Taxes Taxes For Dummies: 2024 Edition Cheat Sheet Cheat Sheet / Updated 11-21-2023 Taxes are a part of life. Love them or hate them (okay, no one loves paying them!), everyone has to deal with them. The Taxes For Dummies: 2024 Edition Cheat Sheet is here to help guide you through tax challenges with some straightforward strategies. View Cheat Sheet

Taxes Filing Taxes as a Freelancer Article / Updated 09-15-2023 You’re free! Free to sleep in until 11 a.m., free to work while your adorable toddler plays at your feet, free to . . . keep really good records of all your expenses for your taxes. Not so fun. The reality is, being self-employed can be awesome for 11 months out of the year, and then come crashing down on your head in the form of lost receipts and unpaid estimated taxes in April. Read on for what every freelancer needs to know for your taxes. Get Organized First, keep good records. Go paperless, get organized and keep track of two things: Your business income. This is your responsibility, and it is a big one. The IRS is especially sensitive about freelancers fudging their income. Yes, you will receive 1099 Forms from clients with what you earned, but only for jobs worth more than $600. So make sure you have a good recording system, like a “Freelance Income” folder in the Money Center. Your business expenses. You don’t want to miss out on deductions related to business expenses, so carefully record what you spent, the date, who you paid it to and the purpose for expenses such as: Business cards, online ads and other tools used to promote yourself and your business Business insurance Interest paid on your business credit card or business loans Lawyer fees and other professional services Rent or dues on a workspace Repairs for your computer, camera and other business-related equipment Routine office supplies like pens, paper, staples, etc. Travel costs like plane and train tickets Business meals with clients and other entertainment reasonable for your business Find the Right Tax Preparer Taxes for freelancers are complicated, so invest in a tax preparer. Look at it this way: You could pay about $300 to get your taxes done, and an accountant could easily save you $300 in fees, deductions you hadn’t heard of and more. If you decide to pay for a tax preparer, make sure they are familiar with all the ins and outs of self-employment taxes. It’s best to find one that specializes in self-employed individuals and is available throughout the year if you have any questions. Read the rest of the article on LearnVest.com. View Article

Taxes How To Find Your Effective Tax Rate and AGI Article / Updated 05-03-2023 An important bit of information you should calculate while you're working on your taxes is your effective tax rate, which is the actual percentage of your gross income that you pay in income taxes. Here’s how you do it: On the first page of your 1040, find your Total Income. Locate your Total Tax. Divide your Total Tax by your Total Income. This determines your federal effective tax rate. Approximate your total tax rate by examining your state income tax returns. Identify your Total Tax and divide that amount by your Total Income. Calculate your total effective tax rate. Add your federal tax rate to your state and local tax rates. By knowing how much of every dollar you earn goes out in taxes, you’re better able to make informed decisions about the real cost of any money decision. For example, if you have an effective tax rate of 30 percent, you’d have to earn about $1.43 to net one dollar after taxes. You’ll also want to know your effective tax rate to be able to more accurately determine the value of tax-deductible expenses. This knowledge helps keep things in perspective. Another important number is your adjusted gross income (AGI), which you need to know if you’re planning on pursuing deductions. The quickest way for you to determine your AGI is to refer back to your last tax return. You can find your AGI for the previous year at the bottom of the first page of your 1040. If your income and deductible expenses aren’t expected to change much this year as compared to last year, use last year’s AGI for your planning purposes. View Article

Taxes Figuring the Value of Charitable Contributions Article / Updated 04-17-2023 If you itemize your tax deductions, you can claim charitable contributions you make. Knowing how to claim charitable contributions can get a bit sticky, but don’t worry. The process is easier than you might think. The IRS states that you’re entitled to deduct the fair market value (meaning what a willing buyer would pay) of items, in good condition, that you donate to qualifying charities. However, the vast majority of people miss out on tax savings to which they’re legally entitled because they don’t know how to determine the fair market value for their donations. For the simplest method of figuring out the fair market value of particular items you donate, try using the TurboTax ItsDeductible program if you make regular donations of personal property. The software costs about $20 and can easily save you many times that amount in taxes. The ItsDeductible program has compiled pricing data based on extensive research of resale outlets as well as recent market data from eBay and provides you with the fair market value of an item as well as a detailed report for your tax filing purposes. And you shouldn’t need to buy the software each year because values tend to remain fairly steady or inflate slightly over time. The rules changed in 2006 regarding charitable contributions. Now you must get a receipt from the charity substantiating all your contributions or donations. Also, items must now be in “good” or better condition to qualify for a deduction. View Article

