1) Do you know what your Marginal Tax Rate is?
[x] Yes
[x] No

As income increases, so does the rate of tax that you must pay. Your Marginal Tax Rate (MTR) is the percentage of income tax you will pay on an additional dollar of income. Understanding your MTR and the implications it can have on your financial plans will help you identify the best strategies to achieve your financial goals.

Planning Tip:
When you make an RRSP contribution, the income tax you save will be based on your MTR. Use this Personal Tax Calculator to estimate your marginal tax rate and the refund you could receive when making an RRSP contribution.

2) Do you know what your Average Tax Rate is?
[x] Yes
[x] No

Your Average Tax Rate is simply the percentage of your annual income that you pay in tax. If your income is $50,000 and you paid $9,000 in tax, your average tax rate is 18% ($9,000 ÷ $50,000). When deciding whether to implement a given financial planning strategy, the impact it has on your Average Tax Rate should be one of the deciding factors used.

Planning Tip:
Calculating your Average Tax Rate before and after implementing a given strategy, will help you decide if it is something you should consider doing. Use this Income Tax Calculator to compare the taxes you are estimated to pay before and after implementing a strategy.

3) Do you know what your current RRSP deduction limit is?
[x] Yes
[x] No

Knowing your RRSP deduction limit is a fundamental part of financial planning and will help you make the most of your retirement savings.

Planning Tip:
Your RRSP deduction limit is displayed on your Notice of Assessment. If you have misplaced it, log into “My Account” on the Government of Canada website.

4) Do you know what your current TFSA contribution room is?
[x] Yes
[x] No

Your TFSA contribution room is something every Canadian needs to know if they hope to make the most of this tax shelter. It will also help you avoid making an over contribution that will be subject to 1% tax each month the excess amount remains in your TFSA.

Planning Tip:
Your TFSA contribution room is displayed on your Notice of Assessment. If you have misplaced it, log into “My Account” on the Government of Canada website.

5) Which statement best describes you when filing your income tax return?
[x] I will typically owe money
[x] I will typically break even
[x] I will typically receive a refund

If you owe $3,000 or more ($1,800 in Quebec) after filing your tax return, you will be required to pay tax by instalment the following year. To avoid paying interest and penalty charges, be sure to make all tax instalments on time. Breaking even is the ideal situation, assuming you are not missing out on any income tax deductions due to a lack of planning.

Planning Tip:
Receiving a tax refund each year means that you are making an interest-free loan to the government. Use form “T1213 Request to Reduce Tax Deductions at Source” to put more money in your pocket each month that can be put towards your financial goals.

6) If you received a tax refund, you would?
[x] Invest it
[x] Pay down debt
[x] Spend it

Many people do plan to spend their tax refund. Whether this is the best way for you to use yours depends on your situation and the financial plans you have implemented. Investing a tax refund or using it to pay down high-interest debt is an excellent way to enhance your wealth.

Planning Tip:
Instead of spending your tax refund, use this RRSP Calculator to estimate how much your tax refund could be worth when you retire.

7) Do you split income with your partner or family members, for tax purposes?
[x] Yes
[x] No

Although there are fewer ways to split income prior to age 65 due to several new rules, exploring the different ways to maximize income splitting, now and in retirement, can save you thousands in income tax throughout your lifetime.

Planning Tip:
To find out how much tax you could save by splitting income, use this Income Tax Calculator to compare different scenarios. Be sure to consult with a tax advisor before splitting your income when filing your tax return.

8) When choosing an investment, does the tax treatment factor into your decision?
[x] Yes
[x] No

Understanding the many tax considerations associated with the various investments available, will help you make better investment decisions. Using tax-efficient investments will help you maximize the after-tax return on the money you have available for savings will enhance the growth potential of your investments.

Planning Tip:
The investments you choose should align with your goals and the resources you have. To better understanding how different forms of income are taxed, review the Tax Table for the province you file taxes in.

9) Do you have self-employment income?
[x] Yes
[x] No

Having self-employment income means you will need to keep good financial records and make several remittances to the Canada Revenue Agency (CRA) throughout the year. If you are an unincorporated proprietor, you have until June 15th to file your income tax return. If you owe money you will be charged interest starting April 30th, so it is best to make an instalment payment of any taxes due by then, even if you plan to file in June.

Planning Tip:
If you have or plan to have a side hustle to make extra money, you will need to report your self-employment income on lines 135 to 143 on your tax return. If you have a loss, you may be able to reduce other income and your over-all tax payable. For more information on corporate income tax, visit this Government of Canada webpage.

9a) If you answered yes, are your income tax instalments up to date?
[x] Yes
[x] No

Tax instalments are due 4 times each year on the 15th of March, June, September, and December. There are several ways you can pay your taxes including, online, by pre-authorized debit, credit card or through your financial institution.

Planning Tip:
To avoid paying interest and penalty charges, you should make all required tax instalments on time. Refer to this Corporate Tax Dates worksheet as a reminder of your tax obligations.   

10) Do you own foreign property in excess of $100,000?
[x] Yes
[x] No

If you own foreign property with a cost in excess of $100,000 for any period in the year, you must make an annual disclosure with the Canada Revenue Agency. Form T1135 must be filed on or before the due date of your income tax return or, in the case of a partnership, the due date of the partnership information return.

Planning Tip:
If required, submit Form T1135 with your tax return for all foreign property you own including bank accounts, stocks, bonds and real estate.

11) Do you currently owe money to the Canada Revenue Agency?
[x] Yes
[x] No

If you owe money to the Canada Revenue Agency (CRA) do not ignore this debt. The most important step to take is to communicate with the CRA to arrange a payment schedule. Regardless of the size of your debt, the CRA will be reasonable with you but only if you communicate with them.

Planning Tip:
If you cannot pay your income taxes in full, the CRA can help you set up a Payment Arrangement. A payment arrangement is an agreement with the CRA to pay your balance in several regular payments over a period of time.

12) Are you a U.S. citizen?
[x] Yes
[x] No

If you are a U.S. citizen living in Canada, you are required to file a personal income tax return on your worldwide income using Form 1040, to report and pay U.S. taxes. If you are a Canadian citizen, as a U.S. citizen or green card holder, it is important to comply with IRS filing requirements to avoid possible tax penalties and interest.

Planning Tip:
You may still be subject to U.S. tax if you work in the United States, or if you are present in the United States more than 183 days in any 12-month period. For more information visit this Canadians in USA webpage (not an endorsement).