Tax Season ends today! It’s tax planning time!

It is officially the end of the tax season. Today is the last day for most Canadians to file their personal income tax returns. I do hope that I have provided you with all the information and tips that you may need to save on your 2009 taxes.

With the end of the tax season, I would like to remind you that now is the time to get your tax plan in place. As I’ve always mentioned before, it is best to consult a professional to make sure that you are offered the best possible tax saving strategies applicable to you.

Here are a few reminders to get you started on your tax planning:

• The key to successful tax planning is starting as early in the year as possible, well before committing to any large purchases or transactions.
• Tax planning is not a one time deal. It is a continuous and ongoing process.
• Every transaction we make has possible tax consequences. So whether you are purchasing a business or making an investment, having a tax plan in place is your best strategy to ensure that you do not lose any money in the end.
• Tax planning must be done as a couple if you are married or have a common law partner. Because spouses’ tax returns are related, and we can split income, deductions and credits between spouses, tax planning as a couple will ensure that you do not miss out on any tax savings.
• Do personal and business tax planning together if you own a business. If you do not plan personal and business tax together, you will not be able to have an accurate tax plan.

Remember, a tax plan is an ongoing process. Start early in the year to ensure that you maximize your tax deductions and credits. You will not regret it when it’s time to file your 2010 personal income tax returns!

Taxpayers’ Ombudsman

If you feel that your service rights have been neglected while dealing with the CRA, you can always contact the Taxpayer's Ombudsman and make a complaint. It is the Taxpayers' Ombudsman's responsibility to ensure that the taxpayers' rights are respected by the CRA at all times. The service rights outlined in the Taxpayers’ Bill of Rights include numbers 5, 6, 9, 10, 11, 13, 14 and 15. Please check my previous blog entry for the complete Taxpayers’ Bill of Rights.

The Taxpayers’ Ombudsman provides independent and impartial reviews of complaints about how the CRA serves and treats taxpayers, and addresses systematic problems that affect many taxpayers.

Mistakes, undue delays, misleading information and staff behavior on the part of the CRA fall under the service-related complaints that the Taxpayers’ Ombudsman takes care of.

Through the assistance of the ombudsman, the CRA has issued apologies, released bank accounts they had seized, cancelled penalties and interests they were charging, reviewed some of its policies and procedures and in some cases, ended collection activities.

Please note that the Taxpayers’ Ombudsman’s responsibilities does not include complaints that are not service related such as those related to tax policy, program legislation, matters that are before the courts and matters that other statutory bodies would deal with. In addition to this, the Taxpayers’ Ombudsman does not direct the CRA to take action.

Before contacting the Taxpayers’ Ombudsman, you should allow the CRA to resolve your complaint within a reasonable amount of time by trying to resolve your issue with the CRA employee you have been dealing with or with the employee’s supervisor. If you are not satisfied with the way they dealt with you, you may file a formal complaint with the CRA by submitting a completed Form RC193, Service-Related Complaint. If you are still not satisfied with the way the CRA dealt with your complaint, you may contact the Office of the Taxpayers’ Ombudsman. There are no costs with filing a complaint or for any service rendered by the Taxpayers’ Ombudsman.

Taxpayers’ Rights

It’s only fitting to end the tax season with some helpful information for taxpayers. So this week’s blogs would be all about tax, tax and more taxes! Let’s start by reviewing what rights you are entitled to as a taxpayer.

1. You have the right to receive entitlements and to pay no more and no less than what is required by law.

2. You have the right to service in both official languages.

3. You have the right to privacy and confidentiality.

4. You have the right to a formal review and a subsequent appeal.

5. You have the right to be treated professionally, courteously, and fairly.

6. You have the right to complete, accurate, clear and timely information.

7. You have the right, as an individual, not to pay income tax amounts in dispute before you have had an impartial review.

8. You have the right to have the law applied consistently.

9. You have the right to lodge a service complaint and to be provided with an explanation of our findings.

10. You have the right to have the costs of compliance taken into account when administering tax legislation.

11. You have the right to expect us to be accountable.

12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.

