Squawkfox » Taxes http://www.squawkfox.com Where personal finance & frugal living are sexy, delicious, and fun. Wed, 25 Jan 2012 19:05:04 +0000 en hourly 1 http://wordpress.org/?v=3.2.1 Top Five Tax Tips for the Taxed http://www.squawkfox.com/2008/02/25/top-five-tax-tips-for-the-taxed/ http://www.squawkfox.com/2008/02/25/top-five-tax-tips-for-the-taxed/#comments Tue, 26 Feb 2008 03:29:06 +0000 Kerry http://www.squawkfox.com/2008/02/25/top-five-tax-tips-for-the-taxed/ Spring is in the air, and so is the hurried busyness of tax season. If you’re anything like me, then you probably have a few piles of papers, a bunch of receipts, and perhaps even a few T4s kicking around.

While claiming the right CRA tax deductions and tax credits can net you a tidy return, there are other means to lessen your tax burden this year. The trick is to know where to invest, how to invest, and what to do with your tax refund.

So to help you feel a little less taxed this time of year, here are my top tax tips to untax you during the dreaded tax season.

tax refund

1. Become a Manic Maxer

A manic maxer is a term I invented to describe the investors who contribute to their retirement savings plans, such as an RRSP, at the beginning of the tax year in January. Maximizing your contribution earlier in the year, rather than later, has huge tax and retirement advantages, including:

  • Earning an additional year of investment growth
  • Maximizing your compounding power
  • Getting your tax return sooner
  • Retiring early

So if you’ve got the cash, get manic by maximizing your RRSP contribution at the beginning of the tax year. It just makes good financial sense.

2. Say NO to Tax Refunds

I hate tax refunds. To me, a tax refund is a colossal failure. A tax refund means you gave the government an interest free loan for the whole year. How generous of you!

A few years ago, Carl and I were refunded a combined $8200 for a single tax year. As a couple, this is exactly $683.33 less bucks a month we had in our savings accounts, earning interest for us. After doing a bit of research I found an awesome way to stop overpaying my taxes and loaning my hard-earned money to the CRA for free. If you are Canadian, just fill out form T1213 – Request to Reduce Tax Deductions at Source to stop giving the government an interest free loan. I complete this form every darn year, and love my “less taxed self” for it.

3. Rethink your refund, don’t squander it!

If you do get a tax refund, stop squandering it on consumer stuff, and Just Say No to Crap!. I hate crap, and so should you. Instead of letting marketers part you with your after tax dollars, consider using it to pay down credit card debt or make an extra mortgage payment. If your debt is covered, consider investing your refund in a diversified portfolio of Exchange Traded Funds or Index Funds. Some popular indexing options for Canadians are ING Streetwise Funds or TD e-Series Funds. When investing in funds, be sure to watch your fees with this handy Portfolio MER Calculator.

4. Max out Your Retirement Plans

Do you contribute a small fraction of the maximum allowable amount to your RRSP retirement plan? Well, I’m happy you contribute something (yay!), but not putting in the maximum amount means you pay more tax! To stop getting maximum taxed, try contributing a few additional dollars to your RRSPs. Besides, the longer your money has to compound the better off you are.

5. Shop Around for Tax Software

Have you been using the same tired tax software every darn year? Perhaps it’s time to shop around and check out lower priced options. I’ve reviewed both Studio Tax and UFile. My preference is with Studio Tax, as the package is free to download and is NetFile certified.

BONUS: Use Your Tax Free Savings Account (TFSA)

If you’re 18 or older, you can open a TFSA at your favourite financial institution and save up to $5,000 in cash, stocks, or bonds every year tax-free. Yes, I just wrote tax-free! Adding just a few dollars to your TFSA can add up to lots of loonies over the years. Check out 5 Reasons To Love Your Tax Free Savings Account (TFSA) for all the contribution rules and benefits!

With these five tax tips, may the year be less taxing on you!

Your Two Cents: Got a favourite tax tip to share? What do you do with your tax refund?

