This year I am going to end my confessions series a week early. I am doing this for two reasons. Firstly, to be honest, I have not found much to write about that I have not already discussed in prior income tax seasons (other than the T1135 fiasco). Secondly, I am a little burnt out from tax season (getting a mild case of food poisoning and having your back act up never helps). So I will see you again in a couple weeks, hopefully in a better state of mind, but until then, I have a couple tips for filing your tax returns this year and some tax planning tips you should consider implementing sooner rather than later.
A Couple Final Reminders
1. File your income tax return on time (May 5th this year) to avoid the 5% late filing penalty (in addition to the 5% penalty, there is an additional penalty of 1% a month thereafter for each month you are late - that could total 17% in total).
2. If you have to file the T1135 Foreign Reporting Form, file it as soon as it is completed. With the July 31st deadline extension, you may either complete the form and not rush to file, or put it off. However, where the form is not filed as required, the CRA can levy a penalty equal to $25 a day to a maximum of $2,500.
Tax Planning for 2014
While taxes are on your mind, you may want to consider some tax planning you can undertake now or plan to undertake in 2014.
Prescribed Rate Loans
1. 1% Prescribed Interest Rate Loan - A Great Income Splitting Opportunity - A good overview.
2. Paying for Private School With Tax-Free Money - A discussion about using a prescribed loan to fund your child's education. You need to read this one in conjunction with the third post.
3. Prescribed Rate Loans Using a Family Trust - Again, you need some large coin to do this, probably at minimum a few hundred thousand in non-registered accounts, but very effective if you have the money.
Transferring Capital Losses Amongst Spouses
If you or your spouse have any unused capital losses after preparing your 2013 tax returns, and the other spouse has unrealized capital gains, you may want to consider transferring the capital losses to the spouse who has the unrealized gains. If you are in this situation, you should start the planning for this now. As this type of planning is complicated, you should speak to your accountant (or engage an accountant for a short consultation) to ensure you do this properly.
I discussed this type of planning in this capital gains post, go to the 3rd paragraph from the bottom (Creating Capital Losses-Transferring Losses to a Spouse Who Has Gains).
Get Your Record Keeping In Order
In addition, get in the habit of downloading any donation receipts immediately. This will ensure you do not miss any donation credits next year and save you scrambling to recall which donations you made.
Make the Acronym Contributions Early
Don't wait to next December to make your RESP or TFSA contributions or February, 2015 in the case of RRSPs. Where possible, make these contributions throughout the year. It will ease your cash flow and these accounts will have additional time to grow tax-free.
That's it for now, I've got a bunch of tax returns to get out.
The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.