Business Owners: A few tax planning strategies to use BEFORE the end of 2018

Hard to believe that we are so close to the end of 2018! There have been some big tax changes that came into place this year for business owners and there is another one coming in 2019.

Business owners are very busy, especially this time of year, and you have to remember that not only do you have a business year end, which might not fall on December 31st, but you have a personal year end that does end that day. Proper planning and strategies need to be implemented now to make the most of 2018, but to plan for the years going forward.

Without going into big long technical details as to what is changing, how it is changing, etc, (that’s more of a one on one conversation) there are a couple of small strategies that are simple to implement and that make tax deferral sense.  The sooner you start, the more tax dollars saved, and it’s a great way to start off 2019.

Near the end of the year is when business owners will typically pay out dividends to themselves and a spouse. With the new income splitting rules we need to do an evaluation on whether or not you will qualify. I’ve had some business owners say they are still going to do it regardless. As long as you are aware of the HIGH penalty for getting caught, then by all means, go ahead. Alternatively, there are cash flow strategies that you can use in order to reduce the need for the previous higher dividend disbursement. For example, if you have young children and are contributing to an RESP, there might be a better long term solution than funding that out of paid dividends, which will result in keeping more tax dollars in your pocket. Don’t worry, with the proper plan there will still be money for your child’s education!

The next thing to plan for is the new passive income rules for small business owners and how they are going to impact you going forward. We want to preserve your small business deduction as long as possible. The sooner we start planning this, the easier it is. You don’t want your investments to all of a sudden do really well next year resulting in the sudden loss of your deduction. Investments have to do REALLY well for the increase in your investments to compensate for your higher tax rate. It is also important to remember that if your company has invested in and owns rental properties, rental income is considered passive income.

A few strategies we take a look at:

  1. Tax-free withdrawals – is there money that can be withdrawn from the corporation on a tax-free basis that would otherwise be invested in the corporation. (Shareholder loans being repaid.)
  2. Life Insurance – there are numerous reasons to hold life insurance policies inside of your corporation rather than personally. Depending on the structure and size of your corporation, even something as simple as eliminating the mortgage life insurance off your mortgage at the bank and owning one inside of your corporation can have compound tax saving benefits over the years. (Do not cancel your mortgage life insurance without your new policy in place, if this is a plan you decide to go with.) This is a cash flow strategy that is very effective. Also, qualifying permanent life insurance policies can also be an alternative investment solution when there is concern that investment growth inside of the corporation will limit or eliminate the SBD.
  3. Investment Strategies – every company is different and we need to take a look at if the best solution is to continue investments inside of the corporation, use RRSP’s/TFSA’s, or create an IPP.

There is not a one size fits all. There are other strategies that can be used as well. You will have to work with both your Accountant and your Financial Planner on the right solution for you and your company. Don’t just take a friend’s advice on this kind of stuff because “that’s what they did/heard”. It could be very costly! And your Accountant would love to hear from you this time of year. As one of my colleagues says, as of December 31st accountants become historians. Do your part and give them more to work with.

Do make sure you take the time to plan! Fail to plan, plan to fail. We are always so busy working to make money,  take a bit of time to make sure that you keep it.

$15/hr Minimum Wage is BS! Follow up from a conversation on Twitter

Some people are really angry that I say an increase in minimum wage is BS and some people are applauding it.

But yes, it is total BS! There is a better solution…..

First of all, you have to understand the demographics behind the people that hold minimum wage positions.  Stats Canada has some really great info on that. Essentially, the majority of minimum wage positions are held by students still living at home age 16 to 25. Another large group in the minimum wage category is women.

For the students living at home, they hold those jobs as entry level jobs. They learn a lot from those jobs! They are using that job to save money for a car, university and just spending money in general. Kudos to those parents that, first of all, aren’t just giving their kids every thing, but also kudos to those kids willing to work for it!

The problem with increasing minimum wage is that it affects EVERYONE, including the minimum wage earners. All of a sudden they lose their jobs or their hours are cut back. They might be making more per hour but their paycheck doesn’t show it. Then the costs of goods increase in order to compensate for the higher wages and they lose all the gains in their wage increase to compensate for higher living costs. This cuts into the wages of higher earners and they are less likely to spend on unnecessary items like eating out, then more minimum wage earners get laid off….. I could go on and on, but it is a vicious cycle! No one wins here.

