Canada Money CA

In Canada there is a type of investment called a guaranteed investment certificate. This investment offers the investor a rate of return that is guaranteed, over a fixed period of time. For example, if invested for three years the rate of return will be 25% regardless of what occurs in the markets. Because of the GIC rates, this has become quite a popular type of investment within the Canadian banking industry.

The main draw card of the guaranteed investment certificates or GICs is that the rate of return is guaranteed. A lot of people look at this as a great way to invest their money in something they are sure will give them a good return as opposed to stocks or bonds which while able to give a large rate of return can also yield a low rate of return because of the volatile markets which they are set in. Because of the nature of guaranteed investment certificates they are seen as a low risk investment unlike the stocks and bonds which are seen as a high investment.

In terms of the GIC rates that are used, the percentage is often dependent upon the type of certificate as well as the length of time that the certificate is invested for. For example, you will have a higher rate of return and rate of interest earned if you leave the GIC invested for ten years as opposed to three years. The length of time one invests for can vary from six months to ten years. It is all dependent upon the personal choice of the investor.

Another contributing factor that helps to determine the interest rate of the guaranteed investment certificate is the interest rate that has been specified by the Bank of Canada. These rates cannot be altered and will have a heavy influence on the rate of interest earned for each certificate.

However if you opt for the market growth or stock indexed guaranteed investment certificate, your interest rate is determined by the amount of growth of a specific stock within the market. This type of certificate is also seen to be a low risk investment when compared with stocks and bonds but can also be seen as slightly high risk when compared to the standard GIC.

If the stock makes big gains then the likelihood of having a great amount of interest is certain. However should the stock not make any gains or even make losses for a certain period, you can have a zero percentage balance of interest. Another drawback is that you can only have a maximum of 25% return over a period of three years.

Whether you go for the registered or non-registered guarantee investment certificate, it is definitely a safer way to ensure that the money that you invest will yield a good return of investment after a number of years.

Once the certificate matures, you can always decide if you want to cash it in or renew it for another period of time. Make sure that you get good GIC rates.

When you’re deciding to buy a house, some of the factors that you have to take into account are mortgage rates. As mortgage rates are important for home-buyers, GIC rates are important for investors. If you’re interested in a customized financial plan, remember to visit us.

GIC FAQ:

Question: If I were to invest in GIC RRSP, can it be withdrawn without penalty if used to purchase a home?
I’m considering transferring my RRSP funds to a 5 year GIC RRSP within my banking institution. The interest rates are simply much higher than my RRSP. My intent is to use this money towards a home purchase in 2 to 3 years and I was wondering if there is any disadvantage or tax penalty involved in such a move.

Answer: There is no tax consequences as long as you keep the funds in a registered RRSP account. You can even transfer between financial institutions. If you qualify you may withdraw up to $25,000 from your RRSP tax free but if you cancel your 5 year GIC there may be penalties. Check with your financial institution.

Question: How to claim U.S foreign tax credit on Canadian GIC investment income?
I have to file tax returns for both U.S and Canada. I’m a Canadian but is treated as U.S resident alien for the past year. I have T5 for the GIC investment income, do you know how much I can get the U.S foreign tax credit from that income?

Answer: A foreign tax credit goes on line 51 of a form 1040. You might also need to fill out form 1116.

Question: 5 Year GIC Help? What is a GIC?
I just put $1510 into a 5 year plan. I Want to know at the end of the 5 years can I just take the money and interest and run or is it like something to do with retirement?

Answer: GICs are very similar to bonds. After the term is finished (in this case the term would be 5 years) you are free to walk away with the original investment and the interest that the investment has accumulated. So you get to keep the interest and the $1510. It does not have to do with retirement.

Question: How much do you invest in GIC’s each year?
Usually, I’ve been putting away my tax returns once I get them but this year I’m hoping to put away a few thousand more. Would you suggest a GIC for more then 1000? Or something else, as long as it’s outside a RRSP.

Answer: It’s all a matter of risk tolerance. I don’t buy any GIC’s because the interest paid is too low.

Question: Need Help Doing Interest On a 5 Year GIC?
So the Amount Invested Was $1,510

Year 1 Interest Rate Is 0.5000
Year 2 Interest Rate Is 1.2500
Year 3 Interest Rate Is 2.5000
Year 4 Interest Rate Is 2.7500
Year 5 Interest Rate Is 5.0000

I want To Know if I Leave it There For the Full 5 Years with out Ever Touching It How Much Am I Going to Make?

Answer: If the rates are in percent then $1,510×5%=$1,585. A gain of around $75.50

Question: Interest gain on a GIC do I have to claim?
My child’s grandma passed away she left some money behind for him. The estate put it into a GIC in his name but in C/o myself since he is underage. My question is do I have to pay the interest gained on this? We got a T4 (or whatever it is) showing us interest to claim. Is this right since its not really our in the first place? And who got to claim the investment in the first place, the estate?

Answer: The estate never ‘claimed’ the investment, whatever you mean by that. They made the investment, but the benefit was solely for your child. Unfortunately, if they paced the GIC in your name jointly, you will have to pay the tax. It should have been placed in the child’s name in trust, which would have kept the interest in the trust and to his account.

The estate has the option of taxing the income in the estate, which is what they should have done instead of issuing a T3. You can advise them to do this for next year. It’s called a designation under subsection 104(13.1) of the Tax Code.

Question: What kind of GIC should I get?
I am 15 and I am wanting to put my money in a GIC. Which GIC would get me the most amount of money in the shorter period of time? I am going to put in 1,000 dollars for at least a year.

Answer: GIC’s don’t pay much in interest. Speak to a financial professional and look at a better investment like a mutual fund or Segregated Fund or something the returns will likely be higher. Otherwise, find a market linked GIC….you can get all of the gains, but none of the losses of the market.

Question: If taxes are collected on GIC’s what is the percentage that is taken?

Answer: Income taxes are not normally withheld by the financial institution paying interest on the capital invested in GIC’s. This interest is however subject to personal income tax if you are a resident of Canada. The amount of tax that you will pay on this interest income is a function of your personal circumstances including the level of income you earn from all sources inclusive of the interest earned on any GICs. It will also depend on your province of residence since, total marginal income tax rates vary by province.

If you want to buy a house and you find that you are living in Canada then you have to consider the possibility of getting a Canadian mortgage. While it is something that you might not want, this is perhaps the only option that you are going to have. Mortgages are given on behalf of people by a bank when they want to buy a house. It is usually as a result of the fact that they do not have the ability to pay for the house themselves.

So the bank will front the money for the house and then the person on whose behalf they have done this will have to pay the bank back. Until they have done this with the full amount of interest as well, the house will actually belong to the bank and this is the way that it works all over the world.

So if you think about the Canadian market at present, you might be interested or surprised to hear that there are now five million people in the country that have mortgages out on their homes. This is as a result of the economic situation and it means that not all of these people were new home buyers, some of them have been forced to use a mortgage as a way of helping them survive as they did not have any other way of doing it. Right now you are also likely to find that interest rates are quite high and there are probably quite a lot of people who are questioning whether or not they have done the right thing in taking on more debt.

Deciding to take out a mortgage should not be a matter of a quick judgment. You should really make sure that you give yourself ample time to take a whole lot of factors into account. This does not mean that you are only going to look at the amount of money that you have borrowed. You also need to decide what amount of time you will take to pay it back and of course there is also the interest rate to take into consideration. The length of payback time and amount of money that you borrow are going to have a direct impact on the interest rate that you are likely to receive.

Given that the current state of the economy is not so good, there are many money lenders that have gone bust. In addition to this, the requirements for getting credit are now a lot stricter. All of this is good but could really slow down the way in which the market grows. This is something that now the Canadian Mortgage and Housing Corporation is there to stop. It provides insurance for those people that want to buy a residence using a mortgage. They don’t do it for a business though.

The Corporation does more than this though and is also a great source of accurate information on the housing market in Canada. They will also help to finance projects that are focused on the renovation of properties and promote the development of housing.

One could say that homeowners in Canada have a lot of things to be thankful for and this is true if you think about the fact that their mortgages are guaranteed. It is a great comfort in a time where there are many people that are just unable to get their act together financially. It is important to protect homeowners in this volatile market and this is what is happening in this country. If you want to get a Canadian mortgage then this is probably one of the best times to do it.

