Many individuals wait until the last couple weeks of April to file their income tax return and this year will probably be no different. The following is a checklist of some last minute reminders that individuals should be aware of when preparing their 2004 individual income tax return:

• The deadline to file your 2004 individual Canadian income tax return to the Canada Revenue Agency is April 30, 2005. Selfemployed individuals and their spouses (or common -law partners) have until June 15,2005 to file their 2004 income tax return. The importance of these deadlines is that if there is a balance of tax owing on your tax return and the deadline is not met, then there will be a late filing penalty of at least 5% of the balance owing. If there is a refund owing then there are no penalties for late filing.
• Regardless of the above filing deadlines, if there is a balance of tax owing for 2004, this tax should be paid on or before April 30, 2004 (even for selfemployed individuals) to avoid late interest charges.
• To maximize tax savings, spouses should consider combining their charitable donations and have the higher income earning spouse claim such donations on hislher tax return.
• To maximize tax savings, spouses should consider claiming the family's medical expenses on the lower income spouse's tax return assuming that spouse is paying at least some taxes.
• If you sold securities in 2004, make sure the Adjusted Cost Base is accurate. If not, there could be double taxation.
• If you received a tax refund from the Canada Revenue Agency in 2004, check the Notice of Assessment to determine if the CRA also paid you interest in 2004 on this refund. If so, this interest income is taxable and should be reported on your 2004 tax return.
• If after netting your capital gains and losses you have excess capital losses in 2004, consider completing Form TIA to carry back the unused capital loss to offset taxable capital gains reported in 2001, 2002 and/or 2003. This will allow you to recoup some taxes paid from previous years.
• Check the amounts in the "Paid by You" Column on your Summary of Investment Income and Expenses to determine if any of these amounts can be claimed for tax purposes as a deduction or credit.
• If there was a security in a non-registered account that had no value during 2004, determine if the security is "worthless" and if a 2004 capital loss can be claimed.
• If you anticipate receiving a tax refund for next year (i.e. 2005 tax return), consider filing Form T1213 to the CRA. This form is optional, so there is no deadline. If this form is accepted by the CRA, they will send you a letter that can authorize your employer to reduce your tax withholdings on your paycheques gomg forward which will increase your net pay.

If you have any questions or require clarification of any of the issues discussed in this document, do not hesitate to discuss these with your advisor.

What is socially responsible investing?

Socially responsible investing, sometimes known as ethical investing, is the application of your personal values and societal concerns to your investment decisions. It considers your financial needs as well as the selection and management of investments based on your personal ethical, moral, social or environmental concerns.

There are three basic approaches to socially responsible investing which have evolved over the years:

1. Screening – the application of guidelines or “screens” to the investment process. These screens can be positive and inclusive, or negative and exclusive.

2. Community Investment – the investment of money that contributes to the growth and well-being of particular communities.

3. Shareholder Advocacy – the process of using shareholder influence to help bring about positive change at corporations.

How does it work?

You, as an investor, can select investments managed by professionals employing social screening, or can choose your investments based on your own screening criteria and research.

By selecting those investments employing positive social or environmental guidelines, you’re able to educate yourself on companies and issues. A significant portion of the investing public in Canada already employs this strategy, with socially responsible investing now accounting for close to $6 billion.

There are an almost infinite number of issues that you can use to select investments for your own portfolio. Here’s a list of some of the most common criteria used to screen fund companies:

• Charitable contributions – how much and what kinds of charities do they contribute to?
• Community involvement – do they support local programs that benefit their community?
• Corruption – do they work with governments that operate in corrupt ways?
• Ecology and environment – do they follow sustainable development practices?
• International human rights – do they conduct business in countries that respect human rights?
• Labor relations – do they treat their employees well? Do their contractors use sweatshops or employ child labour?
• Military weapons – are they a major military contractor?
• Nuclear power – do they generate nuclear power or contribute to the industry?
• Product safety and quality – do they produce safe, reliable products?
• Women’s issues – do they have a good record for treating their female employees and women in general fairly?

Can you reconcile your social conscience with your financial goals?

In Canada, Michael Jantzi Research Associates has created the Jantzi Social Index (JSI), an index of 60 Canadian companies selected on social responsibility criteria. The index was launched in February 2000, and therefore does not have a long-term track record.

