I was listening to my continuing education webinar this morning and I heard something very important that I have not yet heard anywhere else. ITIN's will now have to be renewed on a regular basis. Anybody that has an ITIN that was issued before 2013 (will have a 78 or 79 as the middle section two digits) must renew their ITIN this year and anybody that has had an ITIN that was issued in 2013 or later but not used on a 2013, 2014 or 2015 tax return will also need to renew it. If this applies to you please follow up on this as getting a new ITIN issued if your old one is cancelled is a bit of a pain.
I can across an interesting website today. It made me think about statistics and how they can be very misleading. Censusmapper.ca produces lots of maps of Canadian statistics based on the census reports. The one that I thought was particularly interesting being a personal tax advisor reported income tax paid by individual taxpayers, average income, percentage of tax paid to income and number of tax returns filed.
Canada as a whole....
Canadian taxpayers as a whole averaged $6,667/taxpayer income tax paid by those over age 15 in 2011. The total average income was $40,650/taxpayer which gives an average tax rate of 16.4%. There were 25.9 million tax returns filed. Something to keep in mind is that these are average and not median figures. Averages can be skewed by a few extreme outliers so the median point (i.e. the same number of people above and below) would be a bit lower still.
I only work part time throughout the year (especially back then when my kids were ages 2 and 4) and in 2011 I paid tax of $5,554 on about $45,000 of income after corporate expenses to earn the income and child care deductions on my personal income tax return. This works out to 12.3% tax paid. So on the face of things it looks like my earnings were slightly above average but I paid slightly less tax than average. Being a personal tax accountant helps considerably with that as I know what the rules are and I take advantage of them where possible. I can do the same for you if you get in touch with me. Without breaking any rules of course!
What is interesting about these statistics is that the tax I paid was entirely corporate and as such would not be included in the census personal income tax figures. My taxes paid according to the census would have been $0 on $34,135 income reported on my personal tax return. My practice is incorporated and I pay myself a mixture of salary and dividends. I pay myself just enough salary to use up the employment tax credit and any child care expenses that I have - which in 2011 was the maximum allowed. I pay myself just enough dividends on top of that to use up all my personal and dividend tax credits such that I pay no personal income taxes for the year. In case you are curious why I had $45,000 in income for the year but only reported $34,000 on my personal tax return, $5,500 was the corporate taxes paid on the income earned before I could pay anything out to myself and the other $5,500 went into my corporate brokerage account for retirement savings.
There are ways to plan compensation when a company is involved that lower overall taxes especially if your personal cash needs are relatively low compared to the total amount you earn in the company. If you are in this situation and would like some tax planning advice to help get your tax percentage down please contact me! I can have a look at how you are doing things and see if there is a better way to pay yourself than what you are currently doing. This also needs to be looked at every few years as the relative corporate and personal tax rates are always in flux and what was the best way to do it several years ago when someone last did the calculations may be different from this year.
While you can go look at the website yourself here, I thought this was interesting as well. Alberta, where we were living for the first half of the year, had the highest average income tax paid at $9,020/taxpayer on an income of $50,956 for an average tax rate of 17.7% and a taxpayer base of 2.75 million. This is 35% more tax on only 25% more income! As you can see - the amount of tax you pay varies considerably based on how much personal income you have to draw which is why I don't take any more out than I can report with no personal taxes. It is better to save it for later as one of the few ways to do income smoothing allowed under the income tax act. Another good one to take advantage of if you don't have a corporation is RRSP's
Interestingly, the Northwest Territories had the second highest taxes paid at $8,970/taxpayer on an income of $54,717 for an average tax rate of 16.39% and a taxpayer base of only 30,265. Ontario, which I would have thought would be first or second, was a distant third at $7,020/taxpayer in taxes paid on an income of $42,264 for an average tax rate of 16.6% and a taxpayer base of 9.9 million. British Columbia, where we live now, pays an average of $5,676/taxpayer on income of $39,415 for an average tax rate of 14.4% and a taxpayer base of 3.5 million.
By Districts within Provinces...
