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Tax Saving Plan for Employed People

November 24, 2011

By Shailendra Jain

Employed people have less scope for tax savings as compared to self
employed people.

If you are currently employed, the income and benefits from and related to
your employment are taxed and you cannot claim any deductions against
employment income except that are specifically allowed by the system.

Here are some taxes planning techniques which can lead to save taxes:

• Arrange to get non taxable benefits: There are some employment benefits
which are not taxable like contributions to a registered pension plan,
contributions to a group sickness or accident insurance plan, contributions to
a private health services plan, all or portion of the cost of free or
subsidized school services for your children.

• Ask to have your source withholdings reduced wherever possible: In any
situation where you expect to receive a refund after filing your return, you
should review the form which you file with your employer and seek to have
source with holdings reduced. If you get a refund, that means the CRA has been
holding your money and not paying you interest on it for many months. It is
better you can send a cheque to the CRA at filing time so that you can use that
funds in the meantime.

• Pay interest owing on loan from employer by January 30 of the following

If you receive a low interest -free loan from your employer, you are
considered to have received a benefit from employment. The benefit is set at
the CRA’s current prescribed rate of interest minus any interest you actually
pay during the year or within 30 days after the end of the year. This will
provide you with a cash flow advantage.

• Consider employee’s profit sharing plans for cash flow purposes: there is
no source withholding on the amounts paid by the plan to you. Careful timing of
the employers’ contributions and the plan’s disbursements can give you better
cash flow than would a straight bonus payment.

• Transfer retiring allowances to an RRSP: If you transfer the entire
retiring allowance into an RRSP, the legal fees will never become deductible.
When you take payments out of the RRSP, they are no longer considered a
retiring allowance.

• Claim the employment tax credit to help cover your work related expenses:
Employees can claim a 15% tax credit to help cover their work related expenses.

• Employed trades people can claim the deduction for the cost of new tools:
If you are an employed trade person and you must use your own tools on the job,
you can deduct the portion of the cost of new tools.

• You can claim rebate for GST/HST paid on expenses deductible from your
employment income.

Shailendra Jain;

SJ Chartered Accountant;

Serving Mississauga, Toronto, Etobicoke for Tax, Accounting, Audit
and Advisory.



Ph: 416-622-1221

Article Source:http://EzineArticles.com/?expert=Shailendra_Jain

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