Happy New Year: 2015 is Brimming with Generous Tax Preferences

Happy New Year and welcome to a brand new tax year.

There is a lot to report on already, with generous new tax provisions and indexing changes that will line the pockets of Canadian seniors, families and qualifying small owners who sell their companies in 2015. These and numerous other tax changes will be discussed in detail at Knowledge Bureau’s Distinguished Advisor Workshops, held in Winnipeg on January 20, Toronto on January 21, Calgary on January 22 and Vancouver on January 23.

But for today, here are some highlights to take note of:

Owners of qualifying small businesses who sell or transfer shares in 2015 will be pleased to know the Lifetime Capital Gains Deduction has been indexed to $813,000.

Seniors who collect benefits from the Canada Pension Plan will enjoy a 1.8% increase in benefits due to changes in the Consumer Price Index over the period November 2013 to October 2014. This means that the maximum CPP retirement benefit will increase to $1,065.00 per month starting in January 2015 for a maximum pension of $12,780 for the year. This benefit is calculated on the average yearly maximum pensionable earnings for the last five years.

Those who receive the Old Age Security in January to March of 2015, on the other hand, will receive the same $563.74 amount they received in the last quarter. While also indexed to changes in the CPI, the indexing period for OAS is different. The Age Amount has also risen to $7,033 in 2015, being phased out when net income for the year reaches $35,466. MFA Retirement Income Specialists and their teams will want to review and equalize income generation for the 2015 tax year for couples whose combined pensions and investment earnings are in the $71,000 range to maximize the Age Amount. For those with higher incomes, the 22% federal tax bracket starts at $44,701. OAS Clawback threshold will be an issue in planning incomes as well, which this year starts at $72,809.

Families with minor children will receive more money from the government in 2015.  The Universal Child Care Benefit will increase to $160 for each child under the age of 6 ($1920 per year) and a new benefit of $60 a month for children ages 6 to 17 ($720 per year)  will be available, but the enhanced amounts won’t be paid until July 2015; that is, the extra $60 per month.  This means that parents with a pre-schooler and a 8 year old can expect to receive the following:

– For the pre-schooler:  January to June = an extra $60 per month = $360 plus the July payment of $160 = $520

– For the 8 year old:  January to June  = $60 x 6  = $360  plus the July payment of $60  = $420 or $720 for the year

That’s a total of $1300.  This makes July a great month in which to fund RESP or other educational savings plans for children.

In addition, families whose combined net income levels are less than $44,702 will receive a full Canada Child Tax Benefit of $1,471 for each of the first two children with an additional supplement for the third child for a total benefit of $1,574 for that child. Families with net incomes under $26,021 receive an additional supplement of $2,279 for the first child, $2,016 for the second and $1,918 for the third.

Further, because the amounts claimable for babysitting expenses will also increase by $1,000 in the 2015 tax year, and the Child Fitness Tax Credit will be refundable, DFA-Tax Services Specialists and their staff should be sure to consult with their clients in January to prepare 2015 tax estimations to review whether to reduce withholding taxes to account for these changes as well as the up to $2,000 Family Tax Cut.

It’s Your Money. Your Life. As you ring in 2015, include sound family tax planning in your New Year’s resolutions. It will pay off handsomely. The tax system in Canada has evolved to provide so many generous benefits for families of all types. It’s important for every family member to file a tax return to his or her very best benefit to receive every tax preference available. Then, because family net income is used to apply for many tax benefits, be sure to apply tax-efficient investment and retirement planning principles to ensure the receipt every tax benefit the family is entitled to. This will help to secure a sound financial future and the peace of mind that comes from every worry-free month.

Evelyn Jacks is President of Knowledge Bureau, a national educational institute focused on continuing professional development courses for advisors. See www.knowledgebureau.com for an invitation to the Knowledge Bureau Report, or register for professional online courses to shore up your knowledge on tax, retirement, business, succession and bookkeeping services.

Top Five Tips To Help You Recharge

We have all heard people say they would rather be at work than take a holiday. They dread the unmanageable email list when they get back from a few days off. Interesting, how easy it is to give up your joy to the demands of constant time pressure. Forgotten how to recharge? Consider these five tips for enjoying the holiday season this year:

  1. Turn off the work cell – if you must use your smart phone, make it about touching base and sharing the joy of the holidays.
  2. Celebrate – go ahead, sample anything with whipped cream or chocolate on it!
  3. Exercise – preferably outside, with a snow angel or two, weather permitting.
  4. Play board games – rekindle the competitive spirit, playing something really silly with all the kids.
  5. Count your blessings – true wealth is about peace of mind. That’s the by-product of having enough. . .do you have enough? Consider this carefully. Despite the daily news that reminds us there is much sorrow in the world, we have the opportunity in this great country to differentiate with our talents, enhance our communities with our values, and improve the lot of others by sharing something meaningful with them.

What’s the best way to do that? Cherish, appreciate, respect, and treasure. These are such great words, because they can so easily be transferred with simple gestures to the very special people in our lives, and it costs nothing to do so.

It would be good to bring these words and their underlying intentions to life every day in all of our relationships, of course, but during the holidays, we have a special opportunity to make them real.

Happy holidays, everyone, from all of us here at Knowledge Bureau.

