Now Hiring Instructors

We are currently hiring instructors for our Financial Literacy workshops. Applicants must have at least 5 years of experience working in the financial industry, hold a business degree / financial designation (e.g. B.Comm, BBA, MBA, CFP, CFA) and have prior teaching experience. Please submit your resumes to info@moneymattersworkshops.com.

1. Implement the HST – “The new Harmonized Sales Tax (HST) came into effect July 1, 2010, so you should have already implemented a system to collect and remit the HST on sales and to track the HST you pay on purchases for the purposes of claiming input tax credits,” says Chartered Accountant Monika Malachowska of Etobicoke. “If your business has not made this transition, contact a qualified tax professional for help.”
2. Evaluate your tax instalments – “Check your projected income and instalments to determine if an adjustment is required for the remainder of 2010,” advises Malachowska. “If you expect your annual income to fall, you may be able to reduce your remaining instalments to improve your cash flows. However, keep in mind that if you pay less than the instalment amount the Canada Revenue Agency (CRA) requires, and your final tax obligation is higher than your estimate, interest and penalties may be charged.”
3. Consider alternatives – “Consider taking a salary instead of a dividend,” advises Chartered Accountant Ken Bell, principal, Kenneth Bell CA Business Advisory Group in Brampton. “If you use a vehicle for business and you are incorporated, consider receiving a mileage allowance, because it may cover more than the actual amount it costs to operate your vehicle.” Bell also suggests setting up a rental agreement with your corporation for a portion of your house. “It’s treating a portion of your house as a second location for your office and is better from a tax perspective than the home office deduction of an employee.
4. If you need new computers, buy them soon – “The current 100-per-cent deduction for new computer equipment expires on February 1, 2011,” Bell explains. “So if you need new equipment, plan now and purchase before the deduction expires.”
5. Don’t fall behind on documenting your expenses – “Appropriate documentation of your travel, meals and entertainment expenses should always be part of your overall tax planning strategy,” says Malachowska. “These are among the expenses that the CRA scrutinizes most closely.”
6. Hire your child for the summer – “This is a good idea because it will give you a tax deduction and is good experience for your child,” says Bell. “Just be sure the amount of salary is what you would pay to a non-relative, and be sure to pay by cheque so you have a record of what you paid.”
7. Consider a bonus before year-end – “If you are incorporated, accruing a bonus before year-end can provide a deferral of tax, as the corporation can deduct the bonus expense when it is accrued, but the employee is not taxed until the bonus is paid,” advises Malachowska. “The bonus must be paid by the corporation within 179 days of the year-end.” It’s not always advisable to accrue a bonus, adds Malachowska, so check with your tax advisor first.
8. Make an in-kind donation to a charity – “You will receive a tax deduction for in-kind donations of things like used vehicles or furniture to a registered charity,” says Bell. “An appraisal of the value of the donated items is required, but some charities will arrange that for you.”
9. Assess your RRSP strategy – “Make your Registered Retirement Savings Plan (RRSP) contributions as early in the year as possible,” advises Bell. “If you have an investment outside your RRSP and have a capital gain, you must declare it and can then transfer the investment directly into your RRSP. However, if you have a loss and transfer the investment directly into your RRSP the loss will be denied by the CRA. In that case, it is better to sell off the investment and transfer the proceeds to your RRSP.
10. Talk to a Chartered Accountant – “A CA can help you develop an overall business tax strategy to achieve both tax minimization and tax deferral,” advises Malachowska. “Once the initial planning is done, a mid-year or even more frequent follow-up may be necessary to evaluate the effectiveness of the plan and make any required adjustments.

Brought to you by the Institute of Chartered Accountants of Ontario

Taxable Status of Goods and Services for Consumers Under the HST – Examples

Change in Taxable Status

• Electricity
• Gasoline
• Heating Fuels
• Internet Access Fees
• Personal Services (e.g., Hairstyling)
• Professional Services (e.g., Legal, Accounting and Real Estate Fees and Commissions)
• Tobacco

No Change in Taxable/Exempt Status

• Adult Incontinence Products
• Auto Insurance and Rentals
• Basic Groceries
• Books
• Cable TV Service
• Cell Phone Charges
• Certain Medical Devices
• Child Car Seats and Car Booster Seats
• Child Care Services
• Children’s Clothing and Footware
• Cleaning Products (e.g., Soaps, Detergents)
• Clothing
• Crafting Supplies (e.g., Scissors, Yarn)
• Diapers
• Feminine Hygiene Products
• Furniture
• Home Insurance
• Home Maintenance Equipment (Lawnmowers, Snow Blowers, Sprinklers)
• Home Phone Services
• Luggage, Briefcases, Bags, etc.
• Mortgage Interest Costs
• Most Educational Services
• Most Health Care Services
• Movie Tickets
• Municipal Public Transportation
• Municipal Water
• Music Lessons
• Newspapers
• Over-the-Counter Medication
• Pharmacist Dispensing Fees
• Prepackaged Computer Software
• Prepared Foods Sold for $4 or Less
• Prescription Drugs
• Radios, Stereos, CD Equipment and Accessories
• Refrigerators and Freezers
• Residential Rent
• Restaurant Meals
• Tailoring
• Toys
• TVs, DVDs and Accessories
• Vehicle Repairs (Parts and Labour)
• Vehicles and Parts

Source: Ontario’s Tax Plan for Jobs and Growth, Ontario Ministry of Finance, November 2009.

The finance minister says his frugal upbringing instilled in him the need for financial caution. He wants to spread the habit. Read more about his strategy  here.

