Author Topic: Can"EH"dian Tax - You have questions, I have answers  (Read 253915 times)

Mighty Eyebrows

  • Stubble
  • **
  • Posts: 238
  • Location: Vancouver Island, Canada
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #800 on: July 15, 2019, 05:50:50 PM »
2. I have been trying to do most of my corporate taxes myself but still use an accountant to file my corporate return.  I input my expenses and bank statements into Quickbooks.  She charges me for the return and also insists on charging me for "payroll".  I am confused as to what payroll is and what I am actually paying for.  I do not pay myself monthly and have no employees.  I pay myself one lump sum at the start of the year, from which I deduct income tax and CPP and pay directly to the receiver general the month following the lump sum payment.  At year end I pay myself a bonus from which I again deduct income tax and CPP and pay to the receiver general.  Does payroll require any further work? Is there something that needs to be filed to the CRA each time I pay myself, or is a payment to the receiver general enough?

My accountant unfortunately won't answer these questions, telling me it is all too complicated to understand...

I know this is from a week ago, but I wanted to add to what Goldielocks posted. I do the T4s and summary at the end of the year for our small business and we have up to 5 employees. It is not hard and you can definitely do it yourself. Filing monthly/quarterly payroll remittances with CRA is also not hard.

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-due-dates.html

If you have an accountant that says "it is all too complicated to understand" you either need to have a serious talk or get a new accountant. Have fun!

(Edit to add: You may also have WCB reporting requirements. That is also something you can learn to do yourself.)
« Last Edit: July 15, 2019, 05:53:31 PM by Mighty Eyebrows »

kenmoremmm

  • Pencil Stache
  • ****
  • Posts: 717
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #801 on: July 16, 2019, 04:30:34 PM »
i just came across this thread, and haven't digested all the pages yet, so forgive me if a similar question has been posed. and, thank you for this effort!

my question is what kind of tax implications there would be for US citizens moving to canada (BC or AB) with the goal of residency. one income is still US-based as a remote contractor (say $100k+ USD). the other income would be in the place we move to and in CAD currency (say $60k). there would also be US-based rental income (say $20k).

is this a nightmare setup in terms of taxation?

thanks for your insight!

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 7062
  • Location: BC
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #802 on: July 17, 2019, 09:23:05 AM »
i just came across this thread, and haven't digested all the pages yet, so forgive me if a similar question has been posed. and, thank you for this effort!

my question is what kind of tax implications there would be for US citizens moving to canada (BC or AB) with the goal of residency. one income is still US-based as a remote contractor (say $100k+ USD). the other income would be in the place we move to and in CAD currency (say $60k). there would also be US-based rental income (say $20k).

is this a nightmare setup in terms of taxation?

thanks for your insight!
Double check the "us based income as a remote contractor" part first.   My DH had to sell his on-line Canadian business when we moved to the USA.  Although it was all over a computer, to the US, running a canadian on-line business from home was considered to be working in the USA and required a work visa.  AND it took over 6 months to get that work authorization so the business had to be ended when we moved or put on hold in the meantime.

Usually there are reciprical rules for Canada to what the US does.  If your spouse will be getting a remote contractor work visa for Canada, then you are fine.

I don't have any tax info for your situation, other than that you will file full taxes with worldwide income for the US, and then Canadian tax returns with worldwide income because you are resident.  Usually you get a tax credit for foreign taxes paid, so it does not double up, but some residency situations vary according to your nationality and marital status as to whether you can still file jointly on your US return when out of the USA.   That would be a storm of bad things -- if you can't file US taxes jointly, and you can't claim standard deduction for some reason. 

 I would get professional input on these questions.... especially on the US tax side, there are so many nuanaces depending on each specific situation.


moustacheverte

  • Stubble
  • **
  • Posts: 145
  • Age: 37
  • Location: Switzerland
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #803 on: April 03, 2020, 10:45:33 AM »
I have question about moving out of Canada and departure taxes on investments.

