Over-contributed to your TFSA or RRSP? Here’s what you should do.

By Randall Orser | Investments , Personal Finances , Personal Income Tax , Retirement

It can be an easy mistake to over contribute to your TFSA or RRSP especially if you have an amount automatically contributed each month. If you find that has happened to you there are some basics that you should know to remedy this situation.

RRSP Contributions

The penalty for RRSP over contributions is 1% per month for each month that you are over the limit.  The CRA  does allow you a $2000 grace amount for over contributions but that amount is not tax deductible.  The best way for you to correct an overpayment is to withdraw the amount, though it will be subject to taxes.  You will be able to claim an offsetting deduction if you meet certain conditions (link to CRA Website).  The main condition is that you make sure the the over contribution is withdrawn in the year that it was made, the year in which you receive an assessment for the year of contribution, or in the year following each of these years.

If you meet the conditions for offsetting deduction you can have withholding tax waived on the withdrawal by filing form T3012A.  If you don't do this then the tax withheld at source can be claimed as tax paid on your tax return.  It is very important to keep track of your RRSP contributions and make sure that you withdraw any over contribution so as to penalties that may arise.

TFSA Contributions

Over contributions to TFSA's happens often especially when people have multiple accounts in different banks and they lose track of those accounts over time.  As the limits allowable have varied depending on the year it can become really confusing to contributors.  Two common mistakes are:

  • Replacing a TFSA withdrawal in the same year - if your contribution limit has already been reached you have to wait to replace a withdrawal until January in the next calendar year.  This often happens when the TFSA account is used in the same way as a savings account with repeated withdrawals and contributions which can create an over-contribution as withdrawals do not lower the contribution limit.
  • When a TFSA balance is transferred to another institution, if this is not done as a direct transfer it will be counted as a second contribution and the withdrawal amount will not be added to your  TFSA room until the following year.

TFSA over contributions are 1% per month over the term of the over-contribution until the year end based on the highest excess amount for the month.  There is no $2000 grace amount as with a RRSP and penalties for over contribution must be paid by June 30th.

For more information on TFSA contributions see the CRA's TFSA Guide (RC4466) which also provides you with a RC343 worksheet  for you to keep track of your contributions and withdrawals.  It is also important to review your notice of assessment that you receive from the CRA which states how much contribution room that you have in your TFSA and RRSP for the current year.  It is a good idea to compare the CRA amounts with your own records.   In addition you can get a copy of your contribution history from the CRA's My Account service.

From an article by Denise Deveau

The Inevitable Second Wave – How to Prepare your Business

By Randall Orser | Business , Covid-19 , Employees

Experts tell us that a second wave of Covid-19 is inevitable and in some places it is already here.  Now is the time for your business to review the lessons you have learned in the past few months, and prepare for future disruptions.  More people have safely returned to work but even though it seems more like normal there is still the threat of a second wave.  It is a tough prospect for businesses already suffering from the impact of the first wave but making plans for further disruptions are necessary if they are to survive at all.  Here are some things that companies should consider.

  • Make sure that all members of the response team who have been working non stop take some downtime to rest.
  • Make an honest assessment of the weaknesses experienced in the first wave.  Everyone was learning so use what was learned and plan what could be done differently and more successfully the second time around.  Areas of concern should be logistics and distribution of equipment for people working remotely.
  • The response team needs to continue to compile best practices for a return to work so that employees can do so safely.  Regular meetings and communications with employees is important so everyone stays in the loop.
  • Plan for the financial impact of reduced hours or closure.  The past few months have been devastating for many businesses even though they have been helped by government subsidies. The decline in business could be even greater the second time around so it is important to be aware of programs still in place to help.  Revenue may not be the same as it was before the pandemic so business plans should be made with this in mind, reducing unnecessary spending and creating a financial cushion are most important. 
  • Creating a phasing out plan so that non-essential employees who have returned to work can quickly pivot to working remotely again and plans can be made for more essential workers to phase out of the office if needed to minimize interaction.  The phase out plan should also include how the organization will continue to operate including supply chains and communications to clients or customers.  It also may be necessary for your company to stockpile supplies.
  • Probably the hardest part of planning for a second wave is preparing mentally.  Employees at all levels will suffer anxiety over a loss of wages in event of a partial or full shutdown while they are still trying to adapt to the new normal.  It is important to create a healthy work environment for employees and if possible the company should consider providing counselling for its workers to help them come to terms with the changes.

From an article by Ethan Rotberg

Business Continuity in a Crisis

By Randall Orser | Business , Covid-19 , Retail

Unplanned events can have a devastating effect on businesses and the beginning of the pandemic was definitely no exception.  As consumers stockpiled goods, stores and their supply chains struggled to keep up and keep shelves stocked.  What came out of this situation is the need for senior decision makers to have risk-management and crisis planning strategies in place.

