Category: Taxes

Taxes

4 Ways to Make Doing Your Taxes Easier

David Jackson

 

Does the thought of April approaching set the hairs on the back of your neck on end? If so, you can join millions of people worldwide who also fear doing their taxes. Luckily, with our handy tips, handling your taxes can be a lot easier.

Forms, Forms, and More Forms

In the United States, you may need to complete a W-2, 1099, 4852, or 1040X. Here’s a quick rundown to help you understand the most important ones.

W-2

Employers are required to complete this form for each employee and to send it to the IRS at the end of the year. It reports an employee’s annual wages, as well as any taxes withheld from their paychecks.

1099

There are well over 15 types of this form, but they all act as another way for you to report any additional or different income. Generally speaking, financial institutions handle 1099s and you should receive copies by early February.

4852

This is simply a substitute form for the W-2. If, for some reason, you haven’t received a W-2 from your employer by April, you can use the 4852 to estimate your earnings and applicable tax.

1040X

Linked to the form above, a 1040X is used if after completing a 4852 and then receiving a W-2, you need to amend the previous details.

Tax Tips

As financial expert Alvin Hall says: “…many Americans have this intuitive belief that money will somehow take care of itself over the long run regardless of what they do day-to-day.” With our tips, you can stay on top of your finances and make doing your taxes less of a chore.

Free File

There are several apps and websites available to help you sort out your taxes, but did you know the IRS provide their own free service? Free File uses brand-name software to help calculate everything for you, so don’t worry about getting your sums wrong.

 

Deferring Income

Obviously, the more money you make in a year, the more tax you pay. Tax attorney Joshua Zimmelman suggests that if you own your business, you might think about postponing sending some invoices to make sure that you’ll receive payment in the next tax year. This can help a lot if some of this income would force you into a higher tax bracket..”

Deductions

Don’t forget you can take advantage of either a standard deduction or an itemized one. Standard equals a ‘no questions asked’ flat rate, depending on your status. For example, if you’re single you could claim a $12,000 deduction. Itemized is precisely what it sounds like, and although the deduction can be more significant, it involves filling out a lot more forms.

Extension

Don’t panic if you have a complicated tax situation and believe you won’t file your taxes before the deadline (April 15th). It’s possible to request a six-month extension, which gives you until October 15th to get your taxes in order.

Repercussions

Unfortunately, we’re only human and, as such, make mistakes. What can you do if there’s a problem with your taxes?

 

A tax audit is a scary experience, say leading tax lawyers Rotfleisch & Samulovitch, and if results are bad, it can cost you a lot of money. A tax audit typically occurs if the IRS finds something suspicious, even if it’s a simple mistake on your part. 

 

If this happens to you, then a tax lawyer is almost certainly the best option. “Unlike a tax accountant, your information is protected by solicitor-client privilege,” add Rotfleisch & Samulovitch. This means that any discrepancies won’t risk becoming public knowledge so that you can avoid embarrassment. 

Conclusion

Ultimately, it falls to the individual to prepare correctly for tax season. If you keep our handy tips in mind, they should help you avoid any unnecessary trouble and make doing your taxes a breeze.

Fujitsu

A New Standard in Financial Processing – Fujitsu’s ScanSnap and HubDoc Accounting Software

James Dean

 

A New Standard in Financial Processing

When technology and (GAAP) – (Generally Accepted Accounting Principles) work together in harmony, it is indeed a beautiful thing. Fujitsu continues to show a commitment to evolve each year and that is exemplified by their industry leading status of having the number one global image scanner market share for nearly a decade.

Working in the cloud creates more time to manage resources efficiently and increases workflow productivity. Deviceless scanning is even possible with Fujitsu’s ScanSnap Cloud, as it delivers scanned data directly from the ScanSnap iX1500 to your favorite cloud services, without a computer or mobile device. ScanSnap Cloud automatically classifies your scanned images as documents, receipts, business cards or photos, and sends them to the appropriate cloud service based on your pre-set profile, all while reducing paperwork.