We moved out of Canada in the middle of last year to Switzerland. I know there is a departure tax to pay on our investments as if we had sold them at the date we moved out and instantly bought them back.

How is this calculated, and how to find an accountant that would understand how to file this properly?

Is there anything else I'm overlooking and that we're supposed to pay? We didn't own any house, car, or anything. Only mutual funds with Waterhouse.

And now that we've moved out, do we owe anything else to Canada if we were to sell all our Canadian investments, convert the money, and invest back with our Swiss broker?

FIRE Artist

  • Handlebar Stache
  • *****
  • Posts: 1070
  • Location: YEG
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #804 on: April 03, 2020, 12:06:09 PM »
I have question about moving out of Canada and departure taxes on investments.

We moved out of Canada in the middle of last year to Switzerland. I know there is a departure tax to pay on our investments as if we had sold them at the date we moved out and instantly bought them back.

How is this calculated, and how to find an accountant that would understand how to file this properly?

Is there anything else I'm overlooking and that we're supposed to pay? We didn't own any house, car, or anything. Only mutual funds with Waterhouse.

And now that we've moved out, do we owe anything else to Canada if we were to sell all our Canadian investments, convert the money, and invest back with our Swiss broker?

Just use the value of the stock at either opening or closure on the day you left (just be consistent for all your holdings), and deduct your NBV from that.  That is your capital gain that you owe tax on.  What you are doing is A Deemed Disposition. 

You should only do a Deemed Disposition if you are becoming a non-resident for tax purposes, this is the tricky part.  Have you severed all ties to Canada?  Does Switzerland now consider you a permanent resident and are they taxing you on your world wide income?  That is usually the best way to know if you qualify to become a non resident for tax purposes. 

moustacheverte

  • Stubble
  • **
  • Posts: 145
  • Age: 37
  • Location: Switzerland
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #805 on: April 03, 2020, 12:30:37 PM »
I have question about moving out of Canada and departure taxes on investments.

We moved out of Canada in the middle of last year to Switzerland. I know there is a departure tax to pay on our investments as if we had sold them at the date we moved out and instantly bought them back.

How is this calculated, and how to find an accountant that would understand how to file this properly?

Is there anything else I'm overlooking and that we're supposed to pay? We didn't own any house, car, or anything. Only mutual funds with Waterhouse.

And now that we've moved out, do we owe anything else to Canada if we were to sell all our Canadian investments, convert the money, and invest back with our Swiss broker?

Just use the value of the stock at either opening or closure on the day you left (just be consistent for all your holdings), and deduct your NBV from that.  That is your capital gain that you owe tax on.  What you are doing is A Deemed Disposition. 

You should only do a Deemed Disposition if you are becoming a non-resident for tax purposes, this is the tricky part.  Have you severed all ties to Canada?  Does Switzerland now consider you a permanent resident and are they taxing you on your world wide income?  That is usually the best way to know if you qualify to become a non resident for tax purposes.

So the formula is simply Market Value - Book Value for the day I left?

I am a resident of Switzerland now, I am taxed on my income there, although I still have bank accounts in Canada. But I'm not planning on returning to Canada for the foreseeable future. I guess that makes me a non-resident?

Any other pitfalls to watch out for, or is that really it?

FIRE Artist

  • Handlebar Stache
  • *****
  • Posts: 1070
  • Location: YEG
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #806 on: April 03, 2020, 04:40:02 PM »
I have question about moving out of Canada and departure taxes on investments.

We moved out of Canada in the middle of last year to Switzerland. I know there is a departure tax to pay on our investments as if we had sold them at the date we moved out and instantly bought them back.

How is this calculated, and how to find an accountant that would understand how to file this properly?

Is there anything else I'm overlooking and that we're supposed to pay? We didn't own any house, car, or anything. Only mutual funds with Waterhouse.

And now that we've moved out, do we owe anything else to Canada if we were to sell all our Canadian investments, convert the money, and invest back with our Swiss broker?

