10 myths about taxes that mislead Canadians.

Canuck57

2014-03-25 17:10:40 UTC

They missed an important two that screws many Canadians.

11) TFSA rocks, RRSP is a tax trap if your not careful.

Me, my RRSP is in tax trap territory and by my calculations anyone with
more than $80k in a RRSP is in tax trap category.

A TFSA and RRSP would have the same value ONLY if the following are true:
- no inflation
- same tax rates out as taxes deferred in.
- money never depreciated

Well, we have real inflation, money depreciated (1.00 / 0.89) 12.36% in
the last year and tax rates have never gone down after real inflation is
calculated in.

And RRSP isn't flexible, want $250,000 for a cottage 40 years later?
Well, most of that will be taxed at 40% or more from the RRSP and not
taxed at all from the TFSA.

Even cash investment accounts outperform RRSPs as they get some capital
gains and dividend deductions and spread over time at lower tax rates.

RRSPs get too big, they become tax traps. On death, your estate gets a
40%+ tax hit.

TFSA is for everyone,and income earned doesn't mess up stay at home
spousal deductions.

Its really cheaper to pay the taxes on the money today and use TFSA, as
RRSPs convert inflation gains and diviends to fully taxable amounts,
most likely at rates higher out than you deferred in.

CPP+OAS for a married couple gets you at least 25% marginal tax rate.
Any other income such as cash investments or other pensions will raise
this quickly. Do not do RRSPs until 50+ and get a tax plan for
retirement before you make them too big for the tax traps.

12) Negative value investing. Many put money in mutual funds producing
1% annual return. Real inflation is 8% or more, just look at your food
bills, property/utility taxes, insurances....

So we have 8% inflation and a taxable 1% return, that a 7%+ negative
value compounding year over year. Its why pooled pensions are in
trouble and serious shortfalls, needing more money to pay out less
value. Further, Ottawa has devalued CAD currency for debt, so todays
dolalr is worth (1.00 / 0.89) 12.365 less...and why most investors would
be better off investing outside of Canada as Canada is a tax inflated
depreciating economy of debt. Me, I have 52% of my liquid assets
offshore.... so for each $100,000 I moved offshore a year ago and more
in the past, without gains/dividends its now worth $112,360.

Understanding how Ottawa and banks screw the public is essential in
modern investing. People need to stop thinking of money as immutable
constant value, its really a rapidly depreciating asset with compounding
inflation taxes.

But CBC doesn't allow comments on this article as it would inform people
int he comments section. And the last thing Ottawa wants is money
leaving Canada. Its about presenting illusions and CBC (Canadians
Brainwashing Canadians) herd control.