Give The Gift Of Time: It’s Precious

It seems to sneak up on us every year: the Christmas Holiday season. Regardless of how you celebrate, it is a time to reflect, count your blessings, give, and re-evaluate how you will use your precious resources of time and money in the new year.

At Knowledge Bureau, we spend every day working on delivering excellence in financial education to highly motivated professional advisors who want to take their continuing professional development to an even higher level as masters and specialists in their field. For us that means staying on top of the most current issues in the Canadian economy, and how they relate to the development of Canadian tax laws and the wealth management activities that emerge from this.

To meet our mandate to improve the standard of skill and care your tax and financial advisors apply to the stewardship of your family’s wealth over time, we also have the pleasure of working with some of the most influential voices in the tax and financial services industry who participate in writing financial books with us, supporting our online certificate courses or teach in our regional Canadian workshops and at our annual Distinguished Advisor Conference.

To teach is a passion. It is about so much more than the size of the tax refund or the specificity behind the investment decisions relating to transition periods through family lifecycles: it’s about ensuring Canadians can have financial peace of mind– now and in the future – so that they can maximize the time they have to make a difference and create lasting memories.

That’s true wealth management. . .it’s about managing your financial capital so that your human capital can be well deployed to lead a balanced life. It’s tough to do when everyone is so busy, but it includes taking time off to really enjoy the season with those who matter the most to you in your life.

All of us here at Knowledge Bureau wish to thank you for supporting our passion to teach and raise standards in the tax and financial services. We hope you too can give the gift of your time, and take some of that back for yourself as you slow down for the holidays.

We wish you safe and HAPPY HOLIDAYS and all the very best for the new year!

CRA Security Breaches: Taxpayers Must Be Able To Rely On Privacy

Canada has a taxation system that is based on self-assessment. We are required to accurately assess income, deductions and credits, filing our tax returns on time, or face penalties, interest and/or jail in serious instances. This system has served us well, with the vast majority (over 90%) of Canadians filing and paying their taxes on time. One of the reasons we are so compliant as a nation is that we trust in the confidentiality we are promised under our Taxpayer Bill of Rights.

Here’s what it says in Right #3: You have the right to privacy and confidentiality.

“Under this right, you can expect us to protect and manage the confidentiality of your personal and financial information in accordance with the laws we administer, such as the Income Tax Act, the Excise Tax Act, the Excise Act, 2001, and the Privacy Act. Only employees who need your information to administer programs and legislation have access to your information. We also take other steps to protect your information and make sure it is kept confidential. For example, we follow government-wide and internal policies on the security of information and privacy. We also regularly review our internal processes to make sure your information is safe.”

It’s entirely possible these internal processes are up for review now. Recent security and privacy breaches at CRA are more than eye-brow raising – they are alarming. Last week, the CBC reported human error was to blame for leaking confidential donation claims to the CBC, which published the names of the individuals affected by the breach. The event drew a number of responses, including this one from the former Ontario privacy commissioner Ann Cavoukian who told the CBC that she was “outraged” to learn of the breach. “It’s completly unfathomable,” she said. “Perhaps you have to discharge certain employees… You need a complete overhaul, top to bottom.”

This news story goes on to say that “a total of 168 federal privacy breaches have been reported since April 1, including 22 from the Canada Revenue Agency, making it one of the worst offenders. In October 2013, Canada’s privacy commissioner noted “numerous reports of privacy breaches involving employees inappropriately accessing taxpayer information in recent years,” and “weaknesses in key privacy and security practices that led to taxpayer information not being protected as it should, with thousands of files being accessed inappropriately for years without detection.””

CRA notes on its website that those who feel that their right to privacy and confidentiality has not been respected, should contact the Access to Information and Privacy Directorate, Ottawa Telephone: 613-960-5393 (Ottawa-Gatineau), 1-866-333-5402.

If not satisfied after first contact, a complaint can be filed with CRA – Service Complaints. Or, if still not satisfied, a complaint can be made directly to the Privacy Commissioner of Canada 3rd Floor, Tower B, Place de Ville, 112 Kent Street, Ottawa ON K1A 1H3, Telephone: 613-995-8210 (Ottawa-Gatineau), 1-800-282-1376.

Breaches of confidentiality are also addressed on the website. Specifically, taxpayers are told:

“Contact us at once if you believe that the confidentiality of your information has been compromised or that your information may have been shared with someone whom you did not authorize to represent you. If we confirm that your information has been compromised, we will act to prevent the fraudulent use of the information in our systems and processes.”

The promise is important. A tax system that relies on honest self-assessment by taxpayers and requires that this responsibility be met with consistent accountability, must itself be prepared to display exemplary standards in its responsibilities to ensure privacy and confidentiality as well as fairness and equity in return.

It’s Your Money. Your Life. It remains to be seen if CRA will indeed act to prevent further breaches and how they propose to do so. This story is, however, a reminder that now is a good time to review systems and procedures in your own family and business to ensure the privacy and confidentiality of financial information. Don’t hesitate to secure the help of qualified professionals to make sure your privacy rights, and those of family members, business suppliers and employees, are not compromised. And, you may wish to make sure that any requests for information by CRA are first received in writing to confirm that they are official.