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Quebec Income Tax Changes For 2013

Allan | January 28, 2013 - 9:45 am

Residents in Quebec may be feeling a financial pinch this year due to new tax changes. Many changes went into effect on January 1, 2013, and these changes are going to hit Quebec residents in a number of different ways.

The Cost of Transportation
Commuting around town with public bus or metro transportation has become more expensive. While the cost of a single ticket remains at $3, the cost of a monthly pass has risen from $75.50 to $77.

The Cost of Passports
For those residents who require a passport for international travel, the cost of a five-year passport for both children and adults will increase in just a few months. Effective July 1, 2013, an adult passport will increase in price from $87 to $120, and a child’s passport will increase from $37 to $57. A 10-year passport will now be available for $160.

The Cost of Income Taxes
Perhaps the most costly change that will affect middle-class Quebec residents in 2013 relates to income tax. For residents who earn $100,000 or more, the tax rate will increase to 25.75 percent from 24 percent. For those who earn $130,000 or more, a higher tax rate will be combined with a higher tax on health services. The health services tax will increase to $1,000 from $200 per year. The good news is for lower income families. Those who earn between $18,000 and $42,000 per year will see their tax on health services drop to just $100 per year. Older workers, who are over age 65, will also experience financial pain this year as the annual earnings exemption that was supposed to rise annually has instead been capped at $3,000 this year.

The Pension Plan
If those changes are not enough, one additional change to Quebec’s pension plan will affect most employees. This change is small, increasing the rate by only 0.15 percent. However, with so many other changes already affecting Quebec residents, even this small change will likely be felt by many residents.

The combined effect of all of these new tax changes for Quebec residents will have significant effects, so steps should be taken to refine personal budgets to accommodate these changes.

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2013 Tax Changes for All Canadians

Allan | January 21, 2013 - 1:11 pm

New tax legislation applying to all Canadians has taken effect as of January 1, 2013. The legislation is broad reaching. What follows below are the most significant changes facing Canadians.

The age for early retirement under the Canadian Pension Plan (CPP) remains unchanged at age sixty. However, the payout from the pension will be lower if you file for benefits after January 1 than if you did so on December 31, 2012. Also, in mid-2013, seniors reaching age 65 may now defer collecting Old Age Security (OAS) pension benefits until age 70 if they choose. The objective of these changes is to encourage elderly workers to remain in the work force longer in exchange for a higher benefit payout later in life. Workers who defer collecting their benefits will receive higher payouts when they do collect. Here’s how maximum CPP benefit payouts are set for 2013 based on attained age when benefits are received:

    CPP Maximum Monthly Benefits by Age

  • Age 60 (early retirement): $684.45
  • Age 65 (average age retirement): $1,012.50
  • Age 70 (oldest allowable retirement age): $1,437.75

As you can see, deferring retirement by five years from age 65 to age 70 is tantamount to purchasing a lifetime annuity for $425.25. From a purely financial viewpoint, deferring retirement for five years is a good deal as a lifetime annuity with a monthly payout of $425 would cost on average $70,000 if purchased at age 65.

The tax reforms also increased the Employment Insurance (EI) premiums most Canadians will pay. The EI premium increased by $49.50 and will be followed by another $51.15 increase a year later. Also, workers will be tiered based on the probability they have to make use of EI benefits. The three tiers are frequent claimants, occasional claimants or long-tenured workers (those who rarely take EI benefits). The government wants to see if the EI program can be modified so as to encourage citizens to migrate to regions where work is more consistent.

The four basic tax rates and threshold for benefits is now indexed for inflation at 2% annually. The rates are now as follows:

    Canadian Tax Rates

  • Income after $11,038 – $43,560: 15% tax bracket
  • $43,561 – $87,122: 22% tax bracket
  • $87,123 – $132,405: %26 tax bracket
  • $132,406 and above: $29 tax bracket

In addition, the tax changes will allow workers to save more of their income towards their tax free accounts. The maximum annual savings has increased from $5,000 to $5,500. The federal tax credit for senior citizens is now $6,954 with a net income-based phase out starting at $34,562 and ending at $80,258.