Just use the value of the stock at either opening or closure on the day you left (just be consistent for all your holdings), and deduct your NBV from that.  That is your capital gain that you owe tax on.  What you are doing is A Deemed Disposition. 

You should only do a Deemed Disposition if you are becoming a non-resident for tax purposes, this is the tricky part.  Have you severed all ties to Canada?  Does Switzerland now consider you a permanent resident and are they taxing you on your world wide income?  That is usually the best way to know if you qualify to become a non resident for tax purposes.

So the formula is simply Market Value - Book Value for the day I left?

I am a resident of Switzerland now, I am taxed on my income there, although I still have bank accounts in Canada. But I'm not planning on returning to Canada for the foreseeable future. I guess that makes me a non-resident?

Any other pitfalls to watch out for, or is that really it?

Yes, that is right about the capital gains, there is a special form on your taxes to do the deemed disposition of all your assets.  When I did it I had investments and my townhouse which I switched to a rental property.  For the house I just used the city’s assessed value to declare the house value when I left.  When I returned to Canada, I sold that property and since I left right before the housing bubble burst, the valuation was at the peak, when I came back 9 years later and sold it, it was at a “loss” so I got to bank some capital loss.  I still laugh at that, I sold the house for twice what I paid for it, and got 30K of capital loss to bank from it. 

Being a resident of Switzerland is not necessarily enough to become a non tax resident of Canada.  The taxing your worldwide income is a huge factor to Canada.  I was an expat for many years, and when I lived in the UK, may first posting, I had a visa that allowed me to live and work in the UK, I paid into all their taxes, social security system etc, but the UK still considered me a “not ordinarily resident” person and did not tax me on my Canadian income (from investments, rental property etc).  Later on I moved to Indonesia, they DID consider me a full resident and I had to declare and pay taxes on my Canadian income in Indonesia, that is when I could finally become a non resident of Canada for tax purposes. 

So, in short, tax residency varies situation by situation, country by country, visa by visa.  There is a form you can work through to self assess your residency status.  I did this 15 years ago so things might have changed. 

I would think that if your living in Switzerland is not tied in any way to your employer, then you may well be good to go, but if you are on a work visa that is tied to a particular employer, or has a time limit, then you need to worry.

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 7062
  • Location: BC
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #807 on: April 04, 2020, 12:00:42 PM »
"tied to a time limit" is a key, here.  Also, you can't choose to continue to pay into CPP/ EI or other Cdn taxes/ benefits while away.  (you can choose to do that if you intend to return).

c-kat

  • Stubble
  • **
  • Posts: 162
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #808 on: April 05, 2020, 11:52:42 AM »
I have a questions I was hoping you could answer. My husband has an incorporated company and through that is currently working a govt contract where he goes into the office quite a few days a month.  He bought a monthly parking pass. Can we claim his monthly parking as a business expense?

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 7062
  • Location: BC
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #809 on: April 05, 2020, 11:58:50 PM »
Yes, you can claim parking at a location that is not your normal place of business.  I presume the majority of his time is a home office?  This would be similar to paying for parking to have a client meeting downtown, when your office is in the suburbs.

If he needs a car for work, you can include all auto expenses related to mantaining / having the car, including parking near your home, but you must have a detailed accurate log of all trips, personal and work, and pro rate the totals.  These types of expenses (car) tend to be audited a low, however, so use prudence in what you expense.

moustacheverte

  • Stubble
  • **
  • Posts: 145
  • Age: 37
  • Location: Switzerland
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #810 on: May 18, 2020, 06:18:12 AM »
I created a separate topic but I'm thinking it might fit in this thread instead.

I left Canada last year so my tax return is that of a non resident. I don’t have physical property in Canada but I have my money invested in Canada in iShares with TD.

I hired a professional accountant to prepare my return, but they tell me that I don’t have to pay a departure tax or report anything beyond the T3/T5 about the investments because it’s not physical property.

I think that is wrong. The preparer didn’t even include a T1161 with my tax return which according to the CRA must be completed even if you have nothing to report on it. I also think they’re mistaken and I should pay taxes as if I sold and bought back my investments on the day I left (to trigger a tax event for the profits/loss on the investments market value)

What do you think? Am I mistaken?

