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Tax changes to expect when you’re expecting
2016 Tax Tips for 2015 Filing Year
From Proprietorship to Corporation - When is the Best Time to Incorporate?
Tax Specialists Brief your Clients About CRA Fraud And E-Mail Scams
Bank of Canada cuts rates again

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Tax changes to expect when you’re expecting


Tax changes to expect when you’re expecting - www.aliko-aapayrollservices.com/blog



Tax changes to expect when you’re expecting





Congratulations! If you have a new baby or have a baby on the way, there are plenty of credits and benefits you may be eligible to receive.
Important facts
Your child will also be registered for the goods and services tax/harmonized sales tax (GST/HST) credit.
  • My Account – If you do not live in a participating province, you can apply for the Canada child and family benefits by using the Apply for child benefits service through My Account or by completing and mailing Form RC66, Canada Child Benefits Application to your tax centre
Explanations of these benefits:
  • Canada child tax benefit (CCTB) – The CCTB is a tax-free monthly payment made to eligible families to help them with the cost of raising children under 18 years of age.
  • Universal child care benefit (UCCB) – If you have children under the age of 18, you may be entitled to this taxable benefit, which supports child care choices for families. For the 2015 tax year, under UCCB, families will receive $160 per month for each child under 6 and $60 per month for each child aged 6 through 17. Payments are issued monthly.
  • Provincial and territorial programsMost provinces and territories have child and family benefit and credit programs that combine with your Canada child tax benefit and the goods and services tax/harmonized sales tax (GST/HST) credit.
  • GST/HST credit – Families with low or modest incomes can receive this tax-free quarterly payment to offset some of the GST/HST they pay.
  • Working income tax benefit (WITB) – Low-income families that are in the workforce can claim this refundable tax credit to get personal tax relief. With a child as your eligible dependant, you may now be able to claim this tax credit or the amount claimed may increase.
  • Disability amount – If you or your dependant has a severe and prolonged impairment in physical or mental functions, you or your dependant may be eligible for the disability tax credit (DTC). To determine eligibility, you must complete Form T2201, Disability Tax Credit Certificate and have it certified by a medical practitioner. Canadians claiming the credit will be able to file online regardless of whether or not their Form T2201 has been submitted to the CRA for that tax year.
  • Child disability benefit (CDB) – The CDB is a tax-free benefit for families who care for a child under age 18 who is eligible for the disability tax credit.
  • Registered education savings plan (RESP) – You can start saving for your child’s future now. An RESP is a contract between you (the subscriber) and another individual or organization (the promoter) that allows you to make contributions toward your child’s future education. Programs such as the Canada education savings grant (CESG) and the Canada learning bond (CLB) are other great incentives to create an RESP for your child.
For more information on child and family benefits, go to www.cra.gc.ca/benefits.
 
 

2016 Tax Tips for 2015 Filing Year

2016 Tax Tips for 2015 Filing Year


2016 Tax Tips for 2015 Filing Year- www.aliko-aapayrollservices.com/blog


Did you know that last tax filing season, the average tax refund was just under $1,800, or about $150 a month? That’s a lot of money to give to the government on an interest-free basis. Yet that’s what almost 17 million tax filers did and CRA paid back approximately $30 Billion dollars. Astute tax filers will want to get that money back working for their own futures quickly this year. If that includes you, do file your tax return early and accurately. But make sure you have all your documentation, first.
Make a point of acquiring and reviewing tax software if you are NETFILING this year. If you hire a pro, make an appointment as soon as possible to determine what is needed to meet new tax filing rules and discuss what has changed in your personal affairs. Births, deaths, marriages, divorces, new jobs and job terminations – all can impact the tax return.

From Proprietorship to Corporation - When is the Best Time to Incorporate?


From Proprietorship to Corporation - When is the Best Time to Incorporate?- www.aliko-aapayrollservices.com/blog
From Proprietorship to Corporation - When is the Best Time to Incorporate?



The  dog days of summer are a great time for the Tax Specialist to review 2014 returns for Proprietors and Partnerships to determine whether it is time for some of these taxpayers to consider incorporating their business and removing their business from their personal tax return. But when is the best time to incorporate?
 
The answer to this question varies depending on the needs of the financial needs of the individual taxpayer, the vision for their business and their ability to take their business to its next level of growth; however, a few basic questions will help determine if you should be approaching your client with the suggestion, from a tax savings point of view:
1. Is the taxpayer currently paying a higher effective income tax rate than the corporate tax rate for the province of residence?
The current federal tax rate for a Canadian Controlled Private Corporation is 11% on the first $500,000 of net income. Provincially, rates vary by province from a low of 0% in Manitoba to 4.5% in Ontario and PEI. To put this in perspective, a net corporate income of ~$34,000 in Ontario attracts about a 15.5% effective tax rate. If this corporate tax rate is lower than the proprietor’s personal income tax rate, it may be time to look at incorporating.
2. Is the taxpayer earning more money in the proprietorship than is required to meet their personal and household needs?
A corporation’s lower income tax rate is only effective if the earned income remains within the corporation. If the proprietorship is earning $100K and the taxpayer needs $100K, it is unlikely that a corporation is beneficial for tax purposes.
3. Is there a liability or asset protection benefit to incorporation?
Even if there is no tax benefit to incorporating, there may be a benefit from a liability or asset protection viewpoint. A corporation is a separate legal entity; therefore, the individual cannot be held personally liable for debts incurred within the corporation. This protection can go a long way to protecting family wealth in the event of a business mishap.
 
