It’s That Time of Year Again

Yeah, it’s Christmas and the holidays, but it’s also year end, where it’s the time to tie up loose ends for your 2011 tax season!  I enjoy this time of year almost as much as I enjoy Christmas and the holidays, frankly.

This is my “to do list” to prepare for year end:

• Go over my receipts for expenses and add them up (I really enjoy this and I am not sure why)
• Go over my charitable donations and make sure I have more than $200 (so I can get deduct 29% and not 15%).  If you need to donate, why not donate to your favourite cause AND guest post on my blog? Deadline is Dec 16! Email me!
• Go over my non-registered and see what I can see/ move into my TFSA investment account to offset the capital loss I have for this year
• Make sure I max out my extended health benefits (acupuncture here I come!)

So in addition to reading my own post on how to save more money on your taxes (yes, I tend to be egocentric like that, look at my own reference articles) and my post on 16 last minute tax tips for Tiger Woods/ and his number of mistresses (yeah, I don’t know what I was thinking when I created that blog post title- don’t ask!).

Liz from H&R Block sent me some other tips that might help (and I thought they were quite useful, so I’m re-posting them in point form here)

• Do a rough calculation of your taxable income (this is important so you know what to expect!)
• Donate shares that would gain capital gains to charities
• Pool medical expenses (If you have an expensive trip to the dentist coming up, you may want to consult a calendar. Medical expenses can be claimed in any 12-month period ending in 2011 so it could be beneficial to try to fit known medical expenses into the same 12-month period in order to maximize your claim. You don’t actually have to go to the dentist but if you have an outstanding amount, try to pay the bill by the end of the year. Remember, medical expenses are reduced by a percentage of your income. So the greater their dollar value, the likelier it will be that you can make a claim

PF blog Love

• Retire by 40 gives us an update on hour four-plex rental investment
• Invest it Wisely has a great guest post on how he relearns a valuable lesson to not fall for the hype when it comes to the stock market (and we relearn and relearn again- or at least I do!)
• Dividend Ninja has a great post with and update on income trusts (remember them? They were the bees knees!)
• My Own Advisor has a Million Teacher book giveaway!  I am planning/hoping to read Andrew’s book this weekend and have a giveaway for you next week too!
• Boomer from Boomer and Echo has a great post on how to avoid identity theft 
• Crystal over at Budgeting the Fun Stuff updates her monthly income for last month.  $10,000- yes you read that right!! She is on F-I-R-E! GOOOO Crystal!
• If you haven’t yet entered Sustainable Personal Finance‘s first blogiversary giveaway of an iPad, do so now.
• Prairie Eco Thrifter discusses some eco friendly home improvements that reap great returns.
• Little House in the Valley has a great guest post on the five steps to buying a home
• Krystal from GMBMFB reviews and rebalances her investment portfolio with the help of a fee based advisor
• I was included in Lindy Mint’s DIY Friday (check out her DIY xmas decorations- they are awesome!)
• And Kevin from Invest it Wisely is giving away $300+ just in time for the holidays! Go enter to win!

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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?

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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:

(more…)

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Rambling (and a bit of whining).

This is the first weekend rambling that I did a Saturday (vs a Friday). Sorry it’s late, guys.  This week was so incredibly busy for me, got home at 10pm-ish each night.  It’s great to have a life and friends to meet up with and all, but sometimes people need a little downtime. I decided that I can’t do an entire workweek without having some time to “veg” and hang out by myself (or with my blog and you guys lol).

Yoga.

My $37 one month yoga pass ended and I had thought perhaps I should renew it, but decided against it.  It’s just wayyy too time consuming (but that’s just me).  I would prefer to do yoga in the comfort of my own home, on my own time, and without paying ludicrous amounts of money.  I did really really appreciate the expertise of the instructors in helping me correct my yoga poses and stances, though.

Worrying.

The news of the tsunami and earthquake in Japan that happened late on Thursday was terrible.  First New Zealand and now Japan.  Japan is one of the most advanced countries in terms of earthquake preparedness, but this colossal 8.9 magnitude quake is just so large and devastating.  My thoughts are with those affected by the devastation in Japan this week.  I think we should all take a few moments to become more earthquake prepared ourselves (just a 4L jug of water just won’t cut it, I don’t think).

Taxes.

They say that there are only two certainties in life.  Death and taxes.  So I did finally manage to do my taxes last weekend (Echo, your reminders prevailed! ).  And was sorely disappointed at the small amount of tax refund I am getting (about $1300).  I haven’t even put in my capital gains into the tax software system yet… and there might be more T3′s or T5′s in the wings waiting to reduce my tax return even further near the end of March.

I did make sure to claim my First Time Home Buyer’s Tax Credit.  You get a $5000 tax credit (worth $750) if you bought a first home in the aforementioned tax year.

Speaking of tax software!  Here are the winners of the H&R Block Tax Software Giveaway drawn by random.org!  Thanks to everyone for subscribing, there are now over 300 subscribers to youngandthrifty.ca!

• Grace
• Anne Marie
• Bekki
• Cassie
• Haley

I think the majority of entrants were female (roughly 75%), but it’s pretty cool that random.org picked all female winners, must be in celebration of International Women’s Day this past week.   Girls, I will be emailing you the codes today.  Look for it in your email!

PF Blog Love

• This one has to be number one, because yours truly was mentioned lol.  Financial Uproar does a second edition of his Hot Personal Finance Blogger Chicks and I’m one of them.  Woohoo!  I am thinking of maybe doing a Hot PF Blogger Men of 2011- what do you think?    PS Financial Uproar is FRIGGIN HILARIOUS.  It’s always an amusing read.  Go subscribe
• Krystal at Work has an insightful post discussing whether the job you are in right now is your passion, and would you take a pay cut to follow your passion?
• Fabulously Broke give us the quick and dirty run down of what she does as a consultant
• Mike from Money Smarts Blog gives us a great list differentiating between the different types of financial advisors (eg. the difference between mutual fund salespeople and financial planners)
• Saving Mentor confesses about something he did regarding a recent purchase of a Cold FX bottle, and wonders if it’s morally wrong.  A great discussion ensued!
• Passive Income Earner talks about Children and Money- and how to teach them the value of money by giving them an allowance.
• Sustainable Personal Finance gives us a peak of their house, and also gives us some tips to think about when considering a home purchase.
• Financial Samurai shares with us a little boy who inspired him and reminds us all how lucky we are to be able to carve our own paths in life, and live in a free country.
• Sandy from Yes I am Cheap has a great rant on Direct Student Loans.
• Retire by 40 talks about how $1 can get you a chance to win the $151 million lottery.  Which begs the question, do you buy lottery tickets?

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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)

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