However, according to the Social Investment Organization (SIO), the index was backdated using historical data to determine if it was able to outperform indices of conventional Canadian stocks. This data shows that the value of the JSI stocks increased by 18.9% during the last five years, while the TSE 100 grew by 18.1% and the TSE 300 rose by 17.4%.

The cause of such outperformance is a matter of debate. Some researchers believe that it’s due to the fact that socially responsible companies usually reside in stable sectors and in successful industries. Others believe that there’s a social premium that leads to higher returns because of far-sighted management, higher productivity and lower legal and social liabilities.

What is clear is that, contrary to conventional wisdom, investing according to social and environmental screening does not necessarily lead to lower returns. In fact, in some cases, social screening can produce substantially higher returns.

The choice is yours

Socially responsible investing examines the extent to which your morals and concerns determine your investment decisions. The bottom line is that you can make a difference while building a secure financial future. How you do that is up to you.

The Canadian stock market has had a split personality, repeatedly rising to set new record highs, then falling back again sharply. It’s left many investors wondering whether it’s a bull market – or a bear market. In many ways, it’s both.

A closer examination of the benchmark Canadian stock index, the S&P/TSX, shows that the strong performance is dominated by a handful of stocks. Take away the top 15 performers and the TSX, instead of being up around 600 points, would be down 600 points. In other words, the TSX’s top 15 stocks are up 1,200 points, while the remaining 285 stocks, in aggregate, are down 600 points. What’s more, these top 15 stocks are all from just two sectors of the economy – the energy and materials sectors – reflecting the burgeoning global demand for commodities such as metals, forest products, gold, oil and gas. These two sectors were up 21.9% and 13.3% respectively halfway through 2008.

Meanwhile, the financial sector – which together with the energy and materials sectors accounts for over three-quarters of the TSX – was down 3.1%. Most other sectors were also down.

So even while the TSX sets new record highs, most Canadian investors are experiencing poor returns because their investment portfolios are diversified across many sectors, not just the materials and energy sectors. Furthermore, many investors purposely limit their exposure to these two particular sectors, which can be very volatile, in favour of normally less volatile sectors like the financial sector.

Coping with the market’s split personality

Seeing their portfolio performance lag behind the TSX, many investors are wondering whether there’s anything they should do. The following are some strategies to manage the market’s swings:

1.  Don’t try to time the market. Avoid the temptation to do this – or sell on the highs and buy on the lows. History shows that the long-term direction of the market is always up. But over shorter time periods, it’s impossible to predict with any accuracy what the markets will do. Not even the most successful investment professionals can do this consistently.

2.  Keep some cash on the sidelines. With the markets being so uncertain, it may be wise to increase your allocation to cash and other liquid investments. This way, when the market’s direction becomes clearer, you will have some cash on hand to take advantage of potential opportunities.

3. Stay properly diversified. Loading up on stocks from the energy and material sectors because they’re “hot” now – while excluding the rest – is a risky proposition. Just because these sectors are outperforming now doesn’t mean they will be tomorrow. A properly diversified portfolio holds stocks from a range of sectors to reduce the impact of any one particular sector performing poorly.

In real life, every marriage ends some day. Fifty per cent of marriages end in divorce, and 35 percent with the death of the husband. As a result, on average, women can expect to spend one-third on their adult lives alone.

When death or divorce touches you personally, it can be both an emotional and financial trauma. Thinking of your finances in the midst of grief and pain can be completely overwhelming, especially if your spouse always looked after such matters.

When I do" becomes "I don't."

Of the 50 percent of women who get divorced, only 28 percent will get any kind of ongoing financial support from their ex-husband. At the same time, a recent Gallup poll found that only 26 percent of women have a financial plan. So what's a woman to do?

1. First off, separate your emotional state from your financial one. You will have a life after divorce, but it's up to you to make that happen.
2. Get your divorce paperwork organized in one place, including your divorce decree and settlement papers. Make several copies of all important papers and keep the originals in a safe deposit box, while ensuring your lawyer has copies as well.
3. Take control of your spending by figuring out just how much money you have to live on each month.
4. Create a budget by writing down your expenses and find out where your money is going. Credit card bills and bank statements from past years are great guides.
5. Don't be careless with money or turn over all your financial decisions to someone else. It's your life, your money and your responsibility.