When you’re deciding to buy a house, some of the factors that you have to take into account are mortgage rates. As mortgage rate is important for home-buyers, GIC rate is important for investors. If you’re interested in a customized financial plan, remember to visit us.

Mortgage FAQ:

Question: How does US Citizen get Canadian Mortgage to build a home?
I’m trying to move to Canada in the next few years, and would like to build a home there. Already have property but having trouble finding financing to build on it as I am not a resident, have great US credit but no Canadian credit! Any recommendations on Banks that will consider my US credit history and not require a cosigner?

Answer: Get your citizenship and then you’ll have no problems finding a bank. Try Scotia, TD, BMO, RBC, or CIBC. Scotia, TD, and Bank of Montreal (BMO) are likely to be of most help for you.

Question: Can a Canadian obtain a mortgage from a US bank for a house in Canada?
With US mortgage rate dropping and a strong Canadian dollar, I am interested in finding out if I can have a portion or all of my mortgage from an American bank. Is this feasible?

Answer: Yes this is possible. Many banks lend in multiple countries. This is more prevalent in the residential market.

Question: Canadian mortgage deductable for US tax filing?
I am a Canadian citizen and own a house in Canada. I was wondering if the morgage interest for the canadian mortgage is deductable when I file taxes in US?

Answer: Yes, if you are filing resident tax return. This deduction is itemized deduction. You will take deduction only if your itemized deductions are more than your standard deduction.

Question: I’m relocating to Seattle from Toronto. Can Canadian obtain a mortgage and buy property straight away there?
We don’t have any mortgage in canada but we qualify for one anytime. Does the RBC Canada and RBC US connected somehow?

Answer: You likely will have to get a mortgage from the US branch of a Canadian bank as the US banks will not check your Canadian history.

Also it depends what visa you are on. Most US banks will not give you a mortgage if you are in the US on anything other than a permanent visa (green card). A TN visa or H-1B are not good enough as you are not guaranteed to stay in the US long enough.

RBC US is the Royal Bank. TD Waterhouse in the US is TD Canada Trust

Also most US car insurance companies will not check your Canadian driving history and they will treat you like a 16 year old new driver. In California, I found Mercury Insurance will check a Canadian driving history if you nag them.

Question: Can a US citizen working in Canada deduct US mortgage interest off a Canadian tax return?
I am a US citizen working full time in Canada with no income from sources outside of Canada. I own a home in the US and pay mortgage interest on a US loan. Is there any way this can be deducted from my Canadian return?

Answer: If this is personal use property, no. Canada does not allow a deduction for mortgage interest.

If this is commercial property (e.g. a rental on which you declare rental income), then the interest is a business expense. But since you say you have no income from sources outside of Canada, this is not the case.

Question: Does anyone know how to convert your Canadian mortgage to be tax deductible?

Answer: Mortgage INTERESTS (NOT CAPITAL) are tax deductible in Canada, however only for the portion of the building you RENT OUT. You cannot deduct mortgage interests for a house which is your residence. For example, if you own a duplex and you occupy 50% and you rent out the other 50%, fifty percent of your mortgage interests, along with many other rental expenses would be tax deductible. To know which expenses you can claim, visit the CRA website.

Question: Can you get a mortgage with a US bank for a Canadian property?
I’m purchasing a new home, and I’m wondering if I have any options with going with a US bank for the loan/mortgage. I am a Canadian citizen and the new home is in Canada.

Answer: By all means check but I would guess that reputable lenders would be leery of it. If you default it would be a big hassle for them to foreclose on a property in Canada. It sounds like US banks aren’t really keen to lend to anyone these days.

Question: What access to CDN assets does a US mortgage company have when a Canadian citizen defaults on a US mortgage?
We own a property in Florida that unfortunately does not make financial sense to try to keep. We will likely walk away from the house and default on the mortgage. What access will the mortgage company have to my assets here in Canada, and what are the possible repercussions?

Answer: I would ask an attorney this question. Typically, most states have laws that require a mortgage company to only one solution for the mortgage. If they opt to foreclose on the home, then any other option may not be viable. For example, in California that is what happens. A home can either be foreclosed on as the only remedy or the mortgage company can release the lien on the home and go after the owners other assets, but not both options together. Again, contact an attorney about this.

Cash loan in Canada is a fast and convenient way to receive cash instantly. There are numerous lenders of Canadian payday loans on the net. When you have an emergency payment pending and you are short of cash, then the best option available for you is to take a payday loan of a few hundred dollars and return the amount taken on your payday, when you receive your monthly salary. This way, you can conveniently meet your emergency requirements and still have cash in your hand for your monthly expenses.

These loans are taken to cover the cost of small utility bills like insurance, travel, medicine, school fees and the like. It is very important to pay all your bills on time to maintain your credit score, therefore, taking a fast payday loan is the best solution to pay bills that can not wait till your salary day.

Internet Application

You can easily apply for a cash loan Canada on the net. There are many websites of lenders offering you convenient terms, to apply for hassle free loans. The growth of money lending industry has been phenomenal over the past few years, and millions of borrowers are looking up to these agencies for redress every month. But, along with growth, it has received some negative publicity as well. The reason is the interest rate charged for these loans, which is much higher in comparison to traditional loans provided by banks and other financial institutions. But then, it has many advantages over the conventional form of taking loans.

The procedure involved is simply filling an online application, you get your loan amount in 24 hours and the loan amount is just a few hundred dollars. All these are plus points over traditional loans. There is no harm in taking payday loans, if you make your repayment on the due date. The problem starts, when you are unable to make your repayment on the due date and ask for a roll over to the next cycle.

Since the interest rate is high, the interest amount simply doubles on the next due date. This way, it will become more than the principal amount in a few weeks time, if you continue to ask for a roll over. Therefore, you must keep this option as the last resort for acquiring quick money.

Smart Borrowing

If you take proper measures to repay the loan on time, then a cash loan is the best option, through which you can get finance so conveniently and so quickly. You just have to select a reputable company on the net and fill an online application form, with details of your employment status, your personal details and your bank account number. You will get your loan approval in a few minutes. You then have to confirm the terms of the loan and get your loan transferred into your account immediately.

Click here to find cash loan lenders in Canada [http://www.speedypaydayloan.ca/payday-loan-company.html] using online facility. Bad credit payday loans [http://www.speedypaydayloan.ca/bad-credit-paydayloans.html] provide instant cash with no credit check required. When an emergency arise you can always turn into cash in advance loans [http://www.simplypaydayloans.co.uk/cash-in-advance.html] for quick money until payday.

Cash Loan FAQ:

Question: Charges on cash loans that are the fault of the loan office (moneymart)?
If a person was told the repayment of the loan would not be taken out of a bank account before a certain time, and then it was and the person is now being charged for a returned cheque, would the customer be held responsible for that fee? Or would Moneymart because they said it would not be taken out of the bank account until a later time?

Answer: If you have a written agreement as to when payments would start then I am sure the company (Moneymart) would be responsible for the overdraft fee.

I would make sure you have a written agreement with Moneymart and then I would obtain a copy of your bank record showing the time and date they tried to withdraw money. I would also get a statement showing who penalties you had to pay. I would take this to Moneymart and try to get it resolved with one of their managers. I could not imagine them refusing to pay if you have all the documentations.

Question: Where can I get a personal loan with bad credit, Canada?
I have bad credit, I want to repair. The fiancee is in school, I have gotten myself into a cycle of payday loans and late payments. I want to get out of this hole with something that would allow me to make longer term payments rather then every payday, anyone know a place?

Answer: You will not qualify for a loan. Scrimp and save, get another job, sell some unused items, put in for an early tax refund. Payday loans are the worst predators for gouging people that don’t have other options.

Question: Can you go to jail for not paying back a payday loan?
I have paid so much interest that it more than covered the loan. I was in and out of the hospital and could not afford to pay anymore. The payday loan place said they were calling the police and pressing fraud charges because it was over $500.00. Can they do this and is it legal?

Answer: No, for $500 they will not send you to jail, and will never pay an attorney his fees to prosecute you for that megar amount. You should call them and say you need a payment arrangement. Then call your state’s consumer affairs division and explain the harassment. Put their phone number on the do not call list, to stop the harassment. Call your phone company and tell them they are harassing you. Document every thing I mentioned and just keep notes on all your calls, and action with this compnay. The state you live in may want it one day, if any law suits are pending.

