I'm wondering if anyone here has experiences to share about tax sheltered organizations. A girlfriend I know has been contributing for a couple of years, saves lots of $$$$ and after doing some research myself I'm debating whether I should. Obviously there is risk involved (possible reassessment/audit) but damned if I do and damned if I dont...
Tax shelters
- Thread starter MissJasmine
- Start date
There is usually an accounting firm or two in any large city that specializes in moving/investing money in order to (really) reduce taxation. You will sit with a stratagist for an hour or two and develop a fiscal plan for your upcoming business year. These specialists are seemingly quite expensive at the outset; however, he or she can save you a suprising amount of money in the long run.
Keep asking around. You will eventually find the name of a company in Vancouver that specializes in this sort of thing. It's a little bit different than working with a C.P.A.
A good accountant is worth his or her weight in gold....Really!
Vid
Keep asking around. You will eventually find the name of a company in Vancouver that specializes in this sort of thing. It's a little bit different than working with a C.P.A.
A good accountant is worth his or her weight in gold....Really!
Vid
Cpa ?
vidwindow I think CPA is title only in the Unite States and does not apply here ?
I think you meant a CA ? or even a CGA ?
vidwindow I think CPA is title only in the Unite States and does not apply here ?
I think you meant a CA ? or even a CGA ?
There are numerous tax shelters out there. One is the plain and simple RRSP. There are ways to save money by borrowing money for your investments. Apparently, there's also a tax shelter bank account. I'd suggest talking to a really good financial planner. It's worth it!
Generally, not a good idea!
Here is the most recent CRA warning about these tax shelters:
http://www.cra-arc.gc.ca/nwsrm/lrts/2008/l081204-eng.html
Good luck,
FTG
CRA has been targeting these for years and have stepped it up this past year because of the success that they have had in collecting extra tax $$$ and assessing penalties, etc. The general advice that I give to my clients is to research the organizations carefully and be prepared to repay the additional benefits if/when they are re-assessed. Because of their questionable nature I do not advise on specific investments/gifting with these organizations, EVER!
Here is the most recent CRA warning about these tax shelters:
http://www.cra-arc.gc.ca/nwsrm/lrts/2008/l081204-eng.html
Good luck,
FTG
There is really only two that are fully legitimate.
RRSP (Make certain that you are fully contributed and keep doing so.)
TFSA (Available 1/23, a tax sheltered savings account where your investment returns are not taxed.)
Some life insurance policies have a tax sheltered feature in them where the
earnings are not taxed and then you borrow against them when you are older.
So far these have passed CRA court rulings.
Make certain that you are incorporated if possible as this can open a world of
expenses that may be tax deductable.
RRSP (Make certain that you are fully contributed and keep doing so.)
TFSA (Available 1/23, a tax sheltered savings account where your investment returns are not taxed.)
Some life insurance policies have a tax sheltered feature in them where the
earnings are not taxed and then you borrow against them when you are older.
So far these have passed CRA court rulings.
Make certain that you are incorporated if possible as this can open a world of
expenses that may be tax deductable.
Thanks for all the responses and pms. Nice to know that there are some knowlegable people on this board
If an tax shelter organization is found to be illegitimate, is there not a 3 year limit for reassessment?
Apparently everyone who participates in a tax shelter gets the same warning letter, as CRA does not want people to know that there are other options aside from RRSPs, which only give you a 30some percent tax credit...nothing wrong with them I contribute monthly to mine.
If an tax shelter organization is found to be illegitimate, is there not a 3 year limit for reassessment?
RRSP does not give you a tax credit, it reduces your taxable income. And the 30 some percent is also dependent on your tax bracket. If you are in the 30% tax bracket. For each $100 you put into your RRSP, it will give you a $30 refund or reduces your tax owing by $30. If you want a better deal, consider RRSP investments that also qualifies for the BC Venture Capital Tax Credit. However, these investments can be quite risky.
The 3 year limit would not apply to tax evasion, fraud or misrepresentation.
.
As far as I know, the only way to legally shelter your money is...
to have a valuation done of everything you own (stocks are assesed at current level etc.), and either sell or transfer your Canadian assets - such as your residence (while not 100% necessarry, I know of several instances where people have thought they had all thier ducks in a row, and later ended up with a huge tax bill because their residence here implied they were still a Canadian resident and thus required to pay all taxes)
Once you pay all your taxes owing here, you can declare non residency of Canada and set up your business and residency in a tax sheltered country. You must reside in that country for at least six months plus one day in any given year.
Money that you earn while you are a resident in a tax sheltered country - including capital gains, investment income and earnings - will be dealt with according to the law of that country.
This is a very costly way of doing things, and is really only beneficial if you are prepared to live outside of Canada the majority of the time.
There are also new ways to do things in the emerates. They have a 0 tax rate there - and you are able to become a resident if you own property. As a resident, you are able to set up a business there, and your income derived from that business would be tax exempt. In theory, you could remain living in Canada and have your business income go into a trust in the Emerates.
I wouldn't suggest doing that - as it is definately on the black side of gray.
Other than actually declaring non residency in Canada, and then actually living in your tax sheltered country of choice for the majority of any year - there is no legal way to do it.
For a much simpler, and completely legal way to save taxes, you may simply want to incorporate here in Canada. The money your business earns is taxed at under 20%, and you are only taxed personally on what you pay yourself from it. You can also pay out dividends which are also taxed at a preferential rate structure.
to have a valuation done of everything you own (stocks are assesed at current level etc.), and either sell or transfer your Canadian assets - such as your residence (while not 100% necessarry, I know of several instances where people have thought they had all thier ducks in a row, and later ended up with a huge tax bill because their residence here implied they were still a Canadian resident and thus required to pay all taxes)
Once you pay all your taxes owing here, you can declare non residency of Canada and set up your business and residency in a tax sheltered country. You must reside in that country for at least six months plus one day in any given year.
Money that you earn while you are a resident in a tax sheltered country - including capital gains, investment income and earnings - will be dealt with according to the law of that country.
This is a very costly way of doing things, and is really only beneficial if you are prepared to live outside of Canada the majority of the time.
There are also new ways to do things in the emerates. They have a 0 tax rate there - and you are able to become a resident if you own property. As a resident, you are able to set up a business there, and your income derived from that business would be tax exempt. In theory, you could remain living in Canada and have your business income go into a trust in the Emerates.
I wouldn't suggest doing that - as it is definately on the black side of gray.
Other than actually declaring non residency in Canada, and then actually living in your tax sheltered country of choice for the majority of any year - there is no legal way to do it.
For a much simpler, and completely legal way to save taxes, you may simply want to incorporate here in Canada. The money your business earns is taxed at under 20%, and you are only taxed personally on what you pay yourself from it. You can also pay out dividends which are also taxed at a preferential rate structure.
What Angel says here is spot on & I can attest to the residency being the criterion by which you are judged in the eyes of the CRA.
Here again the criterion would be that you are maintaining a residency in Canada or not.
The CRA has the most power of any tax collecting agency in the world & has authority to come after any legal residents income for taxation anywhere in the world.
I know this first hand.
Excellent advice here again & about the only way to reduce the income tax you pay legally that makes sense.
