TORONTO, Dec. 17 /CNW/ - With the recession receding and Canadians hoping for a brighter new year, those who lost their jobs in 2009 can ease the damage to their bottom line by making key tax decisions now, Ernst & Young says.
"This tumultuous year brought a lot of change, and left different kinds of tax challenges in its wake," explains Gena Katz, Ernst & Young Executive Director. "If you, your colleagues, a friend or a family member have lost a job recently, be aware: making wise choices can ease the financial burden, both now and over the longer term."
Ernst & Young suggests anyone who lost their job in 2009 ask themselves five important questions now, and discuss the answers with an advisor:
1. Have you already negotiated your severance payment? To reduce the tax
bite of a large severance package, you can negotiate receiving the
payment in instalments over more than one year. This provides access
to lower marginal rates in the subsequent year, but it also means
that the individual will not have access to the funds until that
2. Was my severance payment considered a retiring allowance? Retiring
allowances are fully taxable in the year they're received. But a
portion may be eligible for transfer to your RRSP, deferring the tax
on the option of the termination payment. This special contribution
must be made within 60 days of the end of the year to be carried
forward for future years.
3. Did I incur legal fees to secure a severance? The fees are deductible
but only against the severance or termination payment reported, with
net of amounts transferred to an RRSP.
4. Have I made all the right pension plan decisions? If you were a
member of a company's defined benefit pension plan, you will have to
make some decisions in relation to entitlement under the plan.
5. Am I ready to exercise my stock options? If you leave an employer
with unexercised stock options, you generally have a specified period
during which those outstanding options may be exercised. Even if the
options are currently under water, they may have future value if the
underlying securities recover significantly in the exercise period.
About Ernst & Young
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Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
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SOURCE EY (Ernst & Young)
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