Helping First Nations, Inuit and Metis with Tax Filing

The Canada Revenue Agency is trying to reach out to Canada’s First Nations, Inuit and Metis to encourage them to file their tax forms on time and could use your help to make sure these communities get all the tax benefits they are entitled to. But filing tax returns are not always easy, especially when there is income on and off the reserve.

A flurry of good economic news came out of Ottawa last week, relating to our deficit fighting progress, manufacturing sales increases and low unemployment numbers for August. Even the real estate sector has done well. The Honourable Jim Flaherty, Minister of Finance, released the Annual Financial Report of the Government of Canadafor 2010ñ11. Revealing a 40-per-cent reduction in the deficit from 2009ñ10 and $2.8 billion lower total than forecast in June 2011. These numbers are attributable to higher revenues and lower program expenses than forecast. In other economic news reported by Statistics Canada in October, manufacturing sales rose for second consecutive month in August. Transportation, food, and energy, especially petroleum and coal, saw the largest increases overall; Quebec, Newfoundland and Labrador, and Ontario led the provincial increases. Canada's trade deficit with the world went from$539 million in July to $622 million in August as a result of merchandise imports growing 0.7% and exports increasing by 0.5% in August. Employment increased by 61,000 in September, pushing the unemployment rate down 0.2 percent to 7.1%, the lowest rate since December 2008. Educational, professional, scientific and technical services all saw increases in employment, as well as accommodation and food services, natural resources, and public administration. Declines occurred in finance, insurance, real estate and leasing, manufacturing, and information, culture and recreation though, partially offsetting the net increase. Canada's banks have recently been recognized as the strongest in the world (per Bloomberg); but that's not all, the national real estate market is also, for the most part, stable and secure. (See Financial Stability a Must Today) In Canada, at least, the federal Government's stimulus measures subsequent to the 2008 economic downturn have thus far proven their worth. Exemplifying this is the fact that the largest assets on bank balance sheets in Canada are residential mortgages; banks were able to regain confidence in the markets and find incentive for further mortgage lending when certain risks were transferred to the Government. The challenge now, will be to ensure that high residential debt loads are managed to avoid a burst in the current real estate bubble. ADDITIONAL EDUCATIONAL RESOURCES: Join us for peer-to-peer think tanks and year end planning updates at the Distinguished Advisor Workshops (DAW) held in Winnipeg, Ottawa, Toronto, Vancouver and Calgary November 2 to 10, and the Distinguished Advisor Conference in Palm Springs, November 13 to 16.  

The new Employer's guide to filing the T4Slip was released on October 7 and contains two items of note for bookkeepers and business owners getting ready to complete T4 slips for 2011: Upcoming CPP reform The CPP changes for working beneficiaries announced May 25, 2009 will be implemented in January 2012. In preparation for the upcoming changes, starting in January 2012 (for the 2011 taxation year), box 26, "CPP/QPP pensionable earningsî will have to be completed on the T4 slip at all times. Reporting change for insurable earnings Starting in January 2012 (for the 2011 taxation year), box 24, "EI insurable earningsî will have to be completed on the T4 slip at all times. ADDITIONAL EDUCATIONAL RESOURCE: EverGreen Explanatory Notes, Distinguished Advisor Workshops, November 2 to 10.  

Chagnon v The Queen, (2011) TCC 268 A recent case heard at the Tax Court of Canada may have a profound impact for employees and legal advisors alike. The court agreed with obiter comments of Woods J in Fenwick v The Queen, 2008 TCC 243 that paragraph 8(1)b) should extend to legal fees incurred by an employee defending himself in an action by an employer, or a member of a related employer group, seeking to reclaim an amount of salary received by the employee. It is likely that this extension of paragraph 8(1)(b) will lead to an increase in litigation by aggrieved employees who incur legal expenses whilst establishing a right to salary earned. This case arose out of the sale of Vidéotron to Quebec Media Inc and the unsuccessful rival bid by Rogers Communications Inc. The scope and application of paragraph 8(1)(b) of the Income Tax Act was the main issue to be decided. This provision pertains to the deduction available to employees for salary-related legal expenses. The expenses in question related to an unsuccessful defense of an action brought against the appellant two years later by Vidéotron and QMI reclaiming $23,237,627 on the basis that he had inside information relating to Rogers' interest in Vidéotron when the options were granted and that he therefore breached a duty of loyalty to Vidéotron. $383,005 in legal expenses relating to the action was in issue. It was held that paragraph 8(1)(b) extends to legal costs incurred by an employee to retain salary already received when faced with litigation seeking to reclaim that amount. ADDITIONAL EDUCATIONAL RESOURCE: EverGreen Explanatory Notes, Make Sure It's Deductible