The new Canadian tax laws that took effect at the start of 2013 are broad and far reaching indeed. However, as can be seen from the descriptions above, the measures are largely even-handed with both incentives and counter-incentives in place. The entitlement reforms regarding the CPP are an achievement that other nations should take note of.

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Reasons Why Filing Taxes in Canada is Easier Than in the USA

Guest Blogger | December 10, 2012 - 9:34 am

Filing taxes every year is a way to keep our government funded services alive and well. It’s also a time of year that many people dread. Sometimes it’s hard to pay taxes when our paychecks are barely enough to keep us going as it is. Did you know that Canadian laws on taxes differ greatly as compared to the tax laws of the United States?

1. Citizenship Taxing – While the United States taxes individuals based on a citizenship basis, Canada does not. The way the US taxes its citizens is based on how long they were a citizen of the United States in the current year and the previous two years. Canada only taxes on residency. Unlike the US, if a Canadian moves out of the country, the tax doesn’t follow him or her.

2. Estates of the Deceased – Canada does not have an estate tax on those that are deceased. As of 1972, the estate of a decedent isn’t taxed by Canada while it is taxed in the United States. This could become troublesome for the beneficiary as they scramble to liquefy and pay the taxes on the estate.

3. Paid Tax Preparation – In the United States, a tax preparer needs to acquire a PTIN, or Preparer Tax Identification Number. This is mandatory for paid professionals to prepare tax documents for the IRS. However, Canada doesn’t have such regulations and essentially anyone can prepare tax documents. While this could save the tax preparer some money, time, and trouble, someone who doesn’t know what they’re doing could damage your financial future.

4. Quarterly Filing – In the United States, citizens are required to file and pay annual taxes of the previous year on April 15th. In Canada, the due date is April 30th with an additional exception. The tax for self-employed individuals in Canada can be paid quarterly during the tax year without the need to file by April 30th. Their deadline is June 15.

5. Double Taxation – If a citizen of the United States immigrates to Canada, there is a good chance they could face a double taxation if they don’t plan it correctly. As the United States will tax individuals based on citizenship, the person could be taxed for living in the US for a certain period of time. As Canada taxes on residency, that same individual would be responsible for paying taxes based on the amount of time they lived in Canada during the tax year.

Regardless of your filing, paying taxes keeps the country from collapsing. Although you may hate the idea of paying yet another bill, keep mindful of what the taxes are going towards. Look at it as a way of helping the government as they help you every day.

This guest post is contributed by Debra Johnson, blogger and editor of Liveinnanny.com. She welcomes your comments at her email jdebra84@gmail.com.

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Most Outrageous Tax Loopholes for Rich People In America

Guest Blogger | November 6, 2012 - 8:48 am

There has been a great deal of controversy this year about taxing the rich. Some people claim that the ultra-rich do not pay their fair share of taxes due to loopholes in the system. Others argue that the super-rich are the ones who drive the economy and provide jobs, and taxing them may mean slowing down an already sluggish economy. What is the truth? Do the rich really have access to incredible loopholes that allow them to pay little to no income tax?

While every rich person may not take advantage of quasi-legal loopholes, there are a few that have come under fire. Here are the top five outrageous tax loopholes that allow wealthy individuals to lower their tax burden considerably.

1) The variable pre-paid forward contract. This tax strategy has been used by multi-millionaires to avoid paying income tax for many years, but in the past decade it has become part of a long-term investment strategy that greatly reduces tax burdens. Under this plan, a person loans a bank securities with the promise to give them to the recipient at some point in the future. In the meantime, the lender receives payment for the transfer, but because it has not yet taken place, he or she can avoid paying taxes for years on the income. This means that the lender is guaranteed a sales price from the stock and avoids income tax on the transfer, but he or she also loses any future gains in value on the stock.

