Top Taxes

Before the March 1st RRSP deadline, tax payers are asking themselves important tax related questions; Should I put my money in a Tax Free Savings Account (TFSA) or in my RRSP?, When is the right time to move from a province to province?, Should I file my taxes even though I have not made much money in the 2009 tax year?, Can I get any tax deductions for my medical costs in the 2009 tax year?, Can I claim my elderly parents or grandparents as my dependents and get tax deductions in the 2009 tax year?, Can I use my children's university tuition credits to reduce my tax obligations?

Should I put my money in a Tax Free Savings Account (TFSA) or in my Registered Retirement Savings Plan (RRSP)?

If you can invest the money you should use both tax vehicles, but if you can afford just one you must consider the effects on your finances and impacts on overall tax claim of each one separately. RRSP is suppose to give you a tax shelter at the time of tax filing in any given tax year, while Tax Free Savings Accounts uses money after taxes, which once deposited in a TFSA, accumulate interest which at the time of withdrawal is tax free. If you find a financial vehicle within the TFSA account that yields you a lot of interest, the money made from those investments are 100% yours at the withdrawal time.

So, if you think that you will be in a lower tax bracket at the time of retirement, you should invest more in an RRSP, because you will get a greater tax refund at the time of tax filing. However, remember once the RRSP is withdrawn it will be taxed in the future. If you have low income in the future, you will get a smaller tax burden from the RRSP withdrawal. In the second case scenario, if you think you will be making more money in the future or at the retirement age, TFSA is the better option because as mentioned before TFSA accounts and money accumulated in those accounts are not subject to taxation at the time of withdrawing money.

I am moving to another province from my current province of residence.

When is a good time to move? The simplest answer to this question is that you are subject to the tax rates of the province in which you reside on DECEMBER 31, of any calendar year. You should check provincial tax rates to get an idea which provinces have higher tax rates and which ones have lower. Obviously, if you are moving to a province with higher tax rates it is more beneficial to move in the New Year so that you can still qualify for previous tax year at lower tax rates. If the scenario is reverse, pack your bags and get a permanent address in your new province, quick and before the year is out.

What if I didn't make too much money in the 2009 tax year?

In this case scenario, it's recommended to file your taxes even if you had no income or taxes owning. For students, if you are in RAP - Repayment Assistance Program, the government might ask you as prove of income for your Notice of Assessment which is received after you file your taxes. If you haven't filed your taxes you will have no Notice of Assessment, hence no prove of income and your RAP application might be declined. In addition, filing your taxes will determine if you are eligible for such government programs as the Canada Child Tax Benefit, a GST/HST credit or other wide variety of tax rebates available in the 2009 tax year. As well, filing reports will increase your future RRSP contribution room.

Can I get tax benefit if I spent a lot of money on medical costs?

In order to claim your medical expenses in the 2009 tax year, these medical expenses must exceed 3% of your NET INCOME. You can benefit from tax breaks, more likely, if you claim all medical expenses for you, your spouse or common-law partner and your dependents who are under 18 years of age on a SINGLE TAX RETURN. As well you can claim travel costs, meals and vehicle operating expenses, but only if you have traveled more than 40 km to get to the medical facility for treatment. If you traveled more than 80km to get to the treatment you can file additional expenses for accommodations such as hotel, motel etc...It's usually better to claim medical expenses on an income tax return of a spouse with lower income in 2009 tax year.

Can my elderly parents be considered my dependents?

Remember, dependents are not only your children under the age of 18; they can be your parents or grandparents too, provided that they are mentally or physically infirm dependents. Therefore, you are taking care of them, they live with you and have a net income of less than $18,081- you are eligible to claim all or part of the CAREGIVER AMOUNT.

Can I claim tuition credits from my children who are enrolled at a college or university?

Yes, often students have little or no income, so that they can reduce their income taxes to zero with just their personal not taxable amount and then either carry forward their tuition credits for future tax years or transfer the credits to parents or grandparents, spouse or common-law partner, or even your spouse's or common-law partner's parent or grandparent. The student must file their income tax first and claim the tuition credits and then any amount left over after the students' tax is reduced to zero can be transferred to you.

Being a business owner can be a very overwhelming learning experience. If you are just starting out with your business venture, it will take a lot of time to obtain all the information you need to successfully run your business. The added pressure of how to deal with your company's taxes can be equally daunting. In order to avoid having information overload, the best thing you can do is to take the learning process one step at a time. In the meantime here are some resources that are available to you when you are in need of self employed tax advice

When looking for self employed tax advice, the Internet can be your best friend. The first site you would be wise to visit for any tax issues would be the IRS website (www.irs.gov). This is the official site to consult on a regular basis as you will find all the information you need regarding taxes as well as any forms that you will need to download and complete. This site will also provide you with instructions if you need help filling out forms. Another good thing about the IRS website is that it is current and up-to-date, so any new tax rules or legislations will be posted to this site first.