Question: Is cash loan network a scam?
My dad got this mail from cash loan network. He wanted me to sign up for him since he needed the money and doesn’t speak very good English. So when I did it and I thought it was a scam. So I went all the way to the bottom to click remove me but then when I did, it went back to the page where I first filled everything in. Will my dad get scammed? I didn’t fill everything in so that’s a relief. I just went like half way. It didn’t say complete or anything.

Answer: That depends on what kind of information you put on the form already. If you entered his social security number, bank account information or any other sensitive information then YES, be scared. These sites can and will capture any info you put into their forms, even if you don’t submit. You already noticed that something was wrong when you tried to click the “remove me from list” option and it did not work.

If you gave away sensitive information then you need to take precautions. Put your fathers credit report on fraud alert and you might have to close his bank account and open a new one for him. Same goes for credit card info. Call the credit card company and put the account on alert or simply cancel the existing card and order a new one.

And one more thing, there is no legit online bank that would loan you money. A real bank will do a credit check and any fees, etc. are built into the loan and you pay them back with your regular monthly loan payments. You do not send money to a legit bank first to get a loan.

Question: If I kept a single job for 3 years, is there a cash loan center where I can get a 10,000 dollar loan?
Is there a dollar loan center where I can get a $10,000 dollar loan if I hold a job for 3 years? How much a month might I have to pay back monthly? How many thousand dollars might I have to pay back in total, or what percent of the amount I took might I have to pay back.

Answer: It is unlikely that there is a cash loan center out there that will give you that much, regardless of your work history, if you do not have a credit history with them. Most of those types of places will only give you a couple of hundred dollars unless you have a long history with them.

If you have a decent credit score and something to use as collateral, go to your bank, which is more trustworthy.

Question: Anyone know a cash advance pay loan?
I keep getting the sites that send you to other sites. Any out there that just tell you if your approved or not, without sending you to another site?

Answer: Getting a PayDay loan is not a smart move unless you have absolutely no choice. The fees incurred are ridiculous and you end up further behind then you were in the first place.

Question: Do you think merchant cash advances are a good idea?
In my search for a loan to remake my salon, I came across “merchant cash advances” is this a good idea?

Answer: Be wary of any loan off the Internet. Any firm that promises to qualify you for a loan as long as you give them an up front deposit is a scam.

Credit cards are a horrible way to finance anything…the terms can change at any time. If you need financing, go to your local bank. If you can’t qualify, then now is not the time to make changes.

Question: Being sued for payday loan! Help!?
My friend is being taken to court for multiple felonies for bounced checks from a payday loan taken out and not paid two years ago. She is still in school and can’t pay it off. What should she do? What is the worst that could happen?

Answer: First, are you sure that this is a real, confirmed legal threat? Has your friend been officially served a summons with a confirmed court date and court docket number? If this is a real legal threat, try to pay off the debt prior to court. If she does not have the money, then be sure to show up in court. Not showing up in court is the worst mistake she can make.

Remember that the government only represents about 30% of our retirement income, the company retirement pension plan offers another 30% and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. Now you reach the year of RRSP conversion year, you are facing the choice to choose either to convert your registered retirement saving plan to RRIF or annuity. In this article, we will discuss the advantage and disadvantage of RRIF and annuity.

I. If you qualify for the following sources of retirement income, you would be wise to consider an RRIF:

1. Old Age Security (OAS).

2. Canada Pension Plan (CPP).

3. A company pension plan.

4. Other non-registered assets.

You would be wise to convert some of your RRSP into RRIF because you will be better able to afford the flexibility and control for tax-and estate-planning purposes that a RRIF allows because your monthly incomes are guaranteed by 4 sources above.

You may consider staggering maturity so portion of your investment in RRIF will generates the necessary cash flow for withdrawals such as buy GICs or bonds so that 20% of the total matures every year.

In RRIF, you are allowed to invest up to 100% of your investment funds in global investments, thereby increasing your investment’s long-term growth and protection? You also protect your investments against any future declines in the value of our Canadian dollar. Besides, it is far more risky to leave all your money in any single country.

Be sure to consult with professional or independent adviser to assist you in building your investment plan and review your plan at least once each year.

II. If you don’t qualify for four of the retirement income sources

You might want to use at least some RRSP funds to buy an annuity as a foundation for your retirement income plan. This provides guaranteed income to cover your minimum retirement income needs.

I hope this information will help. If you need more information of insurance or series of articles of the above subject at my home page at:
http://medicaladvisorjournals.blogspot.com
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/

All rights reserved. Any reproducing of this article must have the author name and all the links intact.

“Let Take Care Your Health, Your Health Will Take Care You” Kyle J. Norton

I have been studying natural remedies for disease prevention for over 20 years and working as a financial consultant since 1990. Master degree in Mathematics, teaching and tutoring math at colleges and universities before joining insurance industries.

RRIF FAQ:

Question: My friend withdrew a large sum out of her RRIF and no tax was withheld at source?
Contacted Revenue Canada and was referred to General Guide but it was no help. She owes a lot of money and she does not have it. If this is a mistake I can request an interest free loan to pay these taxes for her.

Answer: I’m assuming you’re referring to an amount in box 24 of the T4RIF slip she received? This is reported on line 130 of the T1. The fact that tax was not withheld from the payment is not an error on the part of CRA, but the institution where the RRIF is held. Therefore CRA will not make accommodations other than to set up a payment plan. Normal interest will accrue. She definitely needs to contact them to set this up as soon as she receives a Notice of Assessment.

It is VERY important to file her return on time if she will not be paying her balance immediately, as CRA will add penalties in addition to interest.

Question: Can you purchase a rrif before age 60?

Answer: Yes you can.

Question: How soon must one withdraw amounts from rrif if only 65 years of age?

Answer: Do you have a RRIF now or are you transferring your RRSP to a RRIF? You need to transfer out of your RRSP by the age of 69 and transferring them to a RRIF is the best option. I have not heard of any age limit for a RRIF.

Question: How much tax are you expected to pay at retirement?
How much is the withholding tax on RRIF’s? Should you still maximize your RRSP contributions in the few years prior to age 65+ to take advantage of the tax-free growth and tax deduction, even though at 65+, you will be in a higher tax bracket due to income increases (RRIF withdrawals+ pension+investment income, etc.)? In other words, should a low-income, quasi-senior still be sacrificing for savings when the taxman might take just as much away anyways? I am thoroughly confused.

Answer: This is a complicated question. New thought is that if you are not going to accumulate a minimum of $100,000 in your RRSP then it’s not beneficial to contribute. This is because you will receive minimal benefit from the current tax write offs and tax free growth, but could suffer a loss of social benefits in retirement once you begin drawing on the registered savings. Things like Old Age Security supplement are clawed back at relatively modest income levels.

However, if the same money that was going to go into an RSP was invested in a non-registered plan the only income in retirement would be the actual investment income.

I strongly suggest you go meet with a financial planner and discuss your concerns. Then go talk to a second one after that.

Question: What tax form will be used to confirm a 25% repayment of RRIF withdrawals in Canada?
While it was a thoughtful and lenient provision in light of market losses, I do wonder about the expense of creating a form that will only be used in one taxation year.

Answer: It wouldn’t be the first time that a Form was created for a single year use. Many accountants will remember an election for Capital gains that was only available in 1994.

In either case, there is no form for this. What people will use for verification is the documentation provided by their financial institutions. The amount repaid will be claimed as a deduction at line 232 of the income tax return.

Question: Contributing to Your RRSP, Right Up Until Retirement?
If you have room to contribute, should you buy RRSPs right up until age 69, even though you are in a low income bracket?? Are the tax savings (and potential investment growth) worthwhile, even though at retirement, you will be forced to withdraw and the tax on RRIF and pensions will be as significant? (possibly putting oneself in a higher tax bracket?) Don’t know how to plan this out.

