Be Aware Of Tax Changes For Employees Part 3
As we discussed in our last issue of Breaking Tax and Investment News, with the end of the year now past us, it is worthwhile to review changes that have occurred during 2009 that may impact you or your clients at tax filing time.
Following are recent tax changes specific to those who are employed. It is important to review various tax provisions available to employees in this year of change, as the economic downturn has led to numerous job losses, especially in the automotive, media and manufacturing sectors.
Apprenticeship completion and incentive grants. Employees who received these amounts must report them as income on Line 130 of the tax return.
RPP Contribution Maximums. It is a time when companies are struggling to fund their employees' pension plans. However, if you are entitled to one, and you are assured your company will be able to fund your retirement, your role in planning is to consider all the ways to maximize recent contribution maximums, and "backfillingî any available contribution room based on past services provided. For money purchase plans, the annual contribution limit will be $22,000 in 2010; thereafter the amounts will be indexed. For defined benefit plans, the maximum pension benefit per year of service will be $2,333 in 2009 and $2,444 for 2010. After this, the maximum benefit will be calculated as 1/9 the money purchase limit. Don't forget, you may be able to make past service contributions as well.
And if you are about to receive a pink slip and a severance package, consider maximizing your RRSP contribution. In some cases, legal fees for challenging the amount of severance offered will be deductible too.
RRSP Contribution Maximums. You may contribute to your RRSP throughout the year and within the first 60 days of the new year in order to make a deduction to offset 2009 taxes. Maximum contributions are calculated as 18% of earned income to a maximum dollar contribution limit. This was set at $21,000 for tax year 2009, based on an earned income of $116,667 in 2008. The contribution deadline is March 1st, 2010.
Educational Resources: Now is a good time to look at retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future which could certainly include tax increases on both income and capital. To learn more consider the following Educational Resources available from The Knowledge Bureau:
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