news brief Archives - Page 14 of 17

TFSA vs RRSP: How to decide between the two accounts

Tax Free Savings Accounts and Registered Retirement Savings Plans can be complicated, and sometimes confusing when trying to decide which of the two might best suit your tax needs. RRSP contributions and their tax benefits depend on your earnings, and how much you invested into the RRSP, but generally speaking is more beneficial for people with higher incomes. A TFSA is a better way to fund medium to long-term expenses, especially since TFSA withdraws are not taxable whereas RRSP withdraws are taxable.

“When saving and planning for retirement, it pays to take a long-term approach with today’s decisions – and to personalize them.”

Top 5 habits successful family enterprises have in common

Family businesses are thriving because the people that run them care about the company and who they hand it down to. There are some things that some of the most successful family businesses have in common. They are good networkers and build a community of other good businesses to work with. They also face problems head on, embracing rather than avoiding difficult conversations. They function as a strong family unit while focusing on building the business and networking to promote it.

“The tide is shifting and there is a new wave of family business owners coming along: those that recognize the value gained from an external support network.”

The CRA is tracking alcohol sales to nail tax dodging bars and restaurants

Establishments that serve alcohol are receiving additional attention from the Canadian Revenue Agency. The tax agency feels the rate of tax fraud in restaurants and bars that serve drinks is on the rise. As many such businesses operate heavily with cash, it can be tempting for owners and managers to assume these non-electronic payment methods can go unnoticed. The CRA is tracking how much alcohol is bought and then reviewing business records to catch any issues. Currently, the CRA is focusing on Ontario as well as some other non-disclosed provinces. However, they may expand their efforts to every province and territory.

“The cash-based nature of the food and beverage sector, in addition to the growing use of electronic sales suppression software within this industry, make it an ongoing area of tax non-compliance concern.”

Canada Revenue Agency still subjecting taxpayers to ‘humiliating, frustrating’ benefit review …

Benefit reviews have become an almost nightmarish process for some Canadians. The stories have hit the media, and raise considerable attention to the problem. As a result, the Canadian Revenue Agency has changed its process for how it selects review subjects and proceeds with the review of benefits someone might be receiving. Some tax professionals still say there are problems, however. Some benefit recipients are being advised to simply try and throw themselves on the mercy of the CRA as the only option to ease the pain.

“But Canadian taxpayers who spoke to the CBC about their current battles with the CRA say the changes the agency has made don’t go far enough and have made no difference to their experiences so far.”

Sell your losers, avoid dividends and more tips to minimize your investing tax bill

Investing can be a tricky process. Knowing what to invest in, and when, and how much, can be difficult. So too can be the decision of when to leave an investment, or to stay in. But regardless of your investing acumen, minimizing your tax liabilities on investment income is key to maximizing your financial return. The most important element to sound investment strategy is to take full advantage of your Tax Free Savings Account. It’s an investment vehicle designed to encourage savings, which is why it’s tax-free.

“But one thing every investor can agree on is taxes. No one likes them. They are part of investing, but there are ways to at least keep them as low as possible. Here are five tips.”

Is it time to diversify? Three tips to future-proof your business

Nothing’s ever certain in business; even the most robust and profitable business today could find themselves being forgotten tomorrow. One way to protect your business is to be strategic about how you diversify your business. Spread your risk by not focusing on only one product, industry or service. Researching opportunities for new locations and complementary offerings, communicating your plan and executing the right implementation to preserve culture will all help you succeed. Always pushing and trying new things will help you stay ahead of fierce competition.

“Never underestimate the power of a good reputation. From your shareholders to your employees, it will be easier to get people on board and support the next steps.”

Forecasting which tax breaks may be axed

There’s plenty of speculation around what tax breaks will be eliminated by Canada’s federal government. Two popular tax breaks, which are viewed by many as sacred cows and could spell political disaster if they were altered, are: the tax-free sale of a primary residence and the tax free transfer of wealth upon death. This leaves the capital gains tax rate as the most likely target, given that there is a history of adjusting it. With that said, we’re reminded that this is all speculation.

“This will be the last budget before the next election, so the federal government will want to offer some tangible benefits to voters.”

Ottawa’s tax hike on the one per cent ended up lowering government revenues

Tax codes and how to balance them to ensure all citizens are taxed fairly to support their government’s revenue are a complex subject. On its face, the subject can be boiled down to increasing how much revenue comes in from taxes, or decreasing what amount of revenue the government spends on any of its efforts. Yet simply raising rates doesn’t necessarily boost how much tax revenue a country might collect. Canada is facing that with a recent tax hike on the top one percent incomes that has seen total tax revenue collected actually fall.

“For years, it has been long-argued by various economists that a government is only able to raise taxes so high before the rate itself creates a psychological barrier to work such that reduced economic activity by those high income earners leads to a reduction in tax revenues.”

The tax man cometh for small businesses, too. How to be ready

Operating a business can be especially expensive, so don’t be afraid to use the legal deductions you have coming, but know what you can claim, keep records, know your deadlines and do it correctly. For instance, business expenses can offset tax liability, but this can also draw CRA’s attention to a small business. Any expenses incurred in the course of operating your business, whatever its size, can be used to offset tax liability and reduce what you’ll owe come tax time. Different kinds of expenses have different levels and rates of deduction, so check the tax code or consult a tax professional to be sure you’re taking advantage.

“Entrepreneurs will want to take advantage of any breaks and credits offered by the Canada Revenue Agency, but they also need to stay on the right side of the tax man.”

When is the best time to take your pension?

As we get closer to retirement, we often start to wonder when we should start to withdraw from sources of income like pensions. Depending on your situation and your other retirement savings, like RRSPs, when you start will be different from someone else. What you want to do with your pension money may also influence your decision. For instance, if you’re in good health and in a financially sound situation, then you can afford to wait longer and let the money grow. If you don’t think you’ll get the full benefit from it due to poor health, then considering a lump-sum cash payment may be the better decision. Or, if you want to use it to leave money to your children, then you’ll want to consider how you can do it to reduce your tax rate. Whatever you decide, keep in mind that there are ways to lessen your tax burden, so speaking to a professional first can help you with your estate planning.

“Once you begin taking your pension, in the majority of cases, you can’t stop the process — and that makes the timing crucial.”