1. Tax Loss/Tax Gain Selling May Make Sense. Generate losers to offset capital gains in the year; carry back losses to recover taxes paid in prior years or generate capital gains to use up exempt gains balances left over from the 1994 capital gains elections. This should be done in December, usually before December 23, and in consultation with a professional tax advisor who can work out various scenarios for the current and prior tax years. It’s important to “tax cost average”; that is, use your carry over opportunities to your maximum advantage.

2. Contribute to your RRSP. Because 90% of Canadians fail to top up their RRSP contribution room, it pays to remind yourself all year long that double-digit returns result from the tax savings offered by an RRSP contribution. But, at year-end, consider gifting an RRSP to your family members. When you add the tax savings to the deferred taxation on the earnings within the plan—you are given an added bonus! As well remember the leveraging opportunities presented through the Lifelong Learning Plan and the Home Buyer’s Plan, for those who wish to access RRSP funds to go back to school or buy a home. It all adds up to an investment you can’t afford not to make. Remember, the RRSP contribution is also instrumental in increasing refundable tax credits like the lucrative Child Tax Benefit, which is based on family net income.

3. Maximize Your Tax Deductions. Taxpayers chronically under-report eligible deductions, including moving expenses, childcare expenses, employment deductions, and carrying charges. Taken together with chronic under contributions to RRSPs, it means that net income is being overstated in many cases, causing taxpayers to lose out on the full benefits they could be entitled to under non-refundable and refundable tax credits. It also means they may be over exposed to claw backs of the Age Amount, OAS and Employment Insurance benefits. So, at year-end, take some time to harvest all the data and be ready to maximize your tax savings results for tax season 2004!

4. Adjust Prior Errors and Omissions. If you find that you missed a tax deduction or credit, you can adjust most federal provisions under CCRA’s Fairness Package all the way back to 1985. Simply file form T1ADJ with the applicable receipts. This can make for a lucrative and most welcome year-end bonus, especially if you are looking for creative ways to pay off your credit cards in January!

5. File Returns with a Family View. There are many ways to do a tax return mathematically correctly. . .but your goal should be to file the family’s tax returns to the best benefit of the entire household. Remember that spouses are able to act as agents for one another regarding certain tax provisions: the claiming of dividends, medical expenses, charitable donations and political contributions, for example. Make the decisions on who should claim what, preferably before year-end to maximize potential savings.

6. Transfer Non-Refundable Tax Credits Amongst Family Members. There are two formal transfer provisions relating to certain non-refundable tax credits and their use within the family. Amounts that can be transferred from the lower earning spouse to the higher income earner include the age amount, pension income amount, disability amount, and tuition and education amounts. The latter credits can also be transferred from child or grandchild to supporting individual, to a maximum of $5000 per year. For these reasons, it pays to watch net income levels of all family members. Reducing net income of the lower earners—possibly with RRSP contributions—can pay off for higher earners. So, once again plan before year-end to minimize net income of both spouses.

7. File Returns for Minors. If you have a child age 18 who has little or no income, be sure to file a tax return. This will generate a GST rebate in the quarter after the child turns 19, and accumulate RRSP contribution room on actively earned income sources, to assist with maximization of non-refundable tax credit provisions. If you missed that, remember you can recover missed provisions by filing tax returns in retrospect under CCRA’s Fairness Provisions. Nice Christmas gift for your teenager!

8. Minimize Taxes on Self-Employed Earnings. Proprietors should be sure to fill up the gas tank, buy those office supplies, reward special clients with gifts or pay year end bonuses to staff—all before December 31 to reap tax benefits sooner. It may also make sense to acquire new assets at year-end to initiate half-year rules on capital cost allowances in the current tax year. Taken to January of the next tax year means that you’ll have to wait until the spring of 2005 to recover benefits.

9. Reduce Tax Withholding On Next Year’s Employment Earnings. Contrary to their popularity, refunds are not a good thing! If your average tax refund is $1000 a year or more give your head a shake. . .that’s money that should have been working for you all year long. File Form T1213 if you have deductions that don’t show up on a TD1 Form: RRSP contributions, significant medical expenses, charitable donations, child care or other deductions to get your refund every two weeks instead of at the end of the year. Same principle applies to quarterly installment payments: pay only the correct amount—not one cent more! Remember, you can adjust your installments if your income has dropped significantly from the prior year.

10. File Family Tax Returns on Time to Avoid Late Filing Charges. For individuals, the deadline is April 30, for proprietorships it is June 15. But proprietors should stick to filing by midnight April 30 if they owe money, as the interest clock starts ticking on May 1. Remember that the late filing penalty will only kick in if you owe; however there is also a penalty for those who receive refunds and fail to file on time: your money will not be earning any investment income and will in fact become eroded by inflation. It always pays to file on time and put your money to work for you!

Evelyn Jacks is the best-selling author of 30 books on the subject of personal income taxation and President of The Knowledge Bureau, publisher of live and continuing education content in the financial services industry. For more information on courses and books from Evelyn Jacks, please see www.knowledgebureau.com or call 1-866-953-4769.