6. April 2010 by Dan Walkow, CFA, CMT.

The widely anticipated expansion of the Roth IRA conversion program steamrolled into 2010 in a blaze of hype and publicity, but a new report shows consumer interest has been more of a whimper than a bang. This tax break offers basically one year in which anyone with an Individual Retirement Account (IRA) can shift the money into a Roth IRA and never again pay tax on it.

Read more: http://www.time.com/time/business/article/0,8599,1977893-1,00.html#ixzz0kK2jJaxy

I think one of the most appealing aspects of the new IRA rules is for those investors who have more than enough retirement savings and are looking to “pass down” their IRA to their children who can grow and withdraw assets tax-free.

Posted in Tax, Pensions, Taxation | No Comments »

3. April 2010 by Dan Walkow, CFA, CMT.

The Problem:

Canada Revenue Agency tells me I was not eligible to split pension income with my wife in 2007 and 2008. Now I have a huge tax bill with a penalty. The income came from a registered retirement income fund and a locked-in retirement income fund. That money came from my defined-contribution pension plan when I left Sobeys in 2006. I am now 58 years old.

The Pain:

Only lifetime income paid directly from a pension plan qualifies for the federal pension credit and for splitting with a spouse to save tax, unless it is transferred to you on the death of an earlier spouse. Your RRIF and LRIF withdrawals will not qualify as pension income until you reach 65. It’s another example of discriminatory treatment toward folks without a pension plan.

Posted in Tax, Taxation | No Comments »

31. March 2010 by Dan Walkow, CFA, CMT.

Investors who are under the illusion that all is well in Canada in regards to provincial finances may want to think twice.

Ontario leads the defict parade in Canada and for an interesting comparision between Ontario, Canada and California check it out here.

Posted in Tax, Taxation, Economics | No Comments »

31. March 2010 by Dan Walkow, CFA, CMT.

Hiking taxes and raising fees are not exclusive to most States in the USA; Canadian provinces are faced with growing deficits and tax hikes are front and center both on the consumption and income sides of the ledger.

The squeeze also continues on the the service and government spending side where services and budgets are being slashed to narrow the budget margin.

Expect more, alot more. Deficit reduction is going to be a multi-year process and we are only beginning to  see federal governments both in the USA and Canada implement larger tax grabs. Mindful of the early stages of the economic recovery most governments are introducing tax hikes in bite size chucks but as things improve its going to accelerate.

One wants to revisit your tax planning strategy and prepare accordingly.

See the recent article at the Financial Post on provincial tax hikes here.

Posted in Tax, Taxation | No Comments »

28. March 2010 by Dan Walkow, CFA, CMT.

WITH all the hoopla over the health care bill, hardly anybody noticed that a job creation bill that President Obama signed on March 18 makes it much harder for United States citizens to avoid taxes by hiding money in overseas bank accounts.

Congress is attacking some of these schemes, courtesy of interesting provisions aimed at curbing tax avoidance that legislators wrote into the new jobs bill, known as the Hiring Incentives to Restore Employment Act.

The most substantive section of the bill states that foreign financial institutions will face a 30 percent tax on their United States investments if they refuse to disclose information about accounts they have opened for American citizens in offshore jurisdictions. Another aspect of the bill eliminates a clever derivatives strategy used by investors to make their tax bills on dividends disappear.

The law was written broadly and covers banks, hedge funds, securities houses, derivatives dealers, commodity traders and private equity firms. Indeed, any financial firm that holds or trades assets for its own account or for clients must comply with the new reporting requirements.

The United States continues to put legal means in place to compel offshore investors and advisors to declare and pay tax on offshore investment accounts and investments. Canada, as always, is  a little behind the USA in this regard but you can be sure that that gap will close soon as well. DGW

Read the full article at the New York Times here.

Posted in Tax, Taxation | No Comments »

23. March 2010 by Dan Walkow, CFA, CMT.

A California client of Swiss bank UBS was sentenced to six months home detention for tax evasion in the latest case stemming from a U.S. government probe of citizens hiding billions of dollars in offshore assets.

