’ Then the’ reduction

THOSE NEW Registered
Retirement Savings Plan
tules are still having unex-
pected resuits.

If you contribute to your RRSP
yearly or monthly and want to
have less tax withheld from your
paycheques, note the following
point to avoid delay and confu-
sion. :

When you ask Revenue Canada
to give your employer the required
waiver, you normally estimate
your income for the current year
— iz this case, 1992.

Bui because your RRSP con-
tribution limit now is based on the
previous year's earned income,
also note that figure: your 1991
earned income.

’ Otherwise, Revenue Canada wili

probably calculate your maximum
allowable RRSP contribution on
the 1992 or even 3990 income.
in tax
withholding will be Tess than it
should... |

This is especially likely to occur

if you have your own business and
‘can control — or are subject ‘to
fluctuation in — your income.

Getting a large tax refund might
feel <good,. but it never. makes

- sense ‘financially. Ottawa has had -

the use of your moncy interest-
free.(the ‘budget has just extended
this interest-free ‘period another
. .45days), and you get back dollars

. , with less buying power.

. -*. You -may ask to have less tax
. withheld ‘whenever a tax deduction
‘or credit “will create or increase a
refund. That can‘be caused by not
--only RRSP contributions but also
‘alimony. paid, investment ex-

-., penses, _ charitable donations,
‘ foreign tax credits and so on.

‘unexpected - ‘income’ laterin the
year..won’t’ put” you in. a. position
: of owing tax.

"In ‘such a case, you . should

“- make an appropriate. payment di-

“vectly to your tax account before

_the end ‘of the year,”’ said Leah

_, Ben. Canaan, waiver officer with
‘Revenue Canada, Taxation.

“That wili help protect’ your el-

“ igibility for reduction in - future
- years."” ;

Some tax returns
are easier to fill out
_ than others _

BUSINESS

Examine your options
with new RRSP rules

Michael
-Grenby

DOLLARS AND SENSE

In other words, if you apply for
a reduction of withholding at
source but then end up having to
pay a significant amount of tax
for the year, your next iequest for
a reduction might be denied.

Ben Canaan suggested you
should apply toward the end of
the year for a waiver to take ef-
fect the following year so less tax
will coniizue to be withheld
without interruption. (You have to
make this request annually when
alimony, child support, etc. are
involved — then you need to
Fenew your request only every five
years.)

“We need al! the requested in-
come figures and proof of the
deduction or credit involved,”

‘said Ben Canaan, who handles

several thousand waiver requests a
year. “Otherwise, there could be
delays, or. approval for less ‘than

-. the amount requested.’”

You can get the necessary ap-

- plication form™'to have less tax

withheld by contacting your local
tax offi ee.

Should you sell or otherwise
transfer vour investment property
because of the budget proposal
that changes the capital gains ex-
emption rules? This should be an
investment decision first, a tax
decision second.

Investment property you buy

now will not qualify for the capi-
tal gains exemption. Any capital
gain on property you owned be-
fore March 6 of this year will be
pro-rated,

So if your property value in-
creases in future at the same rate
as or at a greater rate than during
the period you held the property
up to Feb. 29, you will still be
able to claim the exemption. But
if the value doesn’t maintain that
rate of increase, your ability even-
tually to use the exemption will be
reduced as time goes by.

You need to see the new mini-
mum withdrawal percentages table
to understand the effect of the
budget proposal on Registered
Retirement Income Funds. Every
financial institution and retirement
income specialist should have a
copy of this table by now.

Under. the new rules, you may
keep your RRIF for life — instead
of having to withdraw all the
funds by the time you turn 90.

This. change is. significant, as
about one-third of those alive at
age 71 — the deadline for conver-
ting your RRSP — will live
beyond age 90.

If you have an- RRSP or trans-
fer RRSP funds to an RRIF by
Dec. 31, you wili fall under the
old “‘minimum withdrawal’’ rules

until age. 77. That means the-

amount. you must withdraw each
year is smaller than under the new
rules.

From age 78 on --—. or if. you:
start your RRIF after Dec. 31 —
the new rules apply. Under the
new rules, the minimum
withdzawal .. required each year
from age 78 on is less” than under
the old rules and stups increasing
at age 94,: when the minimum
reaches 20% of the balance in
your RRIF, >

Mike Grenby is a North
Shore-based columnist and. in-
dependent financial adviser who
works with individuals; he will
answer your -questions as space
allows — write to him c/o The
North Shore News, 1139 Lonsdale
Ave., North Vancouver V7M
2H4, a

To make things easier, we’ve de-

signed two simpler.tax returns that
don’t have any calculations.

These optional returns are great for
people with straightforward tax
situations. If you’re’ under 65, you
can use the “Short.” If you’re 65 or

over, the “65 Plus” is for you.

F

If you use one of the yellow

“no-calculation” returns,
just send us that one. You

" don’t need to complete any

Wednesday, March 11, 1992 — North Shore News — 47

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