Personal Tax Return Checklist

Here at Danielle’s SOS Financial we are committed to providing you with the largest tax refunds you deserve and finding every tax deduction you are eligible for.

To make sure you don’t miss something, and to help you get every deduction and credit you can, we’ve prepared this handy checklist.

Essentials and General Items

  • Current contact information, including SIN numbers, of the entire family
  • Last year’s tax return
  • Last year’s spousal return
  • Last year’s notice of assessments for the entire family
  • Key life events in recent years – marriage, child, new home, etc
  • Child care expenses
  • Investment income T5 slips
  • Medical, dental and other private health care expenses
  • T2202A for tuition and education amounts
  • Public transit passes
  • Details on any matrimonial or child support payments, if applicable
  • Direct Deposit information, if changed from last year
  • TFSA statements and contribution receipts
  • RRSP statements and contribution receipts
  • Confirmation on foreign property holdings
  • Information on any property, stocks or other assets bought and sold
  • T4E for income from Employment insurance
  • Charitable donation receipts
  • Interest paid on student loans
  • Political contributions

Employees

  • T4s, T4As, T4RSPs, T4RIFs and other tax slips
  • T2200 for Home Office eligibility signed by employer
  • Home Office expenses: utilities, mortgage, stationary, other purchases, etc
  • If eligible for motor expenses, details on kms driven for work
  • Professional dues, insurance, union dues (not reimbursed by employer)
  • Moving expenses (not reimbursed by employer)
  • Tools purchases documentation for trades people
  • If commissioned salesperson, documentation for advertising, promotion, meals & entertainment and other expenses
  • New motor vehicle purchase details and other motor vehicle expenses
  • Legal expenses related to employment or child support amounts

Small Business Owners & Sole Proprietors

  • Software backup of bookkeeping records
  • Manual records of sales and expenses if books are not kept in a software
  • Partnership agreement, if applicable, along with profit sharing perentage
  • Vehicle expenses used in business – vehicle cost, mileage, maintenance, etc
  • Key contracts and agreements summary or soft copy of conracts
  • Details on capital assets purchased and sold during the year
  • Home office expenses, similar to employment section above
  • Inventory count records – last year and end of current year, if applicable

Rental Property Owners

  • List of units owned with address and ownership percentage
  • Expenses on each unit, categorized by expense type – such as, mortgage interest, real estate agent fees, utilities, cleaning fees, management fees, property tax, office expenses, etc
  • Copies of all rental agreements
  • Rental income details for each unit
  • Details on capital additions (greater than $500) categorized by unit

Bookkeeping vs. Accounting

Did you know we do both!

–Bookkeeping vs. Accounting–

If you’re a small business owner, you might be wondering if you need to get a bookkeeper or an accountant – or both.

And now that you understand the need for bookkeeping, you’re might be wondering, “How does it differ from accounting?”

Good question.

The words “bookkeeper” and “accountant” are often used interchangeably. However, there are some key differences that determine the main responsibilities of each role.

–Bookkeeping is a Subset of Accounting–

37883981_2140118849644035_5128132333710344192_n.jpgAn accountant, professional bookkeeper, or an employee of the business can do your bookkeeping.

If you’ve just started a business, chances are you’ll be doing the bookkeeping yourself.

This is no bad thing. When launching a new business venture, it’s crucial that you have an intimate grasp of your financial situation. What better way than to do the bookkeeping yourself?

Essentially, bookkeepers take care of the day-to-day financial work.

They keep detailed and accurate financial accounts and use this financial clarity to help make informed business decisions.

–Accountants are Financial Experts–

Accountants are usually qualified, registered members of a statutory association. So they often have titles like CPA (Certified Public Accountant) or CA (Chartered Accountants).

That’s how they can charge the big bucks.

These experts will use the accounts provided by the bookkeeper. They focus on analyzing the transactions to provide financial advice.

They’ll also use the information in the accounts to file tax returns and other reports.

Whereas bookkeepers handle the day-to-day financial tasks, accountants often step in on a quarterly basis to provide advice and make adjustments.

4 Ways to Get Financially Fit in Your 40s

Many people in their 40s are facing an uncomfortable fact: They simply aren’t where they’d hoped to be financially. Fortunately, all their life experience can help correct for past mistakes.

