Plain-English tips on tax & bookkeeping.

Good to know

Quick tax tips worth knowing.

Short answers to the things clients ask us about most — from RRSPs and TFSAs to owner’s draws and the Disability Tax Credit.

1. 1.

   Sold stocks and don’t want the tax bill?

   Consider donating to a registered charity. It’s reported on your tax return using different schedules — just make sure your tax preparer knows which forms, and more importantly how to fill them out correctly.

2. 2.

   Payroll software takes the bare minimum

   Most payroll software takes the minimum tax off — sometimes not quite enough. It can be good practice to have an extra amount taken off each pay cheque, and if finances allow, a monthly RRSP contribution is a good idea.

3. 3.

   Your corporation sold a major asset?

   If you want to withdraw some of that money there are steps to take first. Paying out dividends is a good idea, but before you do you must determine what portion is non-taxable to you — the list goes on. Talk to your accountant.

4. 4.

   Owner’s draws have CPP consequences

   If you have a corporation and are taking owner’s draws, the government wants the CPP paid monthly, and the corporation will have to pay extra CPP on the draws. If it isn’t submitted monthly, a nice little bill gets added to what the corporation owes at tax time.

5. 5.

   Disability credit, but not enough income to use it?

   If the CRA has formally accepted your disability but you don’t have enough income to claim the credit, your spouse or child could claim it. Certain conditions apply, so talk to your tax preparer.

6. 6.

   Registered Disability Savings Plan (RDSP)

   Depending on your family income, the government will match what you put in — up to $3,500 a year.

7. 7.

   Registered Education Savings Plan (RESP)

   An RESP helps you save for your child’s education, and the government matches your contributions. There are yearly and lifetime maximums, so check with your tax preparer or accountant to plan it out.

8. 8.

   RRSP withdrawals: only 10% is held back

   Most financial institutions hold back just 10% for tax when you withdraw from an RRSP. Remember that when you claimed the contribution you got back more than 10% — so extra tax will be owed.

9. 9.

   RRSP or TFSA?

   Everyone’s tax situation is different. If you think you’ll need the money before you retire, a TFSA is good; if not, the RRSP may be better. It’s also good to diversify — some in an RRSP for the tax credit, some in a TFSA working for emergencies or big purchases.

For more, visit Canada.ca. Every situation is different — ask us before acting on any of these.