2) The carried interest tax rate. A hedge fund or private equity manager can currently count the income he or she receives for managing other people’s wealth as “investment income,” thereby entitling the manager to use the 15 percent tax rate instead of the 35 percent tax rate. This loophole exists in spite of the fact that managers are in no way required to invest this income.

3) Capital gains tax rates. While many economists argue in favor of taxing capital gains at a lower rate than income, the fact is that many investors have misused the capital gains exemptions to their own benefit, creating economic problems such as the housing bubble. Ultimately, this tax loophole‚ can create a greater tax burden for those making less money.

4) Charitable tax deductions. The original purpose of charitable deductions was to reward those who give to the less fortunate. However, charitable deductions have become another tax loophole for the wealthy, who often use giving to offset the income they cannot declare as capital gains. The rich can declare up the 30 percent of their income as charitable giving, even if the money is given to organization in which they have an interest.

5) Futures contracts. A tax break that reduced the amount of income tax paid on increases in value in futures trading was originally intended to benefit farmers and help them protect the value of their crops. However, it has become a fast-growing tax loophole for day traders to utilize in bringing their income down from the 35 percent range to 23 percent or less.

It is obvious that tax loopholes are not a simple subject and will take experts in taxation and accounting to close. However, the benefits to the average tax payer could be significant if the country can bring itself to take this important step.

Aaron Gormley is a current freelance blogger who writes on finance, online dating in Canada, and politics.

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How International Taxes Can Affect My Income

Guest Blogger | October 16, 2012 - 11:57 am

International tax can affect your income in a number of different ways. The amount you get taxed basically comes down to residency and citizenship in most countries, whereby you have to declare your international income alongside your domestic income. In Canada, whether or not you are considered a resident of the country will affect how much tax you pay, even if you don’t live in the country full-time. There are some options, though, for saving money on the tax you pay, which depend on how you choose to register your status as resident or non-resident.

Residency Status

You are defined as a resident of Canada if you hold rent-able or own-able property in the country, or if you have family there, and any financial ties or registrations like a drivers’ license. Canadian born nationals also have citizenship, which they can retain even if they travel abroad. A non resident is defined as someone who does not have a permanent tie to Canada, but may remit part of their income into Canada, or hold citizenship for the country. The same rule applies to businesses that are primarily based and trade in Canada, and those that do not. The Canada Revenue Agency can be tough on the circumstances by which you become a resident, which breaks down to if you are based in the country for 183 or more days a year.

The income tax rate for Canada is about average compared to other countries, and accounts for approximately 40 per cent of individual taxes. For capital gains, half of the gains for the tax year are taxed. Different provinces within Canada levy slightly different taxes on land, and payroll. However, there is no direct tax on estates, while Canadian citizens and residents are eligible for tax credits and benefits. For residents that have worldwide income, and are based overseas, the CRA have measures to help you avoid being double taxed in both countries. Tax credits are used to reduce the amount you would normally have paid, while you won’t pay additional tax if the overseas income tax amount is higher.

Solutions

For those that want to retain their Canadian citizenship, but are frustrated about being taxed on their worldwide income while not living in Canada, it is arguably better to declare yourself as non resident if you want to sever formal ties to living in the country. Basing yourself in a tax haven like Monaco or the Cayman Islands means that you can avoid paying the same levels of tax as you would for a residency. For those that weren’t born in Canada, another option is to declare yourself or your business a resident of Canada. For the first five years of your residency, you can invest worldwide income in offshore trusts, where it can’t be taxed. Once you become an official citizen of Canada, you can then go through the process of declaring yourself as non resident, without your overseas trust being affected.

