Kustom Design Group of Companies

Exceptions to choosing your Income Tax Package

Posted on February 17, 2012 by Michael Lepitre

In some instances, choosing your Income Tax & Benefit Package based on where you resided last December 31, 2011 does not apply. Here are the exceptions:

If, on December 31, 2011, you had residential ties in more than one province or territory, use the package for the province or territory where you have your most important residential ties.
If you are filing a return for a person who died in 2011, use the package for the province or territory where that person resided at the time of death.
If you emigrated from Canada in 2011, use the package for the province or territory in which you resided on the date you left.
If you lived outside Canada on December 31, 2011, but maintained significant residential ties with Canada, you may be considered a factual resident of Canada. Use the package for the province or territory where you kept your residential ties.
Generally, if you did not maintain significant residential ties with Canada, and on December 31, 2011, you lived outside Canada and were a government employee, a member of the Canadian Forces or their overseas school staff, or working under a Canadian International Development Agency program, you may be considered a deemed resident of Canada. Use the package for non-residents and deemed residents of Canada. This also may apply to your dependent children and other family members.
If you stayed in Canada for 183 days or more in 2011, you did not establish significant residential ties with Canada, and, under a tax treaty, you were not considered a resident of another country, you will be considered a deemed resident of Canada. Use the package for non-residents and deemed residents of Canada.
If, throughout 2011, you did not have significant residential ties with Canada and neither of the two previous situations apply to you, you may be considered anon-resident of Canada for tax purposes. Use the package for non-residents and deemed residents of Canada.
However, if you earned income from employment in a province or territory, or earned income from a business with a permanent establishment in a province or territory, use the package for that province or territory.

Reference: CRA Website, www.cra.gc.ca

Posted in Tax Advice Information and Updates, Tax Planning and Tax Preparation, Taxes Accounting and Industry News | Tagged calgary tax accountant, CRA, income tax and benefit package, income tax package, tax advice | Leave a comment

Which Income Tax & Benefit Package should you use?

Posted on February 15, 2012 by Michael Lepitre

As mentioned in a previous blog, there are several types of Income Tax & Benefit Package available for you depending on where you were residing at the end of the tax year. Kindly refer to the blog,2011 General Income Tax and Benefit Package now available, from last week for links to the Income Tax and Benefit Package of each province and territory.

Generally, you would have to use the package for the province or territory where you resided on December 31, 2011. But you should know that there are a few exceptions to this rule such as if you had residential ties in another place. These exceptions will be discussed on our next blog.

If you resided in Quebec on December 31, 2011, you should use the package for residents of Quebec to calculate your federal tax only. You will also need to file a provincial income tax return for Quebec.

So what are residential ties? Residential ties include where your home (whether owned or leased) and personal property are, and where your spouse or common law partner or dependents reside. Other ties that you should take note include social ties, driver’s licence, bank accounts or credit cards and provincial or territorial hospitalization insurance.

If, on December 31, 2011, you had residential ties in more than one province or territory, you should use the tax package for the province or territory where you had the most important residential ties. An example of this case is when you attend university in Alberta but usually reside in Ontario. In this case, you should use the Ontario tax package.

If you moved to another province or territory during the year, you should use the tax package for the province or territory you resided in on December 31, 2011.

Reference: CRA Website, www.cra.gc.ca

Posted in Tax Advice Information and Updates, Tax Planning and Tax Preparation | Tagged benefit package, calgary tax accountant, CRA, income tax, income tax and benefit package, tax advice | Leave a comment

Canada not better off than US

Posted on February 13, 2012 by Michael Lepitre

According to Sherry Cooper, chief economist of BMO Capital Markets, “For the first time in seven years, Canada is now the weak sister to the United States. As good economic news seems to be spreading, at least in the U.S., Canada is now underperforming – in part due to the lagged effect of the strong Canadian dollar on competitiveness.”

In the past, Canada took pride in being better off than our debt-ridden neighbours to the south. However, that has all changed according to a recent report by Cooper. In this report, Cooper stressed that the slow economy in Canada has resulted in stalled job creation, waning consumer confidence and slow personal income growth.

Recent news of widespread labour disputes is not helping either. And according to Cooper, improvements in innovation and productivity will be crucial to keep Canada competitive.

This competitiveness will definitely come in handy once plans of Canadian expansion of several U.S. retailers push through. Expansion of retailers such as Wal-Mart, Target, J.Crew, Victoria’s Secret and others will definitely create some stiff product and price competition for Canadian brands.

