1. Certain expenditures made by individuals by December 31, 2011 will be eligible for 2011 tax deductions or credits including: moving expenses, child care expenses, safety deposit box fees, charitable donations, political contributions, medical expenses, alimony, eligible employment expenses, union, professional, or like dues, carrying charges and interest expenses, certain public transit amounts, and children’s fitness and arts amounts.
   
   
2. You have until February 29, 2012 to make tax deductible Registered Retirement Savings Plan (RRSP) contributions for the 2011 year.
   
   Consider contributing to a spousal RRSP to achieve income splitting in the future.
   
   
3. If you own a business, consider paying a reasonable salary to family members for services rendered to the business.
   
   
4. An individual whose 2011 net income exceeds $67,668 will lose all, or part, of their old age security.
   
   Senior citizens will begin to lose their income tax age credit if net income exceeds $32,961.
   
   Contact your professional advisors for assistance in managing 2011 personal income.
   
   
5. Consider purchasing assets eligible for capital cost allowance before the year-end.
   
   
6. Consider selling capital properties with an underlying capital loss prior to the year-end if you had taxable capital gains in the year, or any of the preceding three years.  This capital loss may be offset against the capital gains.
   
   
7. Registered Education Savings Plan (RESP)
   
   A Canada Education Savings Grant (CESG) for RESP contributions will be permitted equal to 20% of annual contributions for children (maximum $500 per child per year).
   
   
8. Health and dental premiums for the self-employed
   
   Individuals will be allowed to deduct amounts payable for Private Health Service Plan coverage in computing business income provided they meet certain criteria.
   
   
9. A refund of Employment Insurance paid for non-arm’s length employees may be available upon application to CRA.
   
   
10. Taxpayers that receive “eligible” dividends from private and public corporations may have a significantly lower tax rate on the dividends.  Notification from the corporation to the shareholder is required.
    
    
11. Eligible public transit passes will be entitled to a tax credit.
    
    
12. A tax credit for children under 16, at the beginning of the year,  enrolled in certain organized activities is available.
    
    
13. A Registered Disability Savings Plan may be established for a person who is eligible for the Disability Tax Credit.  Non-deductible contributions to a lifetime maximum of $200,000 are permitted which are eligible for tax-deferred grants and bonds.  Please contact your professional advisors for details.
    
    
14. If required income or Forms have not been reported in the past to the CRA, a Voluntary Disclosure to the CRA may be available to avoid penalties.  Contact us for details.
    
    
15. U.S. Citizens and green card holders have U.S. filing obligations.

1. Bonusing down active business earnings in excess of the annual business limit may reduce the overall tax.  However, leaving corporate active business income over this amount presents a tax deferral.
   
   Professional advice is needed in this area.
   
   
2. Notification must be made to the shareholders when an “eligible” dividend is paid - usually in the form of a letter dated on the date of the dividend declaration.  If all shareholders are directors, the notification may be made in the Directors’ Minutes.
   
   Please contact your professional advisor for advice before paying an eligible or ineligible dividend.
   
   
3. Elect to pay out tax-free “capital dividend account” dividends.
   
   
4. Consider paying dividends to obtain a refund of “refundable dividend tax on hand”.
   
   
5. Corporate earnings in excess of personal requirements could be left in the company to obtain a tax deferral.  The effect on the “Qualified Small Business Corporation” status should be reviewed before selling the shares.
   
   
6. Dividend income, as opposed to salaries, will reduce an individual’s cumulative net investment loss balance thereby providing greater access to the capital gain exemption.
   
   
7. Excessive personal income affects receipts subject to clawbacks, such as old age security, the age credit, child tax benefits, and GST credits.
   
   
8. Salary payments require source deductions to be remitted to the Canada Revenue Agency on a timely basis.
   
   
9. Individuals that wish to contribute to the Canada Pension Plan or a Registered Retirement Savings Plan may require a salary to create “earned income”.
   
   
10. Salaries paid to family members must be reasonable.

• the Plan’s cost is reasonable,
  
• the Plan is a basic Plan with a fixed cost, and
• the employee’s personal use of the service does not result in charges that are more than the basic Plan cost.

1. That keeping a log book for automobile expenses is not specifically required by the ITA.  However, by not doing so, she faces a heavier burden in proving that she used her motor vehicle almost exclusively for business purpose.

2. The Court understood that keeping a log book may be tedious and may not always be practical; however, it would be useful in determining the actual business use.

3. The Court noted that if she did not have time to report all her business driving, which they serious doubt, she could have reported her personal driving.

1. As of January 1, 2012 the rules for contributing to the CPP will change.
   
   
2. Individuals under 65 years of age - starting on January 1, 2012, will now have to contribute to the CPP if you are working, even though you may be receiving CPP.
   
   Individuals at least 65 years of age but under 70 - starting on January 1, 2012, unless you elect to stop contributing to the CPP, you will now have to contribute to the CPP if you are working.
   
   
3. To stop contributing to the CPP:
   
   

   Employee - an employee who is at least 65 years of age but under 70 and receiving a CPP or QPP retirement pension, can elect to stop contributing to the CPP by completing Form CPT30, giving a copy to all your employers, and sending the original to the CRA. Self-Employed - If you are self-employed, at least 65 years of age but under 70 and receiving a CPP or QPP retirement pension, you can elect to stop contributing to the CPP.  To do so, complete the applicable section of Schedule 8, CPP Contributions on Self-Employment and Other Earnings for 2012 and file it with your income tax return for 2012. Do not use Form CPT30. The Election stays in effect until you turn 70 years of age or until you revoke the Election.

   
   
   
4. Individuals receiving both pensionable earnings and self-employed earnings who are at least 65 years of age but under 70 and receiving a CPP or QPP pension can elect to stop contributing to the CPP by completing Form CPT30, giving a copy to all your employers, and sending the original to the CRA.
   
   
5. If you want to start contributing to the CPP again, you need to revoke your Election to stop contributing to the CPP.  However, you cannot revoke an Election in the same calendar year that you elected to stop contributing to the CPP.  For example, if you elected to stop contributing to the CPP in 2012, you cannot revoke this election before 2013.
   
   Since you cannot revoke an Election until 2013, Service Canada will provide information about this at a later date.

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this newsletter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents.
For any questions… give us a call.