Hass Associates Accounting: 9 Tax Tips that will save you Money

Offering tax tips is a bit of a growth industry these days, and we here at CBCNews.ca aren't about to fight the trend. So, we've gathered a few general tax-wise suggestions and sprinkled in some specific tips to produce the following list of actionable ideas that could pay big dividends.     

1. Consider making a $2,000 over-contribution to your RRSP.

Tax rules allow you to contribute up to $2,000 more than what you're eligible to contribute to your RRSP without attracting the usual excess contribution penalty, which is one per cent of the excess amount for every month of the contribution year that it stays in the RRSP.

Why might you want to do this?

Even though you can't deduct the $2,000 over-contribution, it could be residing inside your RRSP for many years, continuing to grow on a tax-deferred basis as long as it's in the plan. That $2,000 excess contribution can be deducted in a future year when your actual RRSP contribution is less than the maximum you're allowed to put in.

"Consider using your $2,000 over-contribution when you quit working," accounting firm Grant Thornton suggests in its tax planning guide. "The earned income you have in your final year of employment will entitle you to an RRSP deduction in the following year."

2. Proceed cautiously if a CRA auditor asks you to sign a waiver.

Under normal circumstances — in other words, no suggestion of outright fraud — the tax department has three years to carry out a reassessment of your tax return.

Sometimes, if the clock is ticking down on that 36-month deadline, a CRA auditor will ask you to sign a waiver to allow the agency to conduct its reassessment after the three years are up.

KPMG advises you to consider the request "carefully" and get professional advice. "You are under no obligation to file a waiver simply to make the auditor's life easier," it points out in its 2014 tax planning guide. "If the three-year reassessment period is about to expire, and the auditor does not have enough information to justify a reassessment, it may be to your advantage not to sign a waiver."

And if a waiver is signed? KPMG says a revocation (which would cancel the waiver in six months' time) should be filed at the same time the waiver is signed.  

3. Be sure to take advantage of all income-splitting and pension-sharing opportunities.

Taxpayers can apply to share their Canada Pension Plan (CPP) retirement income with their partners if both are 60 or over. While pension sharing is not considered to be the same as pension income splitting, CPP pension sharing accomplishes much the same thing — putting more income into the hands of the lower-income partner. You can find out more about CPP retirement pension sharing here [Follow Us]. The post-retirement CPP benefit, which was introduced in the 2012 tax year, is not eligible for pension sharing.

Those 65 and over can split several kinds of pension income, such as life annuity payments from a company pension plan, RRIF payments and annuity payments from an RRSP or deferred profit sharing plan. This is also possible for those under 65, when the spouse has died.

Income splitting can save thousands of dollars in tax as income is shifted from someone in a higher tax bracket to someone in a lower bracket. Sometimes, splitting can succeed in reducing or eliminating the claw back on Old Age Security payments or the age credit for the higher-income spouse.

Pension income splitting can also allow both partners to claim the $2,000 pension income tax credit. Tax software programs can be especially useful in suggesting income splitting scenarios.

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