However, the Canadian government are getting stricter on these kind of loopholes, and particularly for businesses. The recent Fundy Settlement vs. Canada in April 2012 voted against the technical definition of overseas trustees as non resident, meaning that companies that want to base themselves in Canada have to clearly abide by income tax, capital gains tax, and other taxes. It’s also important to remember the difficulty and practicality of adjusting residency in terms of home ownership and family status. The CRC are similarly strict on temporary workers with remitted income, and claiming tax back on paying non-residents from Canadian companies. In all these cases, it’s best to seek qualified advice from an international taxation company if you are unsure over how best to declare yourself a resident or non resident.

Liam Ohm is a regular financial blogger. He enjoys reading, writing and networking.

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3 Reasons Why Olympians Should Pay Taxes

Guest Blogger | September 10, 2012 - 9:18 am

For quite some time, America’s Olympians have been held accountable by the current tax laws to pay the taxable income that the gold, silver and bronze medals are worth when they make their journey home from the summer Olympic games.

Not many people even knew about this before the 2012 Olympic games, but its well known now that the athletes are taxed the upper income rate of 35 percent. While the actual price for the once sought after metals are less than a $1,000 for each medal, the prize taxes that the athletes must pay are much greater. Although, this also includes the prize money they receive for winning each medal, ranging from $20,000 to $10,000 per category.

Since the Republican vice presidential contender announced the Olympic Tax Elimination Act, heated discussions have erupted involving America’s current tax situation.

Even though a lot of people, including the president, have quickly taken the side of the athletes, some with valid reasons, there are still plenty of people that continue to support the current tax laws. So, what are some of the valid reasons being expressed to deny an athlete the chance to keep all their earnings?

Complicating An Already Complicated System

Many critics explain that creating another exemption will only complicate the current tax rules and that there isn’t a significant reason for the government to handle a medal winner’s income any different than a non-Olympic citizen. The fact that many people had no idea Olympian winners were taxed, is proof enough that tax system has much bigger problems to deal with.

Everyone Must Follow The Rules

What about the college students that are work multiple jobs to pay a semester of tuition fees? What about the small to medium business owners who have to sacrifice in order to meet their payroll requirements each week? The reasoning here is that citizens who earn because it’s necessary are taxed, so why not tax someone who does something that isn’t. With the current tax law, the Olympians aren’t being targeted with a special tax, they’re just following the rules like every other citizen in the country.

The Olympian Lifestyle

Being an Olympian is a lifestyle of choice, even if you are talented, as there are many out there, you don’t have to pursue a career in being an Olympic athlete. And those that do are typically well off, as many have sponsors, supportive communities and dedicated families. This a choice that has to be made, as there are many unknown Olympians who live like many other low income citizens, but still take part in the games. Some people just believe that being an athlete, which is considered a leisurely lifestyle by many, for a majority of your life shouldn’t grant a special tax treatment.

Marcela De Vivo is an internent marketing consultant and freelance writer focusing on political and immigration issues for Oltarsh & Associates. She enjoys staying up to date on modern technologies and using social media to bring awareness to brands. Follow her on her social profiles at Facebook or Twitter.

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The Merger of Three Accounting Orders in Quebec

Guest Blogger | June 7, 2012 - 9:50 am

All accountants in Quebec who were previously members of either the Ordre des CA, the Ordre des CGA, or the Ordre des CMA will now all be a part of the new, Comptables Professionnels Agréés du Québec. After five attempts spanning nearly forty years, the merger of orders was approved on May 16, 2012. The organization now has 35,000 members, making it the third largest professional order in Quebec and the only unified accountant order in Canada.

Over the next ten years, the three professional distinctions will dissolve into one. Those who already hold a CA, CGA, or CMA certification will be allowed to keep their title and CPA (Chartered Professional Accountant).

Though it is not well-received by all, the unification will allow regulations and standards to come from a single body rather than three different organizations with three different governing styles. Accountants in all of the economic sectors will have business credentials recognized by everyone of all distinctions.

According to the new president of the Ordre, Daniel McMahon, “It’s in the public interest to have a single order with uniform standards, disciplinary procedures and ethics, which the public can easily identify and approach with a complaint or inquiry, and it helps the profession to have one globally recognized business credential.”