Answer: You need to consider how much you’ll save on taxes NOW, by contributing to your RRSP, and letting that money grow tax-free, vs how much you’ll pay in taxes when you withdraw the money at retirement. An RRSP is not always the best retirement vehicle for everyone. If you will have significant income at retirement due to pensions, then it may be best to invest the money outside of an RRSP

So I’ve completed some of my Tax Free Savings Account (TFSA) homework and already I’m impressed. If you don’t already have one set up, hopefully by the time you finish reading you will understand you need to get an account established. Just to warn you, if you haven’t already set one up, it’s not a race, you actually should do some of your own research first as there are many options. As always, some options are much better than others are.

To start with, many people are wondering exactly what is a TFSA and how does it work? When I started researching, I was expecting a very complicated answer to this question, but as it turns out, it’s surprisingly simple. It also has some very promising long term implications as a savings/investment tool.

A TFSA is a special savings account that can be opened by anyone who is a resident of Canada 18 years of age or older. This savings account has a current contribution limit of $5,000 per year and any growth in the principal is completely tax free. This $5,000 is indexed to inflation, but will never decrease below $5,000, so over time you will be able to contribute more in some years and potentially this limit will increase each year.

The part that gets interesting is you can hold the same types of investments in your TFSA that you would also be able to hold in an RRSP. Traditionally this would be mutual funds, GIC’s, bonds and publicly traded securities. Many people are unaware that they can also hold Arms Length mortgages, Mortgage Investment Corporations (MIC’s), or other real estate secured financial instruments in RRSP’s as well which can also be held in a TFSA.

While mutual funds and securities can be quite volatile as everyone has seen with the stock market lately, GIC’s and bonds however are quite stable with their returns. The problems with GIC and bonds are there is so little risk that the returns are low single digit and after inflation you end up almost breaking even, which is not how you get ahead with an investment.

Opportunities like MIC’s and Arms Length mortgages however tend to be slightly riskier, but are attached to property which I consider very secure, and tend to have fixed yearly returns of high single digit and low double digit. Coupling products like these with compounding interest inside a TFSA creates an opportunity for individuals to generate significant growth over time all tax free.

If you consider a couple each investing $5,000 per year in their TFSA and generating a 10% per year return after ten years the $100,000 invested by the couple would be worth $175,000 and is all tax free. Now if you compare this same situation to a $5000 yearly contribution to an RRSP, with the same yearly growth, you would also have the same amount of money at the end, but when you are forced to withdraw it from your RRSP, you would then be taxed on the entire amount!

I’m not positioning this as the end of RRSPs, but as a complementary tool to utilize if you currently have RRSP’s. Or if you don’t use RRSP’s to take advantage of the deduction, you can use the TFSA to save future taxes.

Some great options you have with the TFSA that really help seal the deal is the ability to withdraw from the account at any time and then re-contribute this withdrawn amount back in future years. This allows a younger person just starting out to potentially use the TFSA to save money for a down payment on a house tax free. Or a family could use it as an emergency fund that grows tax free.

Another appealing aspect is carrying over any unused contribution room. If you only have $1,000 to add to it next year, you could then add $9,000 in the following year. This will negate much of the value of compound growth, but will also allow you to contribute more in profitable years, and less in slower years, without being penalized.

Now as you are probably aware, every bank and trust company you can find in Canada seems to be offering to set you up with an account. The part you need to be aware of is that the majority of these institutions will only allow you to place these funds into the limited financial instruments like GIC’s, mutual funds and bonds that they offer. If your goal is to put a certain security fund or MIC into your TFSA, you better be sure you are allowed to do that through the institution you are working with.

Much like RRSP’s there are also some companies allowing you to set up self directed TFSA’s, but if you establish your account with one bank, you may incur additional costs transferring it over to another place. This will require you to have a plan prior to randomly starting the account at your closest bank.

I hope you can see some of the positive possibilities available through setting up one of these accounts and I have managed to get you a bit excited about this. I’m currently looking into more information about some of the MIC’s as I think this may be one of the better options to get started with for people. They are have slightly more risk than a GIC, significantly less risk than most mutual funds, and provide a pretty stable return to grow your investment.

So I have now walked you through the basics of Tax Free Savings Accounts, I’m sure I have now opened a new topic with the option of MIC’s and many of you may be wondering how and where to get information on these. Well don’t worry I won’t leave you hanging with this either. I’m working on information on this as well, so if you want to get updated on this make sure you leave me a comment, email me or give me a call.

Bill Biko http://www.investors.housez.ca

[email protected]

Helping People Generate Their Own Wealth. Visit our blog to find out more!

Tax Free Savings Account FAQ:

Question: What is a tax-free savings account in Canada?
I saw an ad at my bank about opening up a tax-free savings account. That surprised me, because how is the government supposed to know how much you have in your bank account? I never saw that anywhere on the tax forms. I thought the government only taxed you based on how much you make per year. What does a tax-free account mean and should I get one?

Answer: If you have a bank account and earn interest on your money, that interest is taxable. So if you have a lot of money in the account and make, let’s say $200 in interest, that $200 is taxable. The government will know how much you made in interest because the Bank will tell them and issue you (and the Gov’t) a tax form indicating how much money you made in that account.

A Tax Free Savings account is one where the money you earn on your savings (the interest) is NOT taxed; you get to keep it all. You will likely have a maximum of $5000 that you can put into such an account each year (which is more than most people need) and all the interest grows without being taxed. The bank will register that account with the government so they know there will be no tax owing on the interest you make. It was established to help encourage people to save for retirement.

Question: I have vested Restricted Stock Units. Is it smart to transfer them (in kind) to a tax free savings account?
I’ll probably sell them in 3 years or so and I expect that they will increase in value.

Answer: If you transfer any property into a TFSA, you will be deemed to have sold them at whatever their fair market value is on the date of transfer. In the case of stock, this would normally result in you having to report a capital gain. You would not be able to claim a loss as the TFSA would be considered an affiliated person, and the transaction would fall under the superficial loss rules.

Is it smart? Well, essentially, you would be stopping any taxes that will accrue on gains after the transfer. In addition, you would no longer be taxed on any dividends that are paid from the stock as these amounts would be paid to your TFSA. That last would not necessarily be an advantage due to you having lost the ability to use the dividend tax credit.

You’ve got a decision to make, an a few things to consider before you do it.

Question: What’s the best way to save my money?
Which is better for a short term savings? I have $4000 to put aside for my wedding in 2 years. Should I put it in a GIC or a tax free savings account?

Answer: I would avoid GIC’s as they are paying next to nothing on a 2 year term. A proper TFSA should be used for your goals, not one of those interest baring ones.

Question: Putting more money into a TFSA than $5000?
I was looking for a short-term savings account and ING offers one at 3%. It’s their tax-free savings account. It says you can put up to $5000 a year into these accounts, tax-free. More than that and it is taxed.

Does anyone know how much additional amounts would be taxed? On revenue canada’s website it says: “If, at any time in a calendar month, there is an excess TFSA amount in your account, you will be subject to a tax of 1% of the highest such amount in that month.” Which is very confusing. Does this mean my investment will be taxed 1% per month or that the interest earned will be taxed 1% per month?

Answer: Revenue Canada will tax the highest excess balance of the month at 1%, not the interest.

Question: Can I transfer money from my checking account to my tfsa account?

Answer: If you haven’t already maxed out your TFSA, sure! Check your financial institution for what vehicles are available for TFSA investment. Doesn’t matter whether the money is coming from chequing, savings, etc…the only thing that matters for TFSA is the $5000 cap, and where to put your funds into (GICs, stocks, mutual funds, etc.)

Question: TFSA Clarification contribution room allowance?
I have maxed out 5K in 2009 in stocks in the TFSA. In 2010 lets say the stock grew to be worth 20K with the 5K allowance for the new year. If I sold that stock and reinvested it into another set of stocks would the government consider that as excess contribution and make it taxable? Ie. Only be able to buy only 10K worth of stock (2009 5K + 2010 5K

Answer: No your contribution limit has nothing to do with the amount of growth in the plan. Your contribution room at the beginning of the year is equal to unused contribution from previous years plus withdrawals from previous years plus your yearly increase in your dollar limit.

Question: Can I buy an RRSP then shelter it in a Tax Free Savings Account?

Answer: Getting into the technical aspects of this, an RRSP is not an investment. An RRSP is an investment holder and shelters the income generated. A TFSA does the same thing, but in a different way.

That having been said, an RRSP can hold the same type of investment as a TFSA, but the same property cannot be held by both at the same time.

