12 tax tips to share with clients

Besides counting turtledoves and golden rings, here are RBC’s 12 Tips of Tax Planning for clients to keep in mind as 2014 approaches:

For individuals:

1. RRSP contributions:
The deadline to make a contribution to a registered retirement savings plan (RRSP) that can be claimed as a 2013 RRSP tax deduction is generally the 60th day after the 2013 year-end, which falls on March 1, 2014. But since March 1 falls on a weekend, the deadline has been extended to Monday, March 3, 2014.

2. In-Kind RRSP/TFSA contributions:
If you are without sufficient cash to make an RRSP or Tax-Free Savings Account (TFSA) contribution should consider an “in-kind” contribution of eligible securities from their non-registered accounts to an RRSP or TFSA.

3. 2014 RRSP contribution room:
Don’t forget you can deposit up to $2,000 over your contribution limit without penalty. Although the money is not tax-deductible, it can be deducted in a future year if you have the available RRSP room.

4. TFSAs:
Canadians who are 18 and over are eligible to contribute to a Tax Free Savings Account (TFSA). The contribution limit was $5,000 per year from 2009 to 2012 inclusive, and is $5,500 for 2013 and 2014. If you do not use your contribution room in a previous year, the unused room is carried forward indefinitely.


5. Family income splitting loans:
If you set up a prescribed rate loan with your spouse or a family trust in a previous year to split income, it is critical that the annual interest on the loan be paid on or before January 30, 2014.


6. Eligible retiring allowance:
If you received an eligible retiring allowance in 2013, you’ll have until March 3, 2014 to make a special contribution to your RRSP (but not to a spousal plan) without requiring RRSP contribution room.


7. Labour-sponsored investment funds:
Consider purchasing shares of labour-sponsored funds by March 3, 2014 to take advantage of a 15 per cent federal labour-sponsored funds tax credit on a maximum contribution of $5,000 (maximum $750 federal tax credit). Speak with your advisor to determine whether an investment in a labour-sponsored fund is suitable for you.


8. LIRA conversion to LIF/RLIF:
If you are planning to convert a Locked-In Retirement Account (LIRA) to a Life Income Fund (LIF) or Restricted Life Income Fund (RLIF) in 2014, you may want to consider converting the plan in January to give you added flexibility to withdraw more from your LIF/RLIF in the first year.


9. 2013 Home Buyers’ Plan withdrawals:
If you participated in the Home Buyers’ Plan (HBP) in 2013, but borrowed less than the maximum $25,000 tax-free from your RRSP, you may be eligible to make another withdrawal in January 2014 (up to the $25,000 maximum permitted). Subsequent withdrawals will not qualify as tax-free after January 2014.


For business owners:

10. Consider paying yourself a bonus:
If you operate your own business with a year-end after June 30, consider paying reasonable bonuses to employees, including yourself. Canadian tax rules allow a corporation to deduct a bonus paid to an employee on the corporation’s previous year’s tax return as long as the bonus is paid within 179 days after its corporate year-end.


11. T4 filing deadlines for employers:
If you have employees in your own business or you employ a nanny or babysitter, then you must file and deliver the appropriate T4 Summary forms to the CRA and employees by February 28, 2014.

12. Sale of private business shares:
Capital gains from “qualified small business corporation” shares that are not fully exempt under the $750,000 lifetime capital gains exemption can be deferred (in total or partially) by reinvesting the proceeds in a new eligible small business corporation any time in the year of disposition, or within 120 days after the end of that year.