Post by none
http://www.cbc.ca/news/business/taxes/10-myths-about-taxes-that-
mislead-canadians-1.2508364
10 myths about taxes that mislead Canadians.
Misinformation, misunderstandings abound when it comes to our tax
system.
By Tom McFeat, Mar 11, 2014
There is no shortage of confusion and misinformation out there when it
comes to filing your taxes. Advisers like Cleo Hamel, right, of H&R
Block help clients separate myths from fact.
Related Stories
Tax Season: Tips and tools to get you through tax time
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Where in Canada do you pay the most tax?
A certain amount of folklore has developed over the years around the
income tax system and the filing of tax returns, but many of those
age-old perceptions are no longer accurate.
File by April 30 or face potential penalties
Here are some common myths — and the corresponding facts that could
mean extra money in your pocket or at least prevent you from running
afoul of the Canada Revenue Agency's rules.
Myth 1: The person whose name or social insurance number is on the tax
slip is the person who must report the interest in a joint account.
Not necessarily. "Income earned in joint accounts must be reported by
the person who earned the capital in the account," says tax expert
Evelyn Jacks in Jacks on Tax. "Where more than one person contributed
capital in their own right, then the income in the account must be
allocated based on the capital provided by each contributor."
More myths
Check out some other misconceptions about our tax system.
Myth 2: The CRA completely agrees with the information you submitted in
your return if it sends you back a Notice of Assessment that doesn't
dispute what you submitted.
A Notice of Assessment is just the result of a quick assessment that
will have fixed mathematical mistakes you may have made, but it doesn’t
mean that the CRA has examined and OK'd everything you’ve submitted.
"The fact that a particular claim is allowed at this point does not
mean that the CRA … is 'letting' you claim it," notes KPMG in its
annual tax planning guide. "It merely means that the CRA has not
addressed the issue in any detail." The tax agency generally has three
years after the Notice of Assessment is sent to review your file.
Myth 3: Gifts from your employer are never taxable.
Modest gifts from the boss do escape the tax collector's attention but
only within strict limits. Non-cash gifts worth a total of less than
$500 a year aren't taxable if they're given to mark birthdays, holidays
or similar special occasions. Your boss can also give an employee up to
$500 in a non-cash gift once every five years to mark long service or
an employment anniversary with no tax consequences to the employee. The
boss can also provide a tax-free party or social event worth up to $100
per employee. Cash gifts are always taxable. ?
Myth 4: I should have refused that pay raise because it will bump me
into a higher tax bracket.
Federal tax brackets — 2013
Income Tax Rate
Up to $43,561 15%
$43,562 – $87,123 22%
$87,124 – $135,054 26%
Over $135,054 29%
Source: CRA
Canadians face four federal tax brackets and up to six brackets
provincially. But "bumping into the next bracket" means just that one's
income in the higher bracket will be taxed at the higher rate – not
that the higher rate will apply to all of the person's income. "All of
the money you earned below the new tax bracket remains taxed at the
lower rates," points out Edmonton-based financial educator Jim Yih in
his Retire Happy blog. "The bottom line is you should never, ever, ever
turn down money. Enjoy every pay increase you receive without tax
worries, and remember that those higher paycheques mean more money in
your pocket."
Myth 5: The U.S. does not impose withholding taxes on U.S. investments
if they're held in registered Canadian accounts.
The U.S. does not recognize the registered status of TFSAs so any
dividends paid by U.S. stocks will face a withholding tax of up to 30
per cent. Retirement accounts like RRSPs and RRIFs are exempt from U.S.
withholding taxes.
Myth 6: Employment insurance income received during maternity leave is
not taxable.
Not true. All EI benefits, including maternity benefits, are taxable.
"In most cases, Service Canada withholds less than the lowest tax rate
so you may have tax obligations at the end of the year," says Cleo
Hamel, a senior tax analyst with H&R Block.
Myth 7: If you file your taxes online, your odds of being audited
increase.
Since it's not possible to file paper receipts or tax slips online, the
Canada Revenue Agency does sometimes ask people who file online to send
in supporting documents. But the CRA says this is just "routine
verification" and not an audit. "When the CRA flags a file for audit,
the criteria are broad, complex and not based on filing method," the
agency says.
Myth 8: The Canada Revenue Agency doesn't pay snitches.
Big Tip
The largest reward paid by the U.S. Internal Revenue Service for a tax
tip was the $104 million US a former banker received for ratting out
his former employer, the Swiss bank UBS, and for helping authorities go
after the bank's clients for tax evasion.
The tax department has always encouraged reliable tips about Canadians
who might not be paying what they should. But it has never rewarded
tipsters whose information led to recovered taxes — until now. Early
this year, the CRA announced it would start to pay people whose tips
pan out cash rewards of five to 15 per cent of the extra tax collected.
For now, the new snitch line (1-855-345-9042) is just aimed at those
whose funnelling of money offshore results in unpaid tax revenue of at
least $100,000.
Myth 9: You can't take advantage of the RRSP Home Buyers' Plan unless
you have never owned a home before.
Ottawa requires users of the Home Buyers' Plan to be "first-time
buyers." But it defines this as people (and their spouses) who have not
owned a principal residence in the five calendar years up to and
including the current year. For those who owned a home more than five
years ago, they can still withdraw up to $25,000 tax-free from their
RRSPs ($50,000 for a couple) to help them buy a home.
Myth 10: Everyone hates doing their taxes.
http://www.cbc.ca/news/business/taxes/10-myths-about-taxes-that-
mislead-canadians-1.2508364
Not true, if the pollsters are correct. A survey commissioned by
Thomson Reuters and the maker of a tax software program asked 1,009
Canadians last year if they liked filing their taxes. A significant
minority — 41 per cent — said yes. It's worth noting that the survey
did not ask if people liked paying their taxes.

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Socialist-statism corruption is a great idea so long as the credit is
good and other people pay for it. When the credit runs out and those
that pay for it leave, they can all share having nothing but
unemployment, debt and discontentment.