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CIFPs Conference 2007

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CIFPs Conference 2007 USING YOUR CLIENTS TAX RETURNS AS A ROADMAP TO TAX & FINANCIAL PLANNING ABOUT THE PRESENTER After completing a B. Comm. with an accounting ... – PowerPoint PPT presentation

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Title: CIFPs Conference 2007


1
CIFPs Conference 2007
  • USING YOUR CLIENTS TAX RETURNS AS A ROADMAP TO
    TAX FINANCIAL PLANNING

2
ABOUT THE PRESENTER
  • After completing a B. Comm. with an accounting
    major at UBC in 1976, Don articled with a large
    international accounting firm before starting
    Nilson Company in 1979. During his articling
    period, he gained experience auditing large,
    sophisticated accounting systems as well as
    smaller private businesses.
  • Don returned to university in 1980 to complete a
    Master's degree. His 100 page thesis, entitled
    "Income Taxation of the Small Business Sector in
    Canada" provided a valuable insight to taxation
    in Canada and other countries.
  • Don attained his professional accounting
    qualification in 1981, his financial planning
    designation in 1998 and his Trust Estates
    designation in 2006. He has been licensed as a
    Portfolio Manager with the BC Securities
    Commission since 1994.
  • Since 1980, Don has lectured in accounting and
    tax topics for the University of BC, the Society
    of Management Accountants of BC, the BC Real
    Estate Association and the Certified General
    Accountants Association of BC. He presently is
    the Team Leader for the delivery of the Taxation
    1 course on the internet across Canada and
    internationally for the Certified General
    Accountants. He has been involved in developing
    national exams and curricula for the professional
    accounting bodies. Don has delivered seminars on
    practice management and taxation issues within
    the profession and across Canada and in the U.S.

BCom MSc (Bus Admin) CMA FCMA CFP TEP Registered
Portfolio Manager
3
ABOUT THE PRESENTER
  • Don served on the National Board of the Financial
    Planners' Standards Council through June 2004. He
    has served as treasurer of various charitable
    organizations. He has also served on the
    Provincial Board of his accounting body and
    chaired a provincial committee which oversees the
    adherence to professional standards in public
    accounting.
  • He has participated in the Press lock-ups of the
    federal and provincial budgets.
  • Don has received lifetime achievement
    recognitions from the University of British
    Columbia, the Sauder School of Business, the
    Certified Management Accountants of Canada and
    the Certified General Accountants Association of
    BC.
  • Don oversees the day-to-day management of both
    firms. His primary focus is business advisory
    services, corporate and personal tax, investment
    management and business year-ends.

BCom MSc (Bus Admin) CMA FCMA CFP TEP Registered
Portfolio Manager
4
www.investoru.ca www.nilsonco.com
  • This symbol indicates a relevant article on
    our websites

5
Sir Francis Bacon
"Nature, to be commanded, must be obeyed"
6
Sir Francis Bacon
Finances
"Nature, to be commanded, must be obeyed"
7
THE HOLISTIC APPROACH
8
Jacket page 1 Information page
  • Birthdate
  • Pension implications
  • Retirement imminent?
  • Need a 6-step plan?
  • OAS/CPP/RPP/RRIF
  • Elect younger spouses age for RRIF
  • 2,000 pension credit (Schedule 1 line 20)
  • Not enough assets set aside to retire?

9
Jacket page 1 Information page
  • Address
  • Own or rent?
  • Tax and financial implications
  • Appropriate insurance-earthquake?
  • Foreign property verification
  • Married status

10
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11
The big picture
  • 5 year comparative
  • Sources
  • Fluctuations
  • Risk exposure
  • Life
  • Disability
  • Critical illness

12
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13
Jacket page 2 Total income
  • T4 employment
  • Income at line 101 on jacket but no, or low,
    income on Sched 1 at line 312 (EI)
  • An entrepreneur?
  • Management of 500,000 superfreebie
  • Sale? Freeze? Previous 1994 election?
  • Significant retirement asset building reqd
  • Any medical (Schedule 1 line 330)?
  • Ripe for a company PHSP?
  • Death benefit payout policy in place?

14
Jacket page 2 Total income
  • Pensions
  • OAS (line 113)
  • 65 or older?
  • Defer a year?
  • CPP (line 114)
  • If client is over 60, whats the strategy?
  • Cash flow needs?
  • Paying in vs getting out?
  • Excluded years, particularly for Moms

15
Jacket page 2 Total income
  • Pensions
  • RPP/RRIF (line 115)
  • There may be a company benefit plan!
  • What are the survivor elections on death?
  • It may be a RRIF
  • Over mandatory withdrawal age or not?
  • Can undo if not and dont need
  • Funding of death taxes?
  • What are the survivor elections on death?
  • Excess withdrawals? Why?
  • It may include foreign pensions
  • Do they have an accent?