Those who opposed the change were upset because the decision was never put to a vote for all of the members but decided solely by the members on each of the board of directors. Any information that was shared with members was just that, information related without room for opinions.

Regardless of whether members are happy or not, a change has come to the accounting profession that many have been seeking for decades. The new Ordre will need cohesion to succeed and the new board of directors hopes that success in Quebec will inspire other provinces who still operate under divided Ordres to unite.

Audrey Porterman is the main researcher and writer for doctoralprograms.org. Her most recent accomplishment includes graduating from Ohio State, with a degree in business management. Her current focus for the site involves a part time phd and doctorate in education online.

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What is the Quebec Student Protest About?

Guest Blogger | May 28, 2012 - 12:11 pm

Photograph: Olivier Jean/REUTERS

If you’ve turned on your television, radio, or even ventured out of your home, you’ve heard about the student protests in Quebec. But what is really going on? Who, exactly, is protesting and why? Well, to give you some background, this all started on February 13, 2012 when social science students at Université Laval decided to go on a strike to protest the proposal by the Quebec Cabinet, headed by Premier Jean Charest, to raise university tuition from $2,168 to $3,793 between 2012 and 2017.

The original strike at Université Laval was followed quickly by protesters at Université du Québec à Montréal. From there, it caught on with students and supporters across Quebec. At its highest point (so far) on 22 March, 166,068 students were on boycott in Quebec with a total of 300,000 people, including supporters, at the March 22 rally.

To give you some idea of what they are really protesting about, let us go over the history behind tuition in Quebec and how it compares to the rest of Canada. To start with, university tuition fees in Quebec were frozen at $540 a year from 1968 to 1990. In 1994, tuition was increased to $1668 a year, and then frozen until 2007. In 2007 it started increasing by $100 a year until 2012, where it reached $2168. To sum up, tuition increased 300% between 1968 and 2012, not including other fees that are paid to universities (e.g. administration fees, student service fees, etc.).

Now, a 300% increase sounds like a lot until you realize that inflation during this same period was 557%, and, even with the proposed increases, Quebec will still have the lowest tuition fees in Canada. Quebec’s current average tuition is slightly greater than one third of the average tuition cost in the rest of Canada .

Despite the arrest of literally over a thousand protesters, the protests continue. There are many who support Premier Jean Charest’s proposal, however, citing the fact that without the proposed increase in tuition costs, additional taxes and fees to cover the educational needs will be placed on the shoulders of the citizens of Quebec.

This Guest post is by Christine Kane, a graduate of Communication and Journalism. She enjoys writing about a wide-variety of subjects including internet service for different blogs. She can be reached via email at: Christi.Kane00@gmail.com.

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Why do we wait for the last minute to file our taxes?

Guest Blogger | April 10, 2012 - 2:53 pm

Tax filing can be a tedious and a cumbersome task for some and as easy as a cup of cake for others. Many people think tax filing is a dreadful chore, to be postponed for the last minute. You might drag your feet for the last moment to do your taxes, when the deadline is nearing only to discover that something is making your tax liability more complicated than you thought it to be – blame it on pending paperwork or laid back attitude. Therefore, it is advisable to file taxes as early as possible. There are few reasons why we tend to wait for the last minute as entailed below.

Doing one thing at a time

You may believe that you perform best when you pay undivided attention to a specific task at any given time. Tackling multiple activities at once might not be your cup of tea. You may think that tax filing deserves your undivided attention and it’s not worth hurrying up and it might take a back seat as compared to other items in your list.

Interest and Boredom

Interest and boredom lies in the things people engage in doing. Like other works including shopping online, booking holidays and tickets and paying bills, people find filing tax a boring job. Also, numbers are boring for many people and they try to avoid playing with numbers. Since, tax filing is very calculative; they wait until last minute to make their mind to pay taxes as they do not find any other option (It is compulsory to pay).