And what happens if the tax preparer was wrong and the CRA hits me with penalties (25$ a day for that matter) + interests? Is the tax preparer responsible at all for their mistakes or am I on the hook as if I did it all myself?

Finally, should the bill for the tax preparer services be exempt of sales tax since I’m buying from outside Canada?

daverobev

  • Magnum Stache
  • ******
  • Posts: 3958
  • Location: France
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #811 on: May 19, 2020, 03:16:24 AM »
I created a separate topic but I'm thinking it might fit in this thread instead.

I left Canada last year so my tax return is that of a non resident. I don’t have physical property in Canada but I have my money invested in Canada in iShares with TD.

I hired a professional accountant to prepare my return, but they tell me that I don’t have to pay a departure tax or report anything beyond the T3/T5 about the investments because it’s not physical property.

I think that is wrong. The preparer didn’t even include a T1161 with my tax return which according to the CRA must be completed even if you have nothing to report on it. I also think they’re mistaken and I should pay taxes as if I sold and bought back my investments on the day I left (to trigger a tax event for the profits/loss on the investments market value)

What do you think? Am I mistaken?

And what happens if the tax preparer was wrong and the CRA hits me with penalties (25$ a day for that matter) + interests? Is the tax preparer responsible at all for their mistakes or am I on the hook as if I did it all myself?

Finally, should the bill for the tax preparer services be exempt of sales tax since I’m buying from outside Canada?

Hello, fellow non resident.

I'm assuming the TD account is not an RRSP/TFSA? T1163 is pretty explicit at the top there:

https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t1161/t1161-18e.pdf

Fill out this form if you ceased to be a resident of Canada in the year and the fair market value of all the properties you owned when you left Canada was more than $25,000, excluding the following properties:

1)cash (including bank deposits)

2)pension plans, annuities, registered retirement savings plans, pooled registered pension plans, registered retirement income funds, registered education savings plans, registered disability savings plans, tax-free savings accounts, deferred profit-sharing plans, employee profit-sharing plans, employee benefit plans, salary deferral arrangements, retirement compensation arrangements, employee life and health trusts, and rights or interests in certain other trusts. For a complete list, refer to the definition of "excluded right or interest" in Subsection 128.1(10) of the Income Tax Act read without reference to paragraphs (c), (j), and (l)

3)property you owned when you last became a resident of Canada, or property you inherited after you last became a resident of Canada, if you were a resident of Canada for 60 months or less during the 10-year period before you emigrated and the property is not taxable Canadian property

4)any item of personal-use property (such as your household effects, clothing, cars, collectibles) that has a fair market value of less than $10,000. See the definition of "personal-use property" in Section 54 of the Income Tax Act



Cap gains is on a different form, T1243. T1161 is just reporting (CRA being nosy, like T1135, bleh).

moustacheverte

  • Stubble
  • **
  • Posts: 145
  • Age: 37
  • Location: Switzerland
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #812 on: May 19, 2020, 06:21:10 AM »
I created a separate topic but I'm thinking it might fit in this thread instead.

I left Canada last year so my tax return is that of a non resident. I don’t have physical property in Canada but I have my money invested in Canada in iShares with TD.

I hired a professional accountant to prepare my return, but they tell me that I don’t have to pay a departure tax or report anything beyond the T3/T5 about the investments because it’s not physical property.

I think that is wrong. The preparer didn’t even include a T1161 with my tax return which according to the CRA must be completed even if you have nothing to report on it. I also think they’re mistaken and I should pay taxes as if I sold and bought back my investments on the day I left (to trigger a tax event for the profits/loss on the investments market value)

What do you think? Am I mistaken?

And what happens if the tax preparer was wrong and the CRA hits me with penalties (25$ a day for that matter) + interests? Is the tax preparer responsible at all for their mistakes or am I on the hook as if I did it all myself?

