Taxes Work Personal Life Issues

There is no time like the present to start planning your savings and taxes you need to pay than right now. Sounds melodramatic doesn’t it. Well when I posted this particular post, it was April 7th and consumers living in the United States were almost finished with their tax filing which is due April 15th and Canadians had until the end of April to complete theirs.

File Your Taxes and Plan for Next Year

If you have just finished your tax filing, this is a good time to set an appointment with your accountant and begin planning for the following year in an effort to minimize your taxes. Let’s be very clear, there is nothing wrong with using legal means to find and use deductions to minimize your taxes. Using fraudulent claims and deductions that are not allowed in the eyes of the tax department is wrong and illegal. That is why you hire an accountant to keep you from being fined by the tax department or worse going to jail.

Last years taxes are done and there is nothing you can do unless you own a company. Personal taxes are completed. In some jurisdictions you can refile corporate taxes and average the tax owing so that you pay less tax. This is perfectly legit. However you have to plan for this and make sure that all deductions are in order and that you have shown all income properly.

Planning at the end of one tax year filing date is the best time to do this for the current and upcoming years.

Start With a Budget

If you need to contribute to an RRSP or a 401K, then you have to know what your budget is, how much you have coming in and how much will be left over after all bills are paid. Don’t forget to save some for yourself and the rest should go to savings and tax deductible savings if possible to minimize your taxes.

Some times doing a budget like this will identify that you are spending more than you are bringing in. This is the time to do something about it before you get into a bad debt situation. Rein in those expenses and put some money away for a rainy day in your savings account or in your tax deductible account.

Budgeting is tough and sticking to the budget is even more difficult. However like any thing we have to work hard for, the pay off is worth it. Financial independence, lack of worry and stress and savings for a rainy day make it all worthwhile.

Track your Budget Plan

Once you have a budget plan in place the next step is to track your budget every week. I do mine on Saturday mornings. Doing it once a week means that it does not take a lot of time and it helps me identify problems quickly if I am tending to go off my budget.

You will likely need to make mid course corrections, however this should be expected and anticipated. Examine what has changed, and what you need to change to get back on track. Develop a plan that takes you back to meeting your goal so that you can achieve your financial objectives, which among others means minimizing the tax you pay.

We are going to write more posts along these lines. If there is a particular subject you would like to see, please leave a comment. Also if you comments on what we have written, those are welcome as well. Spam comments will be auto deleted.

Tax filing deadlines are approaching in Canada and the United States. In Canada our taxes are due on the last day of April, while in the United States the 15th of April is the usual deadline. For those of you are do your taxes on time, you spare yourselves of the stress and frustration of filing late or getting your tax filing in at the last moment.

There are many millions of people who take down to the wire either because they are missing some key piece of data or they just procrastinate and leave it to the last minute. Either way, most consumers will benefit by being organized and taking full advantage of all of the deductions that are legally allowed by their respective governments.

Do it Your Self or Hire a Professional?

This is often the big dilemma for many consumers. The fact of the matter is that unless you have a simple straightforward tax form to fill out, you are likely going to miss a deduction and pay more tax to the government than you should. There also may be deductions which you are eligible for, but have not even heard of. The tax laws change every year and as a non practicing accountant it is very tough to stay current with all of the new laws and deductions that might be available.

If you are not good with numbers, do not have the time, or just feel intimidated by the complex tax forms, they you are probably better off to do your taxes in advance with an accountant. You may have to pay a bit more for his or her fee, which by the way is tax deductible, it can be wll worth it and you will not have the stress of wondering if you are going to be audited due to a simple mistake.

Plan Ahead

Note that if you suddenly decide a month before your taxes are due, you may have a difficult time to find an accountant to take you on as an account. They are extremely busy at this time of year and usually have a full list of accounts that they have already committed to in terms of completing their tax filings.

They may take you on, however they may specifically not commit toi completing your filing on time, which puts you in a real difficult situation should your return be late and subject to penalties.

Talk to your prospective accountant early in the year and begin tax planning now for this year and for next year with the idea of minimizing your income tax payable. Why so soon, well sometimes you need to make the expenditure, the RRSP investment, the 401K investment in the year you want to deduct and it may take some commitment and savings on your part to meet these deadlines. Planning ahead and knowing exactly what you are going to do well in advance is much easier to accommodate and takes the stress of you.

It all sounds good, but sometimes it is really difficult to do and this is were your tax planner can help you by reminding you that you must make dome deposits etc to prepare for your taxes.

Comments are welcome.

For many years Canadians have looked on the US and been envious with the lower taxes on virtually everything compared to what Canadians are paying. Sure we have better health care in that everyone is covered, but what many American do not know is that we must wait a long time to get the care we need, but that is really the subject of another post which we will discuss sometime in the near future.

This post is more to do with taxes that Americans currently pay and were they are probably going to go. Of course I have to say up front that this is from a Canadians perspective watching what is going on in the United States, knowing what we pay here in Canada.

Consider that you have the following things that are going to contribute to these potential tax increases:

• The Afghanistan war
• The Iraq war
• The Health Care bill
• The negative economy generating less tax income
• Interest rates are on the rise
• State governments are broke
• Most likely Municipal Governments are broke as well

All of these items have huge bills associated with them and income from tax generated areas is way down as well. Somehow the government has to pay for all of this stuff and it does not come free no matter how much money you print. So were is it going to come from? Here are a few areas:

Gasoline – Canadians are paying $4.53 per US gallon, while many states the price of gas is under $4.00 per US Gallon. Here is a big opportunity to increase the income for states as well as the federal government.

Beer, Wine etc – Again Canadians pay from $30 to $40 per case of 24 bottles of beer. In the US we have bought cases of 36 for around $20. Another huge increase all on the consumer is possible here as well.

Sales Tax – In Canada  right now, we are paying 13% were in many states that we have traveled through, the tax is around 8 or 9%. Even in cash strapped California, it is only 8.75%

It is well known that taxes on income are much lower for US workers than Canadians.

Yes you have to pay for health care, however so do we. Most Canadians pay $600 a year as a surcharge on their taxes for health coverage. This may not sound like much,  however you still have to pay for all of your drugs, dental and eye coverage on top of everything that the government pays for. The real big advantage for Canadians  is that you will not go bankrupt from medical bills. You might die before you get treated,  but you will be covered!

These are just a few examples of what is coming to the US consumer as governments in the US try to find ways to generate more income to help them meet their bills. Oh and I forgot, one other area. This is what we call user fee’s.

Every time you go to a park, use a hockey rink, rent a soccer field, all of these fees are going to be increasing as well. In short we are about to see a huge inflationary spike driven by increasing government taxes and the rising cost of oil which impacts everything.

Get ready America, there is going to be a lot less money in your pocket and more in the hands of government!

Comments are welcome, either agreeing or disagreeing. Just keep it clean and professional.