Mark Your Calendar: Critical Deadlines for May and June

Tax season never truly ends, it seems, as there are many more upcoming tax filing, investment planning and education milestones to discuss with your clients over the next six months. Check out our handy checklist below and then test yourself – what are the conversation openers you’ll use and with which clients? It’s your opportunity to shine with every member of the household:

CRA has once again provided us with the lowest prescribed rates in recent history - a 1% rate for certain taxable benefits and loans has been in place since April 2009.  This is a great opportunity to use low-taxed corporate dollars to fund family income splitting, the purchase of new vehicles, new investments or to fund employer-required moves. Advisors should also consider speaking to their clients about opportunities for inter-spousal and shareholder loans with the low rates in effect.   The Canada Revenue Agency announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from January 1, 2010, to March 31, 2010 and have remained unchanged since April 1, 2009. Income tax The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance Premiums will be 5%. The interest rate paid on overpayments will be 3%. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%. Other taxes The interest rate on overdue and overpaid remittances for the following taxes will be: Tax and Duty Overdue remittances Overpaid remittances GST 5% 3% HST 5% 3% Air Travellers Security Charge 5% 3% Excise Tax (non GST) 5% 3% Excise Duty (except Brewer Licensees) 5% 3% Excise Duty (Brewer Licensees) 3% N/A Softwood Lumber Products Export Charge 5% 3%   <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />  Educational Resource: For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.  

"An opportunity exists to blend the unique benefits of a family business with the strengths of a market driven business, providing the basis for greater wealth creation for the family over a longer period of time."   Jenifer Bartman, speaking at the 2009 Distinguished Advisor Conference in Tucson, Arizona By Jenifer Bartman, CA, CMC   Small to medium sized businesses make up a significant portion of Canada's business community and account for a large portion of the country's economic activity. Most people either know someone who runs a business, owns a business, or may be a business owner themselves. People may be employed by a business that is owned and/or managed by an independent group of parties, or perhaps it is owned by an individual or family. Sometimes businesses start off as closely held family businesses that later become more widely held, perhaps by parties including the original owners, or even by parties independent of the founder. Some businesses stay small; some grow moderately, while others grow to become very large businesses, even with operations spanning a number of countries. Some businesses operate for a period of time, experience moderate growth, and then fade into decline. Others, sadly, are wound up and no longer exist, often when the owner retires. Performance, profitability, and value can vary significantly from business to business, with some companies being sought after by customers, partners, and potential acquirers. Others go virtually unnoticed. Why do some businesses become the recognized name or ìprovider of choiceî within their industry, while others fall to ìcommodityî status? Why do some companies remain strong throughout the years, perhaps even over generations, while others flounder when the original driving forces behind the business are no longer involved? Consider the following: Some family businesses exist solely to meet the economic needs of the family unit. The founder generates business within his or her network and does not have any significant initiative to grow beyond this point, so long as the family's economic needs are met. This type of business can be referred to as a Lifestyle Family Business. Some family businesses are opportunity driven, in that the founder wishes to identify unmet needs or areas of potential within the marketplace and seek to position the business to meet and benefit from these needs. The founder is motivated to grow the business beyond the current economic needs of the family and may be driven by factors other than basic economic need, such as being the best provider in their industry. This type of business can be referred to as a Market Driven Family Business. Many family business leaders have never considered their business in this context, including the risks and rewards associated with each category. The challenge is attaining Market Driven Family Business status, and understanding what is required to successfully operate at this level. Jenifer Bartman is a Knowledge Bureau faculty member and is a co-author of MASTER Your Investment in the Family Business ñ How to Increase After-Tax Wealth.