If a business is to survive in a crisis it is important to have:

  • A well tested business continuity plan already in place 
  • Strong leadership to ensure swift and decisive action in response to a crisis
  • Quick and honest communications with employees, shareholders and other stakeholders and where appropriate the media
  • Compassion for employees and customers impacted by the crisis
  • Being prepared to adopt alternative working, technological or communication systems, including changes to company operations, providing personal protective equipment, continuous sanitizing of workspaces and equipment, training staff in new protocols, and where appropriate facilitating remote working for employees.
  • Having access to financial and other resources to help absorb the costs of the crisis, an early and aggressive review of cash flow and the development of a cash management plan

Unfortunately the Covid-19 crisis unfolded without much warning so it was difficult for businesses to make preparations beforehand. It was and is important for businesses to take advantage of all the help available from governments and other organizations.  There the operations of the business should be continuously reviewed and changes made when necessary.  Everyone involved with the business should be kept fully apprised of all changes to business operations.  Managers must be given the resources to be able to act quickly, decisively and effectively and they should know how to access external help and advice.

From an article by CPA Canada

Financial Considerations for First Time Home Buyers

By Randall Orser | Investments , Personal Finances , Personal Income Tax

The Covid-19 pandemic has not stopped people from wanting to buy a home for the first time.  However it is necessary to do some long term planning including preparation for the unknown before taking the plunge into the housing market.

Canadian house sales rebounded by 63% month over month in June showing that the real estate market seems to be holding steady despite the financial problems that the pandemic has caused.  However the Canada Mortgage and Housing Corporation (CMHC) predicts that home prices will fall up to 18% due to job losses, declining income, stalling construction and it has now tightened lending restrictions.  Despite this, Canadians are still feeling optimistic about the real estate market mostly due to the all time historic low interest rates.

If you are thinking about purchasing your first home you should consider the following:

1.  Adjusting your expectations - even if you are relatively unscathed by the pandemic and still have stable employment it is a good idea to weigh your needs against what you want to own and adjusting your expectations.  For example do you really need a single detached home?  If you are working remotely would living outside of the city where property is usually cheaper to buy be an option?  Do you really need a backyard? if not would a condo work for you?  Making adjustments to your expectations will help you to better assess what you can comfortably afford while maybe retaining some of your savings.

2.  What you can afford should be based on your lifestyle not low interest rates. You should not be stretching yourself beyond the limits of what you can really afford while still retaining your lifestyle.  Though low interest rates are a plus for many the CMHC says it is important to consider the losses that you may suffer should house prices decline. Making a bigger downpayment will help to protect you against these possible future losses. 

3.  Align your budget - make sure your budget is realistic and something that you can stick to. Use it to determine the down payment that you can make while accounting for your expenses and leaving some money for savings.  You should consider your cash flow and liquidity and make contingency plans preparing for a worst case scenario such as job loss or unexpected costs.   It is important to maintain your savings rather than relying on credit to help you pull through difficult times.  

4.  Plan for hidden costs - purchasing a home involves a lot more than just your down payment, mortgage payments and the interest rate and you need to be prepared for these extra costs.  These include:

  • Closing costs - legal and administration fees which can account for 1.5 to 4% of the purchase price, land transfer tax, and title insurance.
  • Upfront costs - such as property inspections, condominium fees and mortgage default insurance if required.
  • Less obvious expenses that may vary depending on where you live but for new developments can include infrastructure, planning approval and zoning fees.  It is advisable to seek legal advice to review this type of purchase agreements as the fees can mount up and it is important to set some preset limits on what they are going to be.
  • Additional expenses - besides property taxes, utilities and insurance homeowners should also have a fund to cover repairs and other unexpected costs that pop up.

From an article by Sophie Nicholls Jones

How Covid-19 has Impacted Offices

By Randall Orser | Business , Covid-19 , Employees

The pandemic left many employers scrambling to provide a safe working environment for office workers returning to work.  Offices had to make physical changes to keep employees apart and personal protective equipment had to be provided for those office employees that needed it.  Workers now had to wear visors or masks, shared workspaces had to be shielded with plexiglass dividers and narrow corridors had to be converted into one way aisles indicated by arrows and if possible it was necessary to have more open doors into the office.

Washrooms had to be refigured, every other stall closed off and the number of employees allowed in the washroom at one time to be reduced.  In-office meetings would have to change format, they would be smaller and had to be held in larger boardrooms or in common areas with better air circulation.  Some companies invested in anti-microbial spray to coat surfaces and desks to protect from bacteria build-ups.  With all these changes offices would definitely look and feel very different.