“There’s a different trigger moment for everybody,” says Jay Howard, financial advisor and partner at MHD Financial in San Antonio, Texas. “But regardless of when it comes, people find themselves looking down the barrel of a gun as they consider retirement.”

One challenge is that it’s impossible to advise 40-somethings based on tidy “life stage” demographics. Some are just starting families, while others are sending offspring to college. They’re married, single, divorced, and just about everything in between.

But for those still grappling with financial instability, these four principles can help in moving forward with confidence:

1. Acknowledge what you’ve done right. 
It could be one great decision sandwiched in between some fails, or just a single good habit that can mitigate the impact of a host of wrongs.

Take the example of Kiera Starboard, a 46-year-old controller at a San Diego software firm. A mom to two adult sons and a teenage stepson, she always made having sufficient life insurance—both term and permanent—a priority, the result of her previous training as a financial advisor. “Even if it was tight, I made the payments,” she says. “It was a priority for my family’s sake, and for my own peace of mind.”

Unlike the 40% of Americans who have no life insurance, Starboard was protected when the unthinkable happened last August. Less than two years into her marriage, her husband, Steve, was killed while riding his motorcycle to work—one month after they purchased a small, additional life insurance policy to supplement his employer coverage.

“To have had to deal with financial stress on top of everything else, it would have been unbearable, incapacitating,” says Starboard. “My stepson and I are certainly in a much better position today than we would have been, had Steve and I not followed the advice I used to give to others.”

2. Take action to shore up the decades ahead. 
For many, the hardest part can be learning to put your own long-term future first—sometimes for the first time in your life.

“I see people focusing on their kids’ college savings, and not enough on retirement or an emergency fund for themselves,” says Starboard. Many advisors point out that kids can borrow for college if necessary, but no one can borrow for retirement.

The most important step is clear, says Howard: “You must have a written financial plan, period. Because that plan will dictate what you must do to be successful for the entirely of your life.

“The financial plan is your road map,” he continues. “In it will be your portfolio requirements, your savings goals, and your insurance-related needs.”

Finally, make sure your plan takes inflation into account, commonly estimated at 3% a year. Says Howard, “Inflation is the silent assassin that eats away at your nest egg.”

3. Apply the hard-fought wisdom you’ve gained.
“Treat the numbers determined by your plan—such as monthly savings—as bills that need to be paid,” advises Howard. When money comes in, it’s easy to start thinking of a new kitchen or a trip to Tulum. “Just be patient and keep the bills paid.”

Using that wisdom also applies to the big stuff. As the executor to her husband’s estate, Starboard has held back making any major decisions. “In a prior loss, I committed to real estate transactions and other things prematurely. At the time, it really felt like the right thing to do but my grief clouded my perception. I had a painful, expensive learning lesson.”

4. Focus on your shining future—really.
Forward thinking is an essential part of your financial plan, says Howard. “Get help really envisioning what kind of retirement you want. For each aspect, really drill down. For instance, where do you want to live? Do you want to be near your grandkids? Will you have the money to go see them? How often? It’s not just financial planning, it’s life planning.”

If all that forward thinking feels presumptuous, Howard recalls the eminently quotable Yogi Berra, who once said, “If you don’t know where you’re going, you might not get there.”

And finally, remember the simple refrain: it’s never too late.

Financial planning 101: Retirement

Registered Retirement Savings Plan (RRSP)

An RRSP (registered retirement savings plan) is an investment account that is registered with the Canadian government and is used as a vehicle to save for retirement. An RRSP is different than a typical investment account because it provides specific tax benefits meant to encourage you to keep up with your retirement savings. What does it mean to have tax benefits?

In the case of an RRSP, your contributions are tax deductible, which means you can deduct your contribution amount from your income each year and only pay taxes on the remaining amount. For example, let’s say Susie makes $50,000 and contributes $4,000 to her RRSP. She would only have to pay income taxes on $46,000 ($50,000 – $4,000).

You also don’t have to pay taxes on any of your earnings as long they stay in your account. Instead, you only pay taxes on the money that you withdraw in retirement which is referred to as a tax deferral benefit.

In plain English, this means that you not only get to contribute to your retirement savings tax free each year, but your savings also grow tax free – a great benefit that should not be overlooked.