4. Is there currently income-splitting potential within the proprietorship?
In most cases the answer to this is no. However, within a corporate structure different classes of shares can be issued, opening up various dividend options. This will then allow income sprinkling among family members to take full advantage of individual graduated rates, exemptions and deductions.
5. Is your client financially disciplined enough to manage a fiscal year-end?
One of the underlying advantages to operating through a corporate structure is the ability to establish a non-calendar fiscal year. This opens up income deferral options, allowing the taxpayer to retain more wealth longer by utilizing ITA S. 78(4).
 
Example – S. 78(4)
  • Acme Corporation has a fiscal year-end of July 30th and elects to declare a bonus payable of $30,000. The bonus is expensed on the corporate tax return as of July 30, 2015.
  • The bonus is then paid to the individual on January 3rd, 2016 – within the 179 day requirement of S. 78(4).
  • The bonus is reported on the T4 slip for 2016 and reported on the personal tax return filed April 30, 2017, resulting in a 21-month deferral of personal income taxes.The move from proprietorship to corporation may hold many benefits for the individual taxpayer and at the same time opens up many tax planning and wealth retention opportunities for the individual and their Tax Specialist to explore as the business continues to grow.

Tax Specialists Brief your Clients About CRA Fraud And E-Mail Scams

Tax Specialists Brief  your Clients About CRA Fraud And E-Mail Scams-www.aliko-aapayrollservices.com/blog


Tax Specialists Brief  your Clients About CRA Fraud And E-Mail Scams



It’s a warm summer day. You’re relaxing in the yard and wondering what could possibly make this day better. And then, out of the blue, you receive an e-mail from Canada Revenue Agency stating that they’ve discovered they owe you money!  Could this be true?  Or, do you need to wake up and smell the coffee . . . .?  There are two scams in particular to brief your clients about:  Refund and Collection Scams.
 
Refund Scams.  Even though hundreds of millions of individuals use e-mail daily, CRA does not.   So it’s pretty much  guaranteed that the e-mail you just received  asking for your banking information so that CRA can deposit the funds into your account, is not legitimate.  In fact, when you go to check that the funds have been deposited, you will find that you have become a victim and all your funds are gone.
While scams like this are not new and have been happening probably as long as there has been e-mail, they seem to have been especially aggressive this year; CRA currently lists 22 variations of e-mail scams  that are being used to extract money from your clients fraudulently.
In addition to e-mail schemes, scammers also use text messages, online form submissions and, in some cases, good old snail mail!
So, a key tax literacy message for your clients is this: CRA does not communicate with taxpayers by electronic means outside of the “My Account” and “My Business Account” portals on their website.
Collection Scams.  Reports of telephone calls purportedly from CRA Collections have been making the news recently. According to the CRA newsroom, these calls are very aggressive in nature and go as far as threatening court charges, jail or deportation. The caller demands immediate payment by credit card and, if no credit card exists, demands the immediate purchase of a prepaid credit card.
So what should your clients do if they receive one of these types of communications? CRA recommends that anyone potentially the victim of a fraud ask themselves these questions:
  • Is there a reason that CRA may be calling? Do I have a tax balance outstanding?
  • Is the requestor asking for information I would not include on my tax return?
  • Is the requestor asking for information I know the CRA already has on file for me?
  • How did the requestor get my e-mail address or telephone number?
  • Am I confident I know who is asking for the information?Remember, you can always turn the tables. Ask the caller for the amount on line 150 of your latest tax return. If they can’t or won’t answer that question, they are not from CRA.If you or your clients have received suspected fraudulent communications from someone, contact the Canadian Anti-Fraud Centre at www.antifraudcentre-centreantifraude.ca or toll-free at 1-888-495-8501.
  • http://www.cra-arc.gc.ca/ntcs/frdlntmls-eng.html      