Taxes Creating Files to Organize Tax Records Article / Updated 10-20-2021 Throughout the year, you probably receive a lot of paperwork, some of which you should keep to prepare your tax return. And, you may need to keep other documents to substantiate prior-year tax reporting. Maintaining your documents in an organized fashion will not only help you avoid missing valuable deductions, it will help ensure that your income tax return is complete and accurate. If not, you can be out a lot of money in penalties and interest when errors are discovered. Worksheet outlines files and contents Use this worksheet, which outlines ten main file folders you can create to keep your tax information organized and accessible, whether you keep digital or hard copies. The folders are: bank accounts; brokerage accounts; canceled checks; credit card statements; income; investments; receipts; retirement plans; tax return 20__; and tax info. The worksheet also explains the types of materials to keep in each folder, and how long you should keep them. These files should be incorporated into your general household filing or record-keeping system. When tax time rolls around, all you have to do is pull out or look at these files, and you’re ready to prepare your tax return. If you pay bills online, print a confirmation statement and retain it in lieu of a canceled check. Maintaining efficiently organized and complete personal finance records helps you in so many ways. Not only can you avoid wasting time or stressing out when you can’t find important documents, but you can also avoid wasting money in late payment fees and additional interest charges, not to mention how much better you will feel should you get one of those wonderful audit notices in the mail from the IRS. View Article

Taxes Taxes 101 Article / Updated 07-06-2021 Nobody forgets the first time, whether it was at their high school job at the ice cream parlor or their first job out of college, that they eagerly tore open a paycheck — already planning a shopping spree — only to find that someone had stolen a huge chunk of their money! (If you haven’t felt this sinking feeling yet, prepare yourself.) Yup, that big missing chunk went to taxes. But don’t think you’re not getting anything for it! Here are a few examples of what your taxes get you: the clean water running out of your tap, the police keeping your neighborhood safe, and the garbage that gets picked up on your curbside. You probably have an opinion on whether you’re overpaying or underpaying the government, but that’s a topic for another time. Following is an explanation of the ins and outs of taxes so you can fully understand how they affect your finances. Taxes in a nutshell Taxes are compulsory contributions to the state you live in, and to the federal government, levied by the government to pay for things that society as a whole needs but people can’t pay for individually. That includes everything from the roads you drive on to law enforcement to the salary of the President of the United States. These taxes aren’t optional and trying to hide or outrun them never really ends well (just Google “celebrity tax evasion"). Plus, 96 percent of Americans believe it’s your civic duty to pay taxes, so the best thing to do is get a basic understanding of taxes so that you can pay them accurately and on time, with minimum stress and pain — financial or emotional. Why understanding taxes is important Understanding taxes will save you when filing. Collectively, Americans overpay the government by $945 million every year. That’s about $400 per household. If you understand how taxes work, you can avoid giving too much to Uncle Sam. Understanding taxes will also save you at work. At your job, understanding how taxes work can help you save hundreds on transportation costs or childcare by having your costs of getting to work or having your children take care of taken out of your paycheck pre-tax. But more on that follows. Understanding taxes will also help you budget better. You’ll be able to more accurately plan your monthly and yearly spending if you understand how much you’ll be paying. No one likes financial surprises (unless it’s a giant windfall). View Article

