Waiting for T3 slips to file your tax return?

By now, many Canadians will have received a number of T4 and T5 slips and are just about ready to file your tax return. If you hold mutual funds, some ETFs or trust units however it could be well over another month before you receive your T3 slips. While T4 and T5 slips must be issued by the end of February, T3 slips do not have to be issued until 90 days after their year end, leaving most slips being issued around March 31st. Last year many of these slips did not often arrive in people's mailboxes until mid April. This is often a hassle if you want to file your return early, especially if you're expecting a large refund in the current year.

There is a solution to enable you to file early without receiving your T3 slips. Trusts and fund companies are required to report the tax information on these units by Feb 28 2008. This information will be publicly available on CDS Innovations Inc.'s website. Currently information is posted up to the 2006 year. 2007 numbers will appear shortly.

Here's how to access this info: From the main welcome page, click on the Tax Breakdown Posting link, select your language preference and then choose the type of slip you are waiting for - T3/T5013 or if there is a late T5 you're still waiting on these will also be available. The slips are filed by security name and there is an excel spreadsheet available for download which shows each month's distributions on a per unit basis.


As an example, let's say during 2006 you held Pengrowth Energy Trust units for the entire year in 2006. The month of January shows that a distribution of $0.25/unit was paid out to unitholders, of which $0.23750 is taxed as interest income and the remaining $0.01250 is taxed as return of capital which reduces your adjusted cost base. Based on this information you can then take your distributions that you received and allocate the total distributions to 95% other income and 5% as return of capital and report this as if you received your T3. It will take a little bit more effort on your part and if you hold a large number of funds, this could be a time consuming process. However, this can be very helpful if you're willing to spend the extra time and effort.

2007 Tax Software Reviews

It's that time of year again when many Canadians are starting to buy personal tax software packages. It can be confusing for many people and each year the number of software providers is increasing. I personally find the most popular tax program QuickTax to be the most expensive and most confusing. This year they've come out with about 4 different versions. For most Canadians, they are buying a software package to make the tax filing process easier. QuickTax however, starts off by making the process more complicated than needed. They offer many different versions raning from a Basic to Business Version leaving the taxpayer with questions about which product is best for them. When I first looked at the options this year, I thought I may have mistakenly ended up at the Windows Vista page. Given the wide array of products out there for Canadians, I recommend looking around at other alternatives. Many of the new programs allow you to download the program and try it out before purchasing. My top picks for the 2007 tax year are StudioTax for Windows and TaxFreeway for the Mac. Here's a chart to help you wade through your options.

Tax Software for Macs

Up until 2007 there have been very few options for Mac users wanting to file their tax returns electronically. Users could use web-based programs such as U-file and QuickTabWeb but there haven't been many downloadable options.

I switched to a Mac late in 2007 and was wondering what I would do during tax time. I happily made the switch to a Mac and have had no need for Windows programs up until now. For the past few years I have used the Windows version of TaxFreeway which I have been quite happy with. Much to my surprise they have come out with a version for the Mac! While the windows version is $9.95 for up to 20 netfiled returns, the Mac version is $14.95(for a limited time before it increasing to $19,95). While I'm unhappy about the higher price, I test-drove the Mac version on the weekend and once again it meets my needs. I was happy to see that I could carryfoward information from my 2006 Windows version into the Mac version so I did not have to re-enter all this information. For most people, I think TaxFreeway is an excellent choice. While it may not have as many bells and whistles as QuickTax, it definitely gets the job done at a very affordable price.

Another program available for Macs is TaxTron. It is a little pricier especially if you have a need for multiple returns. The price range from $19.99 - $39.99. You can also download a version for free to try it out.

For a complete list of your tax filing options, see Canada Revenue Agency's site. While many tax providers are already claiming that are Netfile certified for 2007, CRA doesn't officially certify providers until the end of January.

Happy tax filing!