Bank of Canada cuts rates again


Bank of Canada cuts rates again -www.aliko-aapayrollservices.com/blog

Bank of Canada cuts rates again



OTTAWA (Reuters) - The Bank of Canada cut its benchmark interest rate by 25 basis points to 0.5 percent on Wednesday, saying an unexpected economic contraction in the first half of the year had added to excess capacity and put downward pressure on inflation.
"Additional monetary stimulus is required at this time to help return the economy to full capacity and inflation sustainably to target," the central bank said in the interest rate decision that accompanied its quarterly Monetary Policy Report.
Bank of Canada Governor Stephen Poloz had expected a recovery by now from the oil price crash that hit Canada's oil-exporting economy in the first quarter, but that projection proved far too optimistic.
The bank now expects the economy to have shrunk at an annualized 0.5 percent in the second quarter instead of growing by 1.8 percent as Poloz had projected in April. It contracted 0.6 percent in the first quarter.
The bank did not use the word "recession" but the projection of negative growth in both the first and second quarters meets a widely accepted definition of a recession.
The market had been split on whether the bank would cut rates for the second time this year after holding them steady for about four years. The bank had delivered a surprise cut in January that was designed to counter the dive in oil prices, and markets had reacted sharply to that move.
They did so again on Wednesday with the Canadian dollar dropping to a six-year low, and Canadian government bond prices rising sharply and outperforming U.S. Treasuries. [CAD/]
The Canadian dollar tumbled to its weakest level - C$1.2929, or 77.35 U.S. cents - since March 2009 against its U.S. counterpart, hurt also by predictions that the U.S. Federal Reserve will raise rates this year.
"The currency is in uncharted waters here," said Derek Holt, vice president of economics at Bank of Nova Scotia, citing a risk that the Canadian dollar weakens to as low as C$1.30 against the greenback, then diving to C$1.40.
"If the Fed is hiking, we think by September, and the Bank of Canada appears to be leaving the door open to additional rate stimulus, all bets are off."
The bank said excess capacity in the economy grew significantly in the first half and would continue to do so in the third quarter, even with expected economic growth of 1.5 percent.
It therefore pushed back to the first half of 2017 its projection of when full capacity will be reached and inflation return to the bank's 2 percent target. Its previous projection had been for the end of 2016.
The bank acknowledged elevated vulnerabilities from a hot housing market in Toronto and Vancouver and from rising household debt, a key factor that had spurred some economists to advise against a rate cut. It said, however, that the economy was undergoing "a significant and complex adjustment" and required additional stimulus. It continued to see a soft landing in housing.
Perhaps the biggest disappointment for Poloz, former head of the federal export agency, has been what the bank said was a "puzzling" weakness in non-energy exports. He had hoped such exports would help overwhelm the negative effects of lower oil prices on business investment and incomes.
But the bank said its base-case projection assumes "that this unexplained weakness is temporary and that the relationship between exports and foreign activity will reassert itself in the coming quarter".
The bank said the main dangers to its inflation outlook were a larger-than-expected decline in oil and gas investment, weaker non-energy exports, imbalances in the Canadian household sector and stronger U.S. private demand.
 
 
 
 
 

OAS to Increase by $1.13 per Month


OAS to Increase by $1.13 per Month -www.aliko-aapayrollservices.com/blog

OAS to Increase by $1.13 per Month


Seniors will see an increase in their monthly OAS cheques in July, but they’ll have to resort to the 99-cent menu to buy anything with the extra pension.
Old Age Security is indexed quarterly and seniors have seen no increases since October of 2014. 
The maximum OAS (for those who have been in Canada at least 20 years and started on their 65th birthday) increases from $563.74 to $564.87 – an increase of $1.13 per month or 0.2%.  Seniors who qualify for the Guaranteed Income Supplement or Allowance will also receive the 0.2% increase beginning in July.
 
 
 

Selling the US Vacation Property



Selling the US Vacation Property -www.aliko-aapayrollservices.com/blog

Selling the US Vacation Property


With real estate prices soaring in the US and the Canadian dollar falling in value against the greenback, Canadians who invested in a vacation property in the US may be tempted to sell their US cottage and purchase a Canadian cottage instead. 
 
But it’s important to understand the tax consequences on both sides of the border before they do.
Here’s an example to illustrate:   Sarah and George purchased a home in Phoenix in 2011 for $190,000US ($191,000CAN), including costs. Today, the home is worth $290,000US (about $358,000CAN). This represents an accrued gain of $167,000CAN (a $100,000 US gain in the States). The value of the couple’s home in Canada, meanwhile,  has increased only $20,000 over the same time period. What are the tax consequences if the couple sells the US property and uses the proceeds to purchase a cottage closer to home?
The disposition of the US property will create a taxable capital gain to be reported on a US return ($100,000 US). In Canada, the capital gain could be minimized by designating the US property as the couple’s principal residence for all but one year from 2011 to 2015. However, the elimination of the capital gains tax on the Canadian return comes at a price. If the gain is taxable in Canada, the US taxes paid could be claimed as a foreign tax credit.
But if the gain is tax-free in Canada, the foreign tax credit cannot be claimed. At the same time, claiming the US property as a principal residence means the gain on their Canadian home becomes taxable.
Since the US tax cannot be eliminated, the only way to ensure that the same gain is not taxed in both jurisdictions is to make sure that at least $100,000US of the capital gain is taxed in Canada in the year of sale. That’s about $123,000CAN, depending on the exchange rate at the time of the sale.
 