Taxes The Fundamentals of Canadian Estate Tax Article / Updated 07-06-2021 As the saying goes, “death” and “taxes” go together. However, you can take advantage of some tax breaks to minimize the income tax arising on death. The lower the tax the greater the funds available to your heirs! They will thank you for undertaking some of these tips. Undertaking estate planning Estate planning sounds ominous. “Estate” and “death” are terms that often go together. However, it’s worth pointing out that estate planning involves more than just income taxes. Estate planning is a component of financial planning. It focuses on minimizing the work and difficulties faced by executors while maximizing the wealth passed to heirs. Estate planning is far more than simply having an up-to-date will. In fact, drafting your will should be the last thing you do in documenting your estate plan — all the other steps should be taken care of first. Credit: ©iStockphoto.com/DNY59 2012 The first step of an estate plan requires you to decide your estate’s purpose: Who are the beneficiaries/heirs to your estate? Family members? Non-family individuals? Charities? Who is to get what? Should your estate be dispersed on death or should it carry on? Who will see that your wishes are met? Are funds to be kept aside for a specific purpose? A disabled child’s care? a grandchild’s education? Are there assets you wish to be shared after death, such as the family cottage? After you determine your estate’s objectives, design and enact a plan to ensure the objectives are reached. It’s vital here to assess the income tax consequences. Reducing income tax at death Avoid planning for your estate and you can leave a significant income tax liability upon your death. As death and death taxes occur at the same time, you may find that in this situation a significant portion of your income is taxed in a top tax bracket and therefore could lose about 45 percent to the CRA. Understand the relationship between death and taxes Without trying to be brazen, when you die you leave the Canadian tax system. On death, you’re subject to tax for the very last time. The tax rules are generally drafted so that any accrued gains or income you have at the time of your death are subject to tax. A general exception to these rules occurs when your assets are passed on to a spouse/common-law partner. Here the tax can usually be deferred until the death of the surviving spouse/common-law partner. Capital gains and recapture For income tax purposes you’re considered to have sold all your assets at the time of death. The “sale” proceeds are deemed to be the value of the assets at your death. The excess of proceeds over the cost is a capital gain of which 50 percent is taxed. If your assets include rental properties there may also be a “recapture” of prior-year depreciation claims (or capital cost allowance — CCA in tax lingo). Recapture is fully taxed. The tax liability arising on the deemed capital gains and/or recapture must be funded from other sources. As a “sale” occurred strictly for income tax purposes you did not receive any cash to pay the tax. In the worst case, the estate is forced to sell an asset to pay a tax bill. RRSPs and RRIFs On death your registered retirement savings plans (RRSPs) and/or registered retirement income funds (RRIFs) are deregistered and, unless the beneficiary of your plan is your spouse/common-law partner, the full value of each plan is included in the income reported on your final personal tax return. At least most RRSPs and RRIFs provide immediate access to cash, to fund the tax liability by having the plan liquidate the holdings. However, the remaining value to be passed on to your heirs can be dramatically reduced. Live rich, die poor Live it up while you’re alive and leave the coffers empty when you shuffle off this mortal coil — this is the estate planning motto! A proper estate plan will permit you to live the life you deserve, but on death, you may find you don’t legally own a lot of assets — or you’re poor on paper — meaning a low-income tax exposure. Perfect! A way to avoid taxes on death would be to rid yourself of all assets (including RRSPs and RRIFs) before you die. However, you still have to live! Your estate plan must allow you to live comfortably until your death and have access to assets you enjoy — like the family cottage. You want to ensure you have enough funds to live on, and you don’t want to get involved with your children’s squabbles over your assets. You also do not want to face a large tax liability now. What to do? Estate planning tools Although it’s never pleasant to think of our own demise, the thought of paying less tax usually brightens our day. There are a number of ways you can reduce the income tax exposure you may have at death. Early inheritances to your children and grandchildren If an objective of your estate is to pass assets to your children, why not do it now? The kids may prefer some money sooner rather than later — especially if they have an outstanding mortgage. In passing funds on to your adult children you can do an outright gift (a true early inheritance) or you can lend funds and forgive the loan on or before death. Gifts When you give cash to an adult child no income tax implications exist for you, regardless of how the money is used. If you liquidate securities to make the cash gift you may incur capital