Understanding Your Notice of Assessment

By iA Private Wealth, March 14, 2024 It’s tax season, and no matter how many times you’ve gone through the ritual of preparing your income tax return, our refresher will help get you organized and on track for what will hopefully be a smooth and painless experience. Reference materials It may help to have last year’s return handy as a guide to figuring out which slips and forms you may require for this year’s return, and which lines must be completed on those forms. Of course, circumstances can change but knowing what you needed last time is a good starting point for gathering info. Similarly, last year’s CRA Notice of Assessment could help. Each notice contains valuable info, such as your RRSP deduction limit for the next tax year, the amount of unused net capital losses that can be applied to reduce future taxable capital gains, and the correction of mistakes you might have made on your return. Finally, note any tax installments you paid over the year as well as any relevant correspondence you received from the CRA. Here’s a checklist to help gather your tax slips, forms and other required info that’ll be used when completing your income tax return. Federal tax slips T3: Investment income (allocations, distributions) received during the tax year T4: Employment income (also includes CPP/EI premiums paid, income tax deducted, pension adjustment amount, charitable donations made through payroll, etc.) T4A: Pension, retirement, annuity and other income received T4A(OAS): Old Age Security pension benefits T4A(P): Canada Pension Plan benefits T4E: Employment Insurance benefits T4RIF: Income received from a RRIF T4RSP: Income received from an RRSP T5: Investment income (e.g., interest earned from bank accounts and GICs; corporate-class mutual fund distributions) T2202: Tuition and related fees (or a TL11 form if you studied outside of Canada) T5013: Statement of Partnership Income Receipts/documentation RRSP receipts for contributions made in previous calendar year, up to first 60 days of current year Investment-related expenses, including loans used for investing purposes Child care and/or adoption expenses Child support, alimony/spousal support payments Medical expenses Moving expenses Charitable donations, political contributions Professional or union dues not on your T4 slip Digital news subscription fees Business income and related expenses Rental income and related expenses Investment counsel fees and carrying charges Documents pertaining to the sale of real estate  Work-from-home expenses Regarding the deduction for home office expenses that was introduced during COVID-19, some rules and conditions have changed. According to the CRA, eligible employees working from home in 2023 must use the detailed method to claim home office expenses. The temporary flat rate method no longer applies. Visit the Government of Canada website to learn more about eligible expenses and other important information concerning work-from-home expenses.   Our checklist is a basic compilation of common slips, receipts and other documents you may need while completing your income tax return, but it isn’t exhaustive. Not all items will apply to you, and you might need additional info to file your return. We recommend consulting a qualified professional to help ensure you complete your return accurately and fully, claiming all deductions and credits for which you’re eligible.  

By iA Private Wealth, January 11, 2024 While some people love their job so much they never want to retire, for a lot of us the only thing better than saying goodbye to the rat race is doing it sooner than expected. But before clocking out early, there are a few boxes to check to ensure you’re making the right choice. Figure out your finances The first thing to consider is whether retiring early is financially feasible. Working with an advisor to assess your wealth plan may identify issues affecting your long-term finances, and allow you to amend your plan to ensure you have the money needed in retirement. An advisor can calculate your sources of income after you stop working, and project what benefits you’ll likely receive from the Canada Pension Plan (CPP) and Old Age Security. Keep in mind that if you draw from CPP before the typical age of 65, your benefits are reduced accordingly. If you hold personal RRSP/TFSA assets and a workplace pension, those will be accounted for as income sources, as will investment accounts, a business or property you might own, plus other savings and assets. Whatever your income streams, factor in tax implications because a good portion of your cash flow could be taxable income. After totalling your financial resources, consider likely expenses, including the cost of everyday life. Where do you plan on residing and will you rent or own? Do you have health concerns or family history to be mindful of? What lifestyle do you anticipate? Will you travel regularly? What are your hobbies? Do you have dependents to look after? Once you answer these questions, you can arrive at a rough estimate of your expenses. If there’s a shortfall between income and expenses, you’ll need to address it. Proven ways to close the gap include modifying your expected lifestyle to reduce costs, possibly working part time, saving more aggressively and generating higher investment returns (e.g., maintaining enough exposure to equities and other securities with growth potential). Benefits of retiring early There are two major benefits to taking an early retirement: Mental/physical health. Over the course of many years, work takes its toll. Even if you enjoy your job and colleagues, working is often stressful and can drain you mentally and physically. Maybe long work hours compel you to sacrifice valuable activities like regular exercise, socializing and eating sensibly. If you have a serious illness, it might make sense to retire early and tend to your health care needs. Meaningful use of time. While all work has value, being retired lets you focus on things you like doing. Perhaps certain volunteer opportunities and other philanthropic pursuits are appealing, or you want to devote more energy to favourite hobbies. You’ll also have abundant quality time to spend with friends and loved ones, or to begin working on that “side job” or project you always wanted to try. On the fence? Maybe you need a change of pace but don’t want to retire completely. In this case, consider a phased retirement, which means scaling back on work (e.g., taking a part-time job or putting in fewer hours at your current job). This phased approach allows you to continue earning money for the future, provides the social benefit of interacting with colleagues, promotes mental fitness so your mind stays sharp, and offers flexibility to spend more time doing things you enjoy. Whatever you choose, ensure your decision takes into account all your unique personal and financial circumstances. <!-- We can help you with a wealth plan that addresses tax efficiency, so contact us today. -->

