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:

The amount you can contribute to a tax-free savings account (TFSA) will remain at $5,000 in 2012. Despite earlier speculation that indexing would push the contribution limit higher for 2012, Canada Revenue Agency has announced it will stay the same. When the federal government introduced the TFSA in 2009, it said the TFSA limit would be indexed to inflation and rounded to the nearest $500. The 2.8% indexing factor for 2012, when added to the 1.4% indexing factor for 2011 and the 0.6% for 2010 results in a calculation of $5,243.23, which, when rounded to the nearest $500, leaves the limit at $5,000 for 2012.The contribution limit for 2013 is likely to be $5,500 ó unless inflation is less than 0.13% this year. A TFSA is an important savings vehicle for individuals and families. Since 2009, Canadian residents 18 years of age or older have been able to contribute $5,000 in after-tax dollars annually to a TFSA. Although a contribution to a TFSA is not deductible for income tax purposes ó nor is interest on money borrowed to invest in a TFSA ó income generated in a TFSA can be withdrawn tax-free. As well, unused contribution room can be carried forward to later years, and withdrawals in a particular calendar year are added to the TFSA contribution room for the next calendar year. That means that a Canadian resident who has not opened a TFSA has $20,000 in unused contribution room come January 1, 2012. A TFSA is also "attribution-freeî because it is after-tax dollars, allowing you to make a contribution to a spouse's or child's account without having the gift attributed to you. However, it will not reduce your tax liability, the way a RRSP will. For many, then, the order of investing will be an RRSP up front to generate tax savings; then, assuming you have contribution room, you will leverage that tax refund into a TFSA. ADDITIONAL EDUCATIONAL RESOURCES: Reliable, Thoroughly Researched, Tax News You Need to Know: DAW IN JANUARY and EverGreen Explanatory Notes. ADDITIONAL EDUCATIONAL RESOURCES: Reliable, Thoroughly Researched, Tax News You Need to Know: DAW IN JANUARY and EverGreen Explanatory Notes.  

By Evelyn Jacks Finance Minister Jim Flaherty is asking Canadians for their views on how the upcoming federal budget should be structured to meet social and economic objectives. If you have an opinion on how to position Canada for economic and employment growth while reducing government spending ó all heady stuff ó go to the federal Department of Finance's new website at: online pre-budget consultations. The website's online polls asks four questions that all require a high level of financial literacy; a couple of them even require some knowledge of existing provisions. But don't let that stop you: what counts is what's left at the end of the day and your interests matter. The first consultation question, for example, focuses on Canadian businesses and asks whether there are any measures in the next phase of Canada's Economic Action Plan that should be revised, extended or shifted to promote job creation and economic growth? In my view, a few need extension, others should be added. For example, the federal budget should: Increase the restriction on claiming capital cost allowance (currently $30,000 plus taxes for "luxury vehiclesî). This could stimulate car sales while making the limit more reflective of market pricing. Increase write-offs of costs associated with setting up home workspaces and acquiring technology for those who have been downsized. Increase the tax-free withdrawal amount under the RRSP Lifelong Learning Plan to encourage entrepreneurs and their families to go back to school to get skills required to grow their businesses. Increase the tuition/education/textbook transferrable amount to supporting individuals from $5,000 to the full amount of unused credits. Extend the temporary Hiring Credit for Small Business. Extend the Targeted Initiative forOlder Workers to stay in the workforce. Extend the temporary accelerated capital cost allowance treatment for investment in manufacturing or processing machinery and equipment. It's your money, your life. Do you have any good ideas for stimulating the Canadian economy in a fragile world through our tax system? Have your say in the pre-budget consultation process. It could positively affect after-tax dollars in the future. Evelyn Jacks is President of Knowledge Bureau, author of Essential Tax Facts and co-author of Financial Recovery in a Fragile World available at http://www.knowledgebureau.com/Books.asp?tab=Titles  

Canada Revenue Agency holds tax evaders responsible for their actions and the consequences can be serious, as a Markham, Ont., taxpayer recently found out. Taxpayers who claim false expenses, credits or rebates are liable not only for correcting their tax returns and paying the full amount of tax owing, but also for penalties and interest. In addition, if convicted of tax evasion, offenders can be fined up to 200% of the tax evaded and sentenced up to five years in jail. That's exactly what happened to Brothers & Wright Electrical Services Inc. On November 11, the Markham firm pleaded guilty to one count of evading GST under the Excise Tax Act and one count of federal income tax evasion under the Income Tax Act. Brothers & Wright was fined $165,822, representing 200% of the total amount evaded, and given until November 30, 2012, to pay the fine (www.cra-arc.gc.ca/nwsrm/cnvctns/on/on111130-eng.html). As part of your yearend tax update it makes sense to file overdue tax returns voluntarily; that way you will avoid gross negligence and tax evasion penalties. If you have not filed previous years' tax returns or have not reported all income, if you have deducted expenses that aren't allowable or fraudently claimed refundable tax credits, you can voluntarily correct your tax affairs under the Voluntary Disclosures Program at http://www.cra-arc.gc.ca/gncy/nvstgtns/vdp-eng.html. The other option: speak to your tax professional immediately.   Additional Educational Resources: Distinguished Advisors Workshop January  

