Tax Season 2024 Approaches: Beat Inflation with Sound Tax Advice

To pull ahead of high inflation, interest rates and new taxes looming for the first half of 2024,  taxpayers and their advisors can best cope by quickly sharpening their skills on uncovering tax-driven savings to manage financial challenges in the short term, says Knowledge Bureau Founder and President Evelyn Jacks, best-selling tax financial author and award-winning educator.  There are also some things that can still be done before year end, especially for delinquent tax filers, but the time is quickly drawing to a close, so if you have missed filing a return now is the time to catch up and recover refunds and benefits.    

“Many people will find new tax relief due to a host of changes for the 2023 tax filing year,” says Mrs. Jacks. “Turning to 2024, tax and financial advisors can really shine in their communities by providing essential financial services that can lead directly to financial relief during tax season.  This begins with selecting a highly qualified team of tax advisors, who have recent education in tax form completion and tax efficient financial planning.”

To that end, Knowledge Bureau is embarking on its annual Advanced T1 Tax Update for tax accounting and financial advisors staring with a national virtual CE Summit event on January 17 and two in-person workshops on January 24 in Toronto and January 26 in Calgary.  Self-registration is possible here.    

Correct Tax Failing Errors and Omissions.  There are immediate ways to increase cash flow, including tax recovery initiatives.  By adjusting prior filed returns and filing missed returns to recover tax credits and deductions as well as tax refunds, many families can receive thousands of new dollars they didn’t know they had.  The 2013 tax filing year will be statute barred after December 31, 2023, so now is the time to file that return and recover refunds, refundable tax credits and create RRSP contribution room to help build retirement savings.

“There is also a one-time opportunity for families with children this year, says Mrs. Jacks. “While retroactive payments for the Canada Child Benefit can be applied for 10 years back; additional quarterly amounts of either $300 or $150, depending on family income, paid in 2021 must be applied for by the end of 2023.”

Investors should not forget to claim capital losses that can offset capital gains over a period of years – 3 years back and throughout future years to offset capital gains, adds Mrs. Jacks.  Other tips:

Pay Tax Balances ASAP.  For those that owe CRA, especially unincorporated small business owners, the balances due at tax filing time have risen significantly over the years, says Mrs. Jacks, “Now, with a 10% prescribed interest rate on outstanding balances starting January 1, 2024 there are many compelling reasons to pay off tax debt as soon as possible and plan with more tax efficiency in mind.”  In fact, making those payments before December 31 makes a lot of sense.

Tax Planning with a Pro Can Help.  Adapting to economic challenges more proactively begins with finding the right professionals, who have up-to-date credentials.  That’s challenging for many people, says Jacks, because it does involve fees for professional services. 

But it can lead to the making of foundational investments that will secure a household’s future. “By finding an Advisor for Your Future - someone with deep and broad knowledge who can understand your financial challenges and goals – you can be on sounder footing towards financial peace of mind,” says Jacks, “and that’s what true wealth really is.”

Financial Specialist Help with Life Events.   Finding the right help is important to be ready for the financial consequences of life events: when there is a medical emergency, a disability or death in the family, for example, or when there are family debt, investment, retirement, succession and estate planning needs.  “Your pro can help you think about the short- and long-term plans to get your financial health back,” says Jacks. “The goal is to increase after-tax cash flow and increasingly important:  manage tax audit surprises from the CRA.”

The 2024 Tax Filing and Investment Planning Milestones Checklist.   Knowledge Bureau’s newest resource as a primer in conversations between advisors and clients.  “Is everyone receiving all the government benefits they are entitled to? Consider what’s available every month for seniors - Old Age Security, Canada Pension Plan, Guaranteed Income Supplement, Veterans Disability Benefits, and for others - Employment Insurance, and the Canada Child Benefit.  Quarterly, there is the Climate Action Incentive, the GST/HST Credit as well as the Canada Workers Benefit, for example,” says Jacks.

Many of the government benefits available are income tested and that means they can be clawed back as income rises. To preserve or even increase these benefits, it’s important to maximize your RRSP deduction, if you are eligible, and most importantly file a tax return to create RRSP room and receive the benefits as well.  

How Can Your Family Decrease Income Taxes?   Find a DMA™ Tax Services Specialist or Real Wealth Manager™ to work with in 2024.  These astute and highly educated advisors will be able to discuss important concepts like family income splitting and investing for the best after-tax results; it’s a great way to increase cash flow – every two weeks –to pay family expenses, make investments and stay out of debt. 

While these new tax measures are complex and require new planning, new investments such as the new First Home Savings Account (FHSA), the TFSA (new contribution level is $7000 for 2024) and RRSP contributions (maximum contribution is 18% of last year’s earned income to a maximum of $30,780),  all can increase tax free or tax deferred income and turbo-charge savings and spending power.