John McCarthy, a businessman from the wealthy seaside enclave of Malibu, also was placed on three years supervised probation on Monday and fined $25,000 for his guilty plea to a single felony count of failing to report a foreign bank account from 2003 through 2008.

In addition to the fine, McCarthy was ordered to make restitution of more than $485,000 he owed to the government, which he already has paid, and to perform 300 hours of community service, which he can do while under home detention.

He had faced a maximum penalty of five years in federal prison and $250,000 in fines.

But Judge Valerie Baker Fairbank said she weighed in McCarthy’s favor his cooperation with authorities, the fact that he had no prior criminal record and had otherwise “led a responsible, law-abiding life.”

Here is the kind of treatment one can expect if caught stashing money offshore and failing to report a foreign account!

Read more here.

Posted in Tax, Taxation | No Comments »

2. January 2010 by Dan Walkow, CFA, CMT.

Spouses of those wealthy who die this year might find themselves with nothing if the family will isn’t revised—a major wrinkle that could follow Friday’s repeal of the federal estate tax.

An update on the ongoing estate tax issue in the USA.

 Read more here.

Posted in Tax, Taxation | No Comments »

30. November 2009 by Dan Walkow, CFA, CMT.

You can skip your distribution this year and save on taxes.

If you are at least 70½ years old, you normally must take a taxable distribution from your traditional IRA or employer-provided retirement plan by the end of the year — whether you need the money or not — or face a stiff penalty equal to half of the amount you failed to withdraw. But this year is different. Uncle Sam says you can skip your required minimum distribution for 2009. (Employees who continue working past age 70½ are not subject to mandatory distributions from their company plans until they retire, but they still must take distributions from their IRAs.)

IRA owners who turned 70½ between July 1 and December 31 would normally have to take their first distribution by April 1, 2010. But thanks to the waiver, they can skip that, too, delaying their first mandatory-distribution deadline until December 31, 2010.

Read more here.

Posted in Taxation | No Comments »

16. November 2009 by Dan Walkow, CFA, CMT.

Canadian tax officials have also been cracking down on charities that use tax shelters. Those shelters have become big business in recent years, pulling in close to $1-billion in contributions in 2007. That represented nearly 12 per cent of all giving in Canada.

Many shelters operate on a so-called “buy low, donate high” basis. For example, some shelters used to buy massive amounts of artwork at a discount, have it appraised for a much higher amount and then donate the art to a charity. Participants in the shelter would receive a charitable tax receipt based on the appraisal value.

The Canada Revenue Agency (CRA) has been cracking down on these shelters, arguing they are tax dodges that serve no charitable purpose.

Last year, for example, the CRA shut down International Charity Association Network (ICAN), which issued more than $400-million worth of tax receipts in one year. CRA alleged ICAN was a tax shelter that provided inflated tax receipts to donors and offered few if any charitable services. Tax officials are now auditing more than 34,000 Canadians who participated in a related ICAN donation program.

Same old same old. Governments structure a tax incentive to encourage cash flow to a program or sector such as real estate investments, charities, oil and gas etcetera and usually sooner rather than later the “sharpies” come out of the woodwork.

It if sounds like it is too good to be true, it always is……

See full story here.

Posted in Taxation | No Comments »

14. November 2009 by Dan Walkow, CFA, CMT.

Gold and silver receive special treatment in the tax code. Considered collectibles, not capital assets, they don’t qualify for the maximum 15% tax rate on long-term capital gains. Instead, gains on the sale of gold and silver investments, including gold- and silver-backed ETFs, and gold bullion and coins (except certain U.S.-issued coins), are taxed at a maximum rate of 28% when such investments have been held for more than a year. When these assets are held for less than one year, gains are taxed as ordinary income.

See more here on how Gold and Silver investments are taxed in the USA. Barrons by subscription. Click here.

Posted in Taxation, Precious Metals | No Comments »