Finally, should the bill for the tax preparer services be exempt of sales tax since I’m buying from outside Canada?

Hello, fellow non resident.

I'm assuming the TD account is not an RRSP/TFSA? T1163 is pretty explicit at the top there:

https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t1161/t1161-18e.pdf

Fill out this form if you ceased to be a resident of Canada in the year and the fair market value of all the properties you owned when you left Canada was more than $25,000, excluding the following properties:

1)cash (including bank deposits)

2)pension plans, annuities, registered retirement savings plans, pooled registered pension plans, registered retirement income funds, registered education savings plans, registered disability savings plans, tax-free savings accounts, deferred profit-sharing plans, employee profit-sharing plans, employee benefit plans, salary deferral arrangements, retirement compensation arrangements, employee life and health trusts, and rights or interests in certain other trusts. For a complete list, refer to the definition of "excluded right or interest" in Subsection 128.1(10) of the Income Tax Act read without reference to paragraphs (c), (j), and (l)

3)property you owned when you last became a resident of Canada, or property you inherited after you last became a resident of Canada, if you were a resident of Canada for 60 months or less during the 10-year period before you emigrated and the property is not taxable Canadian property

4)any item of personal-use property (such as your household effects, clothing, cars, collectibles) that has a fair market value of less than $10,000. See the definition of "personal-use property" in Section 54 of the Income Tax Act



Cap gains is on a different form, T1243. T1161 is just reporting (CRA being nosy, like T1135, bleh).

I still don’t get it. I have read the exclusions and to me the iShares is taxable because it’s not in a registered account and it’s not cash. So then I just fill in FMV etc in the T1161 and the CRA will calculate the tax due? Or must I also fill T1243 if there is a gain from the forced sale?

daverobev

  • Magnum Stache
  • ******
  • Posts: 3958
  • Location: France
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #813 on: May 21, 2020, 01:02:20 PM »
I created a separate topic but I'm thinking it might fit in this thread instead.

I left Canada last year so my tax return is that of a non resident. I don’t have physical property in Canada but I have my money invested in Canada in iShares with TD.

I hired a professional accountant to prepare my return, but they tell me that I don’t have to pay a departure tax or report anything beyond the T3/T5 about the investments because it’s not physical property.

I think that is wrong. The preparer didn’t even include a T1161 with my tax return which according to the CRA must be completed even if you have nothing to report on it. I also think they’re mistaken and I should pay taxes as if I sold and bought back my investments on the day I left (to trigger a tax event for the profits/loss on the investments market value)

What do you think? Am I mistaken?

And what happens if the tax preparer was wrong and the CRA hits me with penalties (25$ a day for that matter) + interests? Is the tax preparer responsible at all for their mistakes or am I on the hook as if I did it all myself?

Finally, should the bill for the tax preparer services be exempt of sales tax since I’m buying from outside Canada?

Hello, fellow non resident.

I'm assuming the TD account is not an RRSP/TFSA? T1163 is pretty explicit at the top there:

https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t1161/t1161-18e.pdf

Fill out this form if you ceased to be a resident of Canada in the year and the fair market value of all the properties you owned when you left Canada was more than $25,000, excluding the following properties:

1)cash (including bank deposits)

2)pension plans, annuities, registered retirement savings plans, pooled registered pension plans, registered retirement income funds, registered education savings plans, registered disability savings plans, tax-free savings accounts, deferred profit-sharing plans, employee profit-sharing plans, employee benefit plans, salary deferral arrangements, retirement compensation arrangements, employee life and health trusts, and rights or interests in certain other trusts. For a complete list, refer to the definition of "excluded right or interest" in Subsection 128.1(10) of the Income Tax Act read without reference to paragraphs (c), (j), and (l)

3)property you owned when you last became a resident of Canada, or property you inherited after you last became a resident of Canada, if you were a resident of Canada for 60 months or less during the 10-year period before you emigrated and the property is not taxable Canadian property

4)any item of personal-use property (such as your household effects, clothing, cars, collectibles) that has a fair market value of less than $10,000. See the definition of "personal-use property" in Section 54 of the Income Tax Act



Cap gains is on a different form, T1243. T1161 is just reporting (CRA being nosy, like T1135, bleh).

