Time’s Up: CRA’s 100 Day Mandate for Improvement

After years of frustration on the part of tax professionals and taxpayers alike, the Finance Minister ordered the Canada Revenue Agency to clean up its act in 100 days. Specifically, the improvement plan was to run from September 2 through December 11. Finance Minister and Minister of National Revenue, Francoise-Phillippe Champagne instructed CRA to fix “unacceptable wait times and service delays.” Time’s up this week and CRA has released an update on progress. What gets measured, gets done. Let’s see what CRA’s metrics show. 

How much does the average Canadian family pay in taxes each year? The Fraser Institute published the annual Canadian Consumer Tax Index in April, and the findings are not pretty. Since the Institute began documenting this statistic in 1961, the total tax bill has increased by 1686%! When expressed in 2010 dollars, the inflation-adjusted tax bill drops to 140.07% of the 1961 level. The annual tax expenditure has grown more than any other category of expense, including food, clothing and shelter. Spending on taxes has overtaken the Consumer Price Index, a measurement of the average price that Canadians pay for a representative basket of goods and services. It is interesting to note that Statistics Canada just announced that the mix of goods in that basket is being revised to better represent the kinds of things that Canadians currently buy. The Canadian Consumer Tax Index includes a variety of taxes and expenditures when calculating the annual tax bill. This may change from year to year as new taxes are added or deleted, and the makeup of the average family is adjusted as well. Taxes include income tax, EI and CPP contributions, property tax, user fees, business taxes passed on to customers and consumer tax such as provincial sales tax, duty, GST and HST. In 1961, the average household income was $5000, and $1675 or 33.5% was paid in taxes. Fast forward to 2010, when the average household took in a cool $72,393, and gave back $29,913 in taxes. That is 41.3% of income paid out in taxes, and most governments are operating in a deficit position which means that the taxes collected are not even covering current expenditures, let alone debt! If you think of a budget deficit as deferred taxation, and include these annual deficits in the tax burden, the total tax bill for the average Canadian family (not adjusted for inflation) has increased by a whopping 1987% since 1961! What does this mean? According to the Fraser Institute, in 2010 the average Canadian family spent 34% of income on the necessities of life, and 41% was paid in taxes. Compare that to 1961, when 56.5% of income earned put a roof over your head and food on the table, and the government collected 33.5% in taxes. We all pay taxes in order to ensure that programs, services and infrastructure are maintained for all Canadians.  However, no-one should pay more income tax than he or she has to by law.  Don't you think that money in the hands of the taxpayer is just as important as government spending for a healthy, prosperous nation?  Your tax return is a snapshot of your financial health.  Take the time to examine it each year and be sure to seek professional guidance when you have questions or concerns.  Canadians must embrace financial literacy in order to regain control of their tax liability, their budgets and their futures ñ take action now! ADDITIONAL EDUCATIONAL RESOURCES: Master Your Taxes

Job numbers were on the upswing in Canada in April, according to the most recent Labour Force Survey by Statistics Canada. More employment was created last month in the areas of finance, insurance, real estate and leasing, business building and other support services. Overall, jobs numbers have increased 1.7% nationally since April, 2010 and unemployment is down slightly to 7.6%. Full-time employment is now back to October, 2008 levels for the first time since the recession. The good news is spread unevenly across the country, however. Part-time jobs in Ontario rose, driving the unemployment rate down to 7.9% with a 12 month employment gain of 2.4%. Newfoundland and Labrador saw increases in employment as well with its April unemployment rate dropping to 11.1% following a 12 month employment gain of 6.9% - the highest in Canada. Nova Scotia and Manitoba lost jobs in April. Data for tables from: Labour Force Characteristics by Province Tables 3 and 4 Statistics Canada, April, 2011   It is interesting to note that women age 55 and over benefitted from new jobs more than anyone in April, with an increase in employment of 7.9%. It will be interesting to see if the upward trend in employment in general continues, as some of April's job gains are due to temporary hiring for the election and census. ADDITIONAL EDUCATIONAL RESOURCES: Master Your Real Wealth

We are fortunate to live in this great country, which allows us to participate freely in democracy.  All parties and their candidates are to be congratulated!  With a majority government, the people and government of Canada can put their focus on important things over the next four yearsñ families, jobs, health and security to name a few ñ without the distraction of an imminent election call.  One of the first items on the agenda may be a reintroduction of the federal budget, which died with the election call.A review of key provisions follows, some of which will be discussed at the Knowledge Bureau's Post-Election Tax and Economic Review, to be held in Winnipeg on Friday, May 6, Calgary on Monday. We can expect to see the reintroduction of tax measures such as the Children's Arts Credit, Family Caregiver Credit and the Volunteer Firefighters Credit. New initiatives announced during the election to take effect when the deficit is eliminated will almost certainly be included ñ look for the doubling of the TFSA limit and the Children's Fitness Amount, as well as a tax credit for adult fitness. Also announced during the election, the Family Tax Cut will allow up to $50,000 of household income to be shared by a couple with children under the age of 18. Changes to curtail tax avoidance using RRSPs, charitable donations, Individual Pension Plans and Employee Stock Options were introduced in the 2011 budget ñ no doubt they will reappear. Pooled Retirement Pension Plans ñ first unveiled in December, 2010 ñ may well be included with other measures to assist those saving for retirement. Easing of rules for RESP beneficiaries who are siblings, and further access to student loans and loan forgiveness, tuition and education credits will benefit students and young workers. Small business may see the temporry Hiring Credit reintroduced along with the extention of accelerated CCA rates for equipment and machinery. Some seniors could see their Guaranteed Income Supplement boosted and RDSP owners with shortened life expectancy can look for relief to early withdrawal rules. Financial literacy and consumer protection measures were highlighted in the March, 2011 budget - we hope to see that and even more opportunities for Canadians to engage in financial education.  Take a deep breath ñ there are sure to be lots of tax and financial changes ahead!   Join us at one of our VIP Breakfasts for a Post-Election Tax & Economic Overview.  