So, no. An RRSP cannot be sheltered inside a TFSA, because an RRSP is already sheltering some sort of investment.

Question: Is the $5000 limit on TFSA automatically available to everyone?
Or does the individual have to earn, say, over $5000 of income during the tax year?

Answer: You can open a TFSA regardless of your income. The annual limit for 2009 was $5,000 and will go up with inflation in future years. If you do not use your full $5,000 you will be able to accumulate it and use it in future years. If you withdraw money from your TFSA, you can make up your withdrawals.

A TFSA can be in the same form as an RRSP account, so mutual funds, etc. are permissible.

With the economy going the way it is practically everyone is becoming self-employed these days. According to Industry Canada’s Small Business Quarterly, the number of self-employment workers increased by 40,000 to 2.633 million from 2008 to 2009, an increase of 1.5 percent. But are you really self-employed? Yes, of course the guy who is paying you tells you, ‘its ok, you are self-employed’. He calls you a contractor and even has you sign a contract but does CRA (Canada Revenue Agency) think you are self-employed. It is an important question to ask yourself because you may end up being reassessed on the basis of your employment status. This would mean some or all of your deduction may be disallowed by CRA.

Employment status directly affects your entitlement to EI (Employment Insurance) and CPP (Canada Pension Plan). If you are an employee, the payer is considered an employer. Employers are responsible for deducting CPP contributions, EI premiums, and income tax from amounts they pay to their employees. They have to remit these deductions along with their share of CPP contributions and EI premiums.

Certain factors have to be considered when determining if you are an employee or self-employed individual. In all provinces or territories except Quebec, the following determine your employment status. When examining whether or not you are an employee or self-employed individual, the key question is whether or not your were engaged to perform services as a person in business on your own account, or as an employee.

The intent of you and the payer when you both entered into the working arrangement is very important. Did the two parties (you and the payer) intend to enter into a contract of service (employer-employee relationship) or did they intend to enter into a contract for services (business relationship)? The best way to show clear intent is to have a written agreement- the terms and conditions of the work to be performed. Note: In a written contract, the parties may state that in the event of a disagreement regarding the contents of the contract, it is to be interpreted under the Quebec law (Civil Code), even though the contract was formed for example in Ontario (Common Law).

Aside from the contract, you have to answer the following questions and if possible answer them in the contract. CRA uses these same questions to determine whether or not a business relationship existed.

What level of control the payer has over the worker

Control is the ability, authority, or right of a payer to exercise control over a worker concerning the manner in which the work is done and what work will be done. If the payer exercises a high level of control (especially on the worker’s daily activities) then an employer-employee relationship may exist. Some of the indicators that the worker is an employee are; the relationship is one of subordination; the payer controls the worker with respect to both the results of the work and the method used to do the work; the payer determines and controls the method and amount of pay; the worker requires permission to work for other payers while working for this payer; the payer determines what jobs the worker will do; the worker receives training or direction from the payer on how to do the work; and the payer chooses to listen to the worker’s suggestions but has the final word. Some of the indicators that the worker is a self-employed individual are; worker usually work independently within a defined framework; does not have anyone overseeing them; free to work when and for whom he or she chooses and may provide his or her services to different payers at the same time; can accept or refuse work from the payer; and the relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination, or integration.

Did the worker provide the tools and equipment used?

If you own and provide tools and equipment to accomplish the work or have contractual control of and responsibility for, an asset in a rental or lease situation.

Can the worker subcontract the works or hire assistants?

If you have to perform the services personally and can not send a replacement then you are an employee. So the payer has no say in whom the worker hires.

What degree of financial risk taken by the worker?

If you made a significant investment in the tools and equipment along with the cost of replacement, repair, and insurance may place you at a risk of loss. There must not be any reimbursement by the payer for use of these tools and equipments supplied by the worker. With a risk of loss, you are taking high degree of financial risk.

What degree of responsibility for investment and management held by worker?

You had to invest capital to in order to get the contract. You manage your staff- you hire and pay individuals to help perform the work.

Is there an opportunity for profit by the worker?

You can realize a profit or incur a loss, as this indicates you control the business aspects of services rendered and that a business relationship likely exists.

Let’s look at the above statements from a cash-flow prospective. For example, if John Doe is the employee above and makes $19.31 per hour. His latest paycheck has the following information:

Gross Earnings $1057.22

CPP ($ 46.24)

EI ($ 18.32)

FED Tax ($ 120.38)

Take Home $ 872.28

Now if John Doe was self-employed then this is what his cash-flow would look like:

Gross Earnings $1057.22

Fed Tax ($ 120.38)

Take Home $ 936.84

There is a definite advantage to being self-employed over being employed from a cash-flow perspective. The disadvantage is you have to create your own retirement plan (CPP) and a cushion (EI) in the event of a slowdown or shut-off of revenue.

I believe that it is very important that everyone learn to manage and grow their money in as many ways as possible. I believe the key to do this is found through increasing one’s financial intelligence.

Self-Employed FAQ:

Question: Do I have to start immediately my own business in Canada as ”self employed” person?
Or when I immigrate can I start with a job offer for two years to gain the Canadian experience first before risking with my money? And what is the criteria to select ”self employed” candidates? I am a graphic designer.

Answer: If you read the criteria for self-employed at the Canada immigration website you can see that to qualify for that, you need to be an athlete or a farmer. If you try for an entrepreneur, you would have to have a lot of money and business experience.

You can find other categories on the website that you may try to apply under. The skilled worker requires you to have a job offer now unless you are in one of 38 occupations. Quebec skilled worker doesn’t require a job offer but it’s hard to get enough points for them unless you know french. The provincial nominee programs often require a job offer but you may be able to go in under their investor classes with less money than the federal requirements state.

Question: How does Canada’s GST work for the self-employed?
I am self employed and planning to turn my job into a business. I am wondering, do I charge my “employer” GST, do I pay GST, or what does the GST actually mean to me? I couldn’t figure anything out from the govt website.

Answer: If you are self-employed, you already HAVE a business. Self-employed persons don’t have “employers”, they have “clients”. As a GST registrant, you add 5% GST to your client invoices, collect it from them, and remit it to CRA with your GST return.

Question: Self employed in Canada, confused about paying taxes?
If you are self-employed (no employees, sole proprietorship) in Canada, do you still have to pay CPP and EI? And what’s ITC? So confused!

Answer: If you are self-employed, you fill out Form T2125, Statement of Business or Professional Activities, and attach it to your regular T1 tax return. You will also fill out Schedule 8 and pay CPP contributions on this income.

As a sole proprietorship, you do not make EI contributions, as you do not qualify for unemployment.

ITC are Input Tax Credits. If you are a GST registrant and collect GST on your sales or services, you can claim a refund of GST paid on your supplies. These are called Input Tax Credits.

Question: To apply for the Permanent Residence in Canada as a Self-Employed person
If I got permanent residency with a standard form BUSINESS Immigration-simplified application process implemented as self-employed then when you’re living in Canada find a job offer do I need to apply for a work permit for having implemented as self-employed?

Answer: If you are not going to be self employed you can’t get that visa, you need to be honest and apply for the right visa. Just because the business visa may be easier to get you could be deported for making a false statement on the visa application.

Question: Tax question on a Self-employed American living in Canada?
If you are a self-employed American with income entirely from US sources, but you live in Canada, who do you pay taxes to? US? Canada? Both?

Answer: Both. US citizens pay taxes on worldwide income. And Canadian residents pay taxes to Canada. You will get a credit for the taxes paid to Canada to use against your US taxes, and most likely won’t owe any additional taxes to the US as Canada generally has a higher tax rate than the US (you still have to file a US return).

If it were reversed, and you were a Canadian living in the US, you wouldn’t have to file a Canadian return as only Canadian residents have to file Canadian returns not all citizens as in the US.

Question: If you were to open a small business/be self employed in Canada?
And it was an online based service, no goods involved, in laymans terms would it be better to be INCorperated or COrperate?

Answer: You you will want to be incorporated. If your business will do more than 30,000/year you will require a GST number. If you do less than 30,000 you don’t require a number nor do you charge gst. If you are over the 30k and your service buys supplies you will want to file the long form for your quarter remittance, if your service is just labor without buying anything than it is more beneficial for you to file short form GST. You do not require pst for a service business.