Taxpayers might benefit twice by filing missed returns by year endóonce to ensure tax year 1999 doesn't fall off the boards because of the 10-year statute of limitations enforced by CRA for such voluntary compliance under the Taxpayer Relief Provisions. But those who file late and owe can also avoid expensive late filing penalties. Based on what The Knowledge Bureau heard from professionals on its recent Distinguished Advisor Regional Workshop Tour, there are plenty of late filers out there. This is never a good idea especially when CRA owes you money, as you have continued to give the government an interest free loan. Worse, however, is when you owe them; and yes, they will be charging you interestócompounded dailyóand more.  And remember, a return should be filed every year in order to accumulate TFSA contribution room and Registered Retirement Savings Plan room. Voluntary compliance can really pay off when you help a client to file a tax return to clear up their guilty conscience. CRA will not charge penalties if they are told about tax indiscretions before they uncover them ó and there are specific penalties that apply if you are a chronic late filer. There are several layers of penalties that can be invoked including interest, compounded daily, at the prescribed rate of interest, plus 4%. Those kinds of penalties can be downright painful! File 1999 Return Before December 31 To comply voluntarily, tax advisors should remind their clients to see them before year end for details regarding all under-reported income, over-reported deductions or credits and file form T1ADJ to correct errors or omissions. Remember, tax filing year 1999 will be statute barred after the end of this year, so if CRA owes a client a refund, it will be lost if it is not claimed in December. In fact, this could all turn out well if you hurryóan unexpected refund from an adjustment or late filed return could help your client with the credit card payments in January! Non-Compliance Penalties Late filing penalties ófirst time: 5% of unpaid tax plus 1% per month for 12 months; second time within a three year period after demand to file: 10% plus 2% per month for 20 months Failure to file a return ófor each such failure, the greater of $100 and the product obtained when $25 is multiplied by the number of days, not exceeding 100 during which the failure to file continues. Late or insufficient instalments ó 50% of interest payable exceeding $1,000 or 25% of interest payable if no instalments were made, whichever is greater. Failure to deduct or remit source deductions ó1 to 3 days: 3% penalty; 4or 5 days: 5% penalty; 6 or 7 days: 7% penalty; more than 7 days: 10% penalty Second such failure in same year if grossly negligent ó 20% of amount not withheld or remitted. To learn more about preparing T1 tax returns, register for Introduction to  Personal Tax Preparation Services or call 1.866.953.4769 today to make an appointment for your free professional development consultation.

Christmas brides and grooms take heed - there may be no tax benefits to marriage before year end, but that may not be a good enough reason to postpone the big day!  Conjugal relationshipsólegal or common lawórequire the combining, reporting, and sharing of financial resources under provincial marital property laws and for certain provisions of the Income Tax Act.   Here's what you need to know about the tax status of your relationships: ï Check ìmarriedî on your tax return if you are legally married, whether you are a heterosexual or same sex couple. ï Check ìcommon lawî if you have lived together with your partner for a continuous period of 12 months or if at December 31 you were parents of a natural or adoptive child together. Common law couples are treated like married couples for tax purposes. ï Check ìseparatedî if you have been apart for a period of 90 days or more, or you have a written separation agreement. ï Check ìdivorcedî if you have dissolved your marriage with a court order or decree. ï Check ìwidowedî if you lost your spouse or common-law partner to death during the year. These various conjugal relationships affect the filing of tax returns ­significantly, for example: ï They can increase or decrease your monthly cash intake from Child Tax Benefits. ï Maximize your opportunities to contribute to investments like RRSPs. ï They can help you maximize the use of each family member's ­personal ìtax-free zonesî by transferring certain credits between spouses, or win on pension income splitting if you are a couple receiving benefits from one partner's company pension plan. ï They can also restrict you to having just one tax exempt personal residence for your family unit. In terms of the tax preparation process, this requires a family focus, rather than individual, for the best tax advantages for the family unit as a whole, and understand that the family that files tax returns together wins more in tax savings. Mastering your taxes as a family will result in bigger resources for wealth creation. Educational Resources:  Now is a good time to look at retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future, which could certainly include tax increases on both income and capital.  To learn more consider the following Educational Resources available from The Knowledge Bureau: <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" /> Tax Efficient Retirement Income Planning    Master Your Retirement       Master Your Taxes Tax Efficient Investment Income Planning                      Master Your Real Wealth      Master Your Investment in the Family Business  

