Canadians need to act quickly to avoid overpaying their taxes

Dec 7, 2011

CIBC offers expert tips and strategies to help Canadians reduce the taxes

TORONTO, Dec. 7, 2011 /CNW/ - Many Canadians are at risk of paying more in taxes than required this year because they are not aware of various planning techniques or they leave their tax planning too late, says CIBC's tax and estate planning expert, Jamie Golombek.

"2011 brought numerous changes to the tax rules, heralding in both new opportunities as well as new perils to navigate through," says Mr. Golombek. "With 2011 drawing to a close and the holidays coming fast and furious, Canadians need to ensure they do not get so caught up with the excitement and chaos of the season that they neglect crucial year end tax planning strategies, many of which need to be implemented by December 31st to be effective."

In his latest report, 2011 Year End Tax Tips, Mr. Golombek outlines the five most important tax planning strategies Canadians should focus on over the final few weeks of the year.

1. Tax Loss Selling
  If you have investments with accrued losses, year end is a good time to sell as it allows you to offset any capital gains realized in your portfolio over the year. To capture your loss in the 2011 tax year, the settlement must take place in 2011 meaning a trade date no later than December 23.
2. Retirement Considerations
  There are a number of tax considerations for those just entering or well into their retirement years. If you turned 65 in 2011 and have not yet applied for Old Age Security benefits, you should do so as soon as possible since retroactive benefit payments are limited. Mr. Golombek identifies three additional strategies to minimize clawback which can occur with Old Age Security benefits if your net income exceeds $67,668 in 2011.
  "Retirees may wish to consider strategies such as delaying the conversion of their RRSP to a RRIF, reviewing the composition of their investments, or deferring the start of their CPP/QPP pension as ways to minimize Old Age Security clawbacks." He also reminds retirees who turned 71 in 2011 that, "you only have until December 31 to make any final contributions to your RRSP before having to convert it into a RRIF or registered annuity."
3. Review Asset Allocation
  Year end is also a good time to review the types of investments you hold and the accounts in which you hold them, as investment income is taxed differently depending upon the type of income or the type of account in which the investments are held. "Pay close attention to RRSP and TFSA contribution limits to avoid penalties on over-contributions," advises Mr. Golombek, "If you are planning a TFSA withdrawal in 2012, consider withdrawing the funds by December 31, 2011 so you don't have to wait until 2013 to re-contribute the amount."
  If you hold private company shares in your TFSA, RRSP or RRIF, you want to ensure they are not now considered "prohibited investments" subject to harsh tax penalties, as 2011 saw a change in the rules for certain investments held in registered accounts. Mr. Golombek says, "Consider taking advantage of the special transitional relief provisions available until 2021."
4. Contribute to an RESP and RDSP
  Remember to make use of unused contribution room in RESPs to capture the full Canada Education Savings Grant equal to 20% of the first $2,500 per child to a $500 maximum annually. "If you have less than 7 years before your child turns 17 and haven't maximized your RESP contributions, consider making enhanced catch-up contributions based on the carry-forward room available with a goal to capturing the maximum lifetime Canada Education Savings Grant amount of $7,200," recommends Mr. Golombek. If your child turned 15 in 2011 and has never been an RESP beneficiary, Mr. Golombek reminds parents that December 31, 2011 is your last chance to contribute at least $2,000 to an RESP to create CESG eligibility for 2011, 2012 and 2013.
  Also be sure to take advantage of any unused room in Registered Disability Savings Plans (RDSPs) to a lifetime maximum of $200,000 or until the beneficiary turns 59. While contributions are not tax deductible, all earnings and growth accrue tax deferred. The RDSP may be eligible for Canada Disability Savings Grants or Canada Disability Savings bonds.
5. Ensure certain payments are made by December 31
  Be aware that December 31 is the last day to make a charitable donation and get a tax receipt for 2011. Mr. Golombek points out that, "Many charities offer online donations with receipts generated and e-mailed immediately to you." He further points out that there are other expenses that must be paid by year end to claim a tax deduction or credit in 2011. These include child care expenses, medical expenses, interest on student loans or on money borrowed for investing, investment counseling fees for non-registered accounts and safety deposit box rental fees.
  If you are self-employed or a small business owner, consider accelerating the purchase of new business equipment or office furniture that you were planning to purchase in 2012. "Under the 'half-year rule' you are permitted to deduct one half of a full year's tax depreciation in 2011 even if you make your purchase on the last day of the year."

While these tips can help ensure Canadians are minimizing taxes, Mr. Golombek cautions that tax planning should not be left to the last minute. "These five tax tips are just some of the many ways you can act now to reap the tax savings you will realize when you file your return next spring. But keep in mind that tax planning is a year round affair. Be sure to speak to your accountant or tax advisor well in advance of tax filing season to ensure you are paying the least amount of tax legally possible."

More details are available in Mr. Golombek's report, 2011 Year End Tax Tips.

CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at

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