Another great resource for finding self employed tax advice are message boards and blogs. Many tax experts are now using the Internet as a way to share information with the rest of the world. In addition to the advice you might receive from a tax professional online, there are also many self employed individuals such as yourself who will post information as well, base on their personal experience. Take advantage of these forums, and even consider joining a group or two that will provide you with regular updates. These groups are typically free to join and any new information will go right to your e-mail's inbox.

As competent and capable as you are, you can't know everything. To fully understand the tax implications of being in business for yourself, you should always consult an accountant for self employed tax advice. Consulting the combination of an accountant, bookkeeper and financial adviser can you keep you knowledgeable and up-to-date and prepared for any tax issues that come your way. If you don't have access to any of these tax professionals currently, you would be wise to start looking for them now. Having a good tax and financial team behind you will ensure the success and longevity of your business.

If you are one of the lucky few, you will be able to secure your tax refund from the government. Basically, it is the excess amount of the difference between what you actually paid/remitted to the government and what you should have paid based on the computations of the Internal Revenue Service, the former being larger than the latter, obviously.

Many Uses

Now, once your tax refund check is in your hands, you will want to start planning on the ways you can use it for yourself. You can use it to pay debts that have been outstanding for so long because you chose to pay your taxes instead. You can add it to your nest egg for retirement. You can place it in emergency funds. You can invest it. You can add it to your vacation budget.

Indeed, there are many things that you can do with your tax refund. The trick is in making sure that you can actually make good use of it. Keep in mind that said money is actually yours, not the federal government's funds, simply because you earned it but paid taxes on it and then it was subsequently returned to your account. You can call it true love, if you like.

Tax Projection

However, all these things that you can do with a tax refund are with the assumption that, indeed, you have the check with your name on it in your hands. This is possible if and when you have actually no tax liability with the government, instead the tables are turned - the government owes you money.

In turn, you should be able to project your taxes so that by the time the filing of taxes are made, you have the money to pay for them. This way, you can estimate what you will be paying and then increase your chances of getting a refund.

Unfair Relationship

And here is where the unfair relationship between taxpayer and tax collector begins, in a manner if speaking. On one hand, you have to pay your taxes on time or else pay the interests, penalties and surcharges applicable to your late tax payments. As any delinquent taxpayer knows, the Internal Revenue Service is not exactly known for its mercy.

On the other hand, when you pay excess taxes on your incomes, the government will hold your money for at least a year before giving you the tax refund. Take note that there are no interests forthcoming with your money as used by government. Now, how unfair can that be?

Tax Calculator to the Rescue

Fortunately, there are online tax calculators that can help in lessening the instances of such an unfair relationship. These calculators allow anybody to estimate the tax to be paid come filing time, thus, avoiding the loaning of money to the government.

It also allows for efficient setting aside of weekly tax contribution into a savings plan. This way, you get to reap the interest on the savings account instead of the government suing it at no extra benefit to you.

There have been many different income tax act that become law ever few years. Each one adding to the 16th amendment what was supposedly ratified by ¾ of the states back in 1913. Since there were 48 states in the union at that time, 36 of those states must have ratified this amendment before it could become law. It was announced by then Secretary of State, Philander Knox, that 38 states did ratify this amendment in February of 1913.

In 1984, Bill Benson started to look into this ratification process and found some startling results. The state of Kentucky voted down this measure by a 22 to 9 vote against its ratification, but they are on the list of states that ratified this amendment. The state of California never recorded a vote on this amendment so no ratification could have happened. The state of Minnesota never received any information from Washington DC about ratifying this amendment so no vote occurred again. Then, the state of Oklahoma actually changed the wording of the amendment to prevent the federal government from instituting a federal income tax. This leaves only 34 of the required 36 states that needed to ratify this amendment so it could become law.

32 other states made changes to the amendment like Oklahoma did. The problem was that the states did not nor do they now have the power to change any amendment that is sent to them, just a yes or no is permitted.

That leaves only 2 states that actually ratified the 16th amendment so that any future income tax act would be based on as invalid. But the US government will do as they want and if you do not pay your income taxes each year, you could end up in prison.

Of course, the above is not legal or accounting advice -- it is for informational purposes only. Before making any decisions regarding legal or tax matters, it is vital that you consult a licensed professional lawyer or tax accountant.

