2011 Year-end Tax Planning Guide and 2011-2012 Tax Planning Guide now available
TORONTO, Nov. 28, 2011 /CNW/ - Nobody wants to pay more than they have
to in taxes. Grant Thornton LLP wants to remind Canadian taxpayers and
businesses that now is the time to employ end-of-year tax planning
strategies that can help reduce the overall tax burden.
Grant Thornton's 2011 Year-end Tax Planning Guide contains timely and important tax information for individuals,
investors and businesses who want to minimize their tax burden for 2011
by taking advantage of time-sensitive tips that require implementation
before the end of the year or early in 2012. At the same time, Grant
Thornton is also publishing its annual Tax Planning Guide 2011-2012, a more comprehensive desk-top reference on the latest business and
individual tax developments. For the first time, these documents are
now available in a downloadable e-book format for easier reference.
Managing a tax burden has never been more difficult, whether you're
managing your individual tax rates, the rates on your investments, the
taxes on your privately held business, or the income of executives and
shareholders at your company. There are ways to reduce your tax
liability, but all of them take planning.
"It's not too late to change what goes on your tax return when tax
season rolls around," said Gary Dent, Grant Thornton's National Tax
Leader. "Just a little bit of planning in November or December can go a
long way in reducing your tax burden for this year."
Fortunately, there's still plenty of time to put last-minute planning
techniques into play. With that in mind, Grant Thornton offers these
twelve last-minute tax planning tips for individuals and business
Switch end-of-year bonuses into dividends. Business owners may want to look at the split between salary, bonus and
dividends for themselves and their spouse and/or children.
Owner-managers often declare a bonus at year-end to reduce the
corporation's income to the amount that qualifies for the small
business deduction. However, a corporation can also pay dividends to
its shareholders, and eligible dividends may be subject to a lower rate
Maximize the small business deduction. The first $500,000 of active business income receives preferential tax
treatment by qualifying for the small business deduction, and this
preferential treatment begins to be phased out when a corporation's
taxable capital reaches $10 million (this could be less where the
company is associated with other corporations). Since the taxable
capital of a corporation is determined at year-end, check to see if
your company will meet or exceed this threshold and apply strategies to
reduce the amount if necessary.
Accelerate your business expenses into this year's higher tax rates. The federal corporate income tax rate of 16.5% will fall to 15% for
2012, and the general corporate tax rates and/or small business tax
rates of some provinces, such as Ontario, are also declining.
Therefore, it makes sense to accelerate expenses to 2011 to reduce the
amount of income being taxed now.
Sell money-losing investments to offset capital gains. If you are an investor with a capital gain this year (or any of the
last three years), you might want to talk to your investment advisor
about selling investments with accrued losses before the end of the
year. There's one caveat - you can't sell to your spouse and realize
the loss. However, you can sell or gift the investments to a child or other family member. Also,
if your spouse has realized a gain and you have a loss, there are ways
to transfer the loss to the spouse with the gain. However, if you do
sell, make sure the transaction settles before December 31 - many
transactions take a couple of days to complete.
Defer reporting interest income on investments. Watch the timing when buying or selling investments. You have to report
the interest you earned on an annual basis, even if you haven't
received income, so consider buying investments that pay out annually.
If you will soon acquire or rollover a short-term investment like a
GIC, consider arranging for a maturity date early in 2012 so you can
defer the reporting of interest income to your next return. Selling
non-registered mutual funds? Sell before the distribution date so you
don't have to report an income allocation from the fund - just a
capital gain or loss.
Defer the tax when selling your business. Selling a business generates taxable proceeds, but if you reinvest the
proceeds in another small business, you could be able to defer the tax.
To qualify, the proceeds must be reinvested in an eligible business at
any time during the year you sold, or within 120 days after year-end.
Loan money to your spouse or common-law partner and split the income. With current interest rates at very low levels, it might make sense to
move money to the partner with a lower marginal tax bracket so they can
then invest the loan proceeds and include the income/capital gains in
his or her income. However, to avoid negative tax consequences, the
recipient must pay the interest owing no later than January 30, 2012
and certain other conditions must be met.