Around the world communities are grappling with record-setting natural disasters. The recent earthquake and tsunami in Japan, flooding in the North American mid-west and killer storms in the U.S. are recent examples. It is hard to imagine the disruption to daily routines endured by those who survived the devastation. Once the basics of survival are taken care of, how do victims of these events begin to deal with mundane tasks such as income tax filing? In Canada, there are Taxpayer Relief Provisions available to taxpayers affected by natural disasters. On April 28th, CRA announced that those who have been directly impacted by spring flooding or natural disasters outside of Canada, and those who are participating in relief efforts, may apply for taxpayer relief if they are unable to fulfill their income tax obligations by the May 2, 2011 deadline. Those who may have other deadlines, such as business owners and the self-employed, are included as well. Form RC4288, Request for Taxpayer Relief, should be submitted by anyone who is not able to complete tax requirements by his or her deadline. This may allow interest and/or penalties to be waived under appropriate circumstances. CRA encourages taxpayers to register for e-services so that they are able to access information and make payments online when it is difficult to physically access their financial institutions.   ADDITIONAL EDUCATIONAL RESOURCES:  Investment Strategies in Charitable Giving      

Evelyn Jacks, President of the Knowledge Bureau,   Cordially Invites You To   A VIP BREAKFAST                        Please Join Us For An Important Update on Current Issues:                                             Post-Election Tax & Economic Overview                                    Financial Literacy: Your Role as Financial Educator                          Including Strategy & Process in Your Strategic Education Plans                                             Knowledge Bureau CE Credits: 1 hour                                                     DATES & LOCATIONS       May 6th WINNIPEG 7:45-9:00 am Knowledge Bureau Offices ñ 187 St. Mary's Rd                          May 9th CALGARY 7:45-9:00 am The Petroleum Club                            May11th VANCOUVER 7:45-9:00 am Terminal City Club                                            May 18th TORONTO 7:45-9:00 am The National Club                   Our educational consultants will be available to discuss new options                                       for professional development only from:                                                      RSVP By May 4th, 2011                                            Suzanne@knowledgebureau.com                                                         (204) 953-4767

By this time next week we will know the outcome of the federal election on May 2, and the personal tax filing deadline, which occurs at midnight May 2nd, will have passed.  Most Canadians will have filed on time to avoid interest and penalties on balances due, and many will be adjusting prior filed returns for errors or omissions.  Last week, CRA released a revised T1ADJ form for those purposes.  However, the vast majority of taxpayers will be focused on a refund for the current year, so here are some tips to help you spend it wisely: 1. Leverage Your Tax Refund Resist the temptation to buy yet another flat-screen TV. Now is the time to make the commitment to your RRSP, your Tax Free Savings Account and paying down your consumer debt. But what comes first? This may be a question for tax advisors, financial advisors and their clients to review together. Your RRSP will reduce your net income, the figure used to determine the size of clawback to refundable tax credits like the Child Tax Benefit or GST Credit and social benefits like the Old Age Security or Employment Insurance. It will also increase non-refundable tax credits for 2012, based on net income: Age Amount, Spouse Amount and Medical Expenses to name a few. Only 6% of Canadians maximize their RRSP room each year. Find out what you missed out on by not making the contribution last year. Then find out just how effective your RRSP savings will be in helping you build wealth this year. 2. Catch up on late-filed returns. Whatever your reason for missing your tax filing deadline, again and again ó too busy, afraid you'll owe, too disorganized ó make it your plan to catch up, especially if the government owes you a refund.  It doesn't make sense to give the government an interest-free loan which could instead be working for you invested in a TFSA, RRSP or other savings account. Failing to file tax returns also causes other misses with your tax-efficient investment strategies: RRSP room is not calculated for the missed years, capital losses are not reported and refundable tax credits to which you are entitled languish for your attention in government coffers. 3. Know What's Coming. There is a lot we know about your tax advantages for the current tax year, 2011. For example, provincial budgets have recently been tabled in all provinces and territories, and we also know the federal tax brackets and rates, and the indexed amounts for non-refundable tax credits. In addition, the last federal budget introduced changes to tax law that were shelved for now, but it would not be surprising to see many of the provisions re-introduced in the future. As a minimum, do consider whether you can reduce withholding taxes as a result of your tax reporting in 2010, and in addition, review whether instalment payments will be necessary for the rest of 2011.  If not, you'll be able to invest the difference, or pay down debt, both of which would be to your fiscal advantage. For a post-tax season, post-election review of those provisions, do join the Knowledge Bureau in Winnipeg, Calgary, Vancouver and Toronto for a VIP breakfast event. For more information and to register, please see our KB Community page! ADDITIONAL EDUCATIONAL RESOURCES: Master Your Taxes