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Last Updated: Jul 2nd, 2008 - 21:15:22 |
(NC)-The taxman cometh. Lock the doors, cross your fingers and hope for the best.
Sounds terrifying, right? It shouldn't be. According to Sandy Cardy, Senior Vice-President, Tax and Estate Planning at Mackenzie Investments, the taxman's arrival needn't be as scary as it sounds. In fact, Cardy explains, Canadians are not too late to tame the taxman by utilizing some of the following steps.
1. Maximize tax credits: Most purchases that qualify for tax credits or deductions must be made before December 31, 2007, to qualify as part of the 2007 tax year. If possible, pay any eligible tuition fees, medical expenses, childcare bills, child support and tax-deductible legal fees.
Don't forget to make any charitable donations too! In addition to a tax credit, you can eliminate any capital gains tax by donating securities or mutual funds instead of cash.
2. Limit penalties and interest: If you make quarterly income tax payments to the Canada Revenue Agency, be sure not to miss the December 15, 2007, deadline for your last payment.
3. Make an RESP contribution: If you contribute to a Registered Education Savings Plan on behalf of a child or grandchild, make the contribution before year-end to ensure it qualifies for the annual Canada Education Savings Grant (20 per cent - or $500 - on the first $2,500 of your contribution).
4. Take advantage of two extra years: The 2007 federal budget raised the maximum age for Registered Retirement Savings Plans (RRSPs) from 69 to 71. Take advantage of the extra 'wind-up' time by contributing as much as possible to your RRSPs. If you're 71, and must convert your RRSPs to a Registered Retirement Income Fund (RRIF), do it now. Many financial institutions require your transfer instructions at least one month before year-end. If you miss the deadline, the entire amount of your RRSP could be considered income and taxed accordingly.
5. Roll your bonus into an RRSP: If your job affords you the option to roll your before-tax, year-end bonus into an RRSP, take advantage of the opportunity. Rolling your full, before-tax bonus into an RRSP allows you to take advantage of compound interest on the full value of your bonus - which could significantly increase the value of your investment over time.
6. Offset your capital gains: If you are expecting to be taxed on realized capital gains for 2007, determine if you have any unrealized capital losses in any other holding. Capital losses can be used to offset capital gains, thereby lowering your tax bill.
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