On 27 September 2011, Tiff Macklem, Senior Deputy Governor of the Bank of Canada, presented at the National Insurance Conference of Canada in Vancouver. His comments were instructive to investors and their advisors as it relates to risk management in a new economy.Mr. Macklem stated that recessions following financial crises are more severe and are more difficult to overcome than normal recessions. He declared that we find ourselves in a fundamentally new fiscal landscape in which government debt "can no longer be considered a risk-free asset in many advanced countriesî. Specifically, the tendency of using government bonds as the benchmark against which many financial assets are priced is likely to disappear. Slow economic recovery has also had the effect of accelerating the growth of emerging markets at the expense of more advanced economies. In the first half of 2011 the markets saw an increase in risky investments, with investors attempting to yield higher returns. Assets such as high-yield bonds, leveraged loans, emerging-market equity and debt, and commodities are among some of the examples. More recently however, investors have shifted their search for safety and stability, sending prices of risky assets lower. Macklem feels the early efforts to mitigate the sharp decline in the markets in 2008-2009 averted a much larger crisis, but stresses the fact that public confidence in governments is waning as a result of recent indecision as to which route to take. Bottom line for those on fixed incomes in particular: As the markets remain volatile, the importance of guaranteed income sources increases. Seniors relying on Old Age Security will want to ensure they make the most efficient use of their income and take advantage of all subsidies and credits; tax planning in the current economic climate is more important than ever. Now is a good time to discuss retirement income planning options with qualified Master Financial Advisors (MFAs) who specialize in this subject area. ADDITIONAL EDUCATIONAL RESOURCES: Tax Efficient Retirement Income Planning; Master Your Retirement.  

Cash-strapped seniors suffering from prolonged poor investment results will want to ensure that cash flow is supplemented from guaranteed sources like the Old Age Security. If a clawback based on prior year income levels is part of the equation, advisors can help by applying for a reduction in this recovery tax using a newly updated form T1213. Here's how it works: 1. Estimate income from all sources 2. Take deductions including investment carrying charges and interest expenses 3. Take non-refundable tax credits into account including the disability amount and eligible medical expenses and charitable donations, and 4. Provide information about tax deducted at source and paid through instalments If the result warrants a reduction of the OAS recovery tax, the senior will be provided a higher monthly income from this source. ADDITIONAL EDUCATIONAL RESOURCE: Introduction to Personal Tax Preparation Services; Distinguished Advisor Workshops, November 2 to 10.  

Where should your investment advice come from? According to a recent survey by Cisco's Internet Business Solution Group, (March 30, 2011), half of those under age 50 use social networking for their investment advice. That's a staggering number. Yet using the internet to make important financial decisions and then execute them without proper assistance could be a costly solution to your investment questions. It makes no sense to take investment advice from anyone you don't know and trust especially if they don't understand your investment needs and objectives. That's the response to the question "Should I accept investment advice offered over the internet: by The Canadian Securities Administrators, who have published a booklet on the subject, entitled "Investing and the Internetî, (http://www.osc.gov.on.ca/documents/en/Investors/res_investing-internet_en.pdf)   Fraud, in fact, is an increasing problem. Stats Canada reported on a 2009 General Social Survey on Victimization. Seven percent of adult Internet users in Canada, age 18 years and older, reported that they had been a victim of cyber-bullying at some point in their life. Seventy-three percent of those people reported receiving threatening or aggressive emails or instant messages and 8% had their identity assumed by someone sending threatening emails. In addition, the survey showed that amongst those who used the Internet in the 12 months prior to the survey, 4% reported being the victim of bank fraud; that is, reporting incidents where credit or debit cards (or information from them) were used from an Internet source to make purchases or withdraw money without authorization from the cardholder. It's Your Money. Your Life. Why take a chance? When it comes to making financial transactions of any kind over the internet, it's prudent to speak to your banking representative, or in the case of your investment transactions, a registered dealer or licensed investment advisor. Evelyn Jacks is President of Knowledge Bureau, a best-selling author and one of Canada's Top 25 Women of Influence. She blogs most weeks at http://www.evelynjacks.com/