Citing the deepening European crisis, the Bank of Canada yesterday said it is maintaining its target for the overnight rate at 1%. The Bank Rate likewise stays at 1.25% and the deposit rate at 75 basis points. Canada's central bank is expecting the European recession to be more pronounced than it earlier expected. And although U.S. growth has been stronger than anticipated, "household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weigh on U.S. growth.î Canada, too, has enjoyed stronger growth in the second half of 2011 than forecast in October. The Bank notes solid growth in household expenditures and business investment. But it expects that in Canada, too, growth will be curtailed by the fiscal and financial issues afflicting Canada's global trading partners. "The economyalso continues to face competitiveness challenges, including the persistent strength of the Canadian dollar,î it says. At the present time, the Bank of Canada does not see inflation as an issue. Although slightly higher than projected, inflation is expected to decline as a result of reduced pressures from food and energy prices and ongoing excess supply in the economy. Additional Edcuational Resources: Debt and Cash Flow Management  

Changes to the Canada Pension Plan scheduled for January 1, 2012 may come as a surprise for some semi-retired Canadians. Up until now, once you began receiving your CPP retirement pension, you were no longer required (or allowed) to contribute to the CPP. As of January 1, that's changing. By default, all employees (and self-employed taxpayers) who earn CPP contributory earning will be required to contribute to CPP even if they are already collecting a CPP retirement pension. For employees over age 65, there's a way to opt out, but the deadline for opting out is December 31, 2011. If you don't file Form CPT30 with your employer by the deadline you'll be paying CPP contributions on your earnings as on January 1. For employees who are under age 65, the nasty surprise is you have to start contributing to CPP again on January 1, even if you're already collecting a retirement pension.  Employees who are over 70 continue to be exempt.  For employees ages 65 to 69, beginning January 1, 2012, payroll departments are required to withhold CPP contributions unless they have a completed Form CPT30 Election to stop contributing to the Canada Pension Plan, or revocation of a prior election on file.  The election will apply to the first month following the receipt of the completed form by the employer.  So, if you don't want to pay CPP in January, you must file the form by December 31. For self-employed taxpayers, the requirement is not so urgent.  For self-employed taxpayers between age 65 and 69 to opt out of the additional CPP contributions, all that is required is to indicate on Schedule 8 for 2012 (filed with their 2012 tax return) which month they want to cease contributing. The good news for those who continue to contribute after they begin receiving their CPP retirement pension is that they are contributing to a post-retirement pension which could earn them an increased CPP pension of up to $25 per month for each year they contribute while receiving the retirement benefits.   Additional Educational Resources: Advanced Payroll for Professional Bookkeepers  

Canada Revenue Agency has released the 2011 version of the Business and Professional Income guide, which provides guidelines on reporting business or professional income for 2011. The guide updates three areas that affect the filing of returns for the self-employed for 2011. Filing Requirement for Partnerships Beginning in 2011, partnerships with less than six partners are no longer exempt from filing a T5013 Partnership Information Return.Instead, the requirement for filing the T5013 is based on the financial activities and nature of the partnership. This means that some smaller partnerships that have assets in excess of $5 million or have transactions (revenue plus expenses) in excess of $2 million will now be required to file returns.Likewise, all partnerships that have a partner that is another partnership, a corporation or a trust will be required to file a T5013. On the other hand, larger partnerships that do not meet these requirements but were required to file a T5013 in prior years may now be exempt from filing the form. Temporary Hiring Credit for Small Business Small businesses whose 2010 Employment Insurance premiums were $10,000 or less may be eligible for a credit up to the maximum of $1,000 against their increase in EI premiums for 2011 over those paid in 2010. Manufacturing and Processing ó Accelerated CCA The class 29 (straight line, 50% rate)inclusion of manufacturing and processing equipment has been extended to include eligible machinery that becomes available for use in 2012 and 2013. Such equipment would normally be included in class 43 (30% rate, declining balance).