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]]> http://www.squawkfox.com/2008/02/25/top-five-tax-tips-for-the-taxed/feed/ 1 Stop giving the government an interest free loan (T1213) http://www.squawkfox.com/2008/01/29/stop-giving-the-government-an-interest-free-loan-t1213/ http://www.squawkfox.com/2008/01/29/stop-giving-the-government-an-interest-free-loan-t1213/#comments Wed, 30 Jan 2008 05:44:57 +0000 Kerry http://www.squawkfox.com/2008/01/29/stop-giving-the-government-an-interest-free-loan-t1213/ I used to rejoice every April when I got my big fat tax refund back from the good folks at the Government of Canada. The money was like a windfall, a treat, a big juicy pay day. My refunds usually amounted to upwards $4800 since I maxed out my retirement savings plan (RRSP) every year. So you can understand why I always looked forward to tax season.

Three years ago I changed my tune about large tax refunds. When I did some simple math, I found both my “better half” and I were owed a combined $8200 from the govvies for a single tax year. WOAH. As a couple, that is exactly $683.33 less bucks a month we had in our savings accounts, earning interest for us. I then did some more math and calculated how much compound interest we didn’t realize. Here are some quick numbers illustrating how $683 bucks adds up when saved every month for three years at 4% interest:

t1213forms.gif
By overpaying in taxes and giving the government an interest free loan, my “better half” and I lost out on hundreds of dollars in interest each year. Grumble grumble. Now don’t get me wrong, I happen to like the Government of Canada, but to just give them my money for free is nuts. So I started poking around and found a wonderful form which reduces the amount of tax I overpay every month, and thus reduces my interest free loan to the government. The form is called T1213 – Request to Reduce Tax Deductions at Source, and it is really handy for those who have the following deductions:

  • RRSP Contributions
  • Childcare Expenses
  • Support Payments

The form itself is really straight forward. You basically just outline all deductions or non-refundable tax credits for the current tax year and submit it to your local CRA office. I should mention this form works best when submitted early in the year (like now). For those with RRSPs, here’s what you need to do:

1. Choose from the following RRSP contribution options:

  • Set-up a Pre-Authorized Contribution (PAC) plan with your RRSP investment company showing the amount you will regularly contribute. OR
  • Make a lump sum contribution to your RRSP.

2. Once the contribution option is setup, be sure to photocopy the PAC or RRSP receipts from your investment company.
3. Fill out form T1213- Request to Reduce Tax Deductions at Source (from the CRA’s website).
4. Mail your photocopied contribution receipts and T1213 form to your CRA office. In my experience, it takes the CRA anywhere from 2-6 weeks to approve your request.
5. Submit the CRA’s approval form to your payroll administrator at work.
6. Smile, you’re next paycheck is a little bigger and you no longer lend the CRA your hard-earned money for free.

I am currently waiting for the CRA to send my approval. I’ll let you know how it goes. :)

fox

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]]> http://www.squawkfox.com/2008/01/29/stop-giving-the-government-an-interest-free-loan-t1213/feed/ 10 Review: StudioTax 2007 http://www.squawkfox.com/2008/01/27/review-studiotax-2007/ http://www.squawkfox.com/2008/01/27/review-studiotax-2007/#comments Mon, 28 Jan 2008 05:28:37 +0000 Kerry http://www.squawkfox.com/2008/01/27/review-studiotax-2007/ I must love doing my taxes. This is the second time I’ve done them this year. My first tax attempt involved UFile Standard 2007, which I reviewed (and didn’t like to be honest). Since trying UFile, I’ve had a number of readers suggest I try StudioTax 2007. From what I can tell, the company behind StudioTax (called BHOK IT Consulting) is a tiny little shop of two developers located in Ottawa Ontario. Since StudioTax is free to download and use, I thought I should give StudioTax a spin.

StudioTax Details:

  • Windows-based
  • Fully Bilingual
  • Available free of charge (they accept contributions!)
  • Personal use only
  • Offers a maximum of 20 returns (this is a CRA requirement to limit 20 returns)
  • Created for Canadians by Canadians
  • Very likely to be NetFile certified

Getting Started

My first impression of StudioTax came from their website. To be honest, some of the advertisements look kinda spammy. A spammy website doesn’t really instill confidence in a product, especially one I am trusting to do my tax return. But hey, everyone needs to get paid, so I continued onwards (psychic advertisement aside).

