Federal Budget 2011 Overview

The budget highlights below are not comprehensive and only refer broadly to some of the changes that have been made in the budget. For a complete review of the 2011 budget, please direct yourself to the official government website.

BUSINESS

· Charities

o Monetary penalties and suspension of receipting privileges for charities who issue improper donation receipts.

· Hiring Credit

o A one-time temporary hiring credit is available to employers with total employment insurance premiums of $10,000 or less. This credit of up to $1,000 has been introduced on the excess of 2011 employment insurance premiums over those paid in 2010.

· Changes in Accelerated CCA

o Clean Energy Generating Equipment

§ Class 43.2 has been expanded to include clean energy generation equipment that has been acquired on or after March 22, 2011. Depreciation will be at 50% on a declining basis.

o Manufacturing and Processing Equipment

§ Class 29 manufacturing and processing equipment acquired between March 18, 2007 and before 2014, are able to be depreciated at a 50% CCA rate on a straight-line basis, subject to the half year rule. Subsequent to 2013, the rate will be decreased to 20%.

· Stub Period- Corporate Deferrals With Use of Partnerships

o New rules to limit deferral opportunities for corporations with involvement in partnerships. Income earned in a fiscal year by the corporation for its participation in a partnership will need to be claimed on a calendar year basis. Therefore income will need to be accrued for the income from the partnership for the portion of the year that falls within the corporate tax year.

INDIVIDUAL

· Changes To Tax Credits

o Family Caregiver Tax Credit

§ New non-refundable tax credit at 15% of $2,000. This credit is available to caregivers of infirm dependent relatives.

o Medical Expense Tax Credit

§ Currently there is a cap of $10,000 on medical expenses that caregivers can claim for dependent relatives. The budget proposes to remove this limit to years beginning in 2011.

o Child Tax Credit

§ Changes to the current legislation to repeal the limit of one claimant per household. This will allow for multiple families sharing a home to each claim this credit.

o Tuition Tax Credit

§ Changes to the credit that will allow for fees paid to an education institution, provincial ministry, professional association or similar institution to be recognized.

§ Tuition abroad will now be eligible for programs that are three consecutive weeks, instead of the former 13 weeks.

§ Certain exam fees are now tax deductible such as purchase of examination materials, lab coats, calculators, etc.

o Children’s Arts Tax Credit

§ New non-refundable tax credit at 15% of $500 for children under 16 years of age at the start of the tax year. Eligible activities include arts, cultural, recreational and developmental activities. This credit is available for tax years beginning in 2011.

o Volunteer Firefighters Tax Credit

§ Volunteer firefighters are now able to claim a 15% non-refundable tax credit at a base rate of $3,000.

o RESP Transfers

§ Changes to RESPs will allow for subscribers of separate plans to allocate assets among siblings.

· Guaranteed Income Supplement (GIS)

o Seniors will receive increase GIS payments.

· Registered Disability Savings Plan (RDSP)

o Individuals with shortened life expectancies will be allowed to withdraw annual amounts without triggering the ten year repayment rule. This is to allow for these individuals to more easily access their funds.

· RESP Transfer

o Changes to RESPs will allow for subscribers of separate plans to allocate assets among siblings.

· Individual Pension Plan

o The budget proposes that minimum withdrawals be made from the IPP on an annual basis.

Easy Ways To Reduce Your Personal Income Tax Bill

There are many simply ways to reduce the time, and therefore cost, of preparing your personal tax returns without having to have any knowledge of tax.

Accountants frequently charge based on the amount of time it takes to complete a tax. If you organize your documents in a logical and efficient way, your accountant can process your documentation quicker and therefore spend less time on your return, which should translate into a lesser bill. Below are some common mistakes clients make that add to the cost of their return:

· Open your envelopes: If you do not open your mail from the government, small dividend cheques, etc, then someone will need to spend time to take each piece of mail from its envelope and read each item to determine if it is useful or not.

· Extra Information: Do not provide clutter to your accountant. Only provide documentation that is related to your tax return. If you are an employee and have a T4 slip, your accountant likely will not need a pile of your pay slips.

· Do Some Work Yourself: If you are self-employed, why not prepare an income statement. If you tally all your expenses and turn them into an income statement, an accountant can quickly enter your information and notice what expenses you may have missed.

· Totals: Many people summarize their self-employed expenses, medical expenses, etc on a spreadsheet and do not include a column for the total. This will cause someone to have to manually add up your entire column of numbers. By including a total column for each expense on your spreadsheet, it will certainly help to reduce your accountant’s time.

· Multiple Drop Offs of Documents: If you are at your accountant’s office two, three, even four times to drop off papers you forgot to include, expect a higher bill. Every time someone goes into your file to keep entering in information you forgot, the time will increase and so will your bill. Perhaps make a list of all the items you give to your accountant and refer to it each year before you drop everything off.

· Organize your papers: Separate your tax papers into piles by type of document. For example, keep all the donations together in an envelope (or better yet, add them yourself and give the total to your accountant). Keep medical in another separate area. Keep children fitness receipts in another.

· Stapling: A way to reduce time on your file is to avoid stapling all of your documents together. Accountants frequently make photocopies of your slips in order to keep a copy for you, themselves, as well as provide a copy to the government (if paper filing). If all your documents are separated into stapled piles, someone will need to remove the staples from all your pages in order to make photocopies. Simply use paper clips das a faster alternative.

· Multiple Family Members: If you are providing information to your accountant for several people in your family, ensure that your documents are separated by individual. It will be much faster for the processer to enter your returns and not have time spent sorting which papers belong to which family member.

· Use a Professional: It may be initially cheaper to use a tax preparing software or go to a booth in the mall to prepare your return. However, these methods do not often have the knowledge to maximize your refund or know how to help you avoid being a target for an audit. An accountant will know what credits or expenses you may be missing, how to determine which spouse claims which expenses and will be able to help you avoid (or help you through) a tax audit.

Employing these strategies will make completing your personal tax return easier for you, and your accountant!