gains, which would be subject to tax in the year of liquidation. This tax may be lower than on your death, plus you have the cash to pay the tax, and moreover, your current tax rate may be substantially lower than your tax rate in the year of death. Consider establishing a trust in which you add cash to fund investments on behalf of your grandchildren. When the grandchildren are under 18 the interest or dividends earned on the investments will continue to be taxed in your hands. However, any capital gains can be taxed in the grandchildren’s hands. Because only 50 percent of capital gains are taxed, an individual can have $21,644 of the capital gains in 2012 and pay no income tax thanks to the $10,822 basic personal tax credit amount that every Canadian is entitled to. So, here you can reduce the size of your estate and reduce the extended family tax bite. Loans Rather than giving funds to your adult children, you can make a loan. The loan can be set up so it’s forgiven no later than at the time of your death. During your lifetime this offers you some control as you can “call” the loan. The loan can be interest-free if your adult child uses the funds to pay down a mortgage, pay for your grandkid’s tuition, fund a vacation, buy a new car, and so on. Undertake an 'estate freeze' As your assets grow in value so does the tax liability you will face on death. As part of your estate plan you can implement steps to allow this growth to continue (stock and real estate markets willing, of course) but to not have the growth accrue to your hands. This is accomplished by exchanging a “growth asset” for a non-growth asset. In doing the exchange this will “freeze” the growth in your hands and the tax liability that has accrued as at the time of the exchange. The growth of your asset from the time you acquired it to the time of the exchange or freeze will be subject to tax, but not until your passing. The growth after the time of the exchange or freeze accrues to someone else — your heirs. When the growth accrued to you is frozen, so is your tax liability. At the time of the exchange or freeze the future tax liability can be estimated and steps can be taken to plan for its payment on your death. Often, you can purchase life insurance; on your death, the insurance proceeds are used to pay the tax liability, and the estate stays intact. Potential estate freeze situations include: Portfolio of investments. A portfolio of growth investments (stocks, mutual funds, real estate, and so on) can be transferred to a private family-owned corporation on a tax-free basis. (Well, it’s actually a tax deferral because the accrued gain at the time of the transfer will be taxed on your death — but not until then!) In return for your portfolio of investments, you receive fixed-value preferred “non-growth” shares of the corporation. The preferred shares would have a value equal to the value of the portfolio transferred to the corporation and, as the shares are “non-growth,” this value will not grow. The value of the preferred shares would be frozen. The preferred shares would be voting and dividend-paying to allow you to control the corporation (that is, the decisions concerning the portfolio of investments) and to take funds out for living expenses. Your heirs, perhaps your children, would subscribe for the common shares (or “growth shares”) of the corporation for a nominal amount, say $100. The future growth of the investment portfolio will accrue to the common shareholders and will be taxed in your heirs’ hands when they sell or are considered, for tax purposes, to sell the common shares of the corporation on their death. Family business succession. An estate freeze is a common technique used by family businesses. It’s often coupled with passing the business to a second generation. The common shares, a growth asset owned by parents, are exchanged on a tax-free basis (well, again, tax-deferred, as noted above) for preferred shares. New common shares are then purchased by the sons and daughters of the second generation. The parent’s tax liability is frozen and steps are undertaken to provide the funds to pay this liability at death. The preferred shares are inherited by the children who become the sole owners of the business. The procedure repeats itself when the time comes to pass the business on to the third generation. Make charitable donations and bequests Tax savings are available when charitable donations are made in your year of death or after your death by virtue of a bequest in your will. To arrange your affairs to make a bequest, contact the “planned giving” department of your favourite charity. If you begin funding a charitable donation to be given on your death (say, a life insurance policy), you can receive an official receipt for yearly charitable contributions (say, annual life insurance premiums) while you’re alive. Reduce exposure to U.S. estate tax If you own U.S. assets you can undertake strategies to minimize or eliminate the potential U.S. estate tax you may be subject to. It’s best to contact a U.S. estate tax specialist for further advice in this area. If