Because of these generous benefits, RRSPs have a few restrictions like annual contribution limits and specific eligibility requirements. 

Retirement spending

Imagine this. You’ve just retired and have spent the last 45 years diligently saving for this moment. Suddenly, your goal is no longer wealth accumulation, but rather spending the savings that you’ve built up over the years. You have to figure out how much is reasonable to spend each month while still saving enough to live comfortably, hopefully for the next few decades. This process is called retirement spending. 

What else do I need to know?

Retirement spending is very similar to the process of deaccumulation. deaccumulation involves strategizing about the best way to spend the savings you’ve worked hard to accumulate during your working years based on critical factors like your current income streams, investment strategy, personal goals, needs and plans for an inheritance.

Deaccumulation

Most of us spend our entire adult lives at least vaguely aware that saving for retirement is a critical aspect of our financial health. However, saving for retirement is only half of the puzzle.

Once we actually reach retirement age, we’re presented with a new challenge – how to spend the savings we’ve worked hard to accumulate during your working years. This process is called deaccumulation and it requires a completely different skill set than what is needed to accumulate wealth.

To spend effectively in retirement, there are critical factors to consider like:

Income – what are your income streams?
What is a reasonable amount to spend each month that allows you to enjoy life while still saving enough for the future?
What are your needs and wants? Do you have any personal goals you’d like to reach while in retirement, like traveling the world or spending time with family?
Do you want to leave an inheritance?

Answering these questions will help form the basis for your deaccumulation strategy. Given the specialized skill required to successfully manage retirement funds, it may be helpful to consult a financial advisor for guidance.

What else should I know?

Some financial advisors may be well versed in wealth accumulation but may not truly understand the intricacies of deaccumulation. 

Life Insurance for a Family of One

We spend a lot of time talking about how couples, families and businesses can protect their financial futures with life insurance. But what about if you are single—do you need life insurance, too?

There are those people who have no children, no one depending on their income, no ongoing financial obligations and sufficient cash to cover their final expenses. But how many of those people do you really know? And, more importantly, are you one of them?

I think it’s important, then, to illustrate how a life insurance purchase can be a smart financial move for someone who is single with no children. Asking yourself these three questions can help you get at the heart of the matter:

  • Do you provide financial support for aging parents or siblings?
  • Do you have substantial debt you wouldn’t want to pass on to surviving family members if you were to die prematurely?
  • Did family members pay for your education?

Don’t Take My Word for It

Life insurance is an excellent way to address these obligations, and in the case of tuition, reimburse family members for their support. But don’t just take my word for it. Instead, “do your own math.” This Life Insurance Needs Calculator can help you quickly understand if there is a need—a need you might not be aware of—that could be easily addressed with life insurance.

The most important reason for you to consider life insurance may be the peace of mind you’ll have.

In addition to addressing any financial obligations you might have, the current economic climate has made permanent life insurance an attractive means to help you build a secure long-term rate of return for safe money assets. The cash value in traditional life insurance can provide you with money for opportunities, emergencies and even retirement.

For young singles, keep in mind that you have youth on your side. I don’t mean to sound trite. Instead, I’d like you to think about the fact that purchasing life insurance is very affordable when you’re young and allows you to protect your insurability for when there is a future need—perhaps, in time, a spouse and children.

While all of these reasons are valid, the most important reason for you to consider life insurance may be the peace of mind you’ll have knowing that your financial obligations will be taken care of should anything happen.

Financial planning 101: Investments

Commodity futures contract  

Before we delve into the details of commodity futures, let’s first define a commodity. A commodity in economics is a basic good that is considered the same regardless of who produced it. With grain, for example, would you really be able to tell the difference between two different brands while blindfolded? Our guess is no!

Commodity futures take advantage of this interchangeability. If you purchase a commodity futures contract, you are making an agreement to buy or sell a certain amount of a commodity on a particular date at a particular price.

Using commodity futures can make sense for both buyers and sellers of commodities.

For sellers, purchasing a futures contract allows them to lock in a sell price that guarantees a profit, since it’s impossible to predict exactly what the future price of a commodity could be. If it went down too much, they could stand to lose money. Similarly, buyers use future contracts to lock in a purchase price.