With a $167,000CAN gain, 26% of the gain could be exempted and the couple could still claim the foreign tax credit. By choosing to designate the US property as their principal residence for one year, 33% ([1+1]/6) of the gain would be exempt in Canada, limiting the foreign tax credit claim.
By choosing not to designate the US property as their principal residence, 1/6 of the gain would be exempt, allowing the full foreign tax credit.
Of course, in this or any other case, the actual amount of taxes payable in the US and Canada would have to be determined to ensure that choosing not to claim the principal residence exemption for any of the years owned results in the lowest overall taxes payable.
This type of transaction, therefore, should be reviewed well in advance by a Tax Services Specialist  to get the best tax results over time for the sale or deemed disposition of both residences.
 
 
 
 

Two-Parent Families With Kids: $85,000 Is Median After Tax Income

Two-Parent Families With Kids: $85,000 Is Median After Tax Income - www.aliko-aapayrollservices.com/blog



Two-Parent Families With Kids: $85,000 Is Median After Tax Income
 
Written by: Evelyn Jacks
The Canadian Income Survey for 2013 for 2013 was released by Statistics Canada on July 8.  While things are virtually unchanged from 2012, some interesting facts emerge about the income levels earned by Canadian families
The survey defines market income as “earnings, private pensions as well as income from investments and other sources such as support and disability payments”.  After-tax income is defined as the total of market income and government transfers, less income tax.  The survey also defines those who live in “economic families”, as groups of two or more people who live together in the same dwelling who are related by blood, marriage or common-law, adoption, or in a foster relationship.  For the purposes of this article, we’ll call all others, “singles”.
It is clear that when it comes to making ends meet, the numbers squarely favor economic families over singlehood:
  • Senior families.  Where the highest earner in the family was 65 years or older (senior families) median after-tax income was $52,500 in 2013.  Singles in this age group has after-tax income of $25,700.
  • Non-senior Families.  Median after tax income in this group was $77,100; for singles in this group the after-tax income was $29,800.
  • Parents with Children. .  Two-parent families with children had median after-tax income of $85,000.  Lone parent families had median after tax income of $41,700, with families headed by a woman earning slightly less:  $39,400.According to the survey, the median amount of income tax paid, including both federal and provincial tax, by non-senior families was $11,700 in 2013; in contrast, the median paid by senior families was just $3,100.How much do top earners make? The top 10 percent of earners are economic families and singles with an after-tax income of more than $130,600. And in that top decile, average after-tax income was $183,600.  After taxes, Canadians in the highest decile  had 23.7% of all after-tax income in Canada in 2013, while the four lower deciles together accounted for 19.8% of total after-tax income.The bottom line for all taxpayers – regardless of earning level - is that what you keep is more important than what you make. What can tax and financial advisors do to help their clients accumulate, grow, preserve and transition more wealth, as prescribed under a Real Wealth Management™ model?  Here are some suggestions for your next discussion with your clients:For two-parent families: Two-parent families are able to take advantage of the Family Tax Cut, first introduced for the 2014 year. By averaging out family income, two-parent families whose incomes are in different tax brackets are able to retain up to $2,000 in their pocket that would otherwise go to the government.For example: A two-income family with parents earning $75,000 and $25,000 respectively can take advantage of the FTC and reduce their combined tax bill by about $1,330. These additional funds might well be best saved within an RESP, (Registered Education Savings Plan) to take advantage of government grants and bonds available under the plan as well as the tax deferred income accumulation opportunities.For single and two parent families: Both types of economic households – singles and couples - will be able to take advantage of the enhanced Child Care Expense deductions in tax year 2015,  with increased limits of $7,000 for children under seven and $4,000 for children from 7 to 15 years of age. In addition, the Enhanced Universal Child Care Benefit has increased to $160 per month for children under 6 years (from $100), and $60 per month is now available for each child from 6 through 17 years of age starting in 2015. Lump sum payments for the enhanced amounts for of $60 a month for all children under 18 are being paid retroactive to January 2015 this week.  Investing those sums into a child’s education savings or the parent’s TFSA are both great ways to leverage tax efficient investment opportunities for future financial freedom.They may also often benefit from an increased monthly refundable Child Tax Benefit as a reduced family net income has the potential to increase or create access to the monthly refundable Child Tax Benefit.  With CTB claw back rates at 12.2% for one child up to 33.3% for three or more children, the effective return on an RRSP investment for these families can be very high.For single non-parents: Utilizing tax brackets strategically remains the best option for single, non-parent taxpayers. These individuals can maximize the use of RRSPs to reduce their income to a lower bracket, thus paying less tax annually. When taxable income has reached the lowest bracket, maximizing TFSA contributions provides further options for retirement savings and security.For seniors: In addition to being able to claim the Age Exemption amount of $7,033, seniors can also be pro-active from a tax point of view by structuring their income levels advantageously by triggering or deferring OAS and CPP benefits. Furthermore, maximizing tax benefits through pension splitting for married or common-law seniors reduces the overall tax burden when private pension income from RRSPs or RRIFs becomes taxable.   

