The following text may have been generated by Optical Character Recognition, with varying degrees of accuracy. Reader beware!

Page MONEY MANAGEMENT 8 Wednesday February 1989 Middle income earners hit hard for 88 Middle income people will gel nailed quite drastically with the government changes in this years income tax system according to a local accountant Mark Bulicki owner of two and Block franchises in Halton Hills says be sympathizes with anyone making over a year I think a lot of the middle- income people got nailed quite drastically said Mr of the over 90 tax forms be has com pleted to date for Middle- income people are those in the to range he said Welfare recipients the first ar rivals to the tax office because they dont have to wait for T4 slips are reaping the benefits of the government tax reforms Anybody under has been saving about 400 to said Mr Bulicki And upper income earners came out pretty good he said And this years tax forms physically changed The pen system puts all income earners under 27500 in the same tax category The former seven category system is replaced by a threecategory system I think the government is trying to stress a flattax system said Mr Claiming a dependent this year will reap less of a rebate than in Mr Bulicki said an income earner averaging a year and paying 25 per cent combined federal and provincial tax will pay Heres how tax reform affects retirement savings been a long and rocky road for Contribute the government to pin down the away new ground for retirement savings in the first phase of tax reform while nailchewing tax- Contributions for 1988 must be payers wailed apprehensively on made by March Thats the the sidelines deadline But it makes good sense We may not have heard the last to get the job done as soon as pos- word even now but most recently in August the Minister of Finance revealed a oneyear delay in implementation of pre viouslyannounced changes to some of the rules for Registered Retirement Savings Plans So as matters stand your 1988 RRSP contribution will be calcu lated on the same basis as in But you should also bear in mind that both the investment in come exemption taxpayers have come to know and love and the federal employment expense deduction have already been eliminated Significant shelters Whatever the details will still provide a significant tax shel ter for most Canadians almost the only one to survive They mean taxation on part of your income is deferred until you retire or choose to draw income from your plan at any lime up to the year in which you become 71 In the shelter period your savings earn compound interest yearbyyear and can build up to be come the basis of a solid and as sured income for your retirement years LlmHs for These are the limits for the 1988 tax yean If you are a membei of a company or other pension plan your maximum coiftribuuon is percent of earned income to a max imum of 3500 minus your own and your employees contributions to the plan in the year Or if you are not a member of a pension plan as an employee or if selfemployed you can contribute 20 per cent of earned income to a maximum of As matters now stand these same limits will also apply for the 1989 tax year Associate Tax Consultants INCOME TAX RETURNS DONE GUELPH STREET before that You can still beat most of the annual RRSP stampede that way advisers will have more lime to talk to you and of course you earn even more interest In fact its not too early to make your contribution too That way youll earn almost a full year of interest If you don have cash on hand to make your 1988 contribu tions those for either should you borrow money to do so The answer is probably yes But make the decision on the basis of your own specific circumstances How much tax would you be able to defer by borrowing How much would the loan cost How much in terest will the contribution earn 8772217 IF YOURE STILL KEEPING YOUR RECORDS IN A SHOE BOX WE CAN SHOW YOU A BETTER WAY YMS COMPUTERS 21 MID Street West ACTON ONTARIO 8534534 Numerous options Theres no doubt the tax rules remain complex Also theres a be choice of plans to choose among practically every finan cial institution of every kind wants your money at this time of year it seems So if youre relatively unsophis ticated in financial matters its good idea to get professional advice to review the rules relative to the circumstances and needs of you and your family But dont put itoffDontmiss out on the important savings available through RRSPs In the short term if you havent yet been able to make up your mind the best bet may be to deposit your contributions in a special RRSPsavings account or a oneyear guaranteed investment certificate in one of the major finan cial institutions It can stay there in comfort and earn interest until you decide on the next move an extra to have a child All the tax credits they give you are at 17 per cent So youre behind nine per cent right away Commonlaw husbands and wives must watch out said Mr Bulicki We have many common- law marriages in Georgetown and Acton he said So for the general public he recommends having a professional review this years tax form But for liveIn mates who are unmar ried he says get an expert opi nion not a second opinion For everyone this year there are surprises said Mr Bulicki Personal exemptions on the 1967 income tax form are replaced by tax credits said Graeme Goebelle of Goebelle and Alex ander Chartered Accountants In Georgetown Mr Goebelle gave the example of a a year income earner In 1987 a basic deduction of was taken off for living expenses before income tax was tallied 1968 a general tax credit is issued meaning that the taxpayer will get a grant subtracted from the total tax payable on his annual income Mr Goebelle also pointed to government information on deduc tions For 1968 the interest income and dividend deduction and the employment expense deduction was eliminated Turn your RRSP into a retirement savings Retirement planning does not stop when your matures at 71 especially now that the gov ernment is encouraging us to take more responsibility for our gold en years One vehicle that has become especially attractive over the past two years is the RRIF an exten sion of the RRSP that allows you to further spread out your tax load to age 90 When your matures you simply roll it over into a a registered retirement income fund at your credit union trust company or bank The financial institution will continue to invest that money and pay you a rate of return that is as good as he rate on RRSPs Donations still mean tax relief in reform era Chances arc your tax breaks as a result of charitable donations will increase marginally under tax reform at least if your taxable in come is less than But its likely to be a bit more complicated because from now on you get credits instead of deduc tions The crcdi is are 7 per cent on the first you give and 29 per cent on additional amounts Other rules are unchanged So credits are still limited to a maxi mum of per cent of your net in come for the year carryforwards of unused amounts arc permitted for five years and special rules for donations of cultural property gifts to the Crown and gifts of property as opposed to cash are all as they were in prereformed days As before in most cases its still best for one spouse to claim all donations made by both partners There are exceptions however and youll want to check these out if you and your partner have donated fair ly large amounts to charity in the year Also make certain your credits dont exceed your total tax liability because theyre not refundable In stead plan to carry any balance for ward to benefit in a future tax year A LESS TAXING SOLUTION LET US DO YOUR 1988 TAXES If you havent been keeping up on the new tax laws and forms and complicated regulations then you might find preparing your own income tax return a problem This isnt the time to guess at what youre doing Instead of taking a chance get the professional help you need Well see that you get every deduction allowable and every benefit coming to you Goebelle MacAdam Alexander Chartered Accountants 37 Main St South Georgetown 877515