Enter Hubdoc, a software company that helps accountants save time, scale their practice, and build deeper relationships with the businesses they serve by automating document collection and management. Hubdoc’s ever-growing partnership with Fujitsu pays dividends to both technology users and financial software end users. This new software is based on basic accounting rules that turn “shoe box accounting” into a digital workflow that is both intuitive and user-friendly. Simply put – Hubdoc enables businesses to easily and securely scan and submit financial documents to their accountant or bookkeeper from anywhere using the cloud.

Hubdoc allows you to collect, sort, and file all your physical documents onto the cloud in a secured “digital filing cabinet” that is easy to access and search. No more chasing documents or conducting manual data entry. Hubdoc makes it easy for the finance and accounting departments to access their small and large business clients’ financial documents. It automatically collects bank statements, bills, receipts, and invoices from hundreds of suppliers and financial institutions. Clients can also upload documents via Hubdoc’s mobile app, desktop, and email.

With the integration between Hubdoc and Fujitsu’s ScanSnap, going completely paperless is painless. Ultimately, the ScanSnap iX1500 helps you save time and money without ever compromising on the quality of your work.

The convergence is here. Fujitsu and Hubdoc now share a partnership designed for accountants in need of a better, more efficient way to service their clients.

With Hubdoc’s intuitive software integration with Fujitsu’s user- friendly hardware, the usual setbacks are a thing of the past. To learn more about Hubdoc’s accounting software benefits, please visit: www.hubdoc.com. To learn more about Fujitsu’s ScanSnap iX1500, please visit: www.fujitsu.ca

Check out the full article in the next issue of Money Magazine or online at  www.MONEY.CA/fujitsu

 

 

Is IRS Debt Relief Going to Be Your Hero?

David Jackson

If you owe the IRS money, you may feel as if you’re in a hopeless position. The interest and fees the IRS adds to back taxes often amounts to a huge sum of money that may seem impossible to pay.

Don’t give up. If you owe the IRS money, you may qualify for debt relief. While this option is not for everyone and the application process is complex, debt relief provides a reprieve that can help you salvage your confidence, improve your finances, and get your life back. Discover four ways IRS debt relief can help you.

Avoid Wage Garnishments

Image via Flickr by Tax Credits

If you disregard your tax obligations, the IRS can garnish your wages. However, if you’re participating in a debt relief program, the agency won’t take this step. Going the debt relief route can save you the embarrassment and financial distress that accompanies wage garnishment.    

Reduce Your Tax Burden

Possibly the greatest benefit of debt relief is that it may reduce the amount of money you owe the IRS. Get professional help to try to make your tax debt more manageable. If you qualify for debt relief, you may be able to pay a reduced lump sum, called an Offer in Compromise. This option gives you the chance to pay a smaller amount of money as your full and final amount. 

You may also qualify for a long-term payment plan. This type of plan can allow you to pay off your tax debt at a reduced dollar amount over several months or years depending on the amount you owe.

Provide Stress Relief

Owing the IRS money is a huge stressor that can affect almost every aspect of your life, but qualifying for debt relief can help. If you’re able to reduce what you owe the IRS, the amount of stress you’re under can decrease. The plan the IRS will give you to follow can help with anxiety as well.

The payment plan you will use to pay off your tax debt can help you make short- and long-term financial goals. This flexibility can give you a sense of control that can help with stress and anxiety.

Improve Physical Health  

Mental health and physical health are intertwined and improving one can improve the other. Since you could likely enjoy decreased levels of stress after qualifying for a debt relief program, you may find that your physical health improves.

Stress can cause heart problems, digestive issues, sleep disorders, fatigue, and a host of other health problems. When they reduce stressors, people often find that many of their physical ailments diminish as well.  

Qualifying for debt relief from the IRS won’t solve your money problems, but it can lift some of the burdens that go along with them. While you still must pay the IRS what you owe, you may find you’re able to pay a reduced amount, enabling you to reduce your debt more quickly. Qualifying for debt relief can also allow you to avoid wage garnishment and the distress that accompanies it. These combined benefits can reduce your stress levels, possibly leading to improved mental and physical health.