1. The 13% HST will come into effect on July 1^st, 2010. Note that it will apply to payments made on or after May 1, 2010 for property and services provided on or after July 1, 2010.
2. HST will not apply on the purchase price of resale homes.
3. HST will apply on services such as moving costs, home  inspections, lawyers fees and real estate commissions.
4. HST will apply to the purchase of newly constructed homes.  Homes under $400,000 may be eligible for certain rebates from the province.

Refer to the Ontario Ministry of Revenue website here for additional information and stay tuned next week for a summary of how the HST will impact your wallet.

1.  Given the current economic climate, do you recommend a fixed or variable mortgage on the purchase of a home?

The question isn’t necessarily which is better:  the question is which is better for you.  Variable rates have historically tended to average out to be a little cheaper, but not in all instances.  Fixed rates help individuals determine their financial obligations into the future, offering an advantage both in terms of budgeting, and peace of mind.  Being within one’s risk tolerance is important.  If going with a variable rate causes you stress with which you’re not comfortable, it isn’t worth it.

Generally speaking, most lenders tend to have very competitive variable rates.  Fixed rates, however, do tend to vary a bit more.  It’s important to do your homework and work with a good mortgage professional to ensure that you’ve got a competitive rate.  Just remember, though — sometimes it’s not simply about the rate, but also about having the product that’s right for you.  And that’s where a good broker can often be most valuable.

2.       What happens to my mortgage payments if I have a variable mortgage and interest rates increase?

Depending on what lender or financial institution holds the mortgage, there are generally two possibilities:  either you make higher payments, or less of your payment goes toward the principal balance of the mortgage.

The answer to this question is often found only in the small print, and has a tendency to be overlooked.  It’s important to keep in mind that home ownership is a great long-term investment for most people principally due to the opportunity to build equity over time.  In a case where the portion of your payment going to the principal balance is reduced, that principal opportunity is negated.

If rates go up, then, it would require extra money on each payment to continue to reduce the principal at the same pace.  Often that can be worth it, especially since that will reduce the future amount of interest payable.

3.       How much downpayment on a house is required to avoid CMHC mortgage insurance?

In almost all cases, 20% down payment will avoid mortgage insurance.  Mortgage Insurance is in place to allow Canadians to purchase real estate with less than 20% down, by helping lenders mitigate their risk.

While avoiding mortgage insurance is often an obvious ambition, it’s important to work out, in terms of cost-benefit, whether it’s worth putting down 20%, or preferable to retain liquid funds.  The answer to that may vary depending on each individual’s circumstances.

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Marc Mahoney, a member of the Canadian Association of Accredited Mortgage Professionals (CAAMP),  is a Senior Mortgage Consultant with Mortgage Alliance – Shoreline Mortgages, Inc. based in St. John’s, Newfoundland & Labrador.   With access to lenders across the country, he has focused on Newfoundland, Ontario, and Nova Scotia.

Winner of Mortgage Alliance’s 2009 Family Care Award, he has developed a focus on helping individuals determine their needs, and working with them to find the best solutions to their financial ambitions.

For inquiries or questions of any type, you can reach Marc by e-mail at mmahoney@mortgagealliance.com, or by telephone at 709-699-5727 or 1-888-747-9696.

If you are one of the many Torontonians participating in the “mad rush” to get into the real estate market, take a break from the bidding wars and ask yourself if buying a home is a good investment for you. Here’s an article, by Canadian Business, challenging conventional wisdom on home ownership (Thanks to Stefano and www.mycasite.com for bringing it to our attention). Have a read and tell us what you think by participating in our poll over there ———–>

1. You get a tax deduction. Depending on your tax bracket, you can save up to $464 tax for every $1,000 contributed to your RRSP (using Ontario rates). You can calculate how much you’ll save by using this RRSP Savings Calculator.

2. Investment income earned in an RRSP is tax sheltered. This means your money grows faster inside an RRSP versus outside of one. If your RRSP investments grow at 6%, for example, your money would double in 12 years. Meanwhile, if you held the same investments outside an RRSP, and lost one-third of the return to tax annually, your money would double every 18 years.

3. The secret to RRSP compound growth is that you can invest the tax dollars that you defer. Deferred tax is really a zero-interest loan from the government. You won’t repay the loan until decades later in retirement, when you may be in a lower tax bracket.

4. You can take money out of your RRSP when buying your first home. Read more about it in this blog post .

5. Canadians are living longer than ever before. You will likely need all the RRSP savings you can accumulate to cover the costs of a retirement that will likely last 30 years or longer. In addition, Canadians are also retiring at younger ages. If you plan to retire at 55, for example, you’d have to wait five years to start your Canada Pension Plan (CPP) and 10 years to start your Old Age Security (OAS). You may also have to wait until a certain “normal” age to start drawing from a defined benefit employer pension plan. The RRSP is the perfect way to finance the gap before those other sources of cash flow become available.

Not sure how much you can contribute for 2009?

The 2008 Notice of Assessment you received from the Canada Revenue Agency (CRA) after filing your 2008 tax return states your 2009  maximum RRSP contribution amount. If you have not received this notice or need to double check the amount, call the CRA at  1-800-959-8281.

For more information, refer to the following links on the Canada Revenue Agency website:

• RRSP

• TFSA

Remember, the 2009 RRSP contribution deadline is on March 1^st.

Today we launched our new website and opened registration for our winter and spring workshops. As a special thank you to those who have been  following along since our initial “business plan” reveal, we’re offering select workshops and packages at significantly reduced introductory prices. Now’s the time to sign yourself up or buy a gift certificate for someone in need of financial guidance. Don’t wait too long because these prices won’t last.

Stay tuned for next week’s post about RRSPs, the topic du jour…or, more accurately, du mois. And as always, we welcome comments about the new website and workshops!!!