Beware slackers!

Taxpayers who are late with their tax returns and who owe taxes will be charged interest and late filing penalties.  Interest is charged on the outstanding balance starting the day after the due date of the return and is compounded daily. 

Interest are subject to change quarterly so make sure you check the CRA website regularly for updated rates (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/ntrst/menu-eng.html).

The late filing penalty is 5% of the outstanding balance, plus 1% of the outstanding balance every month that your return is late, to a maximum of 12 months. 

Remember, prepare your tax returns well ahead of the due date to avoid paying interests and penalties!

Procastinate later — interests and penalties for late tax returns

We are weeks away from the due date of our Personal Income Tax Returns.  If you have not started on your returns yet, this might change your mind.  Did you know that the CRA charges interests and penalties if you owe taxes and  file your taxes after the due date? Yes they do! The CRA charges interests on the outstanding amount starting the day after the April 30th due date and is compounded daily.

Not only that, the CRA charges a  late filing penalty of 5% of the outstanding balance plus 1% of the oustanding balance every month that your return is late, to a maximum of 12 months. 

Remember:  Prepare your tax returns way ahead of  time. The earlier you file your tax return the better! 

If you have any tax questions, let the tax guru know!

2010 Property Tax Assessment is in The Mail…

As you may or may not be aware of, on January 4, 2010 your property tax assessment was mailed to you. If you haven’t received it yet, you will soon get it. I wanted to let you in on some of the options that you have if you feel that the value of your home is too high on your assessment. If you feel that your assessment is too low, you have two options, leave it where it is or ask them to raise the value and then you get to pay more property taxes. I’ll leave that one up to you.

Here are some interesting stats and findings that came from the 2010 Tax Assessment:

• On Jan. 04, 2010, The City of Calgary mailed approximately 439,000 property Assessment Notices to Calgary taxpayers, which is an increase of 8,000 from 2009.
• The 2010 median single residential assessment (excluding condominiums) is $374,000 compared to $427,500 in 2009. The 2010 median residential condominium assessment is $233,000 compared to $278,500 in 2009.
• The total value of the 2010 Property Assessment Roll is $218 billion, a decrease of $27 billion from last year.
• As a result of the 2010 Assessment, the typical assessment change between the 2009 and 2010 Property Assessment Rolls is -13% for residential properties and -15% for non-residential properties.
• This year, approximately 92% of residential properties’ revenue neutral taxes will stay within plus or minus 10% of last year’s taxes.
• 70%, or just over two-thirds, of residential properties will experience a revenue neutral tax decrease due to the 2010 assessment, while 30% or, just under one-third, will experience an increase in their taxes due to the 2010 assessment only.

We have had the question multiple times before on how the city calculates what the tax rate will be… Here it is…

Tax Rate Calculation

Each year City Council approves the amount of expenditure needed to support City services. To get the amount of revenues required from property taxes, The City takes the overall expenditure and subtracts all other sources of revenue like business taxes, license fees, user fees and provincial grants. The balance is the amount to be raised through municipal property taxes.

In order to calculate taxes, a tax rate is established. The tax rate reflects the amount of taxes to be paid for every $1 of assessed value.

Municipal Tax Rate =  Total revenue required by The City of Calgary from property tax / Total Assessment
Provincial Tax Rate =    Total revenue required by The Province of Alberta from property tax / Total Assessment

Tax Bill Calculation

Your property taxes are calculated by multiplying the assessed value of your property by the tax rates:

Property Tax bill =  (Assessment x Municipal Tax Rate) + (Assessment x Provincial Tax Rate*)

*The Provincial Tax Rate is set once The City receives the annual requisitions from the Government of Alberta (Alberta Learning) and the Calgary Catholic School District. The amounts of the requisition are not subject to review or approval by City Council. The City of Calgary bills and collects this tax amount for the Province of Alberta.

Your annual property tax bill covers the period of January 1 to December 31.

Now… what are your options if you feel that your tax assessment is too high.  Many people don’t look into this, however this can save you a good chunk of change each year if you are on top of it.  Here are the steps that you will want to take.

1. Check to see what the City has on your property by going to their Property Assessment Search
2. Once you know what the city has on your property, they have provided a page on their site that you can search out your neighborhood and download a pdf of all the most recent sales that have happened in your community that the city knows about.
   - For all Single Family Dwellings (not condo’s) you can Search Here
   - For all Condo’s you can Search Here

One last thing… Here is a brochure for you to download from The City of Calgary that they give out for more info on Property Tax Assessments.