00_st_website.gif

Download and Installation

Downloading and installing StudioTax is a breeze. The software does not require a license key or code so a quick double-click on the program executable is all that is needed. I should note that StudioTax requires the Microsoft .NET Framework Version 2.0 to operate. The installer provided a nice link, so the .NET installation was painless.Once the program launched, I was greeted with a very pleasant (and attractive) setup wizard.

00_st_wizard.gif
StudioTax’s setup wizard is really nicely done. I was able to install the software easily and right away gained confidence in using freeish tax software.

Dashing Dashboard

Once installed, StudioTax displays a very easy-to-use dashboard window.

01_st_homepage.gif
On this window, I have access to a number of tasks. I must say, I really love how StudioTax gives me the option to easily access and perform numerous tasks from a dashboard. I didn’t have to hunt for a software update tool or though complex menu systems to get my taxes done. Here are some of the tasks available via the dashboard:

  • Opening an existing return
  • Create a new return
  • View a list of recent returns
  • Check for updates
  • Get help
  • PLUS: a handy toolbar (across the top of the window) is available for quick access to the wizard, validation tools, and forms. YAY!

Creating a New Return

After marveling over the dashboard I clicked Create a new return and began my 2007 taxes. StudioTax provides a straightforward wizard to help the user enter basic CRA tax information. From what I can tell, it seems StudioTax cannot import user data from other tax software (QuickTax, UFile, etc.) and only supports their own .stx file format. This means I had to enter all my personal information (name, residence, SIN number, etc.). This is a minor quibble, but it would be nice to not have to re-enter all my infos.

01_st_quickstartwizard.gif
Another minor quibble I have with the StudioTax wizard is the page where I am to choose my T Slips. I must admit to being a little stumped on this page, wondering exactly which T Slips I should choose. Perhaps my confusion results in not having all my Slips yet (it’s still January). But it would really help to have a tip or very brief sentence defining each slip, so I can better understand if I need to select it. Nonetheless, I easily selected T4, T5, RRSP, and Medical Expenses.
01_st_forms.gif

Entering Taxing Numbers

Moving through the StudioTax wizard is fast, easy, and painless. I actually had fun entering my T4, T5, and RRSP contribution numbers. When it came to enter my medical expenses I was resigned to entering a single number into one box. This is a bit of a pain for me since I have carry forward medical expenses from 2006 and I need to calculate the best 12-month period ending in 2007. Neither UFile nor StudioTax handle this calculation. Since I am dead against paying $40 bucks for QuickTax to perform this new math, I decided to just enter everything into an Excel Spreadsheet, and find the best (most expensive) 12-month period by hand.

Validated with the Tax Explorer

When the wizard is done, QuickTax brings the user to a review screen where all T-Slips are accessible and can be easily navigated or reviewed. My favourite part of this screen is the Tax Explorer pane (left hand side), where I can review all my entered amounts and see if I have a refund or a balance. I used fictitious numbers in this example.

01_st_taxexplorer.gif

Conclusion

I must admit to be surprisingly impressed with StudioTax. The software is easy-to-use, attractive, fun, and affordable! Yes, I said StudioTax is fun! The user interface is simple to follow, easy-to-navigate, and the Online Help is written concisely. StudioTax offers simplicity with an easy-to-follow wizard, which basically holds the user’s hand and gets the job done. Certainly my return is pretty straight-forward as I’m a single foxy gal, with no dependants, some RRSP contributions, many medical expenses, modest interest income, and some capital gains. But getting my taxes done was seamless.

I will definitely follow StudioTax to see when/if they get NetFile certified. Since learning of StudioTax a few weeks ago, I have highly recommended it to my family and friends. A few of my colleagues at work are smitten with it. None of us can believe it was developed by two guys (or gals?) from Ottawa.

fox

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]]> http://www.squawkfox.com/2008/01/27/review-studiotax-2007/feed/ 8 Returning UFile 2007 – Trying StudioTax http://www.squawkfox.com/2008/01/16/returning-ufile-2007-trying-studiotax/ http://www.squawkfox.com/2008/01/16/returning-ufile-2007-trying-studiotax/#comments Thu, 17 Jan 2008 04:28:05 +0000 Kerry http://www.squawkfox.com/2008/01/16/returning-ufile-2007-trying-studiotax/ I don’t like returning stuff. After careful consideration though I’ve decided to send back UFile 2007. My main beef with the application is the poor handling of medical expenses.