Question: Can you get unemployment benefits/insurance in Canada if you quit your job to become self employed?

Answer: No. Quitting your job makes you ineligible for benefits. Being self employed also makes you ineligible for benefits.

Question: Self- Employed in Toronto, Canada?
I am going to teach ballroom dance on my own, so independently. Am I considered self-employed? Do I have to register to somewhere? Do I have to let anybody know, like tax agency or just at the end of the year? How do I do my taxes? As you can see I have no clue, any help will be great.

Answer: You would be considered self-employed. To do this legitimately, you will need a business number and possibly a GST number (if you think you will be earning more than $30,000 per year).

If you register for a GST number, that means you have to collect GST and you will have to hand a certain percentage of that to the gov’t when you do your taxes. If you do not register for a GST number, you cannot collect GST. However, once you start earning over $30,000 (or project that you will), then you do need the GST number.

You might want to get in touch with other self-employed dance instructors to see what arrangements they have set up, and what tax software or tax accountants they use.

If you are planning a visit to Canada, you will need funds. If you don’t want to carry cash with you over the border only to pay high exchange fees, it’s understandable. Instead, you should learn a few ways to send money to Canada prior to your trip.

Sure, you could take cash in U.S. dollars with you to exchange at locales like Vancouver International Airport upon arrival, but expect some fees for this. Additionally, trying to find a location that exchanges money can be difficult depending on where you are, and most people want to relax during their vacation. Considering other options is a good idea.

You could send a bank draft, also known as a cashier’s check, from the U.S. You could then cash it at a Canadian bank or credit union like Bank of Canada, but it typically takes two to three weeks to get the money. If you have no other way of paying for items, this could be very inconvenient.

Another option is to send an international money transfer using an outside service. It usually costs about $10, and takes about two weeks to go through. If you use HSBC, it costs $30 to send money from the one in the U.S. to the one in Canada, and $45 to send it to a completely different bank in Canada. However, this method takes only three to five days, which is not bad.

If you already know where you will be staying, you could send a prepaid debit card to that location so it’s ready when you arrive. You could also simply send it to your current address to take along with you. The next step would be to add the money you need either online or by phone for a small fee of $5 USD. You would have the ability to use it to shop in Canada, or withdraw money in Canadian dollars from various ATMs. Clearly, this could be a valuable tool since you would have access to your money right away with minimal fees.

The exchange rate is currently favorable to Americans, but only slightly. $1 USD is equal to 1.09 Canadian dollars, but remember that the taxes in Canada are much higher than in the U.S., which may cancel out the favorable exchange rate. Most provinces in Canada charge about 13% for sales tax, which adds up quickly. Keep this in mind when budgeting.

The methods to send money to Canada vary, and you should choose depending on when you need the money. Another thing to keep in mind is the fees you will encounter for each method. Going to Canada will likely be no fun if you spend all your money on fees right when you arrive, so plan ahead.

For more information visit sending money to Canada or visit the https://www.atmcash.com/ home page for information on sending money almost anywhere in the world.

Money Transfer FAQ:

Question: A question about transferring American money to Canadian money?
If I go out to Canada with 1,000 dollars, how much would that transfer into Canadian money?

Answer: The rate changes on a daily basis. At present, a Canadian dollar is worth about 96 cents US. So you can do the math. Or you can google up ‘money conversion’ and plug in the amount you want to convert and it will give you the up to the minute exchange rate and the total amount of the exchange.

Question: How do I transfer money from my visa into my bank account?
I’m 30 dollars short on rent and don’t get paid til Friday. I have a check that is going out later today and don’t want it to bounce. How do I transfer money from my visa into my cibc account online?

Answer: Call the credit card company and have them wire it to your bank. This is going to cost you plenty!

Question: What’s the best site and method to make money transfers between gambling sites and my account/me in Canada?
I recently registered for MoneyBookers and they charged me $10 to move $150 to my bank account. They should change their name to MoneyCrookers.

Answer: Try Neteller. I don’t remember the exact fee, but it was like 4-5$ which is better. All those payment processing sites have high fees. Neteller has another thing, their exchange rates are worst in history. So if you will be withdrawing to a bank account with different currency from your neteller account then don’t use it.

Question: Cheapest way to send money from Canada to UK?
My Aunt in Canada has some cash to send to me for my late Father’s funeral donation. What’s the ‘best’ way to do this, ie the lowest cost? Simply send me a CAN$ cheque and I cash it at my UK bank? Or electronic transfer? Or PayPal?

Answer: I suggest PayPal.

Question: Moneybookers safe to use?
I have heard a lot of bad things about money bookers and I’m curious to see if I should use it or not. I live in Canada and I play a really fun online game and I finally decided it’s time to buy stuff from their item mall. I only have a debt card so I’d be transferring funds from my bank account but I need to know if it’s safe to do that sort of thing with out losing my money. I have heard accounts have been cancelled for no reason right after they make the account and put money in them. Also is it easy to transfer money because I’m only 17 so I’m not used to doing things like that. What’s the price for making purchases online? For example with paypal it’s like a dollar something.

Answer: I can only answer from my experience as a Moneybookers customer. Moneybookers is a good alternative to PayPal because it verifies members before they can deposit or collect funds. This greatly reduces the chance of fraud. To sign up for a Moneybookers account you will need to provide copies of ID showing your name, address, and age.

NOTE that you must be over 18 years old to use their service. Do not attempt to open an account using false or misleading info as that is grounds for your account being cancelled.

The fee for online purchases is 1% but it’s capped at € 0.50 so it’s usually very reasonable. You can fund your Moneybookers account from any Canadian bank account provided it’s in your name (once you’re 18).

Question: Can you do a money wire transfer from the UK to Canada?

Answer: Yes, it is the only way to transfer money between countries (International Money Order excepted). Speak to a bank.

Question: Money Transfer from Germany to Canada?
I have a friend in Germany who is going to come to Canada to live with me but I need him to transfer me his first and last months rent. What is the best way to go about this. His bank with charge 40 euro fee, and will take up to 10 pays.

Answer: There is the option of money gram. In the UK its available from post offices and internationally it generally is banks who offer the service. They charge a fee depending on how much you want to send but it is an electronic transaction so it is received almost instantly.

Question: What’s the best way to transfer a 403(b) retirement money into Canada?
I have 403(b) retirement accounts (held by Fidelity Investments) through the university that employs me here in Seattle. I will be moving to Vancouver soon to work for UBC. I want to know what my alternatives are to just leaving my 403(b) States-side. Is there a retirement vehicle in Canada that I can transfer my money into without incurring a lot of penalty/taxes? I tried to call Fidelity but those manning the phones don’t know the answer to this question.

Answer: You cannot roll the 403(b) money to a Canadian account. Any disbursement will be counted as a distribution and you would receive a 1099-R. The full amount would be taxable income that year on your US tax return *and* you would be subject to a 10% penalty if you are younger than 59.5 years of age.

Working from home is an easy commute in the morning and since it is your principal place of business, you may be able to claim some of your home expenses. As a home based-business, you are self-employed and report your business income and expenses in the same way as any other business. Depending on the amount of space you use for business and/or client meetings, you can claim a prorated portion of your utility payments, property taxes, mortgage interest and maintenance costs. It is important to remember, only mortgage interest is deductible – not your mortgage principal.

In Canada, self-employed people do have a little bit longer to file a tax return – until June 15. However, if you owe the government money and file after April 30th, they will start adding on the interest. As you prepare your paperwork for your tax return, here are some deductions to keep in mind:

Office supplies like paper and staples are fully deductible. Bigger items such as computers and office furniture must be depreciated over a number of years according to the Capital Cost Allowance (CCA) rules. CCA rate for computers and computer equipment was increased to 55% effective March 19, 2007. Don’t forget you can only deduct half the annual rate in the first year. So if you purchased a computer for $1,000, you would only be able to deduct $275 against your business income in the first year. In the second, you can deduct 55 per cent of the balance remaining, or $398.75 (calculated as $725 x 55 per cent).

For 2009, computers may be written off 100% in the first year as part of Canada’s economic stimulation package.

You are allowed to claim a portion of your auto expenses that relate to the home business. This includes gas, maintenance, auto club membership, license fees and insurance. It is important to document vehicle use for both personal and business travel so invest in a log book or record system to keep track. The rules may change for 2008 based on the last Federal Budget. There are limitations on how much you can claim for luxury vehicles. The ceiling on CCA claims for 2007 is $30,000 plus GST and PST. And if you want to lease, the ceiling is $800 per month plus GST and PST.