By the time you drop the area to the next largest areas after whole provinces, you get wider variations. The most tax paid in the country was in the northeast corner of Alberta (district 18) which includes Fort McMurray. They paid an average of $20,475/taxpayer on income of $87,874 for an average tax rate of 23.3%. The total tax base is only 51,515 people however as this region is fairly sparsely populated compared to most of the other districts. Keep in mind this is per taxpayer although there would be a lot of single oilfield workers there and I am not sure how many families there would be.
The next highest tax paid was in the district of Halton, just southwest of Toronto. Taxpayers there paid an average of $11,699/taxpayer on income of $56,518 for an average rate of 20.7%. There were 378,000 returns filed. Quite the drop in income tax paid from the Ft McMurray area! Calgary, where we were in 2011, was 4th in the country with taxes of $10,714/taxpayer paid on income of $56,388 for an average rate of 19 and a taxpayer base of 1 million. The largest district - Toronto - paid an average of $8,236/taxpayer in taxes on income of $44,517 for an average rate of 18.5% with a taxpayer base of 2.05 million. Taxpayers in the Central Okanagan, where I live now, paid an average of $5,284/taxpayer on income of $38,851 for an average rate of 13.3%. There were 145,000 tax returns reporting income filed.
Have fun exploring censusmapper.ca to see what averages were in 2011 around where you lived!
My name is Laurie Yoon, C.P.A, C.A. and I am the owner of Expatax Services Ltd. My tax practice currently consists of myself year round and one part-time assistant from January to May each year. I first started working in the accounting field in high school doing bookkeeping for various companies on a self-employed contract basis which continued through university. I started working for a Chartered Accountant friend of the family in January 1996 upon graduation. I moved to Price Waterhouse in January 1998 and began preparing US personal taxes in 1999. I did not like working in the big firm atmosphere of the newly merged PriceWaterhouseCoopers so left them to join a small one-partner international tax boutique firm called CompassTax in the summer of 1999. I enjoyed working there and stayed until October 2004. My responsibilities gradually increased while there, from simply preparing various returns to supervising and training another tax preparer in the summer of 2000. After only a short while, I was put in charge of coordinating and reviewing all personal tax work and equalization calculations in the spring of 2001 for a major international engineering firm that sent employees all around the world. I typically had two co-op students each tax season that I was in charge of training.
I made the leap to starting my own practice in October 2004 and began slowly building my client base through friends and family. I did not have enough clients at first to support myself so I contracted out my review skills to Collins Barrow for two years in March and April and trained CompassTax’s co-op students. This provided additional experience in international matters as I reviewed Canadian returns for the Collins Barrow partners and trained their first year tax preparers. I also gained invaluable experience in preparing US returns for the US tax partner. By the third tax season in the spring of 2007 I had enough clients of my own to get me through without additional outside contracting. By this point I was starting to get new clients by referrals from clients I was already helping. My first child was born in December 2007 and my second in September 2009 so my practice did not grow significantly during that period as I was trying to look after two young children while still working to grow my practice. I hired my first co-op university student to help out part-time during the spring of 2009 and have had an assistant every year since then. I usually have a different assistant each year however my current assistant has indicated he will return again next tax season.
I am originally from Calgary but moved to West Kelowna, BC in the summer of 2011. I was afraid I would have to start building my practice almost from scratch again but to my pleasant surprise almost all of my clients retained my services the following year even though I could no longer meet with them face to face. Currently I deal with my clients almost exclusively by phone and email although I have picked up a number of local clients as well since then.
The original name of my practice was Laurie Mounteer Professional Corp. Mounteer is my maiden name and you will note my email is still Laurie@Mounteer.ca. I married in 2006 but continued using my maiden name as all of my clients and friends knew me that way. When we moved to West Kelowna I decided to start using my married name Yoon. I will answer to either name.
My practice has evolved over the years to be almost entirely personal tax, and I specialize in people with cross border personal tax issues. As a result I am very busy from January to late June. I have a handful of corporate returns that need to be done from the fall through January however they tend to be personal service type corporations for people that came to me originally for international issues on their personal tax returns. I am not actively seeking new corporate work and I enjoy having the summers and fall almost entirely off as my children are still young. I still respond to any emails and questions that my clients have and occasionally have new US citizens that show up in the off season needing to get caught up on their US tax returns.
For all of your tax needs, please call or email me today, and let’s talk taxes!
As always, I got everything filed that had to be filed by the deadline. It was close this year however as I was still putting the finishing touches on returns by late afternoon on May 2nd!
