax year.
Working from Home: If you work from home more than 50% of the time, there are a large number of deductions that you can account for. You can deduct your internet expenses and stationary bought provided that you use these to obtain income. If you rent, you can deduct the portion of rent and any other maintenance costs you would pay for your office space. Per the CRA “Work space in the home expenses” site, you can also deduct:

You can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, maintenance, property taxes, and home insurance. However, you cannot deduct mortgage interest or capital cost allowance.

Consider not giving an interest free loan to the government: Yeah, you heard me…that lovely tax refund you get in the summer? It’s basically YOUR money that the government was keeping warm for you. If you fill out a T1213 form and hand it over to your employer, they can deduct less of your income on your paycheque. You’ll get more money on your paycheque (BONUS) but if you’re like me, you might have a psychological crutch that makes you WANT to see that big tax refund cheque from the government… I’m not sure what it is, the cheque seems so symbolic. HINT: Don’t do what I do! Get your T1213 forms. I’ll try and tell myself to do that for next year too.

Another helpful tip my accountant gave me was to submit it through the mail instead of online. When you submit it online through NETFILE, you keep all your receipts and documents (e.g. T4′s ) and if they ask you to submit it in the future, you do. The accountant I spoke to said that doing it this way may seem more convenient, but he said that more often than not, your tax return gets audited more often than if you were to send it in through snail mail.

There’s a variety of tax return software available. Some are free. You could even use the tax return software to do all your calculations, and then input the numbers into your paper tax return (the tax return booklet).

Here are a few that are popular, FREE, and NETFILE certified if you want to send it through NETFILE:

Studio Tax Not the fanciest of websites, but it’s great for basic tax returns. It’s completely free (if you file less than 20 tax returns)! Free download of tax software and you don’t need a license key or registration key to get it. They even have student versions. You don’t have to pay $40 for Ufile or Quicktax. Studio Tax is highly recommended.
QuickTax recently launched free tax software. Good for 1 return. They have the QuickTax Free online edition, free student edition, and free Freedom Program. These are good for basic returns (if you have any investment slips e.g. T5′s and T3′s then this isn’t for you!). The good thing is, that if you start the free QuickTax free online edition and realize that it’s not meeting your needs, you can upgrade to the QuickTax standard edition without losing any of your precious work. It’s very user friendly and easy on the eyes.
CANTAX This was the program I used last year. It’s super comprehensive and it’s designed for tax professionals. It’s NOT free, but it’s good. It was free for me because my dad the accountant let me use it. =)
UFile You can file for free with UFile if you earn less than $20,000 per year OR if you are a student (Oooh the perks of being a student). If you do not fall into that category, you can try it for free and only pay when you have to print or submit it online through NETFILE. It’s $15.95 for this.
H&R Block has a free online filing product if your tax returns is really simple. Again for their other products, you can start for free and pay if you need to print or file.

Well, that’s all I can think of for now folks. Good luck doing those tax returns! If you liked this post and want to acknowledge the blood-sweat that I poured into writing this, please subscribe and/or add me on Twitter. Thanks!

Have you ever filed your taxes by yourself? What do you think of it? Any suggestions or tips with any of the free tax preparation software mentioned above? Have you ever filed with H&R Block?

Why I won’t be filling out a T1213 for my Tax Return

Tiger Woods: Here are 16 Last Minute Tax Tips for Year End (hey! same number as your mistress count!)

young — Mon, 21 Dec 2009 22:22:59 +0000

I’m not actually sure what the current mistress count for Tiger Woods is, but last I checked, it was 16. I thought I would write up a post about the last minute tax tips before the end of the year to help decrease your tax burden for 2009.