Whether or not you can deduct tolls and mileage on your taxes depends on when you paid the tolls and put on the mileage in question. For instance, you cannot deduct tolls or mileage for driving from home to work. You can only deduct tolls and mileage incurred during business driving. Business driving is the driving you do from one client to another, driving from work to school for company related training, or driving from one employer to another. Any tolls or parking fees paid or miles driven while performing these tasks are tax deductible.

The IRS mileage deduction for 2009 is 55 cents per mile. Tolls and parking fees are deductible at the rate they were incurred.

You should keep accurate records to support all of your driving claims. The records should declare the day and date of the drive, the distance of your drive, where your drive began, where your drive ended, and the purpose of your trip.

The IRS offers you the option of determining what it actual costs you to drive your vehicle, rather than relying on their mileage rate. To do this requires quite a bit of bookkeeping, as you will need to keep track of all costs associated with using your vehicle for business, such as depreciation, insurance, repairs, fuel, tolls, and fees. Then, you must keep a record of all the miles you drove during the year and determine what percentage of those miles were driven for qualified business purposes. Then, you multiply that percentage times the cost of operating your vehicle. In example, if your costs to drive the vehicle were $5000 and the car was driven a total of 10,000 miles, with 5,000 of those miles used for business, you would multiply 50% X $5500 for a total of $2,750.

There are also deductions allowed for medical mileage, charitable mileage, and moving mileage. If you drive to receive medical care, you can deduct that mileage at the rate of 24 cents per mile. If your new job is at least 50 miles away from your prior residence, you can deduct 24 cents per mile for the move. If you drive to a site to perform charitable work or if you use your car to do driving for a charity, you can deduct that mileage at 14 cents per mile.

Whenever deducting tolls, parking fees or mileage, remember to keep very accurate records. The IRS is known to be tough when it comes to driving deductions.

Although the IRS routinely grants income tax extensions and really does not care why you need one, here are a few reasons why you might consider filing an income tax extension.

Accountants are tremendously rushed from February to April. They are less busy during the months of May to October. When people are harried, they tend to make mistakes or overlook details that might be considerable. If you want your accountant to be well rested and have his or her wits fully about them, you might consider filing an extension on the paperwork.

Filing an income tax extension may be a great way to avoid an IRS Tax Audit. If you thought it was the other way around, your wrong. IRS tax auditors are issued a quota and they are expected to meet that quota every year. Returns for auditors are sorted by filing date, and it is likely that if you file late, most auditors will have already met their quotas by the time your return arrives.

Rushing to file your return is never a good idea. The more involved your income tax return is, the more schedules and attachments it will require. Waiting to file your return at a later date can help you to avoid confusion and mistakes. It is always better to file a late return than an incorrect return.

If you own a business and are funding Simplified Employee Pensions or SIMPLE IRA's, it can get quite expensive. Filing an income tax extension also extends your time to fund these retirement accounts.

It's easy to file an income tax extension on-line. There is no paper involved and you will even receive an email confirmation that the IRS has accepted your extension, something they do not give you when you file by mail.

Just remember that filing an extension is just for the sake of the paperwork. Your taxes are still due, in full, by April 15. If you are going to have trouble paying your taxes, in full, an extension will not help you. You will have to make other arrangements with the IRS.

You will find two things like death and the tax, about which you can say that it is not really easy to get rid of them. As far as the taxes are concerned, you will definitely find out that the governments are always willing to lay some tax burdens on almost all the people. You will definitely have to pay the tax as it is quite important for the welfare of the country. It is rather a foolish job to get involved in the tax evasion. This will certainly make your rest of the life quite tense and you will become quite tax fugitive. Hence the people are in constant search about the details of the income tax and how to reduce its effect on our life.

You will have to fill the income tax not before April 15th 2011. However you will also have to make sure that you know each and every detail about the taxes as they will be a great help for you. You will have to know about the marginal rates. You will have to know that how they are applied to the tax brackets.

Every year before the tax rates are made public by the government, many tax experts sit together and extrapolate the tax brackets. However you should know that the tax rates are divided into slabs just like the other countries. Now it's the time to have a look on those slabs. The details are as follows:

1. If your salary is below $16,750 then you will have to pay around 10% of income tax. However if you are a single person and living a bachelor life then you will have to pay more interest as the limit will be only $8,375. Thus married couples are definitely in profit.

2. Similarly you will find the various tax slabs and the final limit is around $373,650. Over this range you will have to pay around 35% of your salary as tax. There are around four slabs in between these two maximum and minimum slabs. They are 15%, 25%, 28% and 33%. The money amounts have also been decided.

However you will find out that there are some changes in 2010 rules and the 2009 rules. Some those differences are on behalf of the overall tax bracket threshold. There is a major change in this field only. All the other fields are left untouched and there is not much difference as far as they are concerned.