Notice of assessment useful in your overall plan

Canada Revenue Agency sends every taxpayer who has submitted a tax return a Notice of Assessment.  We encourage everyone to read the assessment thoroughly, including your accountant and financial advisor.

You may wonder why an investment advisor requests a copy of your assessment.  The bottom line is it is useful for planning purposes to reduce the household tax bill and to ensure you are managing your cash flows and paying the lest amount of tax possible.

Here’s some of the useful information we are ale to obtain from the assessment:

Income Levels

Individuals have several options to reduce their annual income tax liability.  Couples may have income splitting options not available to individuals.  Couples with children may save household tax by considering income-splitting strategies for all family members.  The annual Notice of Assessments for each family member helps monitor changing income levels over time.  Strategies and financial plans will change throughout time with income levels being a primary factor.

TFSA Deduction Statement

Your 2008 Notice of Assessment has a new section this year.  This section will be for your Tax Free Savings Account.  Included within this section will be your carry-forward amount of $5,000.  This year is easy as the 2009 room is $5,000.  For future years this schedule will be useful for your advisor to know how much room you have to contribute to the TFSA.

RRSP Deduction Statement

This statement is included on your assessment as a calculation of your RRSP deduction limit.  The start of this statement is last year’s RRSP deduction limit plus and minus some adjustments (relating to pensions, prior year earned income) to arrive at the limit for the current year.  The statement also includes all unused RRPS contributions.

Net Capital Losses

This amount is normally in the text of the assessment, which we noted above as being very important to read.  If you are unsure of the years in which you incurred the losses you may request these amounts from CRA or view them online yourself through My Account / ePass (free CRA service).  Net capital losses for individuals may be carried back three years and forward indefinitely.

Home Buyers

If you have participated in the RRSP homebuyers plan then you have to repay the amount back over 15 years.   Each year the repayment amount is approximately one-fifteenth of the total amount withdrawn until the full amount is repaid to your RRSPs.   Your assessment will tell you the required repayment each year.  If you do not make an RRSP contribution (and designate it as a home buyer repayment) then you will have to report that amount as taxable income.

Lifelong Learning Plan

Participants who withdraw funds from their RRSP under the LLP must repay the amounts over a period of up to ten years.  If you do not make an RRSP contribution (and designate it as a lifelong learning plan repayment) then you will have to report that amount as taxable income.

Instalments

One of the services we provide for our clients who have to make instalment payments is to arrange to make these payments directly from your investment account.  This ensures the payments are taken care of and that interest and penalties will not apply.  Another option to fulfill instalment payments for people who have registered income accounts (i.e. RRIF) is to arrange quarterly payments to coincide with the instalment payments and withhold extra tax on these payments.

Notice of Changes

If CRA has reassessed your return or made changes they will outline these changes in your Notice of Assessment.  We encourage you to provide a copy to your tax preparer to ensure the changes made by CRA are correct.

If your investment advisor has tax knowledge, they may be registered as a representative with Canada Revenue Agency.  The easiest way to grant a representative (accountant or investment advisor) the ability to view your tax information online through a secure website is to sign a T1013 form.  Once CRA processes this form, your advisor may factor the above information in prior to making investment recommendations or creating tax minimization strategies.