Five Steps To Calculating 2015 TFSA Contribution Room

Five Steps To Calculating 2015 TFSA Contribution Room - www.aliko-aapayrollservices.com/blog

Five Steps To Calculating 2015 TFSA Contribution Room



A new version of form RC343 has been released by the CRA to calculate TFSA contribution room for 2015, taking into account the new 2015 contribution limit of $10,000.
 
The new form is available here.  Here’s how the calculations work:
1. Start with your TFSA contribution room as of January 1, 2014
2. Subtract any TFSA contributions made in 2014
3. Add any TFSA withdrawals made in 2014
4. Add $10,000 (your new  TFSA contribution limit for 2015)
5. If you’ve already made TFSA contributions for 2015, subtract those
Here’s an example:
Joni had  TFSA contribution room of $12,000 as of January 1, 2014, including the $5,500 of new contribution room for 2014. She made a $10,000 TFSA contribution in 2014 and withdrew $15,000 that same year. She has not made any contributions in 2015 yet.  Following the steps outlined above, her 2015 TFSA contribution room is:
1. $12,000
2. - $10,000
3. + $15,000
4. + $10,000
5. - $0
Total: $27,000
 
Beware of TFSA Traps:  The biggest trap, other than holding non-registered investments outside a TFSA when there is contribution room available, is recontributing to the TFSA in the same year as the withdrawal is made. Withdrawals do increase TFSA contribution room, but not until the beginning of the following year.
In the example above, after her $10,000 contribution, Joni’s TFSA contribution room for 2014 was reduced to $2,000. Her $15,000 withdrawal did not open up contribution room until January 1, 2015. If Joni had re-deposited the $15,000 in 2014, she would have had a $13,000 excess contribution. All excess contributions are subject to a 1% penalty tax for each month they remain in the TFSA.
For these reasons, it’s important for wealth advisors to encourage their clients to seek their assistance or consult with  A Tax Services Specialist  before withdrawing money or recontributing it to a TFSA.
 
 
 
 
 

Adjusted Family Tax Cut: Was Spouse A Student?



Adjusted Family Tax Cut: Was Spouse A Student? - www.aliko-aapayrollservices.com/blogAdjusted Family Tax Cut: Was Spouse A Student?




Last week, CRA reminded families to apply for the generous new Universal Child Care Benefit (UCCB) being delivered to families this week. But there may also be more good news:  enhanced Family Tax Cut dollars available for the 2014 tax filing year for families in which one spouse was a full- or part-time student... $2 to $750 more in fact.
The calculations for the Family Tax Cut have recently been adjusted to take into account the unused portion of tuition, textbook and education credits transferred from a spouse or common-law partner. The result is an additional refund of somewhere between $2 and $750, according to the CRA, which will do the calculation automatically if it looks like the family might qualify for the adjustment.
To be sure, however, qualified  Tax Services Specialist  should be consulted to review the calculations for their clients who  have made a tuition, textbook and education credit transfer to their spouse on line 326 of the 2014 T1 return and determine if any other adjustments should be made to the tax return.  Then, find out what your estimated Family Tax Cut will be in 2015 to maximize your investment planning opportunities.
The adjusted calculation can be found on line 499 on the new Schedule 1A, released on June 25:  http://www.cra-arc.gc.ca/E/pbg/tf/5000-s1a/5000-s1a-14e.pdf
 
 