James Dean Editor-in-Chief of MONEY.CA and Money Magazine found this article from Tax Crisis Institute to be helpful, informative and relative to tax problems and issues with the IRS. https://www.taxcrisisinstitute.com/blog/wage-levy-vs-wage-garnishment-difference/

www.taxcrisisinstitute.com

 

6 Tips for Completing Your CIS Tax Return

David Jackson

As a contractor or self-employed business owner, you are obliged to complete an annual Contractor Industry Scheme (CIS) tax form for any and all subcontractors under your employment. This mandatory form is an important document that must be submitted to secure future tax payments of all sub-contractors, as well as their National Insurance.

If you’re stuck on this form, we’ve compiled 6 easy steps to help you through it. This guide is full of useful information that will help the process along a lot quicker.

1. Note the Exceptions

First off, let’s recognise some of the instances you WON’T have to submit a CIS tax return. If you only specialise in the following respective industries you are exempted from this process:

  • Carpet laying
  • Construction material factories
  • Delivery service
  • Surveying and architecture
  • Any non-construction-related service in or around the construction area (even if it’s a service to the workers)
  • Hiring out of scaffolding

If any of these industries apply to you, call the HMRC and confirm that you do not qualify for a CIS tax return.

2. Set Aside Time

Remember that filing a CIS tax return is a time-consuming process. If you don’t have the time to follow this process thoroughly—or if you simply don’t know how to complete CIS tax return, contact one of many trusted CIS tax return services to follow through on the process on your behalf.

But perhaps you want to do it yourself. If so, remember that you have a deadline for filing. So, be sure to plan your filing process at least a month ahead of the deadline, to prevent any penalties.

3. Register with HMRC

Before you can begin the process of filing your CIS tax return, you will have to register with HM Revenue and Customs (HMRC). This helpful online registration will identify you to the service helpdesk, and also generate a Unique Tax Reference number which you will need for filing.

4. Get Your Unique Tax Reference

If you don’t receive a UTR number, contact the service desk and ask for it. This number is completely unique to your company. Without it, your CIS tax form will be rejected, which will incur a penalty from the HMRC.

Keep this unique tax reference number handy during the entire CIS filing process. It’s the single most distinguishing detail of who you are and what your business’ tax obligations are.

5. Include Interest in Your Income/Losses Calculation

You’ll be doing a calculation of your income and your losses. You will also add your business expenses and payment deductions from any contractors working for you during that period. But another important detail to add is the interest earned on your bank accounts or business investment accounts. Failure to include this important detail may result in an inaccurate calculation of your CIS tax obligations.

6. File on Time

Most importantly, don’t file past the deadline. Remember that HMRC will fine you for any late submissions, so avoid this by filing your CIS tax return on time.

How Would an Import Tax Affect Consumers?

David Jackson
sale, shopping, tourism and happy people concept – two beautiful women looking inside shopping bags in the ctiy

In 2017, U.S. President Donald Trump proposed a 20% import tax, also known as a “border adjustment tax.” The proposition created a lot of uncertainty, and while it has yet to come to fruition, many consumers wonder how an import tax will affect their wallets.

Any kind of import tax would likely increase prices for the average American consumer. But experts are still unsure of how much and for how long.

One thing they do know: most industries will be affected. This includes retail, food and manufacturing.

How quickly will prices rise? That depends on what is being imported. It’s possible that consumers could see an immediate rise in products like vegetables, televisions, shoes and clothing.

Most experts think that consumers would see a one-time inflation spike, but prices would adjust over time.

It’s also possible that other changes could come along with the tax that might affect how goods are imported.

The Union Customs Code changed the way goods are imported into EU countries. The changes on imports into Germany forced companies to establish a German EORI to act as a declarant. Previously, companies outside of Germany could import goods as long as they had a non-established VAT number and EORI.

Along with these changes, experts say that a tariff may also have unintended consequences. For example, a spike in inflation could prompt the Federal Reserve to raise interest rates at a quicker pace.