A laid back attitude

Some individuals do not rush around anything in their life whether going for a party or filing taxes. Folks could also be too occupied at their workplace to file taxes. They have a relaxed attitude rather than a frantic attitude. But do not compare them with the folks who have a lazy attitude because such personalities never get the things done. A laid back attitude is a stress free attitude. A person could feel stress by looking at the tax forms and filing procedures, though technology has made things easier today and one can opt to file taxes online.

An individual tends to shift the mindset to concentrate on what makes one self-happy than on what makes the other person happy or what someone else expects. Since the income tax department is liberal enough to give sufficient time to file taxes, people tend to opt for the last few days to file returns. An individual’s income tax documents may prove to be too intricate to file them in advance. One can choose to file taxes online or with help of a Professional Accountant if need be, for an early declaration.

Margaret is a blogger by profession. She loves writing on environment and automotto. She recently did an article on Tata Venture. These days she is busy in writing an article on most expensive watch.

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Canadian Tax Myths Explained

Guest Blogger | March 28, 2012 - 9:19 am

With tax season in full swing, it’s important for Canadian taxpayers to know exactly where they stand on tax-related issues before they file their returns. Unfortunately there have been numerous myths about the Canadian Tax system perpetuated by people who think that they can avoid filing their taxes for one reason or another. Most of these tax myths revolve around the question of whether or not certain aspects of the Canadian income tax laws are constitutional or not (disclaimer: all laws regarding the Canadian tax code are constitutional).

The Canadian Revenue Agency (CRA) and Canadian government officials worry that some citizens will take these myths to heart; they worry that citizens might listen to the rumors and follow only part of the tax code, or avoid paying their taxes all together. I’d like to explain some of the myths behind parts of the Canadian tax code so citizens can feel more informed.

Belief: I can refuse to pay my federal income taxes because of its questionable constitutionality

This is perhaps the most widely circulated myth regarding federal income taxes. Some people incorrectly believe that the federal government does not have the explicit power to levy taxes on an individual, but those powers are specifically described in the Section 91 of the Canadian Constitution. There is a question of whether provincial governments or the federal government can impose direct taxation on a citizen, but the answer is that both can do so. There is no question that the federal government is within its constitutional rights to impose an income tax.

Belief: Canada’s income tax system is based on a citizen’s voluntary compliance because the laws are really unconstitutional

While it’s true that the tax system is based on voluntary compliance, that doesn’t mean that you can voluntarily stop paying your taxes. And the voluntary compliance is certainly not due to the law’s unconstitutionality—the tax laws are constitutional. The government assumes that its citizens will comply with all the necessary tax regulations, but make no mistake: the government assumes that you will pay your taxes if you have taxes to pay. If you do avoid your taxes, provisions outlined in the Income Tax Act (1985) give the government the authority to penalize you. So pay your taxes when they’re due!

Belief: I haven’t filed a tax return in years

Every once in a while you’ll hear some person say that they’ve avoided paying their taxes this year for such and such reason. They might claim that the government “doesn’t really care” if you miss paying your taxes, or they’ll say that the government lacks the resources to track people who evade their taxes. Again, this is just a myth. The Canadian government is fully equipped to deal with perpetrators who go out of their way to avoid or make fraudulent claims with their taxes. Again, the Income Tax Act gives the government the power to punish citizens who knowingly avoid or make fraudulent claims about their taxes. In short: don’t cheat your taxes, it’s not worth it.

Belief: You can negotiate your taxes with the CRA

This claim is just ridiculous. Levels and percentages of taxation are determined by Parliament and regional legislators. Once these government officials pass a law regarding the amount of a tax, that amount is declared law. No legitimate figure within the CRA will allow a citizen to manipulate the rates and numbers of their personal taxes just to save some money. If you know anyone who has done such a thing, then they are committing a criminal offense and subject to severe penalties.

Mariana Ashley is a freelance writer who particularly enjoys writing about online colleges. She loves receiving reader feedback, which can be directed to mariana.ashley031@gmail.com.

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