Family Tax Cuts Could Fatten December Coffers

It’s always a good idea to re-evaluate the requirement to make the December 15 quarterly tax instalment payment (December 31 in the case of farmers) but this year end it’s even more important because the introduction of the Family Tax Credit for 2014, which has the potential to reduce family taxes by up to $2000.

Who has to pay taxes by instalment?  Those taxpayers whose net taxes owing is more than $3000 in 2014 and in either 2013 or 2012.  Net taxes owing include personal income taxes plus CPP and EI premiums owing on self employment.

What’s different this year is that couples with children at home (under age 18) where one spouse is in a higher tax bracket than the other are likely to benefit from the Family Tax Cut of up to $2,000.  The credit will be calculated on new form Schedule 1-A.

However, the new form will not be available until after the instalment payment is due so how can you figure out if that December instalment must be paid or not?  The Knowledge Bureau is here to help.  We’ve just updated our Income Tax Estimator to calculate the Family Tax Cut.  If you already have a subscription to the Income Tax Estimator, you can estimate the Family Tax Cut for clients immediately.   Sign up for a free trial today if you are not a subscriber to see if taxpayers in your circle of influence will benefit.  Questions to consider:

• How many of your clients could be eligible to decrease or eliminate their December tax instalment?

• Can any withholding taxes be reduced before year end on bonuses or other lump sums as a result of the Tax Cuts?

• Can tax withholdings on bonuses or lump sums be annualized instead of taken in one pay period?

This type of planning at year end can spring loose new funds for RESP, RRSP, or TFSA investments, or something lovely like a nice family trip in 2015.  Wouldn’t that be a happy conversation?