A report from Consumer Reports also pointed to the tariff on Chinese tires in 2009. Not only did the tariff raise prices on American consumers, but it cost companies nearly $1 million for each job saved, and three retail jobs were lost for every factory day. China also imposed a tariff on U.S. chicken, which cost the industry $1 billion in sales.

There are also experts who argue that people will hardly notice an import tax. Take, for example, the VAT in the United Arab Emirates (UAE). Consumers in the UAE have significant purchasing power, so a 3-5% VAT would likely not have a significant impact on consumers. A 10% or higher tax raise, on the other hand, would have a bigger impact.

Those purchasing big-ticket items will be impacted the most.

Back in the U.S., President Trump is doubling-down on his pledge to impose a reciprocal tax on imports. If implemented, consumers may not only face higher prices, but the action may also escalate tensions with important trading partners.

“What’s going to happen is either we’ll collect the same that they collect, or probably what happens is they’ll end up not charging a tax and we won’t have a tax, and that becomes free trade,” said Trump.

Although Trump is pushing for the tax, the White House says there is no such proposal for a reciprocal import tax in the works.

Still, economists point out that Trump has the authority to impose the tax without congressional action if he does so by increasing import tariffs. Much of the constitutional power over trade has been delegated to the president through various laws enacted over the years.

RRSP's

RRSP.ORG Registered Retirement Savings Plan

James Dean

Registered Retirement Savings Plan – RRSP.ORG the original website that best describes everything you wanted to know about Canadian registered plans and schemes has taken a turn for the best. The information and knowledge base on RRSP.ORG is more than ready for change and a complete overhaul.

MONEY.CA the leading Canadian money and personal finance website has acquired the aging website for all the right reasons. RRSP is just one of many keyword subject sites that most of Canada wants and needs. For over 20 years this small and meaningful site providing news and information in the world of Registered plans for Canadians has now been taken over by people who know and care dearly about the subject matter and the benefits and advantages it brings to Canadian’s, the government and the country as a whole.

Look forward to the changes and updates as Canadian financial consumers will learn how to make, save and preserve more of their hard earned wealth. The advisor channel is more than welcome to contribute news, information, stories and articles that make sense and pays dividends to the average Canadian.

How to Save Money on Investment Taxes

David Jackson

Paying taxes on investments lowers your rate of return. Investors want to maximize their gains and save money on investment taxes. The right types of investments can help you save money on taxes, and this means more money in your pocket.

Of course, there are exceptions, but the following investments are often solid choices for reducing taxes.

1. Avoid Investing in Dividend-Paying Stocks

Stocks that pay dividends are income-generating, and while it’s great to make money off of an investment, this also means that you’ll be required to pay taxes on this income. A lot of mutual funds will use the tactic of avoiding dividend-paying stocks to minimize the tax burden on their investors.

2. Aim to Avoid Short-Term Gains

Short-term gains are great, but long-term gains in the stock market are where fortunes are made. When short-term gains are realized, taxes need to be paid on the income from the sale of the stock.

Long-term gains offer better returns.

You’ll need to pay very close attention to the calendar here because long-term investments are generally considered investments that have been held for a period of more than one year.

3. Capital Gains Offsetting

When it comes to capital gains, hire an accountant that can help you with your capital gains. One tactic that is used often is offsetting these gains with losses to lower the tax burden. This legal method allows the investor to claim lower gains when they have losses in other areas.

4. Invest in Your Kids With a ROTH IRA

Kids can be left money now, and this can be done with a ROTH IRA. The tax-free compounding can turn a 7% increase annually, leading to a significant amount of money for your child over the long-term.

Money in your estate that will be left to your child will then be out of your estate, allowing you to lower the risk of state inheritance taxes.

You can also invest in a Section 529, which is designed only to be used for schooling.

5. Bond Funds

Bond funds don’t offer as high of a return as stocks in most cases, but there are municipal bond funds that are normally free from federal taxes. Tax-exempt bonds give a lower rate of return than taxable bonds because they offer significant savings.

Most municipal bonds are also free from state taxes – an added bonus.

Investors that are in high income brackets will often choose these types of bonds that offer a tax-free return even if the return is lower than other bond options available.

