Job losses mean new tax challenges to navigate before year end: Ernst & Young

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
        later time.

    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.
    

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For further information: Amanda Olliver, [email protected], [phone]; Brooke McLachlan, [email protected], [phone]; Marie-Ève Graniero, [email protected], [phone]