But what if you’re not actually buying or selling raw goods? What do commodity futures mean for you? Well, some people try to use fluctuating commodity prices to their advantage by purchasing futures as an investment vehicle – basically, by making bets that a commodity price will go up or down. However, commodity futures are extremely risky investments and probably shouldn’t be part of your investment portfolio unless you’ve consulted with a financial advisor.

Annuity

An annuity is a type of investment vehicle that you can purchase from a bank, typically to supplement your income in retirement. The premise is relatively simple – you set aside a certain amount of money in your annuity and the money grows over a set period of time called the accumulation phase. Typically, you are unable to withdraw any money during this phase without incurring significant fees. At the end of this set period, you receive regular payments from the annuity, which is called the annuitization phase. Hopefully, your investment has done well and the money you originally set aside has grown to a larger sum.

While the general concept of an annuity is simple, there are many different variables to consider if you are thinking of purchasing an annuity, like how long the accumulation phase should be, how long you want to receive payments and whether you prefer a fixed or variable annuity. A fixed annuity means you’ll receive equal payments during your annuitization phase, whereas a variable annuity means your payments will be dependent on how much your investment grew. If your investment does well, you could receive higher annuity payments. If your investment does poorly, your payments will be lower.

Annuities can be a great option if you’re looking to secure another stream of income in retirement. However, the different features we discussed above are just a small fraction of the many details to consider when reviewing your options for an annuity. Check in with your financial advisor and don’t be shy about asking lots of questions before making your decision.

Exchange Traded Funds (ETF)

An ETF is an exchange-traded fund. Depending on which ETF you invest in, the fund could be made up of any number of assets, from bonds to commodities to stocks. When you buy shares of an ETF you are buying a portion of the included assets. If the value of the assets goes up, your share value goes up but if the value of the assets goes down, your share value goes down – just like if you were purchasing shares of a stock on the stock exchange.

ETFs have become extremely popular for individual investors lately, and for good reason. ETFs give investors who don’t have a lot of money access to a highly diversified and low-cost investment option. You can also buy and sell ETFs whenever. This last point is what truly differentiates an ETF from a mutual fund. While similar, a mutual fund does not trade like stocks on a stock exchange.

If you’re new to investing, ETFs can be a great option, especially if you only have a modest investment to get started. As always, check in with a financial advisor to learn more.

Mutual funds

Mutual funds allow you to your pool money with thousands of other investors and together invest it in various types of securities, like stocks and bonds. Mutual funds are managed by a team of professionals who are responsible for figuring out the best way to invest the pool of money.

There are many benefits to investing in mutual funds for individual investors. First and foremost, mutual funds allow you to diversify your investments easily, without having to purchase many different individual securities. That’s because the team of investment professionals will select a wide variety of stocks and bonds to invest in on your behalf. You also get the benefit of a professionally managed account for relatively low cost.

If you would describe yourself as an inexperienced investor or as someone who prefers a more passive approach to investing, a mutual fund may be the right fit for you.

However, before investing in a mutual fund, it’s important to review how the fund has performed recently as well as examine its fee structure. Even low percentage fees that don’t sound like a lot, can add up to thousands of dollars lost over the years.

Bond

Bonds are issued by corporations or governments when they need to raise cash. Sounds similar to stocks, right? Well, the big difference between bonds and stocks is that bonds represent debt. Rather than owning a portion of a company like you would by owning shares of stock, when you purchase a bond you are providing a loan in exchange for regular interest payments. Once your bond reaches its maturity date, the original amount you invested (the principal) is returned to you. The only scenario in which you wouldn’t receive the principal is if the bond defaults.

Bond defaults are rare, so bonds tend to be a less risky investment choice. It’s a good idea to include a mix of stocks and bonds in your portfolio in order to diversify. It’s also a good idea to review your ratio of stocks to bonds at various points throughout your lifetime as your goals and income streams change. As you get older, for example, you may want a more conservative investment strategy that leans more towards using bonds.

Equities/stocks

Stocks are issued by companies when they’re looking to raise cash. Once stock is issued, investors can choose to purchase shares of the stock at a particular price, which is determined by the stock market. In exchange for helping to fund the company, investors like you get to benefit from the profits (hopefully) and sometimes losses (bummer).

