Majority report being "somewhat confident" they are taking advantage of all tax deductions, credits and savings
Yet, only a quarter consider themselves very knowledgeable about how they're taxed
WINNIPEG, April 26, 2019 /CNW/ - According to an IG Wealth Management study released today, most Canadians (86 per cent) report that they are somewhat confident that they will take full advantage of all deductions, credits and savings available to them as they prepare their tax returns before the April 30th filing deadline.
However, many could be leaving money on the table as at most one-quarter consider themselves "very knowledgeable" and just 36 per cent of Canadians stated that they work with a tax professional while 50 per cent will prepare their own tax return.
"At IG Wealth Management, we believe in holistic financial planning and ensuring you have optimized all aspects of your living plan, including saving, budgeting, investing, insurance and of course tax", said Jeff Carney, President and CEO, IG Wealth Management and IGM Financial. "Tax is important, but if your advisor is not approaching your financial plan in a comprehensive way you could be leaving money on the table this tax season."
Further, the study showed a knowledge gap exists in how investments and savings are treated from a tax perspective. For example:
Only 42 per cent understand how capital gains are taxed.
Fewer than one-third understand how dividend income is treated.
Just two-thirds appreciate the tax implications of contributing to an RRSP and TFSA.
"The tax system is complex and constantly evolving--it requires vigilance to ensure you're getting the most out of your annual filing," added Carney. "With fifty per cent of Canadians saying they'll manage their own tax filing, it's likely that many people could be missing out on deductions and credits they have a right to claim."
Among the various tax topics that IG Wealth Management has called out for attention this filing season:
Principal Residence Exemption: In recent years, the government has changed its position and now requires you to report basic information on the sale of your principal residence in your tax return. If the requirements are not followed, penalties could apply.
Tax on Split Income: Changes effective for the 2018 tax year significantly restrict income splitting opportunities for incorporated business owners and their family members. If the business owner is already in a high tax bracket, this can increase the tax bill for the business owner's family.
TFSA Overcontributions: Many Canadians dip into their TFSAs and then "pay back" their withdrawal when they receive a cash infusion. However, withdrawals from your TFSA are not added back to contribution room until the following tax year, meaning you can easily go over your contribution limit, resulting in non-deductible interest charges.
According to Aurele Courcelles, Assistant Vice-President, Tax & Estate Planning, IG Wealth Management, it is not just a lack of knowledge that could be keeping Canadians from getting the most out of tax filing season, but also a lack of planning.
"Most of us start paying attention to our taxes in March or April, right before the filing deadline. By that time, it's too late."
"If you want to be tax smart you need to make tax planning a year-round activity. If you're unsure of how to approach things, it's important to seek out the help of a financial professional who can work with you to ensure you're structuring your finances strategically."
About IG Wealth Management Founded in 1926, IG Wealth Management is a national leader in delivering personalized financial solutions to Canadians through a network of Consultants located across Canada. In addition to an exclusive family of mutual funds and other investment vehicles, IG offers a wide range of other financial services. IG Wealth Management has $89 billion in assets under management as of March 31, 2019 and is a member of the IGM Financial Inc. (TSX: IGM) group of companies. IGM Financial is one of Canada's leading diversified wealth and asset management companies with approximately $161 billion in total assets under management as of March 31, 2019.
Research Methodology An online survey was conducted by Pollara Strategic Insights with 1,505 adult Canadians between April 4th and 9th, 2019. Results from a random sample of this size can be considered accurate to within ±2.5%. 19 times out of 20. Results have been weighted by gender, age and region, using the latest census data, to be representative of the Canadian population as a whole.
SOURCE IG Wealth Management
For further information: Media Contacts: English, Olivia Fraczkowski, Proof Inc. for IG Wealth Management, (416) 969-1668, [email protected]; French, Alida Alepian, Capital-Image for IG Wealth Management, (514) 739-1188 x239, [email protected]