Most Canadians are aware that the deadline for contributing to one’s registered retirement savings plan (RRSP) is 60 days after the calendar year end – in order to be claimed on the return for 2016, such contributions must be made before March 2, 2017. Many also know that contributions to a tax-free savings account (TFSA) can be made at any time during the year. Consequently, when Canadians start thinking about year-end tax planning or saving strategies, RRSPs and TFSAs aren’t often top of mind. The fact is, however, that there are some situations in which planning strategies involving TFSAs and RRSPs must be put in place by the end of the calendar year. In other situations, acting before the end of the calendar year, while not required, will produce a better tax result. Some of those situations are outlined below.
On behalf of all of us at Koroll & Company, we hope you and your loved ones have a Happy Holiday Season and a Wonderful New Year!
HOLIDAY CLOSURE - Our offices will close mid-day on Friday, December 23, 2016 and will reopen on Tuesday, January 3, 2017.
While tax planning is best approached as an ongoing, year-round activity, the fact is that for most Canadians the subject of taxes becomes top of mind only a few times a year. Typically, that happens when the annual tax return is due, when the annual RRSP contribution deadline is looming, and for some, at the end of the calendar year.
There is, in fact, good reason to spend some time considering one’s tax situation as the end of the calendar year approaches. With the notable exception of (in most cases) contributing to one’s RRSP, any steps taken in order to reduce one’s income tax bill for 2016 must be finalized by December 31st of this year.
What follows is a list of the most common tax considerations that arise as the end of the calendar year approaches.
During the month of December, it is customary for employers to provide something “extra” for their employees, by way of a holiday gift, a year-end bonus or an employer-sponsored social event. And it’s certainly the case that employers who provide such extras don’t intend to create a tax liability for their employees. Unfortunately, it is the case that a failure to properly structure such gifts or other extras can result in unintended and unwelcome tax consequences to those employees.
Changes in technology and the Canadian workplace, over the past 25 years, have made the option of working from home, at least on an occasional or part-time basis, a common occurrence among Canadian employees. For most, the opportunity to take a break from sitting in traffic gridlock or rushing to catch the commuter train is a valued employment perk.
While advantages, such as these, would likely be enough to make working from home an attractive option, there is another even more compelling benefit. And, that benefit is in the form of tax deductions claimable for home-related expenses by qualifying individuals who work from home.
Once daily weather reports begin to include wind chill factors or frost warnings, the thoughts of many Canadian turn to the idea of spending part of the Canadian winter somewhere much warmer – most often, in one of the southern U.S. states.
And, while the anemic state of the Canadian dollar has required Canadians to downsize some of those plans, it is still the case that thousands of Canadian “snowbirds” fly south every winter.
The budgetary cycle of the federal government follows a regular schedule. The Budget for the upcoming fiscal year (which runs from April to March) is brought down by the Minister of Finance in late winter or early spring.
About six months later, or half way through the fiscal year, the revenue, expenditure, and deficit/surplus numbers, announced and projected in the budget (for both the current and future fiscal years), are updated by the Minister in the Fall Fiscal and Economic Update. On occasion, the federal government will use the Fiscal and Economic Update to announce new taxation and expenditure measures.
Canada Pension Plan (CPP) retirement benefits are available to virtually any Canadian who has participated in the work force and made contributions to the CPP and for most retirees, that monthly CPP benefit represents a substantial percentage of their income. Consequently, knowing what to expect in the way of CPP retirement benefits is crucial to an individual’s retirement income planning.
Unfortunately, it’s also a safe bet that most Canadians don’t know how much they can expect to receive each month from the CPP – or even how to find out that amount.
