Year-end 2012 Planning Checklist


We regularly focus on client retirement and income tax matters.
Our goal is to review applicability of the 2012 planning checklist below with clients.

Attending to it soon is important as many tasks have a December 31 deadline.
Our counsel is to finalize transactions by mid-December to avoid year-end rushes.


These reminders may not apply to all cases and are in no particular order.
We present our 2012 checklist with proposed actions:

1.) Owners and Self-Employed
Owners of companies and self-employed should review their 2012 remuneration mix.
Creating maximum 2013 RRSP room of $23,820 requires income near $132,300 in 2012.
So, revisit your combination of salary, management fees, bonus and dividends as applicable.

2.) Harvesting Gains and Losses
Review the need to realize a capital gain and/or loss for inclusion in 2012 taxes.
You must receive the sale proceeds by December 31.
Be mindful of 2012 gains and losses allocations from mutual funds held in cash accounts.3.) Charitable Giving
Review and decide on your total 2012 charitable giving plan.
You can donate cash or securities directly to charities by December 31 for 2012.
Capital gains on the donated securities are exempt from income tax.

4.) Deductions 2012
If you want to deduct an eligible expense in 2012, pay it by December 31.
Examples are dues, medical expenses, professional fees.
Perhaps tuition fees, child fitness amounts and political donations.

5.) Prescribed Loans at 1%
Loaning cash to a spouse or partner may be beneficial income splitting strategy.
Canada Revenue has prescribed a 1% rate for loans made to the end of 2012.
1% rate is the lowest possible and does not change over the life of the loan.

6.) USA Matters
Canadians who spend time living in the USA may be required to file a US tax return.
It is important to be aware of the “substantial presence” test.
US citizens living in Canada should seek advice on the various US filings required.

7.) Tax Returns for Children/Students
Gather paperwork to file a tax return for each child and student with 2012 income.
This creates RRSP room for future deduction during high income years.
Given their ages, they may also qualify for the HST credit cheques.

8.) Income Tax Instalments
The last 2012 quarterly income tax instalment is due by December 15.
Instalments apply to self-employed individuals.
Also to those who may not remit sufficient tax amounts at source.

9.) TFSA
Tax Free Savings Account setup and/or funding may be necessary.
Maximum 2009/2010/2011/2012 deposits are $5,000 per year for a total of $20,000.
TFSA deposits can be made for your lifetime, but don’t over contribute.

10.) RRSP
Regular and spousal 2012 deposits can be made to March 01, 2013.
Your 2011 income tax notice of assessment sets out the 2012 RRSP room.
A family goal is to equalize investments at retirement between spouses.

11.) RRSP at Age 71
Those who turn age 71 in 2012 must deal with the RRSP by December 31.
Most choices involve converting the RRSP to a RRIF.
A similar process applies to various flavours of “locked-in” retirement accounts.

12.) Additional RRIF Income
Some may want additional 2012 RRIF income, above the minimum.
Requests must be submitted to the RRIF custodian.
Payment to you must be received by December 31.13.) Voluntary RRIF Payment
Some under age 71 may want to voluntarily arrange 2012 RRIF income.
The RRIF must be set up along with the funding.
Some may benefit from using the $2,000 pension income credit.

14.) RESP
The RESP may require setup and 2012 funding.
A $2,500 contribution per child provides the maximum $500 government grant.
A family RESP plan is preferred for two or more related beneficiaries.


15.) RDSP
Registered Disability Savings Plan may require setup and the 2012 deposit.
It allows saving up to $200,000 for a disabled beneficiary under age 60.
Beneficiary must qualify for the Federal disability tax credit.

Talk soon,


avatarAdrian Mastracci - KCM Wealth Management posted Tuesday, November 13th, 2012.

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