you’re considering purchasing a U.S. property, see a U.S. estate tax specialist before you make the purchase. Purchase life insurance Life insurance can be a handy estate planning tool. Life insurance itself does not reduce your exposure to income tax on death — it’s simply used as a means to fund a tax liability on death so the estate does not have to be crippled to pay the tax. Life insurance is most effective when an estate is quite illiquid — say, because the majority of the estate is made up of a cottage or other real estate holdings. A life insurance death benefit payment is not taxable. Because life insurance is, in effect, a benefit to your heirs, let them pay the annual premiums. Have a power of attorney A power of attorney — sometimes called a living will — lets your “attorney” make health and financial decisions for you when you can’t. Make sure your will is up to date This is often considered the last step in your estate plan because you need to visit all the other estate planning steps first. In other words, your will is done after you’ve decided on the objectives of your estate and implemented strategies to meet these objectives while at the same time minimizing your income tax exposure. Using trusts in your estate planning Trust us — a trust is not solely for the old or rich, overly complex, a “tax scam,” or exorbitantly expensive to set up or maintain. A trust can be a very effective tax and estate planning tool. Understanding what a trust is A trust is an arrangement that separates control and legal ownership of an asset from its actual beneficial ownership. In plain English, this means the asset is owned and controlled by someone other than the person(s) that benefits from the asset (say, in the form of income and/or capital gains derived from the asset). Here’s an example of a trust. The parents of a very young child die but leave funds (perhaps via life insurance) to care for the child. Because the child is so young it’s not prudent to give the funds directly to the child. Therefore, an arrangement is set up (a trust) where the funds are made available to the child (the beneficiary) but control of these funds rests with others (the trustees) to ensure the funds are prudently saved and spent. The trustees have a legal duty to ensure the funds are used properly and solely for the benefit of the child. For income tax purposes a trust is a separate taxpayer. A trust must file its own special tax return if it has income, and it may or may not be required to pay income taxes. Where the trust has a lower tax rate than the trust beneficiary(ies) it makes sense to have the trust pay the tax. Where the beneficiary(ies) of the trust is subject to tax at a rate lower than the trust then it’s best to have the trust allocate its income and capital gains to the beneficiary(ies) so they would be subject to tax and not the trust. A trust can be used for many reasons other than tax and estate planning, including the following: Assisting in managing another’s affairs Avoiding family disputes Controlling children’s money Providing for a child’s education and/or special needs Providing for the succession of a family business A trust arrangement is documented in a trust agreement. It will note the trust’s name (say, the Jones Family Trust) as well as the names and powers of the trustees. The trustees can be given strict guidelines on how the trust is to be run and which beneficiaries get what and when, or — as is the case with most modern trusts — the trustees are given discretion in terms of managing the trust assets and distributing income to the beneficiaries. Getting to know who’s involved in a trust A trust requires the involvement of three people. Settlor The settlor starts or “settles” the trust. He or she sells or gifts assets (i.e., investments, money) to a trust. Usually, the settlor’s “job” is complete after the trust is settled. A settlor of a trust is often a parent who wishes to pass on assets to children. The settlor cannot be able to have the trust property returned to him- or herself. If so, the trust will be considered “reversionary” and the tax benefits expected from the trust will not be available. The sale or gift of assets to a trust is considered a disposition for tax purposes. If the asset has an accrued capital gain, it could trigger a tax liability in the settlor’s hands. However, this tax may be less than the tax liability that occurs later in life, or at death. A capital gain will not arise where assets are transferred to a trust that is a spousal, alter-ego, or joint spousal/partner trust. Beneficiaries The individual(s) who will reap the rewards from the trust assets are the “beneficial owners.” Often children are beneficiaries of a trust, especially if they are under 18. The future appreciation in the trust assets will be taxed in the trust or the beneficiaries’ hands and not the settlor’s hands. This is of great advantage where the settlor is at a higher tax rate than the beneficiaries. Trustees Trustees manage or control the trust assets on behalf of the beneficiaries. This permits a parent to minimize a