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RRSPs useful bool to reduce current taxes The Registered Retirement Savings Plan (RRSP) is one of the most useful tools that a taxpayer has to reduce his or her current taxes. Contributions to RRSPs are tax deductible, subject to certain limits. In addition, income earned in an RRSP is not taxed currently. The result is that income tax on amounts contributed plus income thereon is deferred until you withdraw funds from your plan. RRSP deductions made in the year, or on or before the 60th day after the end of the year are deductible, subject to your deduction limit. On your 1993 return, then, you can deduct any amounts contributed during calendar 1993 ( unless they were deducted on last year's return), plus any amounts contributed on or before March 1, 1994. Calculating your deduction limit can be a complicated matter. The limit for 1993 is $12,500, but contribution room carried forward from prior years may increase that amount, and your earned income and employer contributions to other pension vehicles may reduce it. Revenue Canada has attempted to simplify the matter by issuing a statement with your 1992 income tax assessment, informing you of your 1993 deduction limit. If you don't have Prior tax returns can be amended Did you know that if ypu missed filing a business expense that you can go back and amend your personal tax returns? A number of tax filers miss deductible expénses that are business related, to name a few examples, you can deduct subscription costs (eg. - a carpenter subscribes to a Home Renovation Magazine) or book purchases providing that it relates to your area of business. Some other examples might be equipment or a computer used for your business, you would be allowed to take capital cost allowance (a.k.a. ) and loan { if you acquired the equipment through a bank loan. Accounting and legal fees are also deductible if business be showing lower profits. As a result your gross income will be lowered, which means you will pay less tax, triggering a refund from Revenue Canada if you had paid taxes on your business income. Amending a tax return that has been filed is a not a complicated process. You can call Revenue Canada to obtain a form called T1 Adjustment Request and fill out the details as outlined on the form. However, it is advisable that you obtain professional advice first and have your accountant or tax preparer prepare this for you on your behalf. by Betty Penny Comp-U-Count Accounting Services Inc. your statement and don't know how much you can contribute, your local Revenue Canada office can tell you. For Port Perry and surrounding area, which is served by the Scarborough office of Revenue Canada, the numbers to call are 1-800-387-0720 or 1- 800-387-5229. If you are fortunate enough to have surplus funds available, it is generally advisable to make your RRSP contributions early in the year, since tax on the income earned will be deferred in your plan. Many tax advisors are suggesting that this may be especially important for calendar 1994, since there have been indications that the government may reduce the limits in the federal budget, which is expected in February or March. Whether it is advisable to borrow funds to contribute to an RRSP will depend on the individual's circumstances. Bear in mind that interest on money borrowed to invest directly into an RRSP is not tax-deductible. However, if you expect that you will be able to repay the loan by combining the income tax saved and other sources of cash in a relatively short period, say less than a year, then borrowing to invest in the RRSP may be a good strategy. If you expect that your income will be substantially higher or lower than that of your spouse when you are retired, a spousal RRSP can be used to split the income. The high income spouse can contribute an amount up to his or her deduction limit into a plan of which the low-income spouse is the beneficiary. When the low-income spouse withdraws the funds from the plan, it will be taxed in his or . related. 1] Retirement S vy? It requires Providing you have legitimate : a receipts these costs are considered a part of doing H How much money will you need for a satisfying retirement? business. I would not g How can you be certain you will have enough? What steps recommend that you go back # should you be taking now to guarantee your retirement and amend a return for one ®| income? For your free copy of CIBC's guidebook "Investing missed subscription or book : in Your Future" from the ipt, b the tu Strategies for series, would be insignificant, and it w= | Present this coupon to would not warrant the cost. 8 | CIBC, 145 Queen Street, One of the advantages of : Port Perry, Ontario. amending your tax returns g| The guidebook will be from previous years would §| svaiable while quanttes last mean that your busi will : CS msmsmsmamsmamams VAN CAMP & KELLER GHARTERED ACCOUNTANTS Income tax planning and return preparation Preparation of government returns (T4's, 15's) Financial, estate and retirement planning INDIVIDUALS B CORPORATIONS SMALL BUSINESSES Wm FARMS 204 Casimir Street, Port Perry, Ontario L9L 187 Phone 985-9725 her hands, unless the high- can be used to purchase an income spouse made annuity or contributi to any sp 1 Reti RRSP in the current year or two preceding years. In this case, any amounts withdrawn will be taxed in the hands of the high- income spouse. Because an RRSP is designed to be a retirement vehicle, it must mature by the end of the year in which you turn 71. Any final-year contribution must be made on or before December 31 of that year. You may be able to continue making spousal contributions until your spouse reaches the age of 71. It is not necessary to wait until age 71 to take income from your RRSP, allowing you to take early retirement should you so choose. The accumulated funds may be withdrawn in a lump sum, or Registered Fund (RRIF). Income x The annuity or RRIF will provide varying amounts of taxable income required by Revenue Canada to prevent an indefinite deferral of tax. Tax is deferred until you actually receive amounts from the plan. On the death of the taxpayer, funds in an RRSP, RRIF or annuity can be "rolled over" on a tax-deferred basis to the surviving spouse or. certain disabled survivors. If no survivor is eligible for the rollover, funds received out of a plan are taxed in the estate of the deceased. (Randy Keller is a partner in the firm of Van Camp & Keller, Chartered Accountants, located in Port Perry.) Roger B. Moase CHARTERED ACCOUNTANT TAX RETURN PREPARATION "Personal, Confidential Service" BUS FAX : 985-8893 985-4944 RES : 985-7225 GO FOR THE BEST RATE AND MAKE THE MOST OUT OF YOUR MONEY! GO FOR THE BEST RATE! Choose the RSP MULTI-RATER, and benefit from a 5-year GIC with rates that keep growing as the years go by - reaching your money at the highest market rate available on the 2nd, 3rd, and 4th anniversary date, with no penalty. The RSP MULTI- ne tt nr lal od Take and 4% 5% 6% % 7% 8% 1st Year 2nd Year 3rd Year 4th Year * This offer ends March 15t, 1994, and cannot be combined with any other offer. The rates of retum indicated are the rates posted 'subject Io change without prior noice. The rate for the 5th year is guaranteed. 5 LAURENTIAN BANK OF CANADA 165 Queen Street, Port Perry 985-8435 advantage of our Why pt Ln aks peted Lot our specialist hefp Yo veut fren diversification strategies on December 18, 1980 and are