The Rule of 72


The Rule of 72 - www.aliko-aapayrollservices.com/blog
The Rule of 72



Written by Sarah Milton
“Compound Interest is the eighth wonder of the world.” – Albert Einstein
Einstein described compound interest as the eighth wonder of the world because he felt that those who understood it, earned it and those who didn’t, paid it. Compounding is what makes saving early and saving regularly such a powerful part of building wealth and it’s also what makes it so hard to get out from under the mountain of consumer debt that so many of us accumulate. In an nutshell, compound interest is earning (or paying) interest on interest. When you earn interest at a compounded rate, your money grows faster because you are earning interest on your total balance (principal + interest) rather than on the principal alone. Similarly, when you pay interest at a compounded rate (as you do with credit cards) your interest charges grow much faster and your debt load gets larger.
We can see the power of compounding in the table below, which shows how $1000 earning 5% annual interest grows over time. The first column shows how the $1000 would grow earning 5% simple interest (earned on just the $1000 principal) and the second column shows how it would grow earning 5% interest compounded annually (earned on the principal + interest).
YEAR
5% SIMPLE INTEREST
5% COMPOUND INTEREST
5
$1,250
$1,276
10
$1,500
$1,629
15
$1,750
$2,079
20
$2,000
$2,653
25
$2,250
$3,386
30
$2,500
$4,322
35
$2,750
$5,516
40
$3,000
$7,040
45
$3,250
$8,985
50
$3,500
$11,467
The Rule of 72
The rule of 72 is a simple way to estimate how long it will take your money to double in value at a given interest rate. If you divide 72 by the annual interest rate, the answer is the number of years it will take to double. For example, 72 divided by 5 is 14.4. This means that, as you can see in the table above, it takes just under 15 years for $1,000 to become $2,000. 15 years later (in year 30) the money has doubled again to be just over $4,000 and, 15 years after that (in year 45) it has doubled again to become more than $8,000. In year 60, it will have doubled yet again and become $16,000. Using this rule, it’s clear to see that both time and interest rate are two key factors in building wealth. At 8% interest, your money will double in 9 years (72 divided by 8 = 9) but it will take 36 years to double earning 2% interest. For a 20 year old, $100 invested at 7% is worth $2,100 at age 65. For a 30 year old, that same $100 invested at the same rate is only worth $1,068 at age 65 and for a 40 year old, $100 invested at 7% is worth just $543 at age 65. This means that, at 40 years old, even though I’m only twice the age of the 20 year old, I have to save four times as much each year in order to achieve the same level of wealth at age 65. It’s a concept that I wish I had understood as a teenager because I’m pretty sure it would have motivated me to manage my money differently!
At the end of the day, saving is always a very personal decision: the choices we make about whether to save, where to save and how much to save, vary enormously from person to person. However, all too often, I hear people in their twenties saying that they’ll wait to save until they’re older because then they’ll be earning more. When you consider how powerful a factor time is in the wealth building equation, it just doesn’t make sense (especially when you consider that just because you’re earning more doesn’t mean you have more discretionary income). If you can do as much with $25 at 20 as you can do with $50 at 30 or with $100 at 40, it makes sense to start the saving habit early.
Even if you feel like you’ve “missed the boat” because you should have started saving years ago, remember that whatever you save today has a greater power to grow than money you save next month, next year or 3 years from now. We can’t change our past choices but we always have the power to choose to change our financial future by making different choices today.
 
 
 
 
 

Reminder: Some families Will Win UCCB Lottery July 20

Reminder: Some families  Will Win UCCB Lottery July 20/www.aliko-aapayrollservices.com/blog
Reminder: Some families  Will Win UCCB Lottery July 20

 


Following are the key points about the UCCB   benefit:

  • The UCCB is increasing for children under 6, from $100 per month per child to $160 per month, effective January 1, 2015.

  • The UCCB is also being expanded to include a benefit of $60 per month for each child aged 6 through 17, effective January 1, 2015.

  • Because these enhanced benefits were announced in April  21 , 2015 but made effective retroactive to January 1, 2015, families who qualify for the UCCB will receive a lump sum for the additional amounts, payable on July 20, 2015.What does that mean?  Parents with children under age 18 living at home will be receiving a lump sum of $420 per child with their July Child Tax Benefit payment. This amount represents the additional $60 per month per child payable as of January 1, 2015.This is a great opportunity for families  who will be winning the UCCB lottery to invest the lump sum in an RESP or TFSA for maximum growth and tax savings.  

