RJP Bookkeeping Services Michael Smith in Midland
On April 29 at 3:26 PM
Taxes and Debt. The biggest impediments to your wealth. Let's consider a common scenario.
Jack and Jill Hill are saving for retirement. They have decided to use a GIC – Guaranteed Investment Certificate. Guaranteed Investment Certificates (GICs) are secured investments. This means that you get back the amount you invest at the end of your term. At the end of a specified time period (term) interest is payable.
If that GIC is outside a Registered Plan the interest earned becomes taxable. Interest income is taxed at an individual's marginal tax rate. This makes interest one of the least tax-efficient forms of investment income. So, what are Registered Plans?
Most Canadians can take advantage of tax sheltering within a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA). Registered plans now include the First Time Home Buyers Savings Account (FHSA)
Knowing this Jack, and Jill Hill keep their GIC inside of a plan. Great, you say, what does this have to do with debt? Money not spent on taxes owed is money that can be used to reduce debt.
Debt is money you owe a person or a business. It's when you've borrowed money you'll need to pay back. Usually, people borrow money when they don't have enough to pay for something they want or need. If you do borrow money, it's best to have a plan to pay it back. Key to understanding this are the difference between Principle (the amount borrowed) and the Interest (cost of borrowing).
Take a loan for example. The principal (original amount borrowed) is divided into equal monthly amounts, and the interest (fee charged for borrowing) is calculated on the outstanding principal balance each month. This means the monthly interest amount declines over time as the outstanding principal declines.
Example: a credit card debt of $10,000 at the typical rate of 19.99%. Question: how long would it take to pay it off with monthly payments of only $10? Answer: Never. What if you wanted to pay off that debt in 10 years? The bare minimum to pay off that debt is $200 per month and at the end of that period it would be estimated you would pay $10,710 in interest.
The end of tax season is the perfect time to sit down and have a Financial Analysis of your situation.
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RJP Bookkeeping Services Michael Smith in Midland
On April 29 at 3:26 PM
Here's a pro tip to those who normally owe instead of receiving a refund: check that your deduction for income tax is set to the right level. This includes OAS and CPP. Taxes are not automatically deducted from them. So you have to log in to your account to do that. Haven't filed for awhile? You could be missing out on valuable social benefits. We won't judge. File with us today. #angus #barrie #borden #brechin #coldwater #collingwood #creemore #elmvale #innisfil #midland #newtecumseth #ontario #orostation #penetanguishene #perkensfield #portsevern #simcoecounty #spingwater #stayner #tay #tiny #wasagabeach #washago #waubaushene
RJP Bookkeeping Services Michael Smith in Midland
On April 15 at 12:33 PM
Today is Monday April 15th. The deadline to file your personal tax return is April 30th. More importantly if you owe - you need to pay by the 30th. This includes Small Businesses / the Self Employed. While unincorporated Small Businesses don't have to file until June 15th – the taxes that are due are still due by the 30th. Are you ready?
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RJP Bookkeeping Services Michael Smith in Midland
On April 08 at 10:20 AM
It's April 1st and Tax Season is Here. No Joke!
Accepting New Clients
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RJP Bookkeeping Services Michael Smith in Midland
On April 08 at 10:20 AM
Did you know even though personal taxes are due April 30th that financial companies have until May 1st to report to the CRA? Did you know that in most cases you can go online with your institution to download your tax documents?
Accepting New Clients
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