Since I have carry forward medical expenses from 2006, I need to calculate the best 12 month period ending in 2007. UFile just doesn’t handle this calculation! YIKES. My other half has offered to create an Excel spreadsheet for this calculation…but I feel strongly that my tax software should be able to handle this otherwise mind numbing activity.

I’ve decided to give StudioTax a try.

Just a note to prospective StudioTax users:

  • StudioTax requires the Microsoft .NET 2.0 Framework (25 megs) to run.
  • The StudioTax wizard will prompt you to install .NET if it is not already installed on your computer.

fox

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]]> http://www.squawkfox.com/2008/01/16/returning-ufile-2007-trying-studiotax/feed/ 3 Review: UFile Standard 2007 http://www.squawkfox.com/2008/01/13/review-ufile-standard-2007/ http://www.squawkfox.com/2008/01/13/review-ufile-standard-2007/#comments Mon, 14 Jan 2008 07:06:48 +0000 Kerry http://www.squawkfox.com/2008/01/13/review-ufile-standard-2007/ I really have mixed feelings about DrTax Software Inc’s UFile Standard 2007. On one hand I welcome competition for Intuit’s QuickTax, especially considering how every year Intuit decreases the number of returns one can file while raising the price of the product. On the other hand, there’s a reason why QuickTax is a tax software leader in Canada — it’s a slick user-friendly product.

UFile Standard 2007 is not a slick user-friendly product. Actually, UFile is far from slick … it is a mess. Yes, UFile does get the job done. I successfully imported past QuickTax information, I successfully entered current tax information, and I found out I’m owed a small refund from the govvies. But here are some of the issues I faced along the way:

Getting Updates

Most tax software requires an update before starting a return. In fact, most tax software automagically starts looking for updates after it is successfully installed and registered. UFile is not very smart. After I installed and registered UFile, I followed the interview wizard screens and started my 2007 return.

When I tried to import my personal information from QuickTax using the UFile “CarryForward” feature, I was faced with a series of error messages stating I needed to download product updates. This was terribly annoying, as I was not offered an opportunity to update before the interview process began. I had to quit the UFile application twice to figure out how to update the software. After I was updated, I had no issue with importing my QuickTax info.

Update Error Message

 

Update Errors

Terrible User Interface

UFile’s user interface is poorly conceived. The interface is difficult to navigate, non-linear, cartoonish, does not employ many Windows standards, and is generally unattractive to view.

Confusing Interface

Unusual Icons

I actually got stumped several times just trying to perform simple Windows functions, like deleting an extra T4 slip by right-clicking it in the menu. Right-clicking does not work to delete in UFile. To delete the T4, I had to read the Online Help to find the special UFile delete icon. This drove me nuts, as deletion is a pretty standard Windows process. A simple X would have nicely identified a delete icon. Albeit, UFile went against standard Window’s icons in most of their functions … why I have no idea. Delete Icon is below:
Delete Icon

Terrible Translation?

The user interface and Online Help is poorly written and very verbose. It feels like UFile was written in another language, and then poorly translated into English. I struggled trying to find a sensible procedure on how to get something done. Everything is written in long paragraph form which prevents the user from quickly scanning the help and tip files, reading a listed procedure, and getting done with it. I honestly found it annoying to read endless poorly written interface instructions, tips, and help. Please UFile, hire a technical writer in 2008 and get some instructive help!

Click Here Must Die!

Another minor quibble I have with UFile’s interface is the abundance of “Click Here”. Just hyperlink to the noun you want the user to click!