Insurance and health benefits are another concern for self-employed people including those in a home business. If you opt to pay for a private health service plan, you may be able to deduct the premiums as a business expense. To qualify, either your self-employment income must be 50 per cent of your total income or your income from other sources must be $10,000 or less. The maximum deduction is $1,500 for yourself, $1,500 for your spouse or common-law partner, and $750 for each or your children under 18.

Remember to keep all your receipts, just in case you are ever audited. Some sort of accounting software is highly recommended to help you to keep track of your revenue and expenses in an orderly manner.

And watch those deadlines to ensure that you do not have any interest or penalties on any tax owing.

Mark Styranka writes on a variety of topics primarily relating to small business. To learn more, Mark recommends that you visit: http://www.MajecAccounting.com
http://www.MajecAccounting.com/blog

Income Tax FAQ:

Question: Currently on welfare, do I get any money back when doing my income tax?
I moved out of my ex’s place last year with my son, and currently going to college. I was on social assistance starting July 2009. When I file my income tax, will I be getting any money back or not?

Answer: When I lived in Ontario, had dependents and was on welfare (15 years ago) I did get back a small amount. It was like $300 for claiming my rent receipts. You can figure out yours, for free, at ufile.ca, without filing. Low income families can file for free too.

Question: I live in Ontario Canada and wondered if anyone knew if you can claim an adult child at home with no job?
I have a 22 year old son living at home with no income. If anyone knows about claiming them on their income taxes please send me a link to the government website to where I can find this information.

Answer: You can only claim him if he is a full time student or disabled.

Question: Investment in U.S. Securities and paying taxes in Canada?
If one’s employed in Canada (Canadian Citizen) but invests in U.S. securities, such as stocks, how are the gains (Capital and Dividend) treated for tax purposes?
Of course, the funds are traded in U.S. Dollars and the gains are also in U.S. Dollars; would the U.S. gains be considered differently as U.S.Income at a different Marginal Tax rate or will they be taxed at the same Marginal rate as the Canadian Dollar Income?

Answer: While there is US withholding on dividends paid, there is none on capital gain. This is the rule for ALL US Dollar income: you convert the US Dollars to Canadian Dollars at the rate in effect on the day of buy, sale, or dividends paid. Then you report it, on the appropriate lines of Schedules 3 or 8. You are then taxed on your TOTAL world income, at one tax rate.

Question: Can I claim the tax credit for supporting my parents?
My parents are living with my family and have no financial income. I’m in Ontario, Canada.

Answer: The information is at the CRA website in the General Income Tax Guide under line 315 of Schedule 1. You’re looking for the Caregiver amount.

If your parents are over 65 and have income of less than $16,000.00 or if one or both of your parents are under 65 but qualify for the disability tax credit you or your spouse (if you have one) may be able to claim one or both. See your tax preparer for more information.

Question: Reporting Income (foreign income and T2125 self employed)?
I live in Canada and am self-employed. I work in the USA most of the time, therefore I pay taxes to the IRS (I do a US tax return). When I report my income, which is foreign income, do I report on line 104 other employment income and/or on T2125 as income as well? Also, same questions for tax paid to the USA, where on the Canadian forms do I report this as a self-employed person? I would like to deduct some of my expenses, I assume I do this on T2125.

Answer: You’re self-employed, so the income and deductions are most definitely reported on a T2125. The net result is written on your return at line 135.

When it comes to the income taxes paid in the states, there is a tax treaty between Canada and the US that basically prevents double taxation of your profit. However, the US probably has first crack because that’s where you earned your income. Fill in a form T2209 in order to claim foreign tax credits. In addition, you may need a form T2203 in order to avoid paying provincial taxes on the amounts of income if your business was permanently established outside the country.

Question: Canadian Taxation for a Temporary Resident?
I want to know what happens to my income deductions as a Temporary resident? I am an Australian on a Working Holiday visa being paid a full-time employee in Toronto, Canada, and apart from the Federal Income Tax, I have 1.7% and 4.7% being deduced from my gross income for EI and CPP. What happens if I never claim my EI before I leave Canada? What happens to my CPP? I do not envisage at this stage retiring in Canada, so can I claim some of that back?

Answer: EI is the insurance you paid for your Employment. It is not refundable. CPP can be withdrawn if Australia has a treaty with Canada regarding it. Check with a professional to find the right answer.

Question: Business Tax Question, I need help please!?
I opened a business in October, online retail, so my investment in the business was about $30 000.00. Since it recently opened it’s profit has only been around $200.00. How will taxes work, will I owe, get back, etc? I am in BC Canada. Also, the business is solely in my name, so how will it effect my husbands taxes? Up until now he had been able to use me as a deductible, will he still be able to because I have not made an income, or not?

Answer: You need to sort out what part of this $30K is expenses and what is start-up costs. Expenses are directly deducted from income. Start-up capital costs, such as franchises or licenses are not; they are depreciated over time.

If, after this, you still have a profit in the business, it will be deducted from your husband’s Spousal Amount of Non-Refundable Tax Credit.

Question: U.S.-Based Gift contributions (Donations) in Canadian Taxing System?
I’m aware that donations made to a U.S. registered charity organization are tax-deductable from U.S.-Income even for a Canadian Citizen. I’m not sure how this is classified though.
Assume one makes monthly donations to a particular registered institution in the states but earns income in Canada and in the Canadian Currency(CND) but also invests in U.S. equities and earns some U.S dollars. Now will the deductions work towards the U.S dollar income earned through equities? or there are other criteria to consider?

Answer: If your US dividends are US income, yes, you can deduct up to 75% of that as charitable contributions. You will be converting everything to CAN$ on your return, so what currency is earned is not the issue. Line 2 on Schedule 9 will need an attached explanation of how you computed allowable donations.

The 2009 Tax forms are out and instructions on claiming the credit for the new Home Renovation Tax Credit can be found on page 38 of the 2009 General Income Tax and Benefit Guide. To begin, you list your expenses on Schedule 12. For condominium owners, this may include amounts spent by the Corporation, in addition to your personal expenditures.

One of the qualifying conditions for condominium owners is if “the condominium has notified you in writing of your share of the expenses”. This places the onus on the Corporation to calculate and report to the owners their share of eligible expenses.

My recommendation to my condominium boards is to calculate the eligible expenses, copy all the necessary invoices, then to advise each homeowner of their shared based on the same proportionate percentages used to calculate their common element fees, and include copies of the invoices.

There has been some pondering over how to distribute the eligible expenses for those condominium units that have changed ownership during the year. In my opinion, this can be accomplished by the following method:

The eligible period for expenses is after January 27, 2009 and before February 1, 2010, this is a total of 369 days. If you divide the total expenses by the number of eligible days, then multiply that number by the days an owner was in possession of the unit, that should be the amount they are eligible to claim. For example, for a condominium spent $9,000 on repairs and an owner whose proportionate share is 3.687% of the total expenses purchased and closed their unit on November 1, 2009, the calculation could be as follows:

$9,000 x 3.687% = $331.83 / 369 = $0.90 x 92 = $82.73 (92 being the number of days from November 1, 2009 to January 31, 2010). This owner would be eligible to claim $82.73 towards the Home Renovation Tax Credit.

In the absence of clear direction from the Canada Revenue Agency on how to deal with the issue of unit sales, his solution is clear and, in my opinion, is the most fair way of distributing the credit.

About the Author
Tracey McLellan has over 25 years experience in the Condominium management industry. She also teaches financial management and budgeting to prospective property managers and board members at a local college, in addition to sitting as a volunteer on a local community board of directors. Visit our website at http://www.traway.com to discover additional tools to assist you in managing your community!

Home Renovation Tax Credit FAQ:

Question: Canada’s Home Renovation Tax Credit Question?
Who should claim? The higher earner in a home, the lower earner, or split it in some way?

Answer: It doesn’t change the amount of the credit if it is claimed by the lower or higher income person. It is a straight 15% of the amount spent over 1,000 up to 10,000.

It does need to be claimed by someone who has tax payable. Since it is a non-refundable credit it won’t reduce tax payable below zero.

