Financial Fallout: Seven Strategies for Unemployed Clients

Evelyn Jacks

As Canadians face the prospect of higher spikes in COVID cases this fall, the financial fallout will be grim for millions who also face the loss of CERB and other safety nets that were available in the first wave of the pandemic. There are seven basic strategies advisors and clients can discuss now in anticipation of a 2020 tax year dominated by pandemic stress and a 2021 that may be characterized by more debt, and more tax audit potential:

1. Revisit personal and business budgets for September to year end.   
2. Review prior filed tax returns for any missed tax deduction or credits (tax years 2010 to 2020).
3. Discuss debt management plans.  What borrowing options are available and how can debt consolidation help? What is the difference between good debt and bad debt?  Interest rates are low; it may be a good make sense to cover expensive, non-deductible consumer debt with low rate lines of credit.  It is also most important to discuss the payment of tax debt, as CRA can take quick action if collections are at risk.
4. Discuss asset withdrawal plans to pay immediate bills.  What is the most effective tax solution to withdrawing money for bill payment?  What should be tapped first:  RRSPs, TFSAs or non-registered accounts?
5. Consider what investments will or should be dropped in 2020 – RRSP, TFSA, RESP? Dropping the RRSP, for example may be a very bad idea if by doing so, refundable tax credits will drop too.These are important tax free monthly income sources that can in fact be increased with an RRSP investment.
6. Put off pre-payments of insurance or mortgage balances.  That may make sense in today’s low interest environment.
7. Consider the gig economy.  Many who don’t qualify for CERB or EI may need to start their own proprietorship to make money, if job prospects are otherwise poor as the pandemic continues. Discuss what this means from a tax point of view with your clients.

The financial fallout of this most unusual 2020, in other words, is significant.  Financial and tax advisors working together are on the front lines of financial recovery.  To learn more, attend the Virtual CE Summit on September 30:

Session 1 and 2 Financial Fallout and Future Directions Canadian financial commentator and tax expert, Evelyn Jacks will discuss the implications for the future of tax and financial planning after the September 23 Throne speech and review the pandemic-related issues that will make year end tax planning especially important this year.  Of special note are the interrelated tax audit threats for personal, payroll, GST/HST and corporate taxes that must be managed by unemployed Canadians, newly self-employed and high net worth families who may face higher capital gains or wealth taxes in the future.  

In addition, featured guest speakers and topics are:

Session 3 - Terri Williams, CFP. A New Financial Conversation: Personal Health and Risk Management

The pandemic has brought a grim reality to personal financial planning:  long term care is fraught with personal health risks.  Learn how to engage in a conversation about planning for sudden incapacity and death and the specific insurance, investment and tax provisions that can be of financial assistance during periods of disability and at death. 

Session 4 – Vicky Doell, Licensed Insolvency Trustee at BDO Canada and Andrea R. Doyle, Thompson Dorfman Sweatman.  Bankruptcy as a last resort, can a proposal be an option to avoid bankruptcy? How assets are affected by each option, Legal implications of trying to safeguard assets.

Session 5 – Dr. Dean Smith – President, Cadesky U.S. Tax Ltd. Tax Audit Defense – Individuals & Business.  Who are the most likely clients in your book of business to be audited in 2020/21?  What are the most likely provisions to be audited on individual tax returns for 2019:  home office expenses?  CERB payments?  Self-employment income?  Find out how to face the tax auditor on behalf of your clients as you defend the numbers on their personal and business tax returns.  A particular problem:  real estate ownership in the U.S and net worth assessments.

Session 6 – Real Wealth Management Issues.  We continue the saga with our fictional family who is coping with the financial fallout of their pandemic experience.    Grampa age 85 survived a COVID diagnosis, his 55 year old daughter, but unfortunately succumbed to cancer, in a tragic twist.  Her 35 year old son, recovered from COVID, too, but is devastated.  He is a new heir of all of his mother’s property and investments.  Before her death, he started a fledging business, as he lost his job.  He received the CERB and now finds himself in the midst of his executorship, doing double-duty looking after frail Grampa, who is also a cantankerous multi-millionaire. This is a thoroughly spell-binding discussion that encompasses the technical and ethical standards to employ when relationships with families change due to incapacity and death.   Find out how a true RWM model helps these two clients get what they are really paying professional fees for:  financial peace of mind in a difficult time. 

Early registration ends September 15.

Additional educational resources:

It’s also a great time to prepare by shoring up your credentials online by taking a Designation Program to specialize in offering tax and financial service solutions. Consider enrolling two important programs this fall – the links below will provide curriculum details and costs.

1. DFA-Tax Services Specialist™ Designation
2. Real Wealth Manager™ Designation

COPYRIGHT OWNED BY KNOWLEDGE BUREAU INC., 2020.

UNAUTHORIZED REPRODUCTION, IN WHOLE OR IN PART, IS PROHIBITED.