Thought Leadership

The TFSA may turn out to be the greatest gift ever given to the Canadian taxpayer. All it needed to do was grow up. And that, it’s rapidly doing.

The program began humbly enough in 2009, allowing all Canadians age 18 or over the opportunity to contribute $5,000 per year (non-deductible). Now, recognizing the inflation protection built into the TFSA rules originally, the Federal Government has announced that 2013’s contribution limit (and all future years) will be 10% higher, or$5,500.

As of January 1, 2013, that means individuals could have put in as much as $25,500(4 years 2009 thru 2012 at $5,000/year, plus $5,500 for 2013). Of course, with some luck in the markets and re-investment of the dividends, the actual value of TFSA accounts should be significantly higher at this time. A married couple could have over $51,000 in these accounts, by next January. How is yours doing?

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During the summer of 2011 there was a significant amount of media attention directed towards the IRS’ Offshore Voluntary Disclosure Initiative (OVDI). This brought to light the fact that there is a staggering number of U.S. citizens, living in Canada, that are not up to date with their U.S. filing obligations (all U.S. citizens must file annual returns to the U.S.). The media attention focused on the potential penalties for failure to become compliant, with a focus on the “FBAR” (Form TD F 90-22.1 Report on Foreign Bank and Financial Accounts) penalties.

Many of these individuals chose to enter into the 2011 OVDI program by the September 7, 2011 deadline, which granted reduced penalties for late filed FBAR forms.

Another option that many others chose (where they had no U.S. tax liability) was to simply file past due U.S. individual income tax returns and FBAR forms (normally 3 to 6 years of overdue tax returns) and “hope for the best”.
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As readers will be well aware, the HST is being scrapped, and we are bringing back the provincial sales tax on April Fool’s Day, 2013. We thought it might be entertaining, and hopefully even useful, to review the history of this whole escapade, and its players . . .

First, Some Sales Tax History: BC’s former provincial sales tax had its origins in the 19th century. In those days, BC’s economy was far more dependent on the production of tangible goods. In those days, it was far easier to administer a tax that was based on tangible things, such as barrels of whiskey or piles of lumber, because they could be seen, and counted.

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We’ve been busy modernizing some of our procedures over the summer and fall. One of our changes that’s getting very positive feedback is Internet banking. That means you can now pay our account via your bank’s, or other financial institution’s, bill payment website.

It costs you, and us, nothing to use this method of payment, and you get a very effective record of the transaction when using it. So do we.

We’re already well along the way towards a ‘cashless’ society, and cheque writing is rapidly going out of fashion, too.

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The CPP is changing, beginning in 2012. These changes include the following, taken from the Service Canada website:

• Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65.
• Your monthly CPP retirement pension amount will decrease by a larger percentage if you take it before age 65.
• If you are under 65 and you work while receiving your CPP retirement pension, you and your employer will have to make CPP contributions. These contributions will increase your CPP retirement benefits.
• If you are age 65 to 70 and you work while receiving your CPP retirement pension, you can choose to make CPP contributions. These contributions will increase your CPP retirement benefits. You can opt out of making CPP contributions by filing form CPT30.
• The number of years of low or zero earnings that are automatically dropped from the calculation of your CPP pension will increase.
• You will be able to begin receiving your CPP retirement pension without any work interruption.

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Are you a U.S. Citizen or a U.S. ‘Green Card’ Holder?

As you may already be aware there have been a number of articles in the mainstream media recently concerning tax filing obligations of U.S. citizens or residents living abroad.

All U.S. citizens and green cardholders are required to file an annual U.S. individual income tax return (form 1040).

If that is you, please read on:

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Elimination of Tax Deferral – Partnerships and Joint Ventures

As a result of the 2011 Federal Budget the government has proposed to eliminate the tax deferral for corporations that have a significant interest in a partnership. Also on November 29, 2011, the CRA announced that joint ventures will no longer have a fiscal period. Therefore we will now have to report the income from joint ventures and partnerships up to the year end of the company.

For more information, see http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/dfrrl/menu-eng.html.