The Frugal Canadian

A frugal spender seeks to find new ways to save money and increase her net worth.

Sunday, February 24, 2008

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.

Saturday, February 02, 2008

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.