Question: Home renovation tax credit?
After spending the $1000 minimum for the HRTC, is the tax credit applicable back to dollar 1 or just on the amount spent after the initial $1000?

Answer: After the $1000 deductible.

Question: Home Renovation Tax Credit?
Who can take advantage of new HRTC? What is the deadline? If I live in a condo am I still eligible?

Answer: The home renovation tax credit in the Jan. 27 budget applies to condominiums and even to eligible work undertaken by condo corporations. In a typical condo arrangement, each condo-unit owner pays a monthly maintenance fee, which typically goes into the condo corporation’s general or reserve fund, from which the condo corporation would pay contractors’ renovation bills on behalf of the unit owners.

However, the credit is only available to individuals, not corporations, so, the condo corporation is not entitled to the credit. Instead, the draft legislation provides that a condo owner can claim the credit for qualifying renovations made on his or her own unit, as well as for his or her share of renovations of the common areas made by the condo corporation.

Check the CRA website for the documentation requirements to support claims for renovations made to the common areas of a condo building.

Question: Is a new detached garage included in the Canadian HRTC?
I built a garage this summer that set me back $11,600 total cost due to the fact that I done all the labour. Can I claim my detached garage with the Canadian Home Renovation Tax Credit?

Answer: This is a good question since a detached garage is not a permanent fixture to the dwelling. Check with CRA to be sure but in the mean time hold on to your receipts. Also, your accountant should have an answer for you when you file your income tax.

If you wish to file your Canada tax return to the Canada Revenue Agency (CRA) before the deadline, you should know how to do it accurately.

It is the middle of February, when the Canada Revenue Agency begins the process of Canadian income tax return. You should file your taxes early so that your return may get processed early. You have to wait for at least four weeks to check the status of your refund. You will not be able to know about the status of your tax refund until the middle of the March.

It is really difficult to learn about the processing time taken by the CRA for your return because it depends on the way you file your taxes and the time when you submit your return file. If you file your return before the 15th April and you choose paper filing then you will get your return processed within four weeks. If choose TELEFILE, EFILE or NETFILE for your return, then your file will be processed within two weeks.

And, if you file your income tax return after 15th April using paper filing method, then you will have your return being processed within six months. For TELEFILE, EFILE or NETFILE return will take two weeks to get your file processed.

There are certain things you should remember while filing your Canadian taxes online. You should pay the exact amount of tax you owe. You can also benefit from certain things like HST/GST Credit or the Guaranteed Income Supplement under the Old Age Security Program.

You should not miss the deadline for paying taxes set by the CRA. The deadline for filing tax return is 30th April. Generally, Canadian individual returns for any specific year must be filed by April 30 of the subsequent year. If you file your income tax return after the deadline, then the Canada Revenue Agency will charge you a penalty and interest on your unpaid amount.

Jesika William is an expert tax preparer. Learn how to File Canadian Taxes Online accurately and quickly. You’ll know that it’s really easy to file Income Tax Return to the IRS.

Income Tax FAQ:

Question: Income tax BC on earnings less than 30,000 CAD?
I am thinking of starting a business, with myself as the sole proprietor. I do not need a business license as I will be running the business entirely under my first and last name. Will my earnings, that will come to less than 30,000 CAD per year, be subject to income tax? Or will these earnings under Canada BC laws be tax free?

Answer: The $30,000 threshold applies only to whether or not you are required to collect GST/HST on your sales. At that level of income, you will be subject to income tax, both at the federal and provincial level, and you will also be required to pay into the Canada Pension Plan. So, breaking it down:

CPP starts when your income is over 3,500 dollars at a rate of 9.9%. You would be exempt from this only if you are under 18, or over 70, or if you are currently collecting CPP retirement or disability benefits.

Federal Income tax starts when your income reaches 10,385, at a rate of 15%.

Provincial tax starts at 11,000, at a rate of 5.06%.

Keep in mind that this is based on your profit, not the revenue. You would be taxed on the profit realized after expenses. In addition, neither the federal or provincial governments have tabled their budgets yet for 2010. All the numbers shown above are subject to change.

Question: Do native Americans in Canada have to prepare an income tax return even if they live and work in the reserve?

Answer: They don’t call themselves American in Canada. The income tax exemption applies only to income that is earned on the reserve. They would have to include any amounts that were earned off reserve, and also investments, in certain cases. Also, people with native status can still qualify for GST credit cheques and payments for the Child Tax Benefit. For these things, a tax return is required, even all income is exempt from tax.

Question: Can I still claim my tuition on my Canadian Income Tax Return in this case?
I took classes in the US for 2 months (9 weeks to be exact) and these were classes that were NOT going towards any kind of degree. I was also NOT a commuting student. From what I understand I cannot claim the tuition I spent there because of 2 reasons: 1-the courses were not for a degree, 2-I was not a communiting Canadian, meaning I was not living in Canada while commuting to the US everyday for class. Is this right?

Answer: You are correct. You would either have to be a commuter, or be enrolled full time for at least 13 weeks. In your situation, you cannot claim the tuition and educations amounts

Question: US-Canada Tax Treaty?
I got a small amount of pay in January for my work in US. I immigrated to Canada in January. What is the best way for me to file my returns? Can I file as a resident in both countries and thereby not declare one’s income in the other country? Or am I required to declare US income in Canada (and vice versa)?

Answer: The CRA pamphlet “Newcomers” tells you exactly what to declare in the year of your landing. You should take a look at it on their website.

You only report to Canada income for the period AFTER you landed. As a US Citizen, you declare worldwide income and file taxes in the US regardless of your residence. You can take a Foreign tax credit on the US taxes for taxes paid to Canada.

Question: Have qualified for disability tax credit from the past 10 years?
How does the CRA calculate this for the reassessment of my income tax for those years? Does the amount of income tax paid those years have a grand affect? From Ontario Canada and years 1999-2009.

Answer: The disability tax credit has nothing to do with the amount of tax you paid. The federal part is the same no matter where in Canada you live, the provincial part may be different, for Ontario in 1999 the federal and provincial amount was worth about $1,200.00 more of a refund, each year it went up a little bit. For the 10 years you are looking at a refund of about $12,000.00 plus interest.

Question: Someone stole my friends Canada income tax refund. Will she ever get the money?
It was stolen and cashed by someone. They sent her a copy of the signature, and she doesn’t recognize it. Also the cheque contains other numbers like driver’s license and SIN number, but they are not hers. The cheque was cashed in a city she’s never been in. Will the government eventually give her the money, how long will it take?

Answer: The CRA has a procedure for replacing payments, even if the original cheque has already been cashed. Step one is that they will normally have her sign an Undertaking and Indemnity. It’s a standard form that they send, probably already filled in with some of the vital information like the amount of the cheque and the cheque number. That gets sent back to them and they investigate.

If they find that the cheque has already been cashed, a photocopy of the cheque is sent along with an affidavit. This one has to be sworn before a Commissioner of Oaths that they did not get any advantage from the refund.

I had to go through this when one of my EI cheques went astray years ago, and I did eventually get my money, but it took a while, nearly two months from start to finish.

Question: How much is income tax in toronto canada?
I am married and have 2 kids. My wife is a housewife. I wanted to know how much tax I will pay on 110K base salary. Are there any standard deductions? How much will be the take home?

Answer: You need to look at the Canada Revenue website and look under the Ontario Province tax breakdown. Off the cuff though I believe it’s 30% but in Ontario there is a host of things you can claim as expenses especially with children so it’s worth while to investigate all of them! Your financial advisor or accountant may be able to help you with deductions you qualify for.

Question: How are U.S. Income tax-deductable charity contributions treated in the Canadian Income Tax system?
I’m making monthly contributions to a charity organization in the U.S. and the gifts are tax-deductable for U.S.-Income. Are they also tax-deductable in Canada? How will they be treated?

Answer: According to CRA, generally if you have U.S. income you can claim any gifts to U.S. charities that would be allowed on a U.S. return. You can claim the eligible amount of your U.S.. gifts up to 75% of the net U.S. income you report on your Canadian return. However, you may be able to claim the eligible amount of your gifts to certain U.S. organizations up to 75% of your net world income. You can do this if you live near the border in Canada throughout the year and commute to your principal workplace or business in the United States, and if that employment or business was your main source of income for the year.