If you own a business, and your children and/or spouse work therein, consider paying them a reasonable salary from the business. If this is their only income, or they only work part-time elsewhere, they may not need to pay personal income tax if they earn below their personal tax exemption.
If you own a business, pay yourself enough income before the year-end. Focus on allowing for your desired level of RRSP contribution room for the next tax year - perhaps even the maximum.
Keep your tax records for seven years because if you are audited, CRA can back-review your personal income tax returns for up to seven years. Copies of returns, RRSP contribution slips, medical receipts, support for self-employed revenue and receipts, all preparatory source documents, and T-slips may be requested to summarily assess your taxable income. Do your taxes right, and keep the proof. Avoid paying for past income tax, penalties and interest.
Be detailed in your record-keeping regarding your expenses to make sure they are allowed. CRA may investigate whether your deducted expenses were for personal use or for business use. So long as you can support these deductions with proper documentation, such as detailed receipts, you'll not create a tax liability
All family members should file together because this allows everyone to maximize the best use of credits or transfer of unused credits from each other's tax return (for spouse, common-law partner, children, certain relatives if they live with you), such as medical expenses which can be claimed on a family basis.
Use the Internet if you expect a tax refund for a speedier refund. Where you have money owing on your tax return, you can file early and make your payment by April 30. If CRA owes you money, they will pay you quicker if filed on the Internet. Where you give them deposit information, money can be deposited right into your bank account. Another advantage is that you will not need to photocopy and send receipts with your tax return. But caution, the downside is that you are more likely to be contacted for a formal review to verify income and expenses not previously articulated by sending a paper return (you may need verification for up to seven years). Discuss this with your accountant.
Year-end tax planning ideas may need to be implemented all year round, because some of the planning may require expenditures on a monthly basis in order to benefit you by year-end.
You must complete transactions for many items that qualify for tax deductions and credits by December 31 each year-end, to qualify, including: medical expenses, tuition fees, child care costs, charitable and political contributions, child support and alimony, safety deposit box fees, deductible accounting and legal fees, professional fees, and union dues.
In order to qualify for the government-sponsored Canada Education Savings Grant you must make your annual RESP contribution before each year-end by December 31, to qualify.
Business owners and some employees may claim capital cost allowance on depreciable business assets such as automobiles, aircraft and musical instruments required to be used in their business or employment. It makes sense to make the purchase prior to December 31 and take the first deduction in the current year versus purchasing early in the next year. Because you can claim the capital cost all year, this allows for a speedier use of the first deduction.
Disclaimer: A tax and/or legal expert such as an accountant or tax lawyer can help you in special tax areas, and can give you guidance about various topics for which we often can provide a financial product to solve.
You should consult a lawyer or accountant to get detailed tax information, especially if you own a business.
The particulars contained herein were obtained from sources which we believe reliable but are not guaranteed by us and may be incomplete. The opinions expressed have not been approved by and are not those of Investia Financial Services Inc. This website is not deemed to be used as a solicitation in a jurisdiction where this Investia representative is not registered
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