By iA Private Wealth, September 19, 2023 While many people want to purchase a home, it’s become a greater challenge in today’s economic environment. Consumers are financially stretched by high inflation that’s lifted the price of food, fuel and just about everything else. On top of that, central banks have raised interest rates to help control inflation, leading to soaring mortgage rates. Never mind that real estate valuations – while largely off&nbsp;their&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; peak – remain high, especially in large urban centres. What’s a prospective homebuyer to do? In addition to sensible actions like watching your spending and trying to put away more of your earnings, the federal government also helps Canadians pursue home ownership via two targeted programs: the Home Buyers’ Plan (HBP) and Tax-Free First Home Savings Account (FHSA). How the HBP works This plan lets you withdraw, on a tax-free basis, up to $35,000 from your Registered Retirement Savings Plan (RRSP) to purchase your first home. Essentially, it’s an interest-free loan from your own RRSP to help you buy a home. You’re allowed to withdraw funds from more than one RRSP, to a cumulative total of $35,000, provided you’re the owner of each account. The institution(s) that issued your RRSP(s) won’t withhold tax on the money you withdraw. You should also note that certain RRSPs, such as locked-in or group RRSPs, may not qualify for the HBP. You have up to 15 years to pay these funds back to your RRSP, beginning in the calendar year after the withdrawal. Repayment is based on a prescribed schedule with a minimum annual repayment of 1/15th the original withdrawn amount. Note, you may repay more than the minimum in a given year, or repay the entire amount at any time prior to the end of this 15-year period. If you fail to repay the full amount within the allotted time, your outstanding balance is considered taxable income. How the FHSA works This plan was introduced in the 2022 Federal Budget, and now that the legal and administrative details have been addressed, financial institutions are rolling it out. The FHSA is a registered account for Canadians aged 18+ who haven’t owned a home ever or, at a minimum, in the past four calendar years. It allows eligible Canadians to contribute up to $8,000 annually on a tax-deductible basis, to a lifetime limit of $40,000. If you contribute less than the maximum in a given year, the unused contribution room (up to $8,000) may be carried forward to the following year. When you withdraw funds to buy a home, this amount is not taxable (including any income earned in the account). If you don’t withdraw all your FHSA funds to buy a home within 15 years, you must close the account. You can transfer the remaining assets, tax free, to an RRSP or RRIF; otherwise, withdrawal of residual FHSA funds will be taxable. As with many registered accounts, you may invest in various types of securities in your FHSA, such as stocks, bonds, mutual funds and ETFs. Your Investment Advisor can help determine which securities best suit your time horizon, risk tolerance and financial objectives. How do you decide? While the HBP and FHSA may have their own features and distinct rules, both plans can help accelerate the home ownership process. An HBP is valuable if you don’t have much cash available, since you’re withdrawing from your established and funded RRSP. An FHSA is valuable if you can contribute a significant amount of cash, since it’ll lower your taxable income and withdrawals are tax free. The good news is, you don’t need to decide. If you wish (and have money readily available), you may use both the HBP and FHSA to assist with funding the purchase of a first home. Consult with your Investment Advisor to decide how best to use the HBP and/or FHSA to help buy your home, based on your tax situation and overall financial circumstances.