I still don’t get it. I have read the exclusions and to me the iShares is taxable because it’s not in a registered account and it’s not cash. So then I just fill in FMV etc in the T1161 and the CRA will calculate the tax due? Or must I also fill T1243 if there is a gain from the forced sale?

T1161 is not about calculating any tax owing. It is just about the CRA wanting you to state numbers to them.

It is on T1243 that you actually tell them what you have to pay in terms of the deemed disposition.

If the value of your relevant stuff is less than the $25k, you don't need T1161 because you're small fry. But you STILL owe any cap gains per form T1243.

It's just the same as T1135. It's a declaration. "Hi, the CRA. This is what I own". It's bullshit.

Blissful Biker

  • Bristles
  • ***
  • Posts: 423
  • Location: BC
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #814 on: October 30, 2020, 01:00:29 PM »
I would love to get input on a quandary I am mulling over.

DH has essentially FIREd, but has a small coffee roasting enterprise which nets about $1,500 CDN/year.  From my salary we maximize my RRSP and both of our TFSA contributions each year, and are now beginning to grow our taxable accounts. 

Ideally the we want the taxable funds to be in his name because of his low earnings and tax rate.  So for the last two years I have added $10K/year to his taxable account, thinking that as long as we stayed under the basic personal amount it would be fine, even though it exceeds his declared income.  The CRA hasn't raised any raised any alarm bells so perhaps this is fine.  But as I prepare to make this years $10K contribution I am a bit worried it could all come back to bite me.

What do you think?  Any issues with his investment contributions ($6K TFSA and $10K taxable) exceeding his $1.5K income?

For a bit of background, we have $30K per year that we can add to our taxable savings, so I have been putting $10K in his and $20K in mine.    I will FIRE at the end of 2024 at which point our incomes will be similar as we draw down on our investments.

Any input is welcome.  Thanks!

Mighty Eyebrows

  • Stubble
  • **
  • Posts: 238
  • Location: Vancouver Island, Canada
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #815 on: October 30, 2020, 04:55:06 PM »
Ideally the we want the taxable funds to be in his name because of his low earnings and tax rate.  So for the last two years I have added $10K/year to his taxable account, thinking that as long as we stayed under the basic personal amount it would be fine, even though it exceeds his declared income.  The CRA hasn't raised any raised any alarm bells so perhaps this is fine.  But as I prepare to make this years $10K contribution I am a bit worried it could all come back to bite me.

The spousal "attribution" rules catch a lot of people. Although not complicated, they are not super intuitive.

You can give money to your spouse to put in their TFSA, as long as they don't pull it out later and invest it in a taxable income-producing place. Spending the money is fine.

You can pay all the household expenses.

You cannot give your spouse money to invest in a taxable account (well, the income is attributed back to you). There are ways to structure it (spousal loan) but at the yearly amounts you are looking at, it probably isn't worth the paperwork.

Will CRA catch you for breaking the rules? I have not heard of any stories, but personally I like to do things the correct way. If CRA audits you for some unrelated issue, it may bite you later.

https://www.taxtips.ca/personaltax/attributionrules.htm

It wasn't clear from your post whether your RRSP contribution was going into a spousal RRSP to be used later in his name? That is worth looking at.


Edit: From some of your previous posts I notice you have quite a high net worth. You can look at doing a one-off larger spousal loan (minimum 100k) if you structure it right. Then you can just put your future yearly amounts into your own taxable account.

https://www.taxtips.ca/personaltax/lend-to-spouse-child.htm

https://www.finiki.org/wiki/Income_splitting


« Last Edit: October 30, 2020, 05:18:53 PM by Mighty Eyebrows »

Blissful Biker

  • Bristles
  • ***
  • Posts: 423
  • Location: BC
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #816 on: November 08, 2020, 01:04:49 PM »
Ideally the we want the taxable funds to be in his name because of his low earnings and tax rate.  So for the last two years I have added $10K/year to his taxable account, thinking that as long as we stayed under the basic personal amount it would be fine, even though it exceeds his declared income.  The CRA hasn't raised any raised any alarm bells so perhaps this is fine.  But as I prepare to make this years $10K contribution I am a bit worried it could all come back to bite me.