By Roger Currie, Guest Columnist Wow! Ö So near and yet so far! That was the story of the 2009 Grey Cup for Canada's team, as they end up losing it 28-27, despite holding a 16-point lead over the beasts from the east early in the 4th quarter. A lot of clichés come to mind about now. It was the legendary Vince Lombardi who said ìWinning isn't everything. It's the only thing.î It's hard to argue against that one most of the time, but I hope Rider Nation doesn't sink too deep into doom and gloom, and I hope they don't lose any of that amazing loyalty that is something to behold. Cliché #2 says ìThe game lasts 60 minutesîósometimes more for the Riders, and the marvelous Yogi variation on that oneó ìIt ain't over till it's over.î Yes, someone on the sidelines made a horrible mistake by not doing a simple count of the noses on the field. But you don't keep a team like Anthony Calvillo and the Alouettes down forever. Anyway, this team that many picked to finish last, gave us more joy and entertainment this year than anyone could possibly have imagined. Unlike the 1976 Riders who broke our hearts and were followed by the infamous ëReign of Error', this squad is young and talented in many key areas. There's no reason to believe they won't be right up there giving their all in front of that sea of green at Commonwealth Stadium a year from now. The Roughriders have indeed achieved the goal of Jim Hopson and others, and have become an elite franchise. It's now an organization that players and coaches are more eager to embrace, and we can all be proud. So, no sad songs and no fingerpointing, please. It's only a game, and our team played it better than most in 2009. Roger Currie is the Director of News and hosts Currie's Corner on 620 CKRM in Regina.    Educational Resources:  Learn how to win with family dynamics, join us at the Distinguished Advisor Conference to be held in Orlando, Florida in 2010 where we will present topics relating to "Focus on the Family".

Lengthy Wrongful Dismissal Suits Can Produce Lump Sum Averaging <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com🏢smarttags" />Opportunity<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />   Itís a tough time for certain employees today.  As unemployment rises in response to the financial meltdown and global recessions, job loss is a reality in North America, with many receiving termination notices and often, that comes with wrongful dismissal suits.   Once settled, amounts are paid after the fact, with the result that taxable lump sums must be added to income in some cases.  Taxpayers receiving certain lump sum payments, including damages for loss of wages and pension benefits may qualify for special averaging provisions under the Income Tax Act.  The lump-sum payment must have been paid after 1994 from one of the following sources: income from an office or employment received under: judgment from a court or other competent tribunal; an arbitration award; or a lawsuit settlement agreement (including damages for loss of office or employment); benefits from Unemployment Insurance or Employment Insurance; benefits from a superannuation or pension plan (other than non-periodic benefits such as lump-sum withdrawals); spousal, common-law partner or taxable child support payments; or benefits from a wage-loss replacement plan. Amounts not qualifying include: an amount under normal collective bargaining, such as negotiated back pay (although an amount from an arbitration award does qualify); severance and bonuses that are accepted as paid (that is without a dispute); legal expenses; salary reimbursements; reimbursement of top-up payments; repayment of pension benefits; deduction of social assistance payments, workers' compensation, etc. The averaging treatment is allowed under S. 120.31.  Definitions of qualifying amounts are in S. 100.2.  The qualifying amount received by the individual in the particular year (as outlined above) is deducted if that total is $3,000 or more.  The income is then added back into income for the year to which it applies.  The taxes for each year are then recalculated and if the averaging method results in a reduction in taxes, the current-year taxes are reduced accordingly. Taxpayers with income that qualifies for this special averaging treatment will receive a Form T1198 from the payor.  The form should be attached to the tax return and the full amount received included on the return.  CRA will perform the special averaging and reduce the current-year taxes if the averaging results in savings.   Educational Resources:  Now is a good time to look at retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future which could certainly include tax increases on both income and capital.  To learn more consider the following Educational Resources available from The Knowledge Bureau: Tax Efficient Retirement Income Planning    Master Your Retirement       Master Your Taxes Tax Efficient Investment Income Planning                      Master Your Real Wealth      Master Your Investment in the Family Business