Consider whether it makes sense to defer your RRSP contribution. Most people will want to make a 2011 RRSP contribution by the leap-year
date of February 29, 2012. However, you can delay your RRSP
contribution if you expect to be in a higher tax bracket in the near
future, or you make the maximum contribution each year but hold off claiming the amount as a deduction until a future year when your taxable income
Pay certain expenses in 2011 to maximize individual tax benefits. In particular, consider medical expenses; physical fitness costs and
registration costs paid for artistic, cultural, recreational or
development activities for children under 16 years of age; public
transit costs; investment fees (eg. safety deposit rental); moving
costs; tuition and interest on student loans; and charitable and
political donations. Grant Thornton's tax guides also explain how to
donate to charities to maximize tax benefits.
Take care of your estate planning if you own vacation property in the
US. Owners of property in the US may have US estate tax exposure - and, if
you pass away, your estate could now be subject to a US estate tax with
a top rate of 35%, newly reintroduced in 2011.
Reduce the taxable benefit on your company car. If your employer provides you with a car, you'll have a taxable benefit
included in your income. That benefit has two components - a "standby
charge" and an "operating cost benefit". Standby charges can be reduced
if you use the vehicle more than half the time for business and your
annual personal driving is 20,000 km or less. You may also be able to
reduce your operating costs by reimbursing your employer for some or
all of the costs - but you have to do it by February 14, 2012.
Trades might want to top up their tools. Employed trades people might be entitled to a tax deduction of up to
$500 for new tools (except things like cell phones and computers). The
deduction applies to purchases that total in excess of $1,065, so check
your receipts. If you haven't purchased at least $1,565 in tools this
year, try to max out the deduction before December 31.
While these tips aren't a substitute for the recommendations of your tax
advisor, and individual circumstances vary, they will help individuals
and businesses increase their knowledge of changes, and can be used to
begin the conversation with your accountant. For more details on these
tips, or to download your own copy of the new Grant Thornton tax
planning guides, visit http://www.grantthornton.ca/services/tax/tax_guides.
Notes to Editors
About Grant Thornton in Canada
Grant Thornton LLP is a leading Canadian accounting and advisory firm
providing audit, tax and advisory services to private and public
organizations. Together with the Quebec firm Raymond Chabot Grant
Thornton LLP, Grant Thornton in Canada has approximately 4,000 people
in offices across Canada. Grant Thornton LLP is a Canadian member of
Grant Thornton International Ltd, whose member firms operate in close
to 100 countries worldwide.
The information contained herein is prepared by Grant Thornton LLP for
information only and is not intended to be either a complete
description of any tax issue or the opinion of our firm. Changes in tax
laws or other factors could affect, on a prospective or retroactive
basis, the information contained herein. You should consult your Grant
Thornton LLP adviser to obtain additional details and to discuss
whether the information in this article applies to your specific
Grant Thornton has senior tax advisors available for interviews in
Toronto and in communities across Canada.
About Grant Thornton's Tax Team
Whether businesses are looking for advice on domestic, cross border or
international tax issues, or understanding changes to the domestic and
international legislation and regulatory environment, Grant Thornton
tax advisers have experience working with clients across all sectors.
Our domestic tax services practitioners provide effective advice on
personal tax, owner-manager tax and corporate tax—staying on top of new
reporting requirements, the ever-changing legislative and regulatory
environment, and emerging market trends. We can assist with tax
filings, ruling requests and advise on tax strategies to help you
minimize taxes and gain the best possible tax advantages.
Our tax experts work with businesses on strategic issues as well as
day-to-day problem solving, and our senior tax practitioners personally
support the client throughout the course of the relationship. Grant
Thornton is committed to open communication and sharing professional
insight, earning the firm many long-term relationships.
In addition to domestic tax advice, Grant Thornton LLP's Tax Practice
also specializes in international and US cross-border tax planning and
compliance; succession and estate planning; sales tax; SR&ED tax
credit; transfer pricing; and expatriate tax advice.
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