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FAQ

 

Is there a way to avoid probate fees?

How does CCRA view donations made in a will?

When must a student loan be paid?

Should a commission salesman lease or purchase their office equipment?

When is it a good idea to pay your spouses taxes?

What can we expect regarding a Tax Audit by CCRA?

What should we keep in mind when setting our tax planning goals?

Is there a tax benefit to claiming charitable donations?

Does the interest on money borrowed for investments factor into my taxes?

What services do you offer?

 

 

Is there a way to avoid probate fees?

Some individuals seeking to avoid probate fees consider naming a charity as the beneficiary of an RRSP. In this case there would still be an RRSP income inclusion in the year of death but no offsetting donation credit.

 

The gifting has to occur in a two step process. First of all the money has to be payable to the estate. This will only be accomplished if there is no named surviving spouse or dependent child. Secondly, the will must state that the money must be transferred to one or more named charities.

 

Avoiding probate fees while missing out on the resulting donation credit could be very costly.

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How does CCRA view donations made in a will?

A donation made in a will is deemed to have been made by the individual in the year of death. It is therefore available to offset 100% of the individual's net income in that year and the previous year.

 

Revenue Canada says that a donation is not made in the will if the trustees have any discretion as to the amount donated or the recipient charities.

 

Also a donation cannot be claimed if its value cannot be determined. For example, a donation of a house is to be made after the death of a life tenant (such as the surviving spouse), but the trustees can encroach on capital.

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When must a student loan be paid?

The deferral period for students unable to meet their loan payment obligations has been extended to 30 months (from 18 months). As no payments are required in the initial six months after graduation, this allows the students up to three years to manage their loans.

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Should a commission salesman lease or purchase their office equipment?

Employees remunerated partly by commission should consider leasing assets such as computers, cell phones and fax machines. Lease payments are deductible in certain circumstances while Capital Cost Allowance (depreciation on owned assets) is not.

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When is it a good idea to pay your spouses taxes?

If your income is higher than your spouse's consider paying your spouse's taxes as a method of effectively transferring funds to your spouse. This is considered a gift to your spouse but since no income is earned and taxes paid there will be no attribution. (Generally, if you transfer an income producing asset to your spouse the income earned on this asset is taxable in your hands) Your spouse then reinvests the income that would have otherwise gone to pay taxes and there is no attribution back to you. A similar plan is for the higher income spouse to pay all the household expenses while the lower income spouse invests all or most of his or her earnings.

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What can we expect regarding a Tax Audit by CCRA?

Revenue Canada has three years from the time your tax return is initially assessed to review the information and to make a reassessment of your taxes. Therefore you must keep complete documentation of the intent and details of your business and financial activities. Should you be audited these records will assist you in providing evidence of careful and business like planning, an important aspect of many areas of tax law. Recently there have been attacks by Revenue Canada claiming that there never was an expectation of profit when the venture commenced and therefore the losses are not deductible.

 

We should mention that if you have made misrepresentations attributable to neglect, carelessness, wilful deceit or fraud you do have something to worry about. You should also know that there are no time limits for reassessment on these activities.

 

There are some tax planning possibilities that are in the "gray" areas of tax law. In these cases it is possible that upon audit there will be additional taxes levied and it may be necessary to ask a court of law for a final determination of tax liability. If there is additional tax assessed interest will also be charged from the time the tax was originally due. Such interest is not deductible for income tax purposes. It is the responsibility of your tax professional to advise you of any risks regarding your tax plan. It will then be your choice whether to pursue your plan with the understanding that Revenue Canada may reassess your tax. Even in these "Grey" areas there is no need to avoid good tax planning because you fear that you might undergo an audit.

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What should we keep in mind when setting our tax planning goals?

You are responsible for setting your goals. Generally, your primary tax objective should be to recognize taxable income from any transaction at the time and in the form in which it will be most lightly taxed. Your objective may also consist of attempting to level yearly fluctuations in taxable income in order to reduce the impact of graduated tax rates. You may wish to invest in certain tax shelters which defer taxable income and may provide you with future gains.

 

It is essential to remember that reducing taxes is not your primary objective. Your primary objective is to maximize your overall economic and financial well-being. You must also consider your personal risk level when choosing investments. It is highly unlikely that the tax aspects of an investment can turn an essentially uneconomic investment into a sound investment. While a particular expenditure may be tax deductible you must remember that the maximum amount such a deduction is worth to you is the dollar amount of the deduction times your marginal tax rate.

 

For example, consider an investment of $100 which is totally deductible. The maximum amount that you can save through this deduction is about $47, depending on where you live. If you lose the full amount your economic loss after tax is $53. This is not smart tax planning. This is a foolish investment.

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Is there a tax benefit to claiming charitable donations?

If you and your spouse both make charitable donations it is better to combine them on one return as the tax credit on the first $200 is about 25% and is about 50% on any excess. If the contributions are combined only $200 is at the low rate instead of $400 if the donations are reported on both returns. 

 

Tip: Do not forget about donations deducted at source from your salary, these can be transferred also.

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Does the interest on money borrowed for investments factor into my taxes?

If you have borrowed money to invest, the interest is deductible unless the money was borrowed to fund an RRSP. Tip: If you have the option it is usually better to pay loans with non deductible interest first so as to preserve the deductible interest expense. This will reduce your after tax cost of borrowing.

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What services do you offer?

Record-keeping and Accounting, In-house Service Bureau

As government reporting requirements become more complex even the smallest business must maintain accurate and current records. If clients do not have the need for a full-time, in-house bookkeeper, we offer computerized monthly record-keeping to produce the necessary journals, ledgers and financial statements. We can also prepare client payrolls and complete the required government filings for payrolls and for sales taxes.

 

Taxation Services

Rapidly changing tax legislation means that expert advice is essential for both individual and corporate taxpayers. Dalmeny Accounting Services Ltd. tax professionals advise on the complete spectrum of tax concerns that affect you. From concept to execution, we can help you expand the impact of your tax strategy.

 

Personal Tax Planning and Compliance

We work with you to structure your personal transactions to minimize your tax your liability now and in the future. This is accomplished by:

- preparing tax projections and estimates using several different scenarios

- preparing accurate and complete personal tax returns

- updating tax projections and estimates to incorporate changes in legislation and personal status.

Corporate Tax Planning and Compliance

We work with you to:

- ensure your business is structured to minimize tax now and in the future

- maximize the benefit of tax deferral through improved tax accounting methods

- structure business transactions and investments to minimize tax liability

- prepare tax and information returns on a timely basis to avoid unnecessary interest and penalties

- prepare timely and appropriate responses to inquiries made by taxing authorities

GST Compliance

We can help you avoid overpayments by helping you prepare accurate GST returns and by preparing timely and appropriate responses to inquiries made by taxing authorities

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