We all need those minimum wage jobs…… and there are the right people to work in those positions. Students are excellent candidates for it and they are the one’s filling the majority of those positions. Minimum wage jobs tend to be highly concentrated in service jobs like fast food, gas stations, grocery stores. It teaches students more valuable lessons about life, work, and dealing with customers than school will ever teach them.

The problem is that a lot of women hold those positions as well. They also tend to be single women who have children as dependents. It’s not the minimum wage that is the issue, it is the access to education. The costs are too high and student loans are not friendly, especially for single mom’s. Now that is an issue that needs to be addressed and then minimum wage isn’t a concern.

I have a son who works minimum wage. He’s actually always had a job since he was 8 years old. He started with delivering flyers for the local newspaper. He has worked at a grocery store for the last 4 years. His hours have been cut back due to the minimum wage increase. I don’t blame his employer at all.  I work with too many business owners to be that ignorant to think they are just trying to pocket more money for themselves. That’s so far from the truth!

I’m a single mom who has worked hard to educate myself through university. In fact, as a Financial Planner, I am continuously taking courses and training and it costs money…. lots of money.  I wanted and knew I needed more than a minimum wage job to support me and my son. Anyone who wants to do it, will do it. Anyone is capable of doing anything that they want to do, including making $800/hr. Is it easy? Nope. Is it worth it? Yep. It all depends on what you want to do with your life and how motivated you are to do it. We all have to start somewhere. I’m not envious of people who make that much money at all! I applaud them! They are doing something right and following their passions in the right way. And financial security is obviously one of their passions. We all have that inside of us if we are willing to go for it and get over our fears and excuses!

Unfortunately, we have people like Gail Vaz-Oxlade (twitter @GailVazOxlade) telling us that it’s not possible. Total contradiction to what she used to teach in her financial shows. I believe in my clients way more than that. I see my clients reach for the stars and achieve it and exceed it. I have the best clients ever! Maybe that’s why I’m not as jaded as she is.

Check out the conversation on twitter 🙂

@cutecanukgirl and @GailVazOxlad

Let’s Talk About Sex, Baby

PictureQuotes1536948444“Let’s talk about sex, baby.

Let’s talk about you and me.

Let’s talk about all the good things and the bad things that may be.

Let’s talk about sex….. let’s talk about sex.”

Did anyone else just sing along to that? Honestly, I’ve had that song stuck in my head for the last couple days…… However, I’m not here to talk about sex, I’m here to talk about money!

I had the amazing opportunity to this week to spend a couple of days in Kananaskis with some of the most amazing women in the financial industry and it came up a few times that people are more open to talking about their sex lives than they are to talking about their money.

Does this surprise you —– or are you one of them too?

I still remember as a teen driving in the vehicle with my parents and “Let’s talk about sex” came on the radio. All of a sudden there was this awkwardness….. you know —- you really like the song and want to sing along but your parents are right there and —— yeah, remember that? If you have teens you are now experiencing that moment from both sides.

Fast forward 25 years later and now the sex conversation is much less awkward than the money conversation, even if it is with a complete stranger, let alone your parents.

And it’s completely valid to feel that way!

Money is far more private, personal, emotional, raw…… WAY MORE NAKED than people’s sex lives!

And it doesn’t matter if you have lots money, no money, or are doing not too bad – it is the most personal conversation you will ever have. And having that conversation with a Financial Advisor is like stripping down naked in front of a stranger….. it’s just so NOT comfortable!

Money carries so much emotional baggage. Happiness, sadness, stress, anxiety, comfort…. the list goes on. No matter the time of day, or what you are doing (even having sex), we carry money and it’s emotions around like a backpack. It’s always there!

And let’s be real here….. it’s  not often that sex creates negative emotions.

(So we ignore money and have more sex….. it feels better haha!)

It’s time to start those conversations around money. It’s time to face it and get naked (figuratively, not literally, just to be clear 😉

Trust me, a Financial Advisor has seen every money situation possible….. even yours!  And it’s never as bad as you think.

Yeah, it’s awkward at first….. but as time goes on you get more comfortable. You take that backpack off….. then maybe you untie your shoes….. and before you know it, you are having the best nap of your life (or sex for that matter) because it’s been hard to sleep well with a backpack.

It’s time for  you to get good vibes from your money. You deserve it!