If you choose to invest in stocks, you hope that the company performs well so the value of each share goes up. If the share goes up and you sell it at a higher price than your purchase price, you make a profit. Shareholders can also benefit from receiving dividends, which are a percentage of earnings that a company pays to its shareholders at regular intervals.

Stocks can be a very lucrative investment vehicle, but with the possibility of higher returns comes higher risk. It’s impossible to truly predict future company performance, so it’s very possible that the stock you choose to purchase ends up losing value.

Because of the higher risk of investing in individual stocks, it’s a good idea to include a mix of investment vehicles in your portfolio like bonds or mutual funds, in addition to stocks. Some people even opt out of investing in individual stocks entirely, choosing more diversified investment options instead.

Margin Account

In the same way that a bank can lend you money if you have equity in your home, a stock brokerage can lend you money against the value of certain investments in your portfolio. Generally speaking, you can borrow up to 50% of the purchase price of eligible investments. In other words, you may only be required to put up $5,000 of your own money in order to purchase $10,000 worth of stocks or bonds.

By doubling your purchasing power, you also double your potential returns. If your $10,000 investment grew to $15,000, you could sell the shares, pay back your $5,000 margin loan, and be left with a $5,000 profit, effectively doubling your money. Amplifying the power of your money in this fashion is known as using “leverage.” However, the power of leverage works both ways. If your $10,000 investment were to decline by 50%, the broker could force you to sell your shares and you’d lose your entire original $5,000 investment, so there’s still no such thing as a free lunch.

3 Life Insurance Myths That Could Hurt Young Families

When you’re just starting out, it often seems that a dollar never stretches far enough. And with new commitments, such as buying your first home or having children, comes the responsibility to make sure your loved ones will be provided for financially, no matter what life may bring.

If you were to die unexpectedly, life insurance is there to make sure your loved ones can maintain their standard of living, stay in your home, send your kids to the same schools and keep their plans for the future on track. It also gives the grieving spouse or partner time to make decisions, or in some cases find work outside the home, without worrying about finances.

But common misconceptions often prevent young families from purchasing the life insurance they need.

Myth 1: I only need life insurance if I’m the primary breadwinner in my family.

Whether you bring home the largest paycheck in your household or a smaller one, your family relies on your income to maintain its quality of life, and it would be missed if something were to happen to you. Even if you don’t work outside of the home, having life insurance is a smart choice. Stay-at-home parents perform valuable services such as childcare, cooking, housecleaning and household management, which can be costly to replace for a surviving spouse or partner.

Stay-at-home parents perform valuable services such as childcare, cooking, housecleaning and household management, which can be costly to replace for a surviving spouse or partner.

Myth 2: If I buy a term life insurance policy and find that I still need protection when the term ends, I can always renew the policy.

Term policies are quite popular with many young families, and for good reason: They typically offer the greatest coverage for the lowest cost. Term insurance provides protection for a specific period of time (the “term”), and can be ideal for people who feel they have financial needs to cover that will disappear over time, such as a mortgage or a child’s education.

However, many families realize that even after the kids are grown and the mortgage is paid off, their need for insurance continues—to provide income for a surviving spouse, eliminate debts, pay taxes, etc. Because life insurance premiums increase with age, renewing your policy when the term expires can be very expensive. Moreover, poor health may make renewal impossible.

Myth 3: I only need term life insurance. 

Term life insurance makes sense for many young families because their need for coverage is great and their budgets are often limited. But that doesn’t mean it’s the only type of insurance you should consider.

Permanent life insurance policies provide a death benefit as well as other unique features such as lifelong protection and the ability to accumulate cash values on a tax-deferred basis, similar to assets in most retirement-savings plans. You can access the cash values for important uses like a child’s education or a business opportunity. (Keep in mind, however, that withdrawing or borrowing funds from your policy will reduce its cash value and death benefit if not repaid.)

If these features appeal to you, it might make sense to buy a large face amount term policy, giving you the death benefit protection you need, and combine it with a smaller permanent policy. When your budget permits, you can gradually increase your permanent insurance coverage.

And remember, insurance agents and advisers are there to help you. They can step you through your life insurance needs and solutions at no cost or obligation.