Click Here Must Die

Medical Expense Entry

If you are like me and have a series of similar medical expenses to enter, you won’t like UFile’s medical expense interface. UFile groups dates and expense types into one box, forcing the user to perform mindless data entry without an auto-fill function. Auto-fill is pretty standard in Quicken and QuickTax. Furthermore, even after entering numerous dates and medical expense types, UFile still queried me for the date of my last medical expense. Why? Couldn’t the program do a check on my entered data and then verify this with me? Annoying, non?

No Autofill

Don’t Enter Zero?

While entering my T4 information, I couldn’t help but notice the number of times I was informed to not enter Zero. I recall being able to enter Zero numerous times in QuickTax without issue. In fact, a Zero can be a pretty darn standard entry in many people’s tax returns. I was intrigued with UFile’s inability to handle Zero and read the Online Help. Apparently, the smart analysts and programmers who designed UFile decided to use zero logic by allowing the program to calculate a Zero as anything other than nothing. BRILLIANT. There’s nothing like entering Zero in your return and having the whole thing miscalculate your taxes. This is abysmal and should be fixed. I shouldn’t have to understand the program’s suspect logic when doing my taxes. Entering a Zero should just work and calculate nothing, rather than “effectively telling the program that all EI premiums paid are overpayments that should be refunded to you.” Scary, non?

Zero
Zero Help

Conclusion

I wanted to love UFile. More importantly, I wanted to not miss QuickTax. This didn’t happen. Sure, UFile gets the job done. But I did not trust or enjoy the experience. O well. At least thanks to UFile, I know I’ll get about $250 bucks back from the govvies.

fox

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]]> http://www.squawkfox.com/2008/01/13/review-ufile-standard-2007/feed/ 7 Are you switching to UFile? http://www.squawkfox.com/2008/01/11/are-you-switching-to-ufile/ http://www.squawkfox.com/2008/01/11/are-you-switching-to-ufile/#comments Fri, 11 Jan 2008 21:02:07 +0000 Kerry http://www.squawkfox.com/2008/01/11/are-you-switching-to-ufile/ I’ll be posting a review on my experience with UFile Standard 2007 this weekend. I posted my reasons for switching to UFile from QuickTax earlier this week. One of my favourite blogs, Canadian Capitalist, posted a UFile 2007 Quick Review last weekend. I’m really interested in how many people are thinking about making this switch?

fox

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]]> http://www.squawkfox.com/2008/01/11/are-you-switching-to-ufile/feed/ 4 Switching to UFile 2007 http://www.squawkfox.com/2008/01/08/switching-to-ufile-2007/ http://www.squawkfox.com/2008/01/08/switching-to-ufile-2007/#comments Wed, 09 Jan 2008 04:35:13 +0000 Kerry http://www.squawkfox.com/2008/01/08/switching-to-ufile-2007/ I fired QuickTax today. When a company, or bank, or software package annoys me strongly enough, I dismiss them and never look back. Intuit’s QuickTax has been on my dismissal list for a few years now. I’ve been a QuickTax customer since 1997, but this year’s release prompted me to switch to UFile. Here’s why Intuit got the axe:

  1. Price: Is it just me or has the price of QuickTax Standard increased substantially over the last three years? QuickTax Standard sells for $39.99 while UFile Standard is only $19.99 (I purchased from Future Shop).
  2. Decreased Returns: Intuit has decreased the number of returns over the years. This year a household can only file two returns. UFile Standard (for Windows) supports four eight returns while UFile Plus (for Windows) supports 16 returns.
  3. Abysmal Customer Support: Don’t try to email Intuit with software issues…just don’t try.
  4. Advertisement Up Sells: It really bugged the heck outta me how QuickTax would try to up sell my software license once I started doing my taxes. For example, if I entered investment or business income, QuickTax would suggest (through pop-up ads) I purchase the Business Edition. Getting up sold while doing my taxes is the WRONG way to make a sale. Taxes are stressful enough without having your software try to sell you something.

So off I go to do my taxes. There’s no time like the present.

Update: Apparently UFile Standard for Windows (the version I bought) does eight returns on one license, and not four as I had reported. Here’s UFile’s FAQ. Additionally, UFile.ca (the online version) is available free of charge to those with annual income of $20,000 or less. More reason to switch especially if you’re a student!

fox

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