This post isn’t really about Tiger Woods. Tiger Woods doesn’t live in Canada, anyway. He’s probably getting a lump of coal for Christmas because he hasn’t been a good boy this year. Anyway, here you go:

16 Last Minute Tax Tips:

Moving to a different Province?: If you’re moving to Alberta or something, you should be cognizant of what date you actually move. December 31 is the day that the Canadian Revenue Agency will decide what you pay for your taxes. So if you are moving to a province that has LOWER taxes soon, you might get your butt over there sooner rather than later. If you’re moving to a province that has HIGHER taxes, maybe you can wait until the new year.
Getting Married?: For all you winter wedding people, December 31 is the day the Canada Revenue Agency will take if you get married. So you can reduce your taxes that you pay for 2009 by getting your vows done before December 31.
Car Maintenance Expenses: If you use your car for work or your business, you can deduct the expenses related to using that car (gas, oil changes, maintenance, winter tires etc.) So hurry over to your mechanic for that oil change before the end of the year to be able to include those expenses in your 2009 tax return. I’m planning to get my oil changed on Monday.
Donate to Charity: It wasn’t a coincidence that I have been getting more letters from charitable organizations asking for my donations. Many people donate to charity at this time of the year to reduce the taxes that they owe. In B.C., if you donate any amount up to $200, you get 16% back. For any amounts OVER $200, you get 29% back. The government encourages us to donate, therefore they let us give our money tax free. So, if I were to donate a total of $250 in 2009, then the first $200 I get 16% back ($32) and then for the next $50 I get 29% back ($14.50). So if you don’t plan to donate more than $200 this year, it’s probably a better idea to lump them up all together and claim them next year. A great Canadian website that has all the CRA approved charities online is: Canada Helps It’s easy, fast, and convenient.
5. Realize Capital Losses: You can offset your capital gains by selling off your loser stocks. Remember that only 50% of the capital loss can apply. So to calculate the taxes you have to pay: Capital gains – capital losses= net amount x 0.50 x marginal rate. You have to do this before December 24 (a few more days! Hurry it up!) because it takes 3 days to settle a trade and December 28 is in lieu of Boxing Day in Canada.
6. Don’t Realize your Capital Gains until after December24: Then you can defer the capital gains tax you pay for a whole year.
7. Collect all of your Medical and Dental Expenses: Medical and dental expenses can be claimed for any 12 month period. So you don’t really have to rush for this one, I guess.
Stock up on Equipment if you’re Self Employed: You can stock up on computers, stationary, business cards, etc. etc. if you’re self employed. Maybe even the iPhone if you use your phone for work. As long as the receipt is dated before December 31, you’re good to go.
Computers yield a 100% deduction: To stimulate the sagging technology sector, the recent 2009 budget said you can deduct 100% of the cost of a computer you purchased between January 27, 2009, and before February 2011 if you are are a business owner. You don’t have to deduct the depreciation cost. I don’t think many people know about this, there’s not much buzz around it for some reason. So all you bloggers out there, submit your receipts for your computer! Better yet, buy a computer on Boxing Day and claim it! (Talk about hitting two birds with one stone!)

Fill up that RRSP: Fill or max out your RSP room if you can to minimize the taxes that you have to fork out next year AND get a nice tax refund.
Fill up that TFSA: Fill or max out the $5000 that was introduced this year to minimize the taxes that you have to pay.
Home Buyers Plan: If you’re planning to buy a home before the interest rates go back up sky high, you should delay the HBP withdrawl until next year in January to delay repayment until 2012. Otherwise, you’d have to repay your HBP withdrawls in 2011.
Home Renovation Tax Credit: The Canadian Government (bless their hearts) introduced the Home Renovation Tax Credit to stimulate the economy as well. If you spend between $1000 and $10,000 before February 1, 2010 you can get a 15% nonrefundable tax credit. The government keeps adding more things that are eligible for this tax credit. Including: Permanent installed air conditioing, driveway installation, landscaping, permanent installation of a home security system, and tree removal. I know it’s kind of last minute, but I’m sure you can get some of these things done before December 31 to reap the tax advantages for this year. Again, you have to OWN your home to be eligible for this tax credit. *sigh* there goes my home envy again.
Claim Investment Expenses: A real easy one to get before December 31 is to sign up for a safety deposit box.
Lastly, if possible Delay or Defer Income: If your workplace is pretty flexible with regards to your paycheck, you can ask them to delay your paycheck until the new year (you better not be living paycheck to paycheck or this won’t work!) so you don’t have to pay tax on your paycheck until next year.

There you have it. Sixteen last minute tips to save taxes on your 2009 Tax Return. Good luck!

Hopefully there aren’t more than sixteen mistresses, otherwise I’d have to edit this post to include more tax tips!
Any other tried and true last minute tax tips out there?