And although these expansions will “create jobs, boost the value of shopping centre real estate and enhance customer choice, it will also lead to further erosion in Canadian-owned retail company profits and the potential layoff of many of their employees.”

While Canada may be underperforming, the United States has been taking full advantage of increased consumer spending and improved labour markets especially in manufacturing mainly due to the low U.S. dollar and depressed wage demands

But all is not rosy with our neighbours to the south as their federal budget deficit problems remain. And as the U.S. presidential election approaches, economists are unsure what will become of the Bush tax cuts which will be expiring in 2013.

According to Cooper, “As always in Washington, this will not be an “all or nothing” decision. There will likely be a further postponement of the expiration date until after the presidential election or some combination of compromise measures. Either way, the fiscal drag in 2013 is likely to be heavy.”

Reference: “Canada now weak sister to the U.S.: Sherry Cooper” by Eric Lam, February 9, 2012

Posted in Canadian Government News and Updates | Tagged American economy, Bush tax cut, Canadian economy, U.S. election | Leave a comment

2011 General Income Tax and Benefit Package now available

Posted on February 13, 2012 by Michael Lepitre

Please note that the General income tax and benefit package for 2011 is now available on the CRA website (www.cra.gc.ca). The package includes the guide, the return, related schedules and the provincial or territorial schedules, information and forms (except Quebec).

Taxpayers can get the appropriate package according to the province or territory in which they resided on December 31, 2011. Here are the links to the packages of different provinces and territories:

There is also a specific package for non-residents and deemed residents:

Non-residents and deemed residents of Canada

There are several ways you can get the 2011 General Income Tax and Benefit package.

You can get the package online. The package is also available in multiple formats that can be accessed by individuals with visual impairment. You can also use the online order form on the CRA website to have a printed copy of the 2011 General income tax and benefit package and any other forms or publications. Your requests will then be mailed to you.

If you prefer to get a printed version of the package, you can get it from any postal outlet or Service Canada office near you between February and early May.

You can also request a printed copy to be mailed to you starting February 2012 by calling 1-800-959-2221.

As mentioned earlier, there are multiple formats that are available for persons with visual impairment. Most forms are available for download from the CRA website in Braille and in etext. They can also be ordered in Braille, etext (compact disk), large print or MP3 (compact disk). Please call 1-800-959-8281 for more information.

About Kustom Design Group

Kustom Design is a group of interconnected companies, each company striving for the same goal: to provide excellent Accounting and Financial products and services to help clients SAVE on taxes, properly manage their finances and ultimately, achieve Financial Freedom and Lasting Wealth.

The Kustom Design Group offers a complete line of products and services in key areas of accounting, finance and tax; from accounting, consulting and strategic planning to financial and tax education. Visit our website for more information about our products and services.

Posted in Kustom Design Accounting Services News, Tax Advice Information and Updates, Tax Planning and Tax Preparation | Tagged Calgary, CRA, File tax, income tax, Income Tax Return | Leave a comment

Do you have U.S. tax risk? Part 2

Posted on February 8, 2012 by Michael Lepitre

For Americans who own Canadian mutual funds, complex rules regarding Passive Foreign Investment Companies or PFIC because of lobbying efforts of the mutual fund industry. Starting in 1986, many Americans used foreign mutual funds to gain tax deferral on income that was not distributed to them. However, with the new rules on PFIC, the IRS has changed its view of the tax treatment of these foreign mutual funds. A PFIC exists when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average fair market value of its assets are assets that produce or are held for the production of passive income. Passive income includes dividends, interest and its equivalents.

Because of the new rules for PFIC, the IRS now classifies Canadian mutual funds as corporations for U.S. tax purposes. Therefore, the income received from a PFIC or from the sale of a Canadian mutual fund that is PFIC will be subject to U.S. tax and interest penalties.

It is recommended that Americans who own Canadian mutual funds to make the appropriate election for their investment holdings. And with the passing of the Hiring Incentives to Restore Employment or HIRE Act, taxpayers have no choice but to comply.

In addition to the requirement of filing a U.S. tax return and other IRS forms, Americans residing abroad are also required to declare their foreign assets. And with the HIRE Act, Canadian banks and investment firms doing business with Americans must ask clients if they are U.S. citizens or residents starting January 1, 2013. If the client confirms his U.S. citizenship, banks are required to report account information to the IRS. If the client refuses to confirm his citizenship, the bank or investment firm will withhold 30% of any investment earnings and remit that to the IRS.