Heirs to the throne

Success as a parent means taking care of your family. Success as a single parent means sticking to a budget. The grim fact of the matter is that women continue to earn less than men, and are even worse off financially after a divorce - the average woman's standard of living drops significantly in the first year of divorce, while the average man's rises. Another ugly statistic: over a third of women awarded support never see a penny of it!

After a divorce or death, children need to lower their expectations. Going from two incomes to one is a challenge. Children may have a hard time coping with all the changes, but with a little understanding and a lot of love, they'll come to accept their new life on a budget.

Till death do us part

If you're not prepared, the onslaught of paperwork that will hit after your spouse's death may seem overwhelming. Try the following:

1. Get a handle on your assets by determining what you have to work with. Records of both your husband's and your own retirement plans, all insurance policies, bank and brokerage accounts and the deed to your house should be kept together in one safe location.
2. Obtain your husband's death certificates and make several copies.
3. Notify your husband's employer and file for any benefits owed to you, such as pension income, life insurance and health insurance coverage. The company's human resources department should be able to best direct you.
4. Alert your husband's life insurance company and file a claim. Your insurance agent should have all the policy information and forms you'll need.
5. Contact financial services providers so that joint accounts can be transferred to an account in your name.
6. Update your insurance policies but don't make any hasty investing decisions concerning any lump-sum insurance or pension payouts. If possible, place any cash into liquid money market funds in case of unexpected cash outlays.
7. Create a budget that works for you. You'll need to decide how to allocate your money and any payouts to satisfy your needs, as well as how to invest your money for retirement, for your children's education, and so on.
8. Once all the major financial tasks are taken care of, take time for yourself. Don't be pressured into make big financial decisions when still you're trying to cope.

Your fairy godmother

And as soon as you feel up to it, you might also consider finding an advisor that can help you in the realms of:

• Cash management
• Education funding
• Risk management
• Retirement planning
• Tax planning
• Investment management
• Estate planning
• Special needs

John Exler is an Investment Advisor with RBC Dominion Securities Inc. This article is for information only. Consult with your professional advisor before taking any action.
john.exler@rbc.com
905-895-2949

Retirement planning can be divided into three distinct phases, based on your life stage. During each stage, there are specific investment and financial strategies you should consider to help you achieve your retirement goals.

Life Stage 1 – Building your retirement nest egg

• Start early to maximize the impact of tax-deferred compounding over time
• Catch up on any unused RSP contribution room as soon as possible
• Contribute earlier in the year or on a monthly basis to enhance growth potential
• Consider opening a spousal RSP to reduce future taxes

Starting early – the power of tax-deferred compounding

It's important to get an early start on building your retirement nest egg – whether you're saving through a Registered Retirement Savings Plan (RSP), Registered Pension Plan (RPP), or both.

The earlier you start, the greater the impact of tax-deferred compounding. Because any income earned within your RSP (or pension plan) accumulates tax-free until withdrawn. If possible, contribute the maximum every year, while catching up on any unused contribution room from previous years.

How you time your RSP contribution can also make a big difference. If you contribute $5,000 at the end of each tax year for 30 years, your RSP will be worth roughly $566,000, assuming an 8% annual growth rate. But if you contributed the same amount in monthly installments instead, your RSP would be worth approximately $587,000. And if you contributed the lump sum at the beginning of each tax year, your RSP would be worth about $611,000 – $45,000 more than if you contributed at the end of the tax year.

Reducing tomorrow's taxes – today

A spousal RSP is an excellent way to potentially reduce your future taxes. With a spousal RSP, the goal is to equalize retirement income streams between you and your spouse.

For example, if you have one retirement income of $100,000 and pay income tax at a marginal rate of 45%, you would pay $45,000 in tax, leaving you with $55,000. But if you had two smaller income streams instead, $50,000 each, you would pay tax at a lower marginal tax rate on each of the incomes, resulting in lower combined taxes. Assuming the tax rate is 35%, you would only pay $35,000, saving $10,000.

Life Stage 2 – Protecting what you've built and taking it to the next level

• Reduce risk and enhance return potential with advanced diversification strategies
• Rebalance your portfolio to ensure the optimum level of global diversification and sector diversification

Advanced diversification strategies

Diversifying your investments is a proven strategy for reducing risk and increasing return potential. One of the fundamental ways you can diversify your investments is by asset type – stocks, bonds and cash.