The spousal "attribution" rules catch a lot of people. Although not complicated, they are not super intuitive.

You can give money to your spouse to put in their TFSA, as long as they don't pull it out later and invest it in a taxable income-producing place. Spending the money is fine.

You can pay all the household expenses.

You cannot give your spouse money to invest in a taxable account (well, the income is attributed back to you). There are ways to structure it (spousal loan) but at the yearly amounts you are looking at, it probably isn't worth the paperwork.

Will CRA catch you for breaking the rules? I have not heard of any stories, but personally I like to do things the correct way. If CRA audits you for some unrelated issue, it may bite you later.

https://www.taxtips.ca/personaltax/attributionrules.htm

It wasn't clear from your post whether your RRSP contribution was going into a spousal RRSP to be used later in his name? That is worth looking at.


Edit: From some of your previous posts I notice you have quite a high net worth. You can look at doing a one-off larger spousal loan (minimum 100k) if you structure it right. Then you can just put your future yearly amounts into your own taxable account.

https://www.taxtips.ca/personaltax/lend-to-spouse-child.htm

https://www.finiki.org/wiki/Income_splitting

Thank you Mighty Eyebrows!

That helps a lot.  I see that his basic personal amount is entirely irrelevant and I need to limit our contributions to his taxable account to the value of his income.

When my taxable account reaches $100K I'll consider loaning it to him.

Yes, I contribute to a spousal RRSP in his name.  My RRSP is larger than his combined regular and spousal RRSP but I am not too concerned as once we reach 65 years old, we can split the RRSP income equally regardless of who's name it is in.  Right?

Sure appreciate your help.

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 7062
  • Location: BC
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #817 on: November 08, 2020, 05:13:14 PM »

When my taxable account reaches $100K I'll consider loaning it to him.

Yes, I contribute to a spousal RRSP in his name.  My RRSP is larger than his combined regular and spousal RRSP but I am not too concerned as once we reach 65 years old, we can split the RRSP income equally regardless of who's name it is in.  Right?

i concur with Mighty Eyebrows - TFSA is fine, but the taxable account needs to be related to the income source.   the loan prescribed rate is only 1% right now, and you can make that fixed for the duration of the loan, and interest only payments.

For the spousal RRSP question, what I found is that the RRSP splitting only works after age 55 (or later, depending on how you structure it to pension income).  It needs to be converted to LRIF or other pension, in order to split.

If you are thinking early retirement, you may want the option to have his RRSP/ spousal RRSP sufficient to draw 50% of the required $$s in the early retirement years.

In addition, if you contribute it at a high rate for a few years, then stop contributing to it entirely (only add to yours) for 3+ years, then he can withdraw from the spousal RRSP at HIS tax rate -- and use it to invest in that taxable account, for example.   All while you are still earning a high income, or even if you are part time retired with a solid income / tax rate

Mighty Eyebrows

  • Stubble
  • **
  • Posts: 238
  • Location: Vancouver Island, Canada
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #818 on: November 09, 2020, 01:18:13 AM »
That helps a lot.  I see that his basic personal amount is entirely irrelevant and I need to limit our contributions to his taxable account to the value of his income.
Happy to help.

It may seem like a chore, but the best practice is to have two separate bank accounts (even if they are both joint, make one "yours" and one "his") and make sure the amounts don't get mixed between you as they come into your household and then out to your investments. Most sources I have read say it is best to be able to trace exactly where each deposit came from.

