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Reflecting on the 2010 tax season

A few points to consider on reducing your tax bill, TFSA, and tips for seniors.

Now that the 2010 tax season has concluded for most of us, maybe it's time to reflect on the results from our tax returns. Was there tax owing to Canada Revenue Agency or was a refund expected?

If tax was owed, did you take advantage of the options available to help reduce your tax bill?

For example, if you are still working, was a group retirement program available through the employer, pension plan &/or RRSP plan and if not, did you make contributions to a personal RRSP plan? All of the contributions to these plans would be tax deductible and in the group plans many will have the chance to have the contributions taken directly off the pay cheque and put into the relevant plan. Even the personal RRSP can have contributions taken on a regular basis (monthly) from a bank account and placed directly into the plan. Both of these can have the contributions invested on a regular basis rather than lump sums being invested at certain times. The advantage is buying investments at different costs during the year helping to even out those costs. This is called dollar cost averaging. We can contribute to retirement plans up to (currently) age 71yrs., providing we have the option to do so.

The TFSA, (Tax Free Savings Account) was introduced to us on January 1,2009 with the option to put up to $5,000 per year into this account, and the investment inside the account will grow tax free, i.e. interest earned will not be declared via T5 to put on our tax return. Hence the name "tax free". For 2010 a further $5,000 can be placed into this account growing tax free. If you have to withdraw some funds from this TFSA, no tax is applicable. Canada Revenue has some good information about this account as well as the many financial institutions where this account can be opened. Taking advantage of this savings vehicle will help to reduce tax owing.

For seniors who have pension income from a company retirement plan, Canada pension plan or Old age security, tax is taken off this income when it is paid. Maybe a little tax taken each month is a little better than no tax taken and a tax bill when the return is completed. A little "hurt" monthly is better than a "big hurt" come tax time, and possibly not having enough funds available to pay the bill when due.

If you are expecting a refund, examine areas of income where too much tax was paid. Adjusting these areas even moderately to reduce overpayment should be carefully considered - ask questions of persons that can help you. Excess tax paid could be used to pay off some high interest credit card debt, pay down a mortgage or loan, help to reduce any interest due, or used to top up your RRSP if available, and still have a tax deduction for next year.

These are just a few points you may consider, but why not speak with a tax person. Many places have consultants that offer you guidance to tax advantages. It is always worth your time if you are not sure.

Seniors Home Plan

Once again at tax time we will service 5 seniors homes where we go out meet the client, pick up their tax info, bring it back to the office , do the tax prep, and then return it to the client at their residence all at no additional charge.

ITF News

We are sad to advise the passing of owner and partner in the firm, Michael Dominic Martelli.

Mike passed away on June 9th, 2011 after a battle with illness and is sadly missed by Elaine and all of the staff at Interior Tax & File.

We wish to thank all our clients for their heartfelt best wishes and for the continued support that you have shown to both Elaine and to Interior Tax & File as we continue into the future.

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