Stocks provide long-term growth potential, while bonds and cash provide a safety cushion.

But diversifying by asset type is just a starting point when it comes to properly diversifying your retirement savings. You should also consider other diversification techniques, including:

Global diversification. Studies show that a portfolio balanced between Canadian and global investments reduces risk and enhances return potential. With the elimination of the 30% foreign content limit in 2005, it's now much easier to increase your level of global diversification.

Sector diversification. Today, stocks tend to perform based on the industrial sector, regardless of international borders. Diversification by sector, in addition to international exposure, may enhance your opportunity for greater returns.

Life Stage 3 – Maximizing your retirement income

Consider alternatives to boost your after-tax income

Boosting your income

Getting the income you need from your retirement savings can be a challenge given the low interest rates currently offered by GICs and government bonds. Seeking higher income, retirees are increasingly turning to other investments, like corporate bonds, income trusts and dividend-paying stocks. The key is maintaining the right balance between secure investments and investments offering the potential for higher income.

Corporate bonds. Carefully selected high-quality corporate bonds can provide higher interest payments compared to a government bond, without substantially higher risk. Risk is determined by the credit rating of the issuer. A high-quality corporate bond issued by a well-established corporation may have a credit rating of “A” compared to “AA” for a government bond. A medium-grade corporate bond might have a credit rating of “BBB” but would most likely offer a higher interest rate to attract investment.

Income trusts. Like stocks, income trusts are publicly traded equities and should be considered part of the equity component of your portfolio. But unlike stocks, income trusts distribute most of the cash earned from underlying assets directly to investors. Income trusts can provide much higher income than bonds, but bear in mind the distributions are not guaranteed and can vary.

Dividend-paying stocks. You can boost your after-tax income with dividends from Canadian corporations, which are effectively taxed lower than interest income due to the dividend tax credit.

John Exler is an Investment Advisor with RBC Dominion Securities Inc. This article is for information only. Consult with your professional advisor before taking any action.john.exler@rbc.com905-895-2949

It’s that time of year when, like Christmas, 'giving’ has implications to the pocketbook. Yes, the taxman cometh. And if you own your own business, the taxman has the habit of dropping by twice: once to see how your business is doing and once again to see how you are doing.

To help you make the most of the taxman’s visit, here are 12 tax-planning strategies for the owner manager that has their own incorporated business. Due to the complexity of tax laws and that every corporation and owner manager has different facts and circumstances, it is important to consult with qualified tax and/or legal advisors before taking any action on the strategies below.

• Consider employing lower income family members and pay them a salary that is reasonable based on the services they are performing. The salary will create RSP contribution room and generate CPP/QPP pensionable earnings.


• Consider paying dividends from corporate earnings to spouses and adult children shareholders. Canadian dividends are taxed lower than salary. However dividends will not create RSP contribution room or CPP/QPP pensionable earnings. Dividends paid out to benefit related minor children are taxed at the highest marginal tax rate under the “kiddie tax” rules.


• Consider an estate freeze so that the capital gain on the future growth of the business is deferred and attributed to the next generation but the control of the business can remain with the parents.


• In certain circumstances, consider setting up an RCA or IPP to increase the retirement savings of the owner-manager and lower the tax burden of the corporation.


• Consider corporate owned life insurance for funding buy-sell agreements, funding tax liabilities, key person protection, etc.


• Use corporate funds to make the RSP contribution for the owner-manager. The cash used to make the RSP contribution will be considered employment income (reported on the T4 and thus will create future RSP contribution room) but the offsetting RSP deduction will avoid taxation on the increased salary.


• If possible, pay bonuses to employees to reduce the company’s taxable income to $300,000 since the first $300,000 of small business active income (2005 value) is taxed at low tax rates (17% - 22%).


• Consider deferring employee bonuses up to 179 days after the corporate year-end. The company will get a tax deduction in the current corporate tax year but does not have to pay the bonus in the current year. The employee though will declare the bonus in the year of receipt, which in certain cases may lower the tax liability for the employee on the bonus. However withholding tax will continue to apply on the bonus.


