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:

All Canadian taxpayers who receive German pension income from German national institutions are being asked to file tax returns in Germany for tax years 2005 and onward. The German authorities will assess these returns to determine if taxes are owing. A response to an enquiry from The Knowledge Bureau to the German tax administration was received on December 10th and the key points are summarized below. 1. Forward German income tax returns for 2005-2009 to: Finanzamt Neubrandenburg (RiA) Neustrelitzer Strafle 120 17033 Neubrandenburg Deutschland 2. Tax forms (German language only) are available: http://www.regierung-mv.de/cms2/Regierungsportal_prod/Regierungsportal/de/fm/ or http://www.formulare-bfinv.de/ 3. Pension income documentation must be attached and details of the last residence and/or place of employment in Germany should be included. 4. A twelve week deadline from the date of notification has been given and an extension can be requested under certain circumstances. 5. Foreign tax credits: The tax treaty between Canada and Germany allows for the taxing of German pension in both Canada and Germany. However, a foreign tax credit is available in Canada for taxes paid on the same income in Germany. Canadian taxpayers should claim the amount of pension income that is taxable in Germany. German taxes paid on the pension income will be deducted from Canadian tax owing on the income as per Article 23 1. of the tax treaty: Article 23 Relief from Double Taxation "1. In the case of a resident of Canada, double taxation shall be avoided as follows: (a) Subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions, which shall not affect the general principle hereof, and unless a greater deduction or relief is provided under the laws of Canada, German tax (other than capital tax) payable in accordance with this Agreement on profits, income or gains arising in the Federal Republic of Germany shall be deducted from any Canadian tax payable in respect of such profits, income or gains.î Provisions may be available for more favorable tax treatment if 90% or more of the taxpayer's income is from Germany and the remaining income falls within certain amounts. 6. Professional help. It is strongly suggested that professional tax advice be obtained from a German-speaking tax professional with in-depth knowledge of German tax legislation. However, official representation in Germany by Canadian professionals is discouraged. Consultation with a specialist such as Siegfried Merten, MFA, should enable affected citizens to complete their tax filing requirements with Germany. Please see the links below that have been posted by the German Consulate General in Vancouver. They contain the tax treaty between Canada and Germany, CRA information on the taxation of German pensions and German language websites. http://www.vancouver.diplo.de/Vertretung/vancouver/en/Taxation_20of_20German_20old_20age_20pensions.html http://www.vancouver.diplo.de/Vertretung/vancouver/en/04/TaxationGermanPension__Seite.html Additional Resources: Cross Border Taxation Course and EverGreen Explanitory Notes

On December 7th, the federal government and province of Saskatchewan announced proposed changes to the Saskatchewan Pension Plan. The annual limit for contributions will rise from $600 to $2500, subject to available RRSP contribution room. This is good news for those who wish to tap into more of a good news story for those looking for financial stability in retirement. Since its inception in 1986 the SPP has averaged a return of over 8% per year. The SPP is a money purchase plan designed for those who have no access to an employee pension plan. The only requirement for joining the plan is that you are between 18 and 71 ñ and there are no residency requirements. In the past, you did not need earned income to contribute to the SPP and this was of great benefit to unwaged citizens such as homemakers. Their contributions were not deductible but the rules allowed them to build retirement savings with after-tax dollars. The government implemented the Tax Free Savings Account that can now be used in these circumstances as TFSA contribution limits are not dependent upon earnings and are available to every Canadian resident age 18 and older. Rollovers will be permitted to the RRSP or RDSP (Registered Disability Savings Plan) or a financially dependent child. Other rules regarding attribution and over-contributions that apply to RRSPs will also apply to SPP. For example, some or all withdrawals from spousal SPP accounts will be taxed to the contributing spouse when there have been spousal SPP contributions in the year of withdrawal or the two previous years. These attribution rules will apply to contributions made after 2010. As well, SPP contributions will be part of the annual RRSP contribution limit and therefore subject to over-contribution tax and penalties. The first $600 contributed for the 2010 tax year will be exempt from these rules SPP annuity payments will be eligible for pension splitting and the pension amount as they will no longer be referred to as a prescribed provincial pension plan and instead will be a specified pension plan. This is significant as, unlike RRIFs, the SPP will be eligible for pension sharing at age 55. With no residency requirements, this may be an attractive addition to your retirement plan! For further detail: http://www.saskpension.com/ http://www.saskpension.com/administration/limitincrease.php http://www.fin.gc.ca/n10/10-118-eng.asp   ADDITIONAL EDUCATION RESOURCES:  Tax Efficient Retirement Income Planning Course and EverGreen Explanitory Notes.

