Canadian Personal Finance Blog

Cause he’s the Tax Man

This time of year is magical in terms of the sheer volume of money that seems to go for taxes in my household.

First we have the CRA and Income Tax coming due in April, which causes lots of excitement as I mentioned in How Do You Dor Your Taxes?, and I am happy to say that this portion of the Magical Tax Mystery Tour is over, with my E-filing this past weekend. I like to get those in early, especially when the government owes me money (and even if you owe them money, you don’t have to pay until the last possible day).

The second exciting part of this Tax Trek is Property Taxes that I owe to the City of Ottawa. Ottawa’s system has a couple of ways you can pay and I choose to make the two payments they ask for in March and May (you can pay monthly if you wish as well), and this makes for the right hook portion of the tax combination punch I receive this time of year.

Property taxes have continually gone up since I started owning a house about 13 years ago, as various levels of Government off-load their own service load and down load them to the municipal governments, but also the City of Ottawa is an interesting story all on it’s own with Amalgamation and the fact that the City of Ottawa keeps growing (and thus it’s thirst for Tax Funds is never quite satiated).

Given I seem to live in my finances in this time of year, I always end up noticing interesting points that these taxes bring into focus for me:

• I pay more in Property Taxes than I do in Mortgage Interest on my house. I guess this is a good thing, but this may change when interest rates go up.
• With Income Tax there is always a chance that I will get a refund from the Government, but this is never going to happen from my Property Taxes (which explains why I seem to loathe Property Taxes more than Income Taxes).
• Property Taxes are the only tax on the Perceived Value of something, as opposed to actual value or income. If I sold my house for $1 tomorrow, but the City said it was in fact really worth $1,000,000.00 they would be right and that would be what the new owner of my house’s valuation would be. I have seen many people successfully argue that their property valuation was too high, but it is a tedious and slow process (and you might end up with a higher valuation if you are not careful).
• If I wanted to pay more Property Tax, in exchange for more services (say better street lighting, better sewers or a fire hydrant near-by), I would not be allowed, and there is no way for me to buy these service improvements from a private firm either (given the city has a monopoly on these services).
• Even though a portion of my property taxes goes to the Schoolboard of my choice, this does not guarantee my child an education with that board. If they feel my child is not suited to their service (behaviorally, or because they have a learning disability or other reasons) they can refuse me this service, and I have little recourse (but I still must pay the fees). That one is always an interesting discussion point to bring up at a party that seems to be too quiet.

I don’t think there is anything too deep in those points, just some stuff I noticed about my property tax bill.

The Budget announced on Thursday did one or two good things, announced some ominous things (for me) and didn’t do much else.

Good: RRSP/RSP to RDSP

The one good thing is that estates of deceased parents and grandparents can transfer money tax-free to a child or grandchild’s RDSP, which helps those with disabled kids, so a very good thing.  The RDSP program will also allow for Carry Forward of the Disability Bonds for up to 10 years, so those who may not have enough to put in one year ,can make it up in the next year (seems a logical step in the program).

OK: Options Victims Saved?

There was a statement about the lucky folks being taxed for money they didn’t make on Stock Options, but the exact logic and methodology is not yet completely understood (as can be seen from this post from Michael James (an admitted victim)). I never had to worry about options ever being worth anything, so I think this doesn’t affect me in any way.

Interesting: Government Cost Controls

This one is directly in my new backyard, with a statement about budget freezes in the public service. What will this mean? Again, not exactly clear, but spending seems to have stopped for now, which might be a good thing for taxpayers (not for us civil servants). Will this mean lay-offs? My guess would be maybe, but a lot of attrition losses due to retirement not being replaced, might be the more logical choice. Will this cut down on bureaucracy and mismanagement? Did it do much in Nortel? Again, the answer is maybe, but I doubt it. Whatever bureaucracy that is there, will stay there, and anybody mis-managing things, are most likely going to stay where they are too, but we shall see.

No mention of the Public Service pension plan, but many ominous statements about it coming from the “side sources” of the government, so another area to watch closely.

Why Not Back to the Past?

So how is it that 4 years ago we were running surpluses and now we are running massive deficits? A couple of reasons come to mind, but they don’t quite add up:

• Massive infrastructure programs to help start up construction and such
• Less Government income, because less folks are working (and those that are, aren’t getting huge raises, and some even took pay cuts).
• More unemployed, so more money going out of the EI “cash cow”, instead of coming in.

But this doesn’t seem to add up to a $50Billion deficit in my mind, but again, maybe it is just not that simple. Anybody think of any other reasons?

As you can tell, I use QuickTax to do my tax returns and those of my direct family. I find it a useful tool, but my bet is other software solutions might work just as well, but I am comfortable with this tool, so I keep using it (I am a creature of habit).