Reference: “Does your client have U.S. tax risk?”by Terry F. Ritchie, January 27, 2012, advisor.ca

About Kustom Design Group
Kustom Design is a group of interconnected companies, each company striving for the same goal: to provide excellent Accounting and Financial products and services to help clients SAVE on taxes, properly manage their finances and ultimately, achieve Financial Freedom and Lasting Wealth.

Posted in Tax Advice Information and Updates | Tagged Canada Revenue Agency, Income Tax Return, CRA, Tax Advice Information and Updates, tax planning | Leave a comment

Do you have U.S. tax risk? Part 1

Posted on February 7, 2012 by Michael Lepitre

Being a dual citizen of Canada and the United States poses a lot of complications especially because of recent tax changes in the United States.

According to Terry Ritchie, author of the Advisor.ca article, “Does your client have U.S. tax risk?” clients and advisors alike have to be aware of the issues related to being dual citizens – “American citizens are deemed to be residents of the U.S. for income, gift and estate tax purposes. A U.S. citizen who is also a resident of Canada would be deemed to be a Canadian tax resident and also subject to tax on their worldwide income.”

It is important to note that not all of the American citizen’s worldwide income is subjected to tax in both Canada and the U.S. The foreign-earned income exclusion exempts US$95,900 of Canadian-source employment income. After application of this exclusion and the application of foreign tax credits, most U.S. citizens in Canada do not pay additional U.S. income tax. But do remember that the U.S. citizens are still required to file their U.S. income tax and other required filings.

U.S. citizens residing in Canada are required to file IRS Form 1040 annually on their worldwide income. The deadline to file this is April 15^th if the American owes U.S. tax. If the American does not owe any U.S. tax, they can file their income tax return on or before June 15^th.

It is recommended that dual citizens coordinate their Canadian tax return with their U.S. tax return. It is always best to have an experienced tax preparer familiar with both Canadian and American tax rules to prepare the tax returns. This will ensure that all tax compliance requirements are fulfilled on both sides.

Unfortunately, according to the article mentioned, “you can’t escape the clutches of the IRS by renouncing your U.S. citizenship, as this causes further complications. (see article, “Americans in Canada”).”

Reference: “Does your client have U.S. tax risk?” by Terry F. Ritchie, January 27, 2012, advisor.ca

Posted in Tax Advice Information and Updates | Tagged Canada, CRA, Personal Income Tax Return, tax planning | Leave a comment

Tax Season is drawing near!

Posted on January 27, 2012 by Michael Lepitre

As we all know, the tax season is drawing nearer and nearer. In a couple of weeks, the T1 for 2011 will be available for you. So what can you do to make this tax season more bearable than the last? Get organized!

As simple filing system would be a big help this season. Start by gathering all your receipts, T-slips and other required tax documents. Next step is to organize your tax documents. Remember to keep it as simple as possible. It can be in a printed format or you can keep a folder on your computer as well, depending on which format you find most convenient.

Here are some of the documents you will need. This will give you an idea when you are gathering and organizing for this tax season:

Your previous Notice of Assessment. This will help you confirm if you had any carry-forwards from the last income tax return you filed.
T-slips such as T3, T4, T4A, T5, etc.
Donation receipts
RRSP slips
Medical Receipts
Childcare Receipts
Child fitness and arts receipts. Remember that parents can now claim the Children’s Arts Tax Credit which gives the opportunity for parents of children who participate in paid artistic, cultural, recreational and developmental programs to enjoy the same benefits as parents whose children participate in paid programs of physical activity.
Transit passes
Capital gains/losses
Tax shelter documents (donation slips and T5003)
Super Flow through’s (T5013, T5018, T101)
Employment Expenses (T2200)
Education Amounts (T2202)
Business (Income & Expenses or Corporate Wages)
Rental (Income & Expenses)
Interest on money borrowed to invest
Other investments
First time home buyer documents

These are the basic categories of documents you will need for this tax season. We suggest you start early and not wait the last minute!

About Kustom Design Group

Posted in Calgary Tax Accountant, Tax Advice Information and Updates, Tax Planning and Tax Preparation | Tagged calgary tax accountant, canada tax, tax accountant calgary, tax season, taxes in canada | Leave a comment

Kustom Design Group of Companies

Exceptions to choosing your Income Tax Package

Which Income Tax & Benefit Package should you use?

Canada not better off than US

2011 General Income Tax and Benefit Package now available

Do you have U.S. tax risk? Part 2

Do you have U.S. tax risk? Part 1

Tax Season is drawing near!

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