2010 Property Tax Notice Brochure Download

I hope this gives you a good idea of what you can do about your assessment and gives you a great start on making sure that your are paying the proper amount of taxes.

All Information given here is from The City Of Calgary Website

Home Renovation Tax Credit (HRTC) part 2

Here is a summary of the important features of the Home Renovation Tax Credit:

• This is a non-refundable & temporary tax credit valid for the 2009 tax year only.
• The tax credit is 15% of eligible expenditures on home renovations made on eligible dwellings
•  The tax credit applies to expenditures over $1,000 to $10,000
• The maximum tax credit amount is $1,350 per family ($9000 x 15%)

We’ll get into more detail on my next blog!

Sources:  www.cra-arc.gc.ca and www.taxtips.ca

Home Renovation Tax Credit (HRTC)

One of the highlights of the 2009 tax year is the Home Renovation Tax Credit or HRTC.  The HRTC is a non-refundable tax credit based on eligible expenses for improvements to your house, condo or cottage. 

Please note that the HRTC’s is available for the 2009 tax year only and the eligible period began last January 28, 2009 and will end on January 31. 2010. 

Eligible expenses for goods acquired during this period, even if they are installed after January 2010 will still qualify.  However, if an eligible expense involves work done by a contractor or a third party, and the work is not completed by the end of January 2010, only the portion that is completed before February 1, 2010 will qualify even if a payment has been made.

Sources:  www.cra-arc.gc.ca  and www.taxtips.ca

DUE DILIGENCE: GIFTING ARRANGEMENT TAX SHELTER

As with all other financial transactions, due diligence is needed in choosing the right Gifting Arrangement that best suits you.  Here are some things you need to know in choosing a Gifting Arrangement Tax Shelter:

1.       Ensure there is a Tax Shelter number (TS#)

2.       Ensure the transactions are structured legally.

3.       Ensure the transactions make business sense.

4.       Ensure there is a legal opinion by a reputable lawyer.

5.       Ensure there is a defense fund in place to back the program.

6.       Ensure the charities are Registered Canadian Charities.

7.       Ensure the organizations involved could function without the tax shelter being in existence.

8.       Ensure the cause is real and there is a real benefit for recipients.

WHAT ARE GIFTING ARRANGEMENTS

Gifting Arrangements are powerful as they provide tax savings for people who want to contribute to great humanitarian causes.  Through Gifting Arrangements, Canadians can raise money much faster for charities and cases faster than most other fundraising vehicles.

The first thing you need to know is that CRA has announced that they will challenge all Gifting Arrangement Tax Shelters in Canada.  You will probably be reassessed. The key factor is to pick the winners that will be able to withstand CRA’s challenge and deal with CRA through out the years and likely win in Court.

RISKS WITH FLOW THROUGH SHARES

The main risk with Flow Through Shares is the Market.  If the market does not perform, then most likely your flow through shares will not perform either. You would really need to do due diligence with picking and choosing the companies you would like to invest in. In addition to this, Oil & Gas Companies and Mining Companies belong to different markets.  Therefore, if you have flow through shares in both an Oil & Gas company and a Mining Company, you would have to keep track and monitor both markets.

Having said that, however, the tax savings you will receive from your flow through shares could still make up for your losses if your shares do not perform. 

GOOD USES FOR FLOW THROUGHS

There are many benefits to utilizing Flow Through Shares. Here are some of them:

1.       Utilization of capital losses

2.       RRSP meltdown

3.       One time or large income years

4.       Eliminate OAS Claw Backs

5.       Become eligible for tax credits due to lower income

6.       Corporations with large income years

If you have any questions about flow throughs, please send me a message through the ask the gurus section! Look forward to hearing from you!

FLOW THROUGHS: A unique Canadian invention

Flow Through has been around in Canada since the 1950’s, and has stood the test of time.  This is an original alternative investment strategy that has been used by the super rich for decades. 

What is the difference between a Flow Through Share and a Super Flow Through Share?

Both Flow Through shares give you nearly 100% of your participation amount as a tax deduction.  The main differences are

1.       Flow Through Shares are in the Oil & Gas Industry

2.       Super Flow Through Shares are in the Mining Industry and give you an extra 15% Tax Credit on top of the tax deduction.

Next Page »