16
Jacket page 2 Total income
  • Pensions
  • RRSP (line 129)
  • Client is de-registering? Why?
  • Cash problems?
  • One-off problem?
  • Better solved another way?
  • Tax management to deliberately deregister?

17
Jacket page 2 Total income
  • EI income
  • Maternity leave?
  • Children coming!!!
  • RRSP withdrawals planned?
  • Watch spousal contribution trap

18
Jacket page 2 Total income
  • Investment income
  • Limited partnership income (line 122)
  • May have some pregnant tax shelter issues
  • Dividends (line 120) and interest (line 121)
  • Relative amounts may provide insight to risk
    profile, eg NO dividends
  • Opportunity for better tax-smart investing
  • Invest with profile of your beneficiaries?

19
Jacket page 2 Total income
  • Rental income
  • Gross at line 160, net at line 126
  • Client has investment property
  • Pregnant taxation on gains and recapture
  • If net zero, probable means CCA taken
  • Need to manage?
  • Clever means to manage the exposure
  • Apply wisdom to CCA claiming
  • Asset allocation implications
  • Client doesnt have real property
  • Indirect vs direct investing, eg REITs

20
Jacket page 2 Total income
  • Self employment income
  • Gross at line 162, net at line 135
  • Client making significant income?
  • Need it all to live?
  • This income fluctuates?
  • Assess wisdom of incorporating to smooth and
    defer tax and create some tax levers

21
Jacket page 3 Net Taxable income
  • Pension deductions
  • RPP (line 207)
  • Theres a company benefit plan!
  • RRSP (line 208)
  • Theres a sheltered portfolio!
  • Interest (line 221)
  • Client is carrying deductible investment debt
  • Is leverage appropriate? Reasonable risk?

22
Jacket page 3 Net Taxable income
  • Support payments (lines 230 220)
  • Appropriate tax treatment?
  • Is agreement current and satisfactory to clients
    present reality?

23
Jacket page 3 Net Taxable income
  • Resource claims (line 224)
  • Is client wisely using tax shelters?
  • Or inappropriately? given
  • Age
  • Risk profile
  • Tax position

24
The Notice of Assessment
  • Capital loss carryforwards
  • Non capital loss carryforwards
  • Both useful in future tax management?
  • Should have been a previous carryback?
  • MinTax balance forward
  • Investment Tax Credit forward
  • Both likely have impact on future tax shelter
    acquisitions

25
The Notice of Assessment
  • RRSPs
  • RRSP room
  • RRSP advance and excess contributions
  • Home Buyer status
  • Impact on future contributions
  • Catch up plan?
  • CRA Crack down on off-side excess contributions

26
Net income statistic
  • Drives
  • Child tax benefit
  • GST credit
  • Medical credit
  • Universal child care benefit
  • Guaranteed income supplement
  • Medical premium assistance
  • Clawback
  • Applying for these and/or managing benefit

27
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28
Couple comparative
  • Marginal tax brackets
  • Unused credits
  • Some transferable credits
  • Dividend transfer with new, higher credit system
  • Some not
  • Clawback

29
Couple comparative
  • Solutions
  • Generate income to use credits
  • Deregistration
  • Forego carryforward deductions/credits
  • Income split
  • Earned income in owner corporation
  • New 2007 pension splitting
  • CPP split

30
Couple comparative
  • Solutions
  • Portfolio management
  • Spousal loans for investment income
  • Retention of net proceeds from trading-down home
  • Swaps to more tax-smart construct, across spouses
    and/or sheltered accounts
  • Ownership of passive vs productive assets, eg
    cottage
  • Asset shedding (to kids)

31
KIDS
  • Drive
  • Single parent exemption
  • Child tax benefit
  • Enhanced for disabled
  • Universal child care benefit
  • Child care
  • Education transfers
  • Disability transfers
  • RESP plans

32
Schedule 1
  • Donations (line 349)
  • What is your clients view of gifting?
  • Estate planning implications?
  • The Carnegie School?
  • Do they understand the tax breaks?
  • Capital gains tax break in-kind (Sched 9 line
    339)

33
Global Positioning Planner
  • You are your clients GPS!

34
BEST of ALL
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