6. Defer Taxes with Treasury Bills

You can confidently defer your taxes slightly by strategically utilizing treasury bills. This means that you’ll only have to pay taxes on the treasury bill the year that it matures. Three- and six-month bills are the best option because you don’t have to pay taxes on the interest.

Interest taxes are also exempt on the state and local level.

So, when you want to be able to lower your tax bill the last minute, you can defer taxes through the purchase of treasury bills.

Creating Wills for Tax Planning Purposes

David Jackson

The most important thing you can do to reduce the amount of inheritance tax that must be paid on your estate is to make a will. In the absence of a will, estates are distributed according to the rules of intestacy. This can result in higher amounts of inheritance tax being owed to HM Revenue & Customs. The wills and probate solicitors in London at SCL Wills and Probate can assist you with will writing services to help minimise inheritance tax.

Inheritance tax is an extremely emotional subject that has been increasingly politicised in recent years. If you are concerned about reducing the taxes paid by your beneficiaries, you may want to seek advice from experienced tax planning solicitors and probate solicitors. Visit http://www.sclwillsandprobate.co.uk/ to learn more about the services provided by SCL Wills and Probate.

Factors to Consider When Planning Your Estate

Transferring property is one way people use to help minimise the amount of tax that must be paid on an estate. For this to be successful, specific rules must be followed. Property can be transferred to a spouse or civil partner without inheritance tax. However, when a person is giving assets to children or another person, the donor must survive for another seven years and must not maintain any interest in the property or the property will continue to be considered part of the estate for tax purposes.

Trusts are sometimes used to reduce taxes owed on an estate. You may choose to create a discretionary trust or fixed trust for tax purposes. There are limits to the amount of money, property, or assets that can be gifted through a trust. Get the advice of your solicitor regarding these limits and any possible charges or periodic charges that may need to be paid before setting up the trust to make sure your goals are well served.

Do you plan to leave money to charity? Donations to charity that amount to at least ten percent of the value of the estate may reduce inheritance tax by up to 36 percent. Tax planning solicitors can help you make decisions about charitable donations to reduce inheritance taxes.

Making gifts during your lifetime to your beneficiaries can help avoid inheritance tax. This can be done in small gift allowances, larger annual gift allowances, and one-time tax free wedding gifts to children and grandchildren, and regular contributions from excess income. There are annual limits to each type of git, which may be exceeded, provided that you survive for at least seven years beyond when the gifts are made.

Investments made in unquoted companies, companies listed on the Alternative Investment Market, and investments for companies that are enterprise investment schemes may qualify for Business Property Relief. In order for the investments to be exempt from inheritance tax, you must hold the shares for a minimum of two years. If the investments are held for more than two years and still held at the time of death, your beneficiaries may enjoy 100 percent inheritance tax relief.

Planning ahead is the best way to minimise the inheritance tax that must be paid on your estate. Take into consideration all the possible options to make the best decision for your estate and heirs. Because each situation is unique and annual limits and other rules change periodically, it is best to consult with a solicitor for advice that is specific to your estate.

Ed Rempel Org

What is The Cash Flow Dam?

Ed Rempel

What Is The Cash Dam and How Does It Work?

 The Cash Dam (sometimes referred to as a “cash flow dam”) is a simple but powerful concept, and it’s an especially attractive option for those who are familiar with the Smith Manoeuvre or other tax minimization strategies. Cash Dam can help you with tax optimization if you have a mortgage and own either a small business or a rental property.

What is cash damming?

 The Cash Dam allows the owner of a small business or rental property to more quickly pay down their non-deductible mortgage on their home. It’s a variation on the Smith Manoeuvre, but without additional investing. The Cash Dam is essentially an expedient way to change bad debt into good debt.

For someone who’s using the Cash Dam, what it involves is using a line of credit to pay for business expenses. Then, while using the increased business cash flow, you pay down a non-deductible mortgage or loan. This, in turn, produces an increasing tax-deductible business loan, while paying down a non-deductible mortgage or loan. Be advised that the Cash Dam as described above will only work for those who own a non-incorporated personal or partnership-based small business or a rental property.