Mortgage and House Update

A while ago I wrote about whether or not or not we would prepay a mortgage and how much our downpayment would be. We decided on putting 25% down, under a 5 fixed rate mortgage with bi-weekly payments. As new homebuyers, we weren't really sure what we were getting into. The house that we purchased is an older home and we knew that we could have have some unforeseen repair bills. We ended up putting half of our net worth into the house and have kept the the other have invested in a diversified portfolio including RRSPs. Keeping some cash outside the mortgage ensured we would not be cash poor and have some flexibility. We plan to make aggressive prepayments every year. Our goal is to be mortgage free on this property in 7 to 10 years.

Fighting the urge to spend money

I desperately want a new computer. My existing PC is extremely slow and increasingly becoming less reliable as I see the blue screen of death more and more these days. I've decided to make the switch to a Mac and am looking at a model which retails for $1699($1937 including tax).

Maybe I've been completely swayed by Apple's clever ads. The "restarting" ad is a personal favourite at the moment. Although it is more expensive than a comparable PC, most of my computer time is spent on multimedia activities and after checking out Macs failry extensively I decided to make the switch. Still, I'm not going to rush out and buy one. I've set a goal of raising enough money from sources of income other than employment. I've been working hard since January 2006 and I'm getting pretty close.

Poker winnings - 890US ~$1000CDN
BestBuy gift card - $100 CDN - from a poker bonus
Focus Group Stipends - $200 - for attending marketing research group sessions
Side Business Income - $335
Pending Business Income - $250

Total - $1,885

I'm so close but still short $50. I should reach my goal by the time Leopard comes out.

2007 Federal Budget

Here's a quick highlight on the 2007 Federal Budget relating to personal income tax matters. Other than the new child tax credit, there are not many significant changes. See here for full details. While there are many corporate tax measures, I've limited my summary to individual taxpayers.

• Working Tax Benefit - A 20% refundable tax on income over $3000 to a maximum credit of $500/individual or $1,000/family as an incentive to get into the workforce and get off welfare
• New Child Tax Credit - $2000 tax credit per child under the age of 18. Amounts to a $310 tax savings per child.
• RESP limit upped to $50,000 lifetime with the Federal Grant raising to $500 from $400 per year. Keeping the grant rate at 20% this means you'll need an annual contribution of $2,500 to maximize your federal grant. In addition, part-time will be eligible provided that 12 hours a month are spent on studies.
• Personal credits - The 2007 basic exemption is $8,929 with an increase to the spousal credit to match the basic exemption. 2008 basic exemption will be indexed plus a $200 increase and 2009 will be indexed with a $600 increase.
  
• Increasing the age limit to 71 for RRSP and RPPs. Currently the age limit is 69 before it requires to be transferred to a RRIF to be withdrawn as an annuity.
  
• The age credit is increasing by $1000. Low to mid income level seniors will save $155 per year. In addition, pension income splitting will allow for lower taxes for seniors.
  
• Registered Disability Savings Plan - It will be based on the RESP structure where contributions are eligible for a federal grant and earnings are tax deferred. To me this one doesn't make a lot of sense. The feds are recognizing the financial hardship that many families are faced with when dealing with a disability. Most of these families don't have the savings to participate in such a program in the first place.
  
• Transit Passes - Weekly passes will be eligible for the credit
• Lifetime Capital Gains Exemption - increase to $750,000. Unfortunately this does not apply for publicly listed shares. This applies to qualified small business corp. shares.

Talking Tax

Over the holidays, I discovered a television show on Report on Business TV which has some pretty good tax information. Talking Tax airs twice a week on Tuesdays and Thursday mornings at 11:30am. The half hour show invites a tax expert every day to answer emails and telephone calls from the public.

Various topics are discussed ranging from very basic to intermediate tax issues. Here are a few of the topics discussed over the past week:
- Automobile expenses and what documentation you need to claim them
- When to claim income on option writing and how options are taxed
- Pension splitting for seniors
- Various RRSP contributions questions
- Travel medical expense as an allowable credit

Since the personal tax season is creeping up on us all, it might help you out if you've got a tax question. You can email them at TalkingTax@robtv.com or call them at 1-877-667-6288 or locally at 416-957-8199. You can find the archives for the past couple of weeks here