potential tax liability without giving assets directly to a child who, at least in the eyes of the parents, may not act responsibly. Investigating common trusts Trusts fall into two categories: testamentary and inter-vivos (or living) trusts. A testamentary trust is created on the death of a settlor, and a living trust is created while the settlor is still alive (hence the name). Each category of trust is taxed differently. Here are the most common types of testamentary and inter-vivos trusts and when they’re best used for reducing taxes and/or other purposes. The term income splitting — or, as it’s sometimes called, income sharing or income shifting — is used to describe the plans or steps taken to shift income from a higher-tax-rate family member to a lower-tax-rate family member. The family income remains the same but the family income tax burden is decreased, leaving more after-tax income for family living expenses. The idea here is that parents transfer investments to a trust in which the children are beneficiaries. The income earned on the investments is then taxed in the children’s hands. Because the children are expected to be in a lower tax bracket than the parents, the family is better off on an after-tax basis. Working against this objective are the income tax provisions called the “attribution rules.” These rules essentially state that no matter who receives the income, it’s taxed in the hands of the person who made or funded the investment. In other words, the income earned on the investment asset is “attributed” to the individual who funded the investment. However, there are exceptions to the attribution rules: Attribution of interest or dividends occurs only if the child beneficiary is under 18. Therefore, no attribution occurs when the beneficiaries are adult children. No attribution of “income on income” applies. Interest and dividends earned on the reinvestment of interest and dividends do not attribute. No attribution of capital gains applies. Because only 50 percent of capital gains are taxed, a trust beneficiary could be subject to tax on $21,644 of capital gains in 2012 but pay no tax because of the $10,822 basic personal tax credit amount available to all individuals. No attribution of interest and dividends applies, even when the beneficiaries are children under 18, where funds are loaned, rather than gifted, to the trust. The loan must be made at a market rate of interest and the interest on the loan must be paid within 30 days of the end of each calendar year. The individual lending the funds — say, a parent — would include the interest received in his or her personal taxable income and the trust would deduct the interest costs in determining its taxable income because the interest is being incurred to earn income on the investments. For this strategy to work effectively in shifting income from a parent to a child, the trust assets need to have an investment return greater than the interest rate on the loan. Testamentary spousal trust As this trust is “testamentary” it is created by a will. On death, the assets of the deceased are transferred to a spousal trust on a tax-free basis. The trust must permit only the surviving spouse/common-law partner to receive the income of the trust assets until his or her death. A spousal trust has three main advantages: Just as with assets bequeathed directly to a spouse/common-law partner, the deceased spouse/partner on death does not face capital gains and the associated income tax in respect of assets transferred to a spousal trust on death. The income tax on the accrued capital gains on the assets of the deceased is deferred until the later of the surviving spouse/common-law partner selling the assets and the death of the surviving spouse/common-law partner. Like any trust, it has trustees to manage it. Where the spouse/common-law partner of the deceased has little financial experience this permits an element of control. A testamentary spousal trust is taxed at the same tax rates as an individual. Therefore, the same graduated rates apply. This permits tax savings when the spouse/common-law partner of the deceased is taxed at a higher tax bracket than the trust. Therefore, less tax, more funds for the surviving spouse/common-law partner. Multiple testamentary non-spousal trusts Like a spousal trust, these trusts are taxed at graduated tax rates. The beneficiaries are often children. Separate trusts are created (usually one per child) as opposed to one trust. This allows the tax savings of the graduated levels of tax to be multiplied. Alter-ego and joint spousal/common-law partner inter-vivos trusts You need to be at least 65 to establish these trusts. Assets can be transferred to these trusts without triggering income tax on the accrued capital gain at the time of transfer. In the case of an alter-ego trust, the tax on the accrued gain is deferred until your death. Where a joint spousal/common-law partner trust is used the tax can be deferred until the death of the second spouse/common-law partner. Making use of these trusts doesn’t decrease your income taxes at death (or on the death