Two Hot Tax Tips for Year-End Planning

If you want your clients to start 2017 on a sound financial footing, you’ll help them with the one BIG thing they can do before year-end to keep more money in their pockets in 2016: reduce their taxes with these two smart tips for tax savings.

1. Recover taxes owing from prior years. Sometimes individuals put off filing their income tax returns because they think they owe money. In fact, the CRA (Canada Revenue Agency) may owe them both taxes and refundable tax credits. If you are aware your clients may be delinquent filers, help them get caught up before year end. It’s the first cornerstone of year-end tax planning. Tax refunds resulting from errors and omissions may be recovered for up to 10 years. This means returns for 2006 must be adjusted by December 31 of this year. Remind your clients that by filing a return, RRSP contribution room is created to enhance retirement savings in the future (so this is a particularly important strategy for Millennials). As well, capital losses may be recorded to enable savings in the current tax year and carry-forward or carry-back opportunities, too. Advisors using this strategy can save significant sums for some of their clients.
 

2. Never overpay quarterly tax instalments. If your clients remit income taxes in quarterly instalments, the final instalment for the year is due on December 15 or, in the case of farmers and fishers, the annual instalment is due December 31.  Make sure your clients haven’t overpaid their instalments—you don’t want to draw money out of the markets if you don’t have to. (Also, be prepared to do an estimation of the 2017 taxes payable. Knowledge Bureau has an excellent tax estimator for these purposes.) If 2017 income is expected to be lower than in past years, your clients may be able to reduce their instalments or perhaps not make them at all going forward. To use the optional “current year” or “prior year” methods of calculating instalments, check out the Canada Revenue Agency’s online publication Paying Your Income Taxes by Instalment. Saving on tax instalments is a nice way to create new capital for investment purposes or to provide extra money for that much-needed vacation!

Visit your DFA-Tax Services Specialist or MFA-Retirement and Estate Services Specialist before year end to compute your tax advantages.

©2016 Knowledge Bureau Inc. All Rights Reserved.

Refer a Friend	Research	Calculators	Course Trials