13. You have the right to expect us to publish our service standards and report annually.

14. You have the right to expect us to warn you about questionable tax schemes in a timely manner.

15. You have the right to be represented by a person of your choice.

I would like to encourage you to get familiar with your rights as taxpayers to make sure that you are treated professionally, courteously and fairly especially during this tax season. Whether you are simply filing your personal income tax returns, getting tax information or are being reassessed, it is important that the CRA respects all the service rights you are entitled to according to the Taxpayer Bill of Rights.

http://www.cra-arc.gc.ca/E/pub/tg/rc4417/rc4417-09b.pdf

Step 3: Legally Minimize Taxes Paid part 3

Here are more ways you can save tax.

• Trust Structures – Trust structures can protect your assets and pass them to the next generations. Trusts can be used for effective tax minimization through income splitting.
• Tax Shelters – Generate new tax credits and support humanitarian causes. Tax shelters help the less fortunate while helping you to save taxes at the same time.

Other Tax Saving Strategies include Tax Deferral Strategies and Flow Through Shares.

• A Tax Deferral Strategy is an arrangement where you get tax benefits immediately but will most likely pay it back at a later date. Aside from its tax benefits, the tax deferral strategy allows individuals to support Canadian humanitarian initiatives.
• Flow Through Shares are common shares of Canadian resource companies issued to finance the exploration an development of resource properties. To encourage investment by these companies, the federal government allows exploration and development expenses incurred to be flowed-through to investors and deducted for tax purposes.

It is more important now than ever to be able to find ways to save on your taxes. There may be a lot more ways for you to save on your taxes so make sure you consult with a professional. Consulting with a professional and having him help you set up a tax plan will ensure that you make use of all available tax saving strategies applicable to you.

Step 3: Legally Minimize Taxes Paid part 2

Let’s review the tops ways you can save tax.

Maximizing all tax deductions & credits – It’s common knowledge that all taxpayers are given the opportunity to take advantage of all tax deductions and credits applicable to them so let’s make use of them to help us save on our taxes! It is recommended to seek professional advice to identify all deductions and credits available.

For employees, consider opening a home based business – A small business is one of the best tax savings tool. We are talking about a simple sole proprietorship and not a big enterprise. The most significant benefit of full or part time self employment is that you will be able to increase the amount of deductions you are entitled to write off.

"Having a home based business allows the employed individual to write off part of the cost of running the business and part of the mortgage interest, heating, insurance and renovation bills and so on. Home Based Businesses can provide the opportunity to claim tax deductions in the beginning and give you cash flow later on." Read more at the www.kustomdesign.wordpress.com More tax saving strategies tomorrow!

Step 3: Legally Minimize Taxes Paid part 1

As we approach the deadline for filing taxes, I want to discuss the 3^rd Step to Financial Freedom, Legally Minimize Taxes Paid, in detail.

Let’s look at the basis on how Canadians save taxes – We do not look at tax evasion or tax avoidance which are illegal. Instead, we look for ways to minimize taxes legally. According to the Supreme Court of Canada, which super cedes the CRA – You have the right to arrange your affairs in ways to minimize taxes.

We’ll review the top ways people are saving taxes on my next blog!

Step 2: Eliminate Bad Debts part 3 -- Paying Down Debt

As a rule, you will usually pay down your debts with the highest interest first, using three ways:

1. Closed Circle: Establish budget totals to determine your available income to service debt on a monthly basis.
2. Overflow / Abundance – As you close your circle and take control of your finances, you will have overflow that will allow you to get out of debt faster.
3. Debt Reduction Strategies – There are several strategies that can help you get out of debt such as debt consolidation.

Step 2: Eliminate Bad Debts part 2 -- More about DEBT

Many people are trapped in the circle of bad debt, borrowing money all the time to purchase things that will only drop in value, or depreciate, such as an automobile or a plasma TV. Sometimes, people even have to keep borrowing money to keep up with paying debt, becoming slaves to interest.

It is alarming the gigantic debts being run up by Canadians, often thanks to credit card companies’ handling out credit cards like candy. Credit Cards should be used for monthly expenditures and paid off every month in full. Never pay Credit Card interest!

Important update: Loonie closes above parity

Let’s take a break from discussing the 5 Steps to Financial Freedom and take a look at an important news about the Canadian dollar.

According to several financial news sources as of April 14, the Canadian dollar closed above parity with the US dollar for the first time since May 2008, finishing at more than a quarter cent to 100.08 cents US. Backed by Canada’s slow economic recovery and confidence on Canada’s effective debt management, the Canadian dollar has looked more attractive to global investors when compared to the US dollar and Euro.