of your spouse/common-law partner), but these trusts work extremely well to minimize your probate (also known as estate administration tax) exposure on death. Other advantages include the following: They can serve as a will substitute: Because the assets are in a trust they are not part of your estate and do not pass to your heirs as the result of a will. The assets will pass according to the trust agreement. Compulsory succession rules can be avoided. These assets are not subject to a will that could be contested. They can enhance privacy: A probated will is a public document. Using these trusts prevents the public from knowing the value of your estate and who your beneficiaries are. They can serve as a power of attorney substitute: Co-trustees or successor trustees can act on your behalf if you become unable to manage the assets of the trust. A power of attorney is not needed for assets owned by a trust. View Article

Taxes Which Business Expenses Can I Deduct from My Taxes? Article / Updated 03-26-2016 Businesses can deduct a wide variety of business expenses from their taxes. The IRS specifies that, to be tax-deductible, business expenses must be ordinary and necessary for the operation of your business. Tax-deductible expenses include the following: Home-office If you work from home you can deduct the costs of operating and maintaining the part of your home that you use for business. Rent Phones Utilities Postage Health insurance Auto expenses Internet access Business travel Business meals and entertainment Professional services and consultants Business cards and stationery Retirement plans Interest payments on business credit cards Education Office supplies Office furniture The federal government has determined that plenty of things aren’t deductible. Too bad! Here are a number of deductions that may not be considered legal by the IRS: Anticipated liabilities Bribes and kickbacks Demolition expenses Personal expenses Social or recreational clubs Lobbying expenses Political contributions Federal income taxes Penalties and fines as a result of breaking the law When in doubt, consult with an accountant or tax advisor to see which expenses you’re allowed to deduct and which ones you aren’t. It’s far better to be sure about your allowable deductions before you take them instead of years later, when your business expenses are disallowed by the IRS. View Article

Taxes Value Added Tax in the UK Article / Updated 03-26-2016 Value Added Tax, or VAT, is a tax charged on most goods and services provided by VAT-registered businesses in the UK. VAT is charged when a registered business sells to either another business or to a non-business customer. When registered businesses buy goods or services they can generally reclaim the VAT they’ve paid. There are currently three rates of VAT, depending on the goods or services the business provides. Rates Payable on 0% Books, newspapers, children’s clothes, most food items 5% Domestic gas and electricity/energy-saving materials 17.5% Standard rate for most items – set to rise to 20% from 4 January 2011 From April 2010, traders must register for VAT if their annual sales exceed £70,000 for the previous 12 months or expect to go over this level within the next 30 days. From April 2010, traders whose sales fall below £68,000 may – but aren’t obliged to – deregister for VAT. View Article

Taxes Tax-Free Savings Accounts: TFSA Tips for Canadians Article / Updated 03-26-2016 Canada Revenue Agency gave us all a little gift recently. As of January 2009, you can shelter up to $5,000 a year in investments in a Tax-Free Savings Account (TFSA). The beauty of the TFSA is that you can withdraw cash as needed — and you don’t pay a tax penalty. Here’s what you need to know about the Canadian TSFA in a nutshell: You can start contributing to a TFSA at age 18 — all you need is a Social Insurance Number (SIN). TFSA contribution room accumulates even if you don’t open an account. What that means is that, if you don’t open an account or make a contribution this year, by next year, you’ll have $10,000 in contribution room waiting and so forth. Over-contributions are subject to a penalty tax of 1 percent per month. Eligible investments in a TFSA run the gamut, from daily interest savings accounts to stocks, mutual funds, bonds, GICs, and, in some cases, shares in small business corporations. Income earned in a TFSA, including interest, dividends, or capital gains, isn’t taxable. Unlike any other tax-advantaged savings vehicle, you actually recover contribution room the year after you make a withdrawal. If you die, the fair market value of your TFSA goes into your estate tax free, but any gain or income that builds up afterward is taxable. You can’t currently name a direct beneficiary for a TFSA, but future amendments to provincial laws may allow that. The TFSA is versatile so you can use it in a number of ways: Supplementing tax-sheltered money in RRSPs and Registered Retirement Income Funds (RRIFs) Saving for your child’s education or your own education Accumulating a down payment on a home Keeping an emergency fund View Article