Typically I do my taxes over about a 1.5 month period, while the various tax receipts and such arrive at my house. Typically the methodology followed would be something like:

• Buy Quicktax (although this year I could have had it for free, darn!)
• Update Quicktax (this is iterative, because there seems to be new updates every week, and then as tax season comes near an end there seems to be an update every day or so)
• Create this year’s tax returns for my family, based on last year’s Quicktax files, this manages to bring forward a lot of useful info like personal info, and also Rrsp limits and such, so I don’t have to reference last year’s returns from the CRA, just run the utility and start from there
• Go into Quicken and glean out whatever information I think I can get, and do a rough estimate of what my taxes might be. Inevitably I overestimate how much tax I have paid and I start getting delusions of large tax refunds, but that is soon remedied. Quicktax does have an import from Quicken tool, however, every time I use it, it really screws up a lot of things, because I don’t have my Quicken set up correctly, so I typically do this by hand.
• With this estimate I will see if there is a need to buy RRSP’s to lower tax owed, which usually is not the case
• As each receipt and/or T-4 or such arrives I then type it into Quicktax and watch my estimate become a closer to reality number
• Over this time I will remember things I have forgotten to input like the cost of my safety deposit box, or my kids bus passes, and I will add them with glee seeing my refund number inflate.
• By the time the first week of March rolls around my return is 95% complete and factual (i.e. not based on estimates), and I can start thinking about E-Filing my return, however, this year I printed out my return first to have a look at it, and found a few “oddities” that I am not sure where they came from, so now I am chasing them down to find out why.
• Finally I have to decide whether I feel confident enough to submit my returns via E-File, it usually happens on a Sunday morning, when I get a sudden burst of enthusiasm and it all gets done. One year there was a problem with my data that I had to follow up with the CRA (it actually stopped me from E-filing), but hopefully this year will not be one of those years.

With that, I await to see whether I forgot something (inevitably a receipt will appear near the end of March, which I have forgotten about), or whether I made an incorrect assumption, when the CRA sends me their response to my submission. Most years it has been spot on, which makes me very happy.

Anybody else do their taxes this way? Did I miss something?

It is time for the first major give-away on this site (ever).

Intuit was kind enough to contact me and send me 2 copies of  QuickTax Standard, which I will gladly give away (since I already bought a copy for myself before they sent me these (yes, irony is a good friend of mine)).

Legalities: Please note, I do use Quicktax (and Quicken) but the copies I have I paid for with my own money (more fool me), I think these are useful tools, but I am not being directly paid to run this give-away (in fact I am out of pocket because I have to ship it to you).  I do run advertising for Intuit to sell Quicktax, as you have seen over the past few weeks, but this give-away is not connected to those ads.

How can you win one of these free copies? Well, let’s first start out with some of the ground rules:

Free Software

Ground Rules

1. I assume  you are a regular reader of this blog, so all you need to do is leave a comment on this post with your e-mail address to enter (no mailing address needed yet, just an e-mail).
2. Given this software is for Canadian Taxes, you should really be a Canadian, or have a use for it (don’t just enter so that you can re-sell it on E-bay that is just scummy).
3. Your comment needs to have a good reason why you want this software (if you say you are having problems with the CRA and are thinking about going for a short airplane trip, you are disqualified), yes, I want it is a valid reason, but so dull. Also remember I have ANTI-SPAM filters on my comments, so if your comment looks like SPAM it might not get entered (or if you are a SPAMMER!).
4. If you subscribe to my feed, you will have my undying respect and your Karmic mojo will increase 3 fold (no, you don’t get another entry, but I figured I’d beg).
5. Feel free to TWEET this (remember I am on twitter as the BigCajunMan (see the button below), and if I see you tweet this, I will add another entry in for you).
6. I hope shipping this isn’t too expensive (no it is not going to go Fed Ex or overnight, it will go via Canada Post).
7. If you are associated with Intuit or are married/related to me, you are not eligible to enter.

Contest will close on Tuesday February 23rd at Midnight.

This year I will not be receiving a tax rebate, thanks to a plethora of reasons, but if I did there is always the question what do you do with found money like this?

Found Money: Windfall or Savings?

Simple Savings Routine

Some people have a very good equation at tax time:

• Put moneys into RRSP up to Limit
• Take Tax Rebate from this saving and apply to mortgage as overpayment
• Repeat methodology each year

An excellent Savings routine, and if you can do this a good way to build up your RRSP and pay down your mortgage.

Let’s Go On Vacation

Other folks I know view Tax rebate moneys as “found money” and feel  that since it hasn’t been planned for, it can be spent however they wish and they typically use it towards a family vacation. Surprisingly, I don’t think this is a bad thing, if the family vacation is just that and not an excuse to spend more money on vacation and go farther into debt. Vacation and rest is important, as long as it is well planned (financially).

I Hate Tax Rebates

Another group of folks I know, despise getting a tax rebate, because that means the government has had your money for the year, when you could have had it instead, and they make sure their employer takes off as little tax as possible, while ensuring they don’t owe money to the government come April 30th either.

I like this concept as well, and usually try to make sure I pay as little tax as I can. 

At the end of it NOT owing money to the CRA is a good thing.

Found Money?

So what if I “find” money (say it falls off the back of a truck, or a relative gives me some)?

If you go with the RRSP routine, it becomes a savings windfall:

1. Money goes to RRSP and creates a tax rebate
2. Tax Rebate moneys goes onto Mortgage or into a savings vehicle if Mortgage is paid off.

I like that idea a great deal.

What do you do with found money?