CRA may be OK if you give them a convincing story, but I figure people here are careful enough with money to want to know how to do it right. Even if you choose not to bother keeping the money separate, at least you know what CRA will be looking for, if they ever come knocking (and hopefully they won't).

yu203964

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Re: RRSP over-contribution
« Reply #819 on: November 11, 2020, 11:34:24 AM »
I have a RRSP over-contribution of $1,900. I am retired and don't have any new room to absolve it. How can I withdraw it without tax/ penalty? Any CRA form to apply for the withdrawal?

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 7062
  • Location: BC
Re: RRSP over-contribution
« Reply #820 on: November 11, 2020, 11:20:51 PM »
I have a RRSP over-contribution of $1,900. I am retired and don't have any new room to absolve it. How can I withdraw it without tax/ penalty? Any CRA form to apply for the withdrawal?
You can have $2k overcontribution without penalty....   is the $1900 on top of that?

if so...
You should be able to just withdraw it from the RRSP, like any other withdrawal, and as you won't be claiming it at tax time this year, it should wash out on your tax forms.

Sometimes you need a form if it is in an RRSP tied with your employer, in which case, just call the company it is with and ask them (it would be their form).  Heck, just call the bank it is sitting with and ask them which form to use.


c-kat

  • Stubble
  • **
  • Posts: 162
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #821 on: November 16, 2020, 01:35:56 PM »
I have a question I'd love to get your input on.  When my husband lost his job in the private sector three years ago he was offered a government contract.  But he had to incorporate in order to accept it, so for the last three years this is what we've done. He just accepted a full time position in the same government department as an employee rather than a contractor.  He starts in December. We're thrilled because we have young children and this will provide us with stability and benefits. Also, I find the payroll and taxes for the corporation cumbersome.

He currently has about 2K of income from other sources in the business. He'd like to grow it, but I don't know if that will happen. We'd like to keep the business open, but our accountant charges 4K a year for the corporate taxes, which is more than he'll make now that he won't have the government contract. Should we close the business and switch it to a sole proprietorship, so this way we could just report his 2K of additional income on our personal taxes?  If so, how would we make the switch?  Or should we keep the corporation open and do our own taxes since they would be quite simple?   Or would they still be complicated?

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 8659
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #822 on: November 16, 2020, 03:05:32 PM »
Should we close the business and switch it to a sole proprietorship, so this way we could just report his 2K of additional income on our personal taxes?  If so, how would we make the switch?  Or should we keep the corporation open and do our own taxes since they would be quite simple?   Or would they still be complicated?

I can't speak to the switching from a corporation, but I do my taxes via a sole prop from contract work and it's about 3hrs of time to do income tax for the year and maybe another 1hr to deal with GST. I just use Turbo Tax business edition which costs something like $130. I've never used an accountant. Everything is pretty simple.

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 7062
  • Location: BC
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #823 on: November 16, 2020, 06:49:02 PM »
I concur about the sole proprietorship.   It's worth it when your annual gross is around $60k, but under $20k, it's not unless it is a specific strategy for risk or future growth reasons.

I had a hard time with one contract, where they wanted me to incorporate and I outright refused.  I provided the WCB, business license, show proof of multiple income sources and then had to buy $2 million business liability insurance... even though I already had $250k business liability in place.. that extra insurance which cost $2k/yr.

  The incorporation is their shortcut to "prove" that you are not an employee.   If you have all of the above, you may be able to forgoe the incorporation.

Mighty Eyebrows

  • Stubble
  • **
  • Posts: 238
  • Location: Vancouver Island, Canada
Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #824 on: November 16, 2020, 09:07:29 PM »
We'd like to keep the business open, but our accountant charges 4K a year for the corporate taxes, which is more than he'll make now that he won't have the government contract.
Holy cow, that is expensive! We have a pretty complex long-running family business (with employees, etc.) and our accountant fees run roughly 2500/yr. I do a lot of the prep (and T4s, GST, WCB, etc.) but our accountant is top-notch and also gives excellent planning advice.

For a one or two-person business, you should be able to do your tax-prep for much less. It really depends on the cost/benefit balance of keeping the corp going.