Everything You Need to Know About RRIFs

Everything You Need to Know About RRIFs-  www.aliko-aapayrollservices.com/blog




Everything You Need to Know About RRIFs
Written by Jim Yih
 
Most Canadians choose a Registered Retirement Income Fund (RRIF) as their retirement income option. A RRIF is a comfortable transition because of its similarity to an RRSP. A RRIF provides a high level of control over the investments in your retirement plan, the advantage of tax-free growth of assets within the plan, as well as maximum flexibility in establishing an income stream. RRIFs come in a number of shapes and sizes.
The first decision is income
The first thing you will need to determine is how much income you need or want. This decision will have the greatest impact on the longevity of your money. If you spend too much too fast, you will run out of money. Even if you don’t need or want the extra income, you have the minimum income rules to contend with.
You can tailor your income to your needs, subject to minimums imposed by the federal government. If you need steady monthly, quarterly, or annual income, it’s available. If you require a large lump sum for a major purchase, travel, or some other purpose, that’s available too.
RRIF withdrawal rules
This table outlines the minimum withdrawals on RRIFs established after 1992, as set by the government. Before age 71, the minimum percentage payout is worked out in the following way: 1÷(90 – your current age).  RRIF minimums were once again changed in 2015
So if you’re 65, your minimum withdrawal would be 1÷(90-65)=4%. With a $100,000 RRIF, that amounts to $4,000. Once you reach age 69, the following schedule applies:
Age
2015 and later
1992 to 2015
Pre 1992
65
4.00%
4.00%
4.00%
66
4.17%
4.17%
4.17%
67
4.35%
4.35%
4.35%
68
4.55%
4.55%
4.55%
69
4.76%
4.76%
4.76%
70
5.00%
5.00%
5.00%
71
5.28%
7.38%
5.26%
72
5.40%
7.48%
5.56%
73
5.53%
7.59%
5.88%
74
5.67%
7.71%
6.25%
75
5.82%
7.85%
6.67%
76
5.98%
7.99%
7.14%
77
6.17%
8.15%
7.69%
78
6.36%
8.33%
8.33%
79
6.58%
8.53%
8.53%
80
6.82%
8.75%
8.75%
81
7.08%
8.99%
8.99%
82
7.38%
9.27%
9.27%
83
7.71%
9.58%
9.58%
84
8.08%
9.93%
9.93%
85
8.51%
10.33%
10.33%
86
8.99%
10.79%
10.79%
87
9.55%
11.33%
11.33%
88
10.21%
11.96%
11.96%
89
10.99%
12.71%
12.71%
90
11.92%
13.62%
13.62%
91
13.06%
14.73%
14.73%
92
14.49%
16.12%
16.12%
93
16.34%
17.92%
17.92%
94
18.79%
20.00%
20.00%
95+
20.00%
20.00%
20.00%
The second decision is what to invest in
Financial institutions offer plans that can hold Guaranteed Investment Certificates (GICs), mutual funds, cash, or other financial instruments. Alternatively, you can establish a self-directed RRIF to include a combination of individual securities in your plan, such as stocks, bonds or Treasury bills (in addition to the investments mentioned above).
RRIFs offer investment flexibility. You can hold the same investments that are eligible for an RRSP. Shares of Canadian corporations, corporate and government bonds, Canada Savings Bonds, Treasury bills, mortgages, GICs, term deposits, covered call options, warrants, rights, and mutual funds that invest in eligible securities are all qualifying investments. You can also hold a limited percentage of your RRIF in foreign investments. Just like an RRSP, a RRIF lets you retain control over your investments, rather than handing over your money to a third party.
The longevity of your RRIF is simply based on how much money you make in investment return and how much you take out for income. It does not take a lot of mathematical know how to figure out that if you earn more money than you withdraw in income, the RRIF will grow.
For example, if you invest in a GIC RRIF at 6% and you take out the minimum (4.76%) at age 69, your RRIF should grow by 1.24%. At age 72 given the same investment return, the minimum is now 7.48%. This means your RRIF will deplete in value by 1.48% (7.48%-6.00%).
What will happen to your RRIF when you die?
You can leave your remaining RRIF assets to your heirs upon your death by designating the proper beneficiary. Not all other retirement income options provide for this. Naturally, your desire to provide an estate for your spouse, beneficiaries or charities may have an impact on how you set up your RRIF. While this may or may not be an issue, income and investments should remain the priorities.
RRIFs are flexible
One of the benefits of the RRIF is the flexibility you have in dictating income. These are some common types of RRIFs.
  • Minimum income RRIF – This RRIF provides the minimum level of income. Typically, people who choose the minimum income RRIF are those who do not need the money and want to defer taxable income for as long as possible. Remember, if this is the case, you can base the RRIF on the age of your younger spouse.Furthermore, remember the RRIF minimum income is based on the value of the RRIF on December 31 of the previous year. Sometimes this can make income planning difficult because you really don’t know what your income will be until the last minute.
  • Capital preservation RRIF – Preserving capital and paying out a fixed level of income are the goals of this RRIF type. In this case, you will withdraw your investment returns each year (subject to minimums). If you are using mutual funds, you might elect a reasonable target return like 8%, for example, with the hopes and intentions of earning 8% to maintain the capital.
  • Level income RRIF – If you want to provide income for a specific period of time such as to age 90, this RRIF would be the right choice. In this instance, you would determine the amount of income you could derive so that the entire asset would be depleted by the time you reach 90 years of age. You can use age or time frame.Have as many RRIFs as you wantYou can have as many RRIFs as you want. You can have one that pays a level income for the next 5 years to bridge income until government benefits. You can have another that is a capital preservation RRIF for a more stable long term level of income.Generally, many people consider consolidating into one RRIF. With a single RRIF, you can easily manage your investments and you’ll only have to worry about one minimum withdrawal. Several RRIFs require more time and energy, and you’ll have to arrange to withdraw at least the minimum from each one.Withholding tax detailsRRIF income is subject to government withholding tax rates. Just like your employer withholds taxes and remits them directly to the government, your RRIF administrator is required to do the same. Minimum income RRIFs are not subject to withholding tax, but you can request any level of withholding tax desired. In all other circumstances, there is a 10% withholding rate on withdrawals less than $5000, 20% on withdrawals between $5000 and $15,000 and 30% tax on withdrawals over $15,000.As you can see, there are a lot of issues to deal with when it comes to planning your RRIF income. Take the time to plan wisely.

Enjoy the benefits of filing on time and online


Enjoy the benefits of filing on time and online - www.aliko-aapayrollservices.com/blog


Enjoy the benefits of filing on time and online
Did you know?