By iA Private Wealth, May 15, 2023 Do-it-yourself (DIY) investing is nothing new, but in recent years it has grown in popularity thanks to the proliferation of self-styled experts on the internet, particularly YouTube and social media channels such as TikTok. The idea is that personal finance and investing really aren’t that complicated, and that you’ll save money on advisor fees if you go it alone. The truth is that only a very small number of people – people who live and breathe investing and personal finance in their spare time – have a reasonable chance of doing a good job of managing their own finances. But even they would significantly benefit from the unbiased assessment of a professional advisor, in the same way that doctors and lawyers turn to other doctors and lawyers when they need health or legal advice. For virtually everyone looking to build and preserve wealth, save for their children’s education, and meet all the other goals that define our financial lives, working with an advisor will be the best financial decision you ever make. Let’s take a closer look at some of the key benefits of working with an advisor. A dedicated professional An accredited advisor has the training, skills and experience to help build and maintain your wealth plan. Think of this plan as a roadmap to help you navigate life’s many twists and turns. For instance, if you buy a home, get married (or divorced), start a family, have a change in job status, experience a serious illness&nbsp;&nbsp;&nbsp; (or a death in the family), or receive an inheritance – just to name a few notable events in life – your advisor will adapt your plan so you can remain on track towards achieving your financial goals. It’s similar to how GPS recalculates your route if you miss a turn or encounter an unexpected construction zone. Advisors also have proven methods of helping you save better, spend more wisely and budget smarter. It takes time and skill Not many people have the time or expertise to monitor their finances, including their investments. If major economic or geopolitical issues arise (recent examples include skyrocketing inflation and interest rates, the war in Ukraine and the global pandemic), would you know how they may impact your investments and overall financial situation? Would you be able to make the required adjustments to address current and impending conditions? Your advisor can be proactive and make financial decisions in your best interests, using the latest professional research and analytical insights to inform those decisions. A nose for savings Advisors know how to maximize tax efficiency so you can pay less tax and keep more money working for you. They’ll assess your life circumstances and recommend sophisticated solutions and strategies as part of your plan. Depending on your and your family’s needs, an advisor may suggest an RRSP to save for retirement, an RESP to save for your child’s post-secondary education, a TFSA to cover an upcoming large expense, an RDSP to provide financial support for a child living with disabilities, an FHSA to help save for your first home, etc. An advisor can also make you aware of certain government benefits and programs, and help you apply for them. Focus and discipline One of the biggest pitfalls of DIY investing is failing to maintain proper discipline. So many people react to short-term market and economic events (positive or negative) by being impulsive and either buying or selling when they shouldn’t. Investing is a long-term endeavour and you shouldn’t allow short-term “noise” to influence your decisions or interfere with your carefully developed wealth plan. Fear, panic, greed and overconfidence are just some of the emotions that can lead you to make poor or risky investment decisions. An advisor can help you stay calm and focused, so you can enjoy peace of mind even when markets are highly volatile. What all of this means is that any money you think you’ll be saving by going the DIY route will almost certainly pale in comparison to what you’ll save once an advisor has put your finances under the microscope. If you’re ready to take the next step towards securing your financial future, get in touch with an iA Private Wealth Investment Advisor today.

By iA Private Wealth, March 24, 2023 It’s that time of year again. Tax time is right around the corner, and the sooner you get your slips, receipts and forms in order, the smoother everything will go. Preparing well is crucial First off, you want to make sure you file your tax return on time. If you owe money, you won’t incur an interest penalty on your balance if it’s paid before the deadline, which is typically April 30, but this year it’s May 1 since April 30 lands on a Sunday. If you’re entitled to a refund, it’s better to receive it as soon as possible so you can put that money to good use (e.g., investing for the future, paying down debt, getting essential repairs done on your home). Enlist a professional It may also help to work with an accountant or other professional with experience filing income taxes. Not only can they ensure that you pay all the taxes you owe, but they’ll also help lower your tax bill because they know how to find and properly claim the credits and deductions you’re entitled to. For instance, you may qualify for a tax deduction if your employer required you to work from home as a result of the pandemic. This deduction is valid for the 2020, 2021 and 2022 tax years, provided you worked from home 50% or more of the time over a period of at least four consecutive weeks. The deduction is calculated using one of two methods provided by Revenue Canada: the “temporary flat rate method” and the “detailed method.” Your accountant or tax preparer can help you choose the one that will yield the greatest financial benefit given your personal circumstances. A tax professional will help you maximize your allowable tax benefits related to medical and childcare expenses, charitable donations, and more. If you earned employment income from foreign sources or investment income from foreign property in 2022, the tax calculations are fairly complicated, so they’re best left to an experienced accountant. Looking ahead Once your income taxes are filed for the 2022 tax year, it’s not too early to begin planning for your next tax return. Be organized by having a good recordkeeping system for all tax-related forms and documents. It’ll make tax time run more smoothly next year, plus it will help you stay on top of whatever tax breaks you should be claiming. You can work with your Investment Advisor and tax professional to ensure you do everything possible to minimize your taxes. You want to make the most of tax-advantaged plans such as the RRSP, RESP, TFSA, and RDSP. Your Investment Advisor can also work with you to implement tax-efficient investment strategies to optimize your long-term wealth-creation potential. We can help you invest according to your needs while also saving on taxes, so please contact us today.