I filed 83 tax returns for 73 people this tax season. While this doesn't sound like a lot keep in mind that I generally do not do many of the ultra simple returns which have only a few slips and take under a half hour each. Most of the returns that I do are all day projects for each person and there are a few that are multi-day affairs.
Volunteer Tax Clinics...
I volunteer at the local seniors tax clinics on Thursday mornings from 9 am to 12 noon from the last Thursday in February to the last Thursday in April. Generally lots of fun talking to the seniors that come in to get their tax returns done and it is amazing how low their incomes are yet a lot of them still donate at least some funds to their pet causes. I did 50 returns over 9 weeks - I missed a week in March being full of cold! These are the very simplest of the simple tax returns for the most part as many of the seniors only have their OAS and CPP slips. They are not taxable and the only reason they need to file tax returns is to continue getting government benefits like the guaranteed income supplement and GST credits.
So much for posting to my blog during tax season. Amazing how fast time flies when you are busy working. I poked my head up for air and spring is in full bloom here in Kelowna. I will be more diligent in posting now that the March and April crunch time is done.
I have not had any comments on my blog posts. I tested the comment function just now and it does work - so I am guessing no one is interested enough in what I am writing to comment on it. In that case - could you please make some suggestions as to what would be interesting?
I have been watching the statistics for this site and the number of unique visitors has been ranging between five and twenty five visitors a day over the last two months. What is also interesting is that the number of unique visitors has been has been averaging 75 to 100 per week - there are some repeat visitors coming back to check out what I have to offer. It will be interesting to see what those numbers are next year after I have had a whole year to build traffic to my site. I am a numbers geek - I find things like this fascinating!
What's up next!
Now that it is May I am going to take stock of where I am (and update my on line status list) and send emails to those that have not sent me any information yet because they are so thoughtfully waiting until the worst of tax season is over to get their US returns filed.
I have very few files left to work on in May this year compared to previous tax seasons. I think I will have most of those wrapped up by early next week. I hope to have everything that I know is coming done by the end of May when my assistant goes back to his June to December full time job. I will still be available to complete anything you might require over the summer and throughout the fall however in between enjoying the sunshine, getting my garden in order and playing with my kids age 6 and 8.
I have had several files come in this past week so tax season is definitely starting to pick up. I have 13 Canadian returns completed already and 6 US returns completed already. This is a lot for so early in the season and with my new assistant we have managed to complete about as many files already as I had done by the end of March last year by myself. Four hands are definitely better than two for getting things done faster!
My assistant has been coming most days but does not yet have enough to do for full time. As a result we are on top of files that have everything and have a number of files that are almost complete but missing one or two things. Some of those missing things came in on the weekend so tomorrow should be a good day for finishing up files in process!
All the T4's, T5's, T4A's and NR4's had to be filed by today. I was full of good intentions for getting these all done early this year but what with one thing and another I just filed the last ones 5 minutes ago at 8:30 pm. I am usually going to try to post something on Thursday or Friday each week but I was so busy the past few days that I am only just getting to it now.
Part of the problem of course was that I was waiting for T5's to be issued for two companies to finish up their income reconciliations. They were not issued on time so I finally had to estimate it based on last year's slips and go with that.
The next deadline that I have to worry about is not until April 15th which is the US filing deadline for anyone needing a US return that is in the US. Since that isn't for quite sometime I will be going back to working on the returns that have come in so far. Most are still missing some information which is why they haven't been finished yet but a few have had the information come in over the past few days while I was trying to finish up everything that had to be filed for today.
Returns are starting to trickle in and the website visitor stats are interesting. People are seeing my website and I have even had a few call me so far despite it being very early in tax season. For the next few weeks even discounted returns will get done fairly quickly until a backlog starts to build up - usually by mid to late March.
I haven't had any comments yet so I am not sure if my comments don't work for some reason or whether it is simply that no one has anything to say! Can the next person that reads my blog comment on something just so I know it works please?
Until then I hope all is well in your world and you are considering me for your tax needs!
Photo by Nan Lalande
Laurie Yoon, C.P.A., C.A.
My practice has evolved over the years to be almost entirely personal tax, and I specialize in people with cross border personal tax issues.