Example:

 If you own a small non-incorporated business that has $2,000 in expenses each month and you also have a readvanceable mortgage, then the $2,000 per month expense would be paid by the home equity line of credit (HELOC). You then use the additional $2,000 you have in your business expense account to make a payment on your non-deductible mortgage. Interest paid on money that’s borrowed for business expenses is tax-deductible; by using the Cash Dam, you’ll be left with a tax-deductible business loan and a non-deductible mortgage that’s been quickly paid down.

One of the keys to the Cash Dam, however, is capitalizing the interest on the business line of credit. That way, you avoid using any of your own cash flow and you keep the business line of credit tax-deductible.

How does the Cash Dam differ from the Smith Manoeuvre?

The Cash Dam relies on using a tax-deductible business loan to allow you to pay down a non-deductible debt, while the Smith Manoeuvre allows you to buy investments. Investing from your credit line is why the Smith Manoeuvre has much higher risk and return than the Cash Dam.

Potential applications

 Say that you’re a rental investor, instead of using your own cash flow to pay for rental-related expenses, you can use the Cash Dam and a line of credit. In this instance, using the Cash Dam would help you pay for your personal mortgage and help you satisfy your tax obligations as well.

And if you are a small business owner, the Cash Dam can be extremely advantageous. The strategy gives you a way to quickly pay down your non-deductible mortgage and convert that debt into a tax-deductible business loan.

Canada’s Taxation on Pain and Suffering, Litigation Damages

David Jackson

The Canadian Revenue Agency makes it clear that there is no income tax on pain and suffering awards. Awards can be granted by a judge, jury or they can be settled out-of-court without paying taxes.

Settlements are not taxed if they’re non-pecuniary damages.

Non-pecuniary damages are those damages that are difficult to measure. For example, it’s difficult to put an exact value on an impairment of life, emotional distress or impairment of physical or mental abilities.

“Trying to figure out the right medical treatments, whether surgery is necessary and you’re going to be able to pay these bills can be overwhelming for any victim,” states Reyna Injury Lawyers.

Awards are seen as compensation not income. They money awarded in a settlement is a reimbursement.

Litigation Damages

Personal injury awards are tax-free. Litigation damages, however, are not tax-free. Damages are taxed in the same manner as income, and in some areas, such as Alberta, the taxation rate may be as high as 39%.

Litigation damages are different than pain and suffering.

Business contracts or the destruction of property are within the scope of litigation damages. In these circumstances, it’s often plausible to put a monetary value on the damages. A contract, for example, may have resulted in a loss of $1 million in business.

This figure can be determined by how much money was lost as a result of the contract obligations not being fulfilled.

Personal injury claims cannot have an exact amount given with 100% certainty. A person may have been awarded lost wages in a settlement, but this figure will also not be taxed. The main difference is pecuniary versus non-pecuniary damages.

Profits from Awards

Settlement money is yours to do as you wish, but if you choose to invest this money, the income earned will be taxable. That is, if you were to invest your money at a 5% rate per year and earned $1,000 in income, this would be taxable income.

Settlements are only tax-free initially.

You can also opt to receive a structured settlement. These settlements are interest- and tax-free, and they’re periodic payments.

Annuity payments must meet the following criteria:

  • Awarded only in death or personal injury cases
  • Agreement on payment terms
  • An annuity contract must be purchased
  • Insurers must remain in accordance to the settlement

Canada’s non-pecuniary damages had a maximum compensation value of $100,000 following a 1978 Supreme Court decision. The value is adjusted for inflation and remains around $350,000 at the time of writing this article.

Employment damages are tricky because the characterization may result in the defendant needing to meet withholding requirements or not. Exceptions must be clear if the income is not to be taxed. Otherwise, the income from employment damages would be subject to the Income Tax Act.

Employers that are paying a settlement to an employee are almost always going to result in the settlement being seen as employment income. Necessary withholdings will be required. If the employment income is related to another matter, it may fall within an exception.