• Ensure a legally binding shareholder’s agreement is in place. Among other things a shareholder agreement can help to ensure an orderly manner for settling shareholder disputes; can set restrictions on selling shares to third parties; can provide a framework for the purchase of the shares of a deceased shareholder; competition clauses, etc.


• Determine what the Paid-Up Capital (PUC) is on the shares. If the PUC is not nominal, an amount per share up to the PUC may be paid out to the shareholder tax-free in a complex series of transactions. This can assist shareholders requiring cash in a tax-effective manner. However, this tax-free pay out will reduce the ACB and PUC of the shares going forward.


• To minimize net corporate tax due to “integration”, consider paying out dividends to the shareholders in the same year that passive investment income is earned in the corporation (however before doing this consider other issues such as creditor protection, U.S. Estate Tax, etc).


• Ensure that the corporation qualifies for the $500,000 qualified small business exemption prior to a disposition of operating company shares. If not, certain transactions may need to take place prior to disposition in order to “purify” the shares for purposes of the qualified small business exemption.

JANUARY

• 15th - Deadline for an employee to inform their employer of any deferred stock options benefits related to a stock option exercise from previous year.
  
• 30th - Deadline to pay interest for previous year on a family loan at prescribed interest rates.
  
• Consider making maximum lump-sum RSP contribution for current year.
  
• Consider making $2,000 lifetime over-contribution to your RSP.
  
• Review your personal financial plan, including your estate plan to ensure it is still appropriate.

FEBRUARY

• 28th - Deadline for employers to send in T-4 summary to the Canada Customs and Revenue Agency (CCRA). In addition, a copy of the T-4 slip must be delivered or mailed to the employee by February 28th.

MARCH

• 1st - RSP contribution deadline. If it’s a leap year, the deadline is February 29. This deadline applies for regular RSP contributions, retiring allowance RSP contributions, or Home Buyers’ Plan or Lifelong Learning Plan RSP repayments.


• 1st - Labour-Sponsored Fund contribution deadline. If it’s a leap year, the deadline is February 29.


• 15th - 1st quarterly Canadian tax installment is due.


• 31st - Inter-vivos/Living Trust tax return deadline. If it is a leap year, the deadline is March 30th.


• If you are expecting a tax refund, consider filing your personal tax return early—but only after you have received all your necessary tax information.

APRIL

• 15th - U.S. resident tax return or four-month extension request deadline. Deadline for extension request for non-resident aliens who are subject to withholding tax. Deadline for the balance owing to avoid interest charges.


• 30th - Deadline to file your Canadian personal tax return and pay any balance owing, to avoid paying interest and a late filing penalty.

No one likes to pay more taxes than they need to. Here are some strategies to help you maximize your RSP performance.

Make the Most of Your RSP

When it comes to “tax-wise” investing, an RSP is hard to beat. Not only are your RSP contributions tax deductible, providing you with immediate tax savings, they also grow faster due to being within a tax-deferred vehicle. This “dual tax advantage” can enable you to build a much larger retirement nest egg over time, compared to a non-registered investment.

If you've fallen behind in planning for your retirement, you're not alone. A recent study showed that 53% of affluent Canadians do not have a formal written financial plan.

Do you need to catch up?

If you have less than 15 years before retirement and you have saved less than $200,000, then you may need to fast-track your retirement savings plan. This is especially true if you don't anticipate a future source of additional income, such as a substantial inheritance.

Here are eight strategies that could help you get back on track:

Rising costs and shrinking government benefits are making it increasingly challenging for Canadians to build a nest egg that will let them retire in style. If you plan to retire earlier than the “standard” age of 65, the challenge becomes even greater.

It doesn't mean you have to give up your dream of early retirement. With careful planning and some special strategies, you can overcome the hurdle of fewer income-producing years to enjoy a prosperous early retirement. The planning begins right now.

Changing expectations

Donating cash is still the most popular way for Canadians to help charities. But if you want to maximize the amount your favourite charity will receive – and gain valuable benefits for yourself – you might want to explore some of the following strategies.

Make a bequest in your will

Through your will, you can arrange for specific assets, including cash, stocks, or property, to go to a specific charity. Or you might leave the estate residual (the amount left over after paying debts and making all necessary designations) to a specific charity.