Help clients save with tax tips

With the 2011 income tax deadline approaching, your clients are looking for ways to keep money in their pockets. The question is: Have they planned ahead, and are you prepared to help?

Many Canadians tend to think of filing income taxes as a last-minute “must-do” task, but little pre-deadline planning can help alleviate tax season stress and also help your clients save some money.

“Tax planning shouldn’t be left until the annual tax filing deadline arrives,” said Jason Round, head of financial planning support for RBC Financial Planning. “There are strategies you can benefit from throughout the year that can help you boost your tax savings and get on the road to achieving the financial goals you have in mind all that much sooner.”

RBC has offered a list of five simple tax tips to help people save and plan, which include taking advantage of all possible credits and income splitting opportunities, ensuring that investments are tax-efficient and utilizing TFSAs and RRSPs.

Canada Revenue Agency has also offered the following top ten ways to help people prepare for their taxes and meet their financial obligations, and your clients should be aware of these strategies and credits.

• Plan ahead – Submitting your income tax and benefit return before the tax-filing deadline means you can avoid having to pay late-filing penalties.
• Families – Save those receipts! All the activities you have been paying for throughout the year (piano, karate, tutoring, hockey, and more) may save you money at tax time.
• Tax-free savings account – A tax-free savings account (TFSA) is a great way to save money since you don’t pay tax on any income you earn from investments in your TFSA.
• Registered retirement savings plan – Any income that you earn in a registered retirement savings plan (RRSP) is exempt from tax, as long as the funds stay in the plan. RRSPs help you save for your retirement and give you a break at tax time too.
• Public transit tax credit – If you or someone in your family is a regular user of public transit, then you may be able to claim a non-refundable tax credit based on the cost of eligible transit passes.
• Pension income splitting – If you receive income from a pension, you can split up to 50% of eligible pension income with your spouse or common-law partner to reduce the taxes that you pay.
• Students – Students can claim the tuition, education, and textbook amounts. Have you graduated recently? You may be eligible to claim the interest that you paid on your student loans.
• Child care expenses – If you have children, you may be able to claim childcare expenses that you or your spouse or common-law partner paid so that either of you could work, do research, or go to school.
• Home buyer’s tax credit – If you’re a first-time homebuyer you may be eligible to claim $5,000 on the purchase of your new home, which can save you up to $750.
• For clients who are self-employed, hiring an apprentice can help with taxes since the salary paid to an employee registered in a prescribed trade, in the first two years of his or her apprenticeship contract, qualifies for a non-refundable tax credit for the employer.