Jun
13
By Fin MacDonald, Fin Tax Service
Now that the dust has settled on both Tax Season and the Provincial Election, let's look at some tax planning ideas. From the tax preparer's point of view getting a big refund is not a cause for celebration; it means that you have overpaid your taxes and not had the use of that overpayment month by month. Here are some ways to convert that refund into cash flow:
Do you make regular RRSP contributions?
Many people wait till the end of February to make their RRSP contributions and then receive a refund based on those contributions. If you make regular contributions to your RRSP, through payroll deductions on employment income or from a savings account for example, you can apply to the Canada Revenue Agency to have the source deductions on your employment income reduced to reflect this. What this will do is allow you to have the use of the RRSP deduction throughout the year, rather than waiting till your refund comes.
Similar adjustments to your monthly payroll deductions can also be done if you have any of the following regular payments:
- Child Care Expenses
- Support Payments
- Employment Expenses (if you are required to use your vehicle, for example)
- Carrying Charges and other Expenses on Investment Loans
- Charitable Donations or Rental Losses
To make this request use Form T1213 Request to Reduce Tax Deductions at Source for Years_____
http://www.cra-arc.gc.ca/E/pbg/tf/t1213/t1213-12e.pdf
Reductions on tax deductions on superannuation or other employment based pension plans can also be made, usually on request, if you find that you have large refunds each year caused, for example, by charitable giving.
Do you make Quarterly Installment Payments?
If you do, and you reduce them to the point where your total amount owing on April 30th is less than $3,000, then there will be no penalty for doing so.
Medical Expenses
Tax deductions are available for medical expenses. The list of what qualifies is long, some examples: Dental, Prescriptions, Acupuncture, Massage, Travel (beyond 40KM for medical treatment), Medical devices, and Home support for people with disabilities.
Some medical expenses can be planned, for example, clients of mine have had dental implants done which add up to many thousands of dollars. Medical expenses are one deduction that can be claimed on other than a calendar year basis. For example, if you had medical expenses in the autumn of 2012, but not enough to claim a tax deduction, when it comes time to file your 2013 Tax Return by taking ANY DATE in the year, and going back 365 days, you may now have enough for a claim.
Pension Splitting
Pension Splitting has had a wonderful impact on many senior couples by reducing the total amount of tax payable. Tax deducted from Pension Plans and CPP or OAS payments may also be reduced to reflect this.
June 17th - Self Employed Tax Return Deadline
No, that's not a typo! With June 15th falling on a Saturday, the filing deadline for self-employed individuals (and their spouses) this year is June 17. Taxes owing are due on April 30th however. I had one self-employed client call the last week of April and he wanted to know whether he should be making a payment. After all the expenses of a start-up business he is starting to see some real income, so I suggested he make a $2,500 payment. If that proves to be too large, he will have the overpayment back by July 1st with E-file and Direct Deposit.
Next time:
Medical Expenses for people at all stages of life.
I hope you find these articles useful and I write them from my lens of Helping You to Keep MORE of Your Money!