At this time of traditional giving, CRA is urging Canadians to exercise caution when donating to charity as the holiday season approaches, by avoiding fraud and tax receipts worth multiple times more than the actual donation. To avoid an unexpected tax headache down the line, Canadian taxpayers and their advisors should review the rules when giving to their favorite charity this holiday season: 1. Confirm Registered Charity status: Consult the CRA Charities Listings or call 1-800-267-2384. 2. Get proper receipting: An official donation receipt for cash must include a statement that it is an official receipt for income tax purposes, the name and address of the donor, the CRA registration number (Business Number) of the charity, the amount of the donation, the year of donation, the CRA name and charities website and a unique serial number. In-kind donations must include the fair market value of the gift. Contribution of your time or skill, fees for day-care, purchase of lottery tickets where proceeds benefit a charity and payment of certain tuition fees do not qualify. 3. Avoid Charitable donation schemes: CRA reviews all tax shelter arrangements, which by definition include tax shelter donation arrangements such as gifting trust arrangements, leveraged cash donations, and buy-low, donate-high arrangements. CRA routinely reduces the tax credit claimed to the amount of the taxpayers' cash donation or less, and may also charge interest and penalties. To date, the CRA has denied approximately $1.4billion in donations claimed, auditing over 70,000 taxpayers. Canada Revenue Agency provides detailed information on its website on fraud avoidance. Of particular interest are the 3 videos in the series Giving to Registered Charities 101. They offer an easy to understand look at the benefits of giving as experienced by both the donor and the recipient. This is an ideal introduction for teens and young adults ñ CRA even has a YouTube channel! http://www.cra-arc.gc.ca/chrts-gvng/dnrs/menu-eng.html ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes and the Knowledge Bureau certificate course: Fundamentals of Charitable Giving

The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will remain at 5% for the first quarter of 2011, while the rate paid on taxpayer overpayments on corporate returns will be 1% and non-corporate returns 3%. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.

For corporations other than Canadian controlled private corporations which qualify for the small business deduction, the net tax rate will decrease from 18% effective January 1, 2010 to 16.5% effective January 1, 2011 and 15% effective January 1, 2012. In other good tax news for business, computer hardware acquired before February 2011 will qualify for a 100% tax write off with no half year rule (Class 52) if the asset will be situated in Canada, not used for any other purpose before acquisition and is for use in a business carried on in Canada. ADDITIONAL EDUCATIONAL RESOURCE: KB Introduction to Corporate Tax Preperation and EverGreen Challenge 2010

Taxpayers should prepare to file their TD1 Personal Tax Credits Return before the end of December to ensure their withholding taxes on their January pay cheques are correct. Each year certain tax and benefit amounts are indexed to inflation. This year these credits and thresholds have increased by 1.4 %. The link to the form is http://www.cra-arc.gc.ca/E/pbg/tf/td1/README.html The Basic Personal Amount for 2010 was $10,382 in 2010; it has been increased to $10,527 for 2011, or $877.25 a month. The actual annual dollar equivalent is $1579.05 on the federal side; provincial credits will increase these amounts. For seniors the following credits are important, and most are indexed for 2011: Age Amount: This has risen by $91 to $6537 Infirm Dependant Amount: An increase of $49 to $4282 Disability Amount: Up by $102 to $7341 Caregiver Amount: A $59 increase to $4282 Pension Amount: Remains at $2000 Canadians are also curious about making claims under the Medical Expense Tax Credit. For 2011, eligible medical expenses in excess of 3% of net income--up to a ceiling of $2052ócan be claimed. This ceiling level has increased by $28 for the 2011 tax year. Medical expenses are claimed in the best 12 month period ending in the tax year. Unchanged in 2011, the amounts of eligible donations claimable qualify for a federal non-refundable tax credit of 15% for amounts less than $200 and 29% for amounts over $200 to a maximum of 75% of net income. Unused donations can be carried forward for five years. To take advantage of tax savings sooner, best to make donations before year end. The Distinguished Advisor Workshops (DAW), being held across Canada January 11 to 20 will cover details behind all of these and other important deductions and credits, as well as a thorough review of tax, investment and retirement planning options for 2011. Registrations are excerpted until January 7 for Winnipeg, Calgary, Edmonton, Vancouver, Toronto, Ottawa, Montreal and London venues. (hotlink) ADDITIONAL EDUCATIONAL RESOURCES: Essential Tax Facts by Evelyn Jacks (hotlink)