Economists don’t expect the loonie to go any higher against the US dollar but expect it to stay around parity for the next while.

Read more about the loonie –

http://www.financialpost.com/most-popular/story.html?id=2905269

We'll see what happens. Experts are saying that it may not go higher, but who knows!

We’ll get back to covering the 5 steps tomorrow!

Step 2: Eliminate Bad Debts

The 2^nd step to financial freedom is eliminating bad debts. First of all, debt is not necessarily always a bad thing. Indeed, there can be such a thing as ”good debt.” Let’s look at a simple definition of Good Debt and Bad Debt.

• Good debt has an asset attached, usually positive cash flow and is tax deductible. Good Debt is Debt that is typically being paid by someone.
• Bad debt does not have an asset attached and is usually consumer debt and is not tax deductible. Bad Debt is typically paid by you.

What’s next after the Closed Circle Budget?

Creating your Closed Circle Budget is your first step to financial freedom. It is in this initial step that you build on a solid financial foundation for you, your family and the future generations of your family. You must practice all the 5 Steps regularly before you can truly reach financial freedom. Here’s an overview of what these steps are:

1. Develop a Closed Circle Budget
2. Eliminate Bad Debt
3. Legally Minimize Taxes Paid
4. Wealth Accumulation and Increase Passive Cash Flow
5. Wealth Preservation

The Closed Circle and the Business Owner part 2

The Closed Circle for business owners works very similar to a Closed Circle for Individuals. You should still use the same steps as you did to create your personal Closed Circle. However, the main difference is that you have to do a lot more forecasting as your business will grow.

Closed Circle for business owners must also be reviewed regularly and changed as the business goes through growth and changes.

Also, since we get paid personally from our business, we must factor that into the Closed Circle. We know how much we need for our personal Closed Circle. Therefore, we should budget the amount we will pay ourselves in the obligations section of your business’ Closed Circle.

The Closed Circle and the Business Owner part 1

Business owners should have a separate Closed Circle for their business. If there is more than one business, then each business should have its own Closed Circle. The exception to this is if you have a small home based business that is a sole proprietorship. At the beginning, there are probably not a lot of expenses, nor is there much income, so in this case, you could just include the small home based business in your personal Closed Circle until it grows to a point where the income is covering the expenses.

In Creating a Closed Circle for your business:

Obligations are Cost of Goods Sold

Necessities are Operating Expenses

Wants are expenses for growth and team enjoyment

Making children a Shareholder of a Family Corporation

This topic has come up again and again as we consult with families who have businesses. Should we make our children a shareholder, or shouldn’t we? This question, and subsequent decision, requires thought and planning. Two of the major areas to consider are tax and estate planning. How close is the family? Many kids go estranged as they become adults or marry a spouse that could influence the Corporation. This could cause an issue if you’ve issued voting shares. Voting shares have control of the company and have the value in a Corporation, while non-voting shares are used by many simply to issue dividends only. Remember that your children must be 18 to receive dividends. You must also realize that it is a business and must be treated as a business. If you are going to add your children as shareholders to the Corporation it should be updated in the Minute Books to reflect the changes, and a shareholder agreement should be done. There is a much better method of including children in the “benefits” of your business and passing the business and estate on to them tax free. A Family Trust can simply own the Corporation, making the children beneficiaries of the trust. You are the Trustee who makes the decisions and you can simply change beneficiaries and directors when you are ready. There are many more benefits to a family trust, please do inquire if you have questions.

Amending the Excise Tax Act part 2

The Minister of Finance Jim Flaherty insisted recently that the government was not imposing any new tax, he, however, noted: "The proposed changes contained in the Notice of Ways and Means Motion tabled in the House of Commons on March 22, 2010 are designed to confirm our long-standing policy intent to restore the situation that existed prior to the court decisions. We are not imposing new taxes." This is because changes to the Income Tax Act are put into existence before they are passed as law. When will the continuous growth of the tax burden on the people stop? Not until the current fiat financial system that is built on the backs’ of the people crashes. The more Canada goes into deficit over the next years, the more taxes that will be collected, or become collectible on the Government’s Balance Sheet. The more the debt, the more the interest, the more the taxes!