3 Things to Include in Your Tax Plan

With personal income tax-filing season over, it’s time to talk to your accountant or financial advisor about tax planning.

This is where your accountant earns his keep. There’s no shortage of people who can prepare a tax return, but a good accountant should easily pay for himself through good advice.

Where do you start? Here are three things you and your tax advisor should consider when you talk about tax strategies:

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Tax-Free Bonus? Bogus

“Hi, Scott. How can I get the year-end tax-free bonus from my company? Please call me back.”

That in essence was the message a client left on my voicemail last month. At first I had a flash of anger that someone would believe such a thing is possible. Then once I calmed down I actually started to laugh.

We were in tax season after all so being stretched to the limit can cause me to have some strange and dramatic reactions to situations.

Seriously, though, it’s nothing to laugh about. This client has enough CRA debt to float a boat. Tax-free bonus? Right.

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An RRSP Is Not a Rainy-Day Fund

The best advice you’ll get about retirement savings is to make regular, automatic contributions to your RRSP.

The amount you contribute can be deducted from your earned income, and any income from investments in your RRSP will compound tax-free. By the time you retire, you’ll probably be in a lower tax bracket than you are now, when you’re working. Funds withdrawn at that time will be taxed at a lower rate.

Doesn’t sound so hard.

Well, life is what happens to you while you’re busy making other plans.

If you have debt or other bills, an RRSP looks like a ready pool of cash. Should you withdraw funds to pay off debt or a major expense?

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Just the Ticket: More Tips for Managing Receipts

So you spent the last month ripping your house apart and running your hands under the bunk mattress for any shred of paper that might justify a tax deduction.

If there’s one thing you can do every day to put yourself in the best possible position to take advantage of potential claims, it’s to be diligent about collecting receipts and other source documents

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Fire Up the Wifi (and Other Tax-Season To-Dos)

In life, taxes are inevitable but there are times when they don’t need to be a high priority.

This is not one of those times.

February is a busy month. You’ve heard the thud of tax packages hitting the counters at Canada Post outlets and Service Canada offices. Tax software companies are all shouting about how simple it is to file a return. And with the RRSP contribution deadline on Feb. 29 this year, you’ll gladly take the extra day to try to come up with the money.

Let’s slow down and make a to-do list for the month. Before we begin, make sure your internet connection is up and running. You’re going to need it.

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Scamming Season

Within the first 10 days of December we had several clients call to say they were almost scammed by someone claiming to be from Canada Revenue Agency collections.

This “agent” was telling people they needed to pay their debt immediately or face jail time. Our clients explained that if they owed money this was the first they’d heard of it. The caller was relentless with threats and trying to obtain payment. Thank goodness these folks had the confidence to hang up the phone.

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How Times Have Changed

After helping quite a few clients incorporate over the past few months, it got me thinking about how times have changed.

Fifteen years ago, in 2001, 36% of our owner-operator clients were incorporated and employees of their business while 64% were sole proprietors. Today, the percentage who are incorporated is 67% and 33% are sole proprietors. Almost an exact flip-flop.

Our clients are not unique. Whenever I speak to owner-operator groups I ask for a show of hands to see how many in the audience are sole proprietors versus how many are incorporated. Incorporation is always more popular.

So what has driven this change?

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Not the Boss of You

Right now I have four files on my desk that involve clients wanting to incorporate their business.

Two clients want corporations for contract employment. One is a truck driver who tells me that everyone he talks to wants him to be incorporated before he hires on. The other is a software developer. He’s actually the son of a trucking owner-operator client of ours. He’s been offered work in another province and incorporation is one of the conditions of the job.

Why are these guys being asked to incorporate

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Talking Shop—and Taxes

You love working on your truck but you’ve had it with dropping greasy tools onto a dirty driveway. Changing out filters and adjusting brakes would be a lot easier inside a dry, insulated, well-lit shop.

Lucky for you, your home is on a property big enough to let you extend the driveway and add a building.

So you research types of structures, talk to contractors about square footage and construction costs, and discuss permits with the building code office. You settle on a location that won’t block the view from the kitchen window.

It’s all fun, exciting stuff.

But there’s one more call to make. You should talk to your accountant about how this idea of yours will affect your taxes.

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