Filing your income tax and benefit return and paying what you owe on time helps you avoid possible interest and penalty charges, and ensures that your benefits won't be delayed.
Important facts
  • You have until midnight on or before April 30, 2015, to file your 2014 income tax and benefit return.
  • If you or your spouse or common-law partner is self-employed, you have until midnight on June 15, 2015, to file your return.
  • Any balance owing must be paid on or before April 30, 2015—even if your return is due on June 15, 2015.
What happens if I don't file on time?
When you file your yearly tax return, you are letting the Canada Revenue Agency (CRA) know your current tax situation. Without that information, the CRA can't be sure that you are still eligible to receive certain benefit payments. If you don't file on time, your benefit and credit payments (for example, the Canada child tax benefit and the goods and services tax/harmonized sales tax credit) may be interrupted.
Also, if you have a balance owing and you don't file your return on time, we'll charge you a late-filing penalty. The penalty is 5% of your 2014 balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. If we charged a late-filing penalty on your return for 2011, 2012, or 2013, your late-filing penalty for 2014 may be 10% of your 2014 balance owing, plus 2% of your 2014 balance owing for each full month that your return is late, to a maximum of 20 months.
In addition to the late-filing penalty, if you have a balance owing for 2014 you'll be charged compound daily interest beginning May 1, 2015, on any unpaid amounts owing for 2014.
Even if you can't pay all of your balance owing right away, you should still file your return on time. You can set-up a pre-authorized debit agreement using the My Account service, or call us at 1-888-863-8657 to make a payment arrangement. By filing on time, you'll avoid the late-filing penalty.
CRA online services make filing easier and getting your refund faster
The CRA's online services are fast, easy, and secure. You can use them to file your income tax and benefit return, make a payment, track your refund, receive your notice of assessment, and more. Did you know that the Government of Canada is switching to direct deposit for payments that it issues? This includes your tax refund and benefits payments? Sign up for direct deposit today! For more information, go to www.cra.gc.ca/getready
 
 

What mistakes are made when investing money


What mistakes are made when investing money- www.aliko-aapayrollservices.com/blog


What mistakes are made when investing money
 
Written by Wayne Rothe  
 
In two decades of helping people with their money, I’ve learned that most people – left to their own devices – make mistake after mistake. They do precisely the wrong thing at the worst time – zigging when they should be zagging. These errors crush people’s finances and scuttle their retirement dreams. A good financial planner can help but it doesn’t guarantee success either. Planners can only advise; our best advice sometimes goes unheeded.
Some people don’t like financial “guru” Suze Orman. She shoots from the hip and tells people the raw truth, which often hurts. I must say that I do like her common-sense advice. In her book The Money Class: How to Stand in Your Truth and Create the Future You Deserve, Orman admits that no one knows what the stock market will do this year, or next. Not Warren Buffett, not the best fund manager and not the smartest investment advisor.
Predicting markets is a fools game
During good markets I’ve had clients tell me I’m brilliant. I’m sure some also think I’m an idiot when markets are lousy and their investments are doing poorly. I’m neither a genius nor an idiot. I’m just a guy who knows how to build good portfolios, how to create a financial plan, how to stay on track, how to minimize taxes and – perhaps most importantly – and how to avoid the colossal investing mistakes that destroy retirement dreams.  the truth is I have no idea where the markets are going in the next year or two. I do think I have a pretty good idea where they’ll be in the next 10 years, which is the period you should be concerned about. That is, unless you’re within a few years of needing your money for retirement, or for some other purpose.
“Don’t worry if the market goes up or down,” Orman says. “Focus on building a diversified portfolio with a mix of stocks and bonds that will grow in value over the long term. Think decades, not quarters.”
Investing is important but not everything
Orman says that there are more important factors to your success than an investment’s rate of return.
“A financial planner can help you figure out an allocation strategy,” Orman contends, in other words the proper mix of stocks, bonds and cash to fit your goals. “That said, how much money you set aside is more important than how you invest it. You need to be putting away at least 10 to 15 per cent of your salary every year – around 25 per cent if you started saving in your 30s or 40s.”
That requires people to – wait for it – spend less and take on less debt. Orman writes. “I am going to challenge you not merely to live within your means, but to live below your means.”
Orman says that income from your savings plus government benefits should replace 70 to 80 per cent of your pre-retirement income. If you get a raise, invest half of it. Actually, I think that some people can manage fine on 50 to 60 per cent of their pre-retirement income.
The last thing I’ll highlight from Orman’s fine book is that if you’re not retiring or otherwise don’t your money in the next 10 years, a stock market decline is actually good news. You should be cheering for bad markets.
Orman invites you to imagine that there is a jacket you’ve had your eye and it’s discounted by 25 per cent. “Wouldn’t you be thrilled?” she asks. “You should feel the same way about stocks. When the price of an investment drops, your dollar buys more shares—and more shares will earn more money when the markets inevitably go back up.”
She’s saying what I have said many time – that a market downturn is an opportunity to buy into a rising tide at reduced prices. Learning this important fact should help you avoid investing mistakes and make you a more successful investor.