The biggest change was the number of employees that returned to the office.  The two metre physical distance rule mean't that there had to be fewer bodies in the office at any one time.  Most offices had only had 20-25% of their employees return to work in the first phase of the return to work and Samantha Sanella from Cushman and Wakefield believes that up to 30% of employees will never return to the office without a vaccine.  

Sanella believes that there will be a return to the private walled in offices instead of the open concept style of office. Although these type of offices take up more space and are more expensive to build many companies will make the changes to keep their critical workers safer. As the overall office space will be smaller they will have some workers continue to work from home.

These changes in office format will result in prospective tenants changing their criteria when looking for new office space.  They are going to be more focused on the health certifications of the space and new office spaces may have a new look with more open windows and outdoor space.   

Despite these necessary changes experts believe that offices will survive.   Even though people are working from home they want to return to the office and have a connection other employees.  

From an article by Adrienne Tanner

Be Wary of Adding a Covid-19 Surcharge to your Business

By Randall Orser | Covid-19 , Retail , Small Business

As businesses reopen they have to try and make up lost revenue while at the same time having additional operating expenses due to Covid-19.  According to a survey in May by the Canadian Federation of Independent Business (CFIB) 70% of Canadian businesses reported a 30% drop in revenue and the other 30% reported a 40% drop.  On top of these losses businesses have had to cover the cost of the new health and safety protocols including social distancing, cleaning, sanitizing and personal protective equipment.

To try and offset these new expenses some businesses have introduced a Covid-19 surcharge a fixed amount or percentage which is added to the total bill.  While this surcharge is understandable because of the extra cost of dealing with customers during the pandemic, there are some considerations that should be made prior to passing these costs onto the customer.

1.  Consider the ways that you can make extra revenue - these could include making the surcharge optional or donation based, adjusting services or products offered or increasing prices.  The pandemic has had a greater impact on small businesses but they should still take time to consider what is the best way for them to adjust to this new norm and whether it will be temporary or permanent.  They should make sure that they have exhausted all government relief options before charging customers extra.   It should also be a time to focus on giving exceptional service to clients so as to not lose the ones that you have.  If you do apply a surcharge customers need to understand that it is due to the additional costs to reopen your business.

2.  If a surcharge is the right action for your business you need to decide to how you will calculate this additional fee - either as a percentage of the total bill or a fixed amount and it is important to remove it as soon as restrictions are lifted and your business goes back to normal.  Customers need to know that this surcharge is for a specific time and the cut off date will be honoured by your business.  The last thing that you need is for your clients to perceive that you are gouging in a time when everyone is going through financial difficulties.   It is important to inform customers of this extra charge in advance and explain why it is being implemented.

3.  Be upfront and honest with your customers - you need to clearly communicate to your clients the the surcharge is in place long before they reach your checkout.  Customers would rather know in advance so that they can make the decision whether or not to make the business transaction with you.  You should post on your website and social media, inform customers when they make an appointment or during phone calls, and make sure there is a notice posted on your store window or door.  

The response from consumers to paying a surcharge has been varied depending upon the industry type or products offered.  Once they understand why they are being charged extra most people are supportive especially if they know that there is an end date and they know that it is not an opportunity for the business to extra money.

From an article by Sophie Nicholls Jones

Find the Right Balance for your Remote Workers

By Randall Orser | Business , Cloud-computing , Covid-19 , Employees , Technology

Is your business planning to keep all or some of your employees working from home once the pandemic is over?  Though many giant companies are planning to keep employees working remotely, whether your company should do the same will depend on varying factors such the type of industry the size of your company and your available resources. Here are four things you should consider if you are planning to keep your workers working remotely.

1.  The resilience of your company and your employees - it can be difficult to create a workable balance between how things were done prior to the pandemic and how they will be done under the new conditions, and adjustments will need to be made. Companies can create a plan where some employees work from home and some work in the office, but remote employees should still have some on-site presence.  Distributing a workforce has to take into account business functions, workplace characteristics and office culture and weigh it against the preferences of the employer and employees.  As these changes will have quite an impact on your employees it is important that they are resilient and able to adapt to the changes so that their mental health, productivity and health and safety do not suffer.  

2.  Setting up a distributed workforce will require some logistics - work premises will need to adhere to new health and safety measures including ventilation, proper distancing and limited use of common spaces, but outside factors also have to be considered such as the use of public transit and access to the building.  Outside factors particularly can make it very difficult for a company to isolate itself even though they have the proper rules in place within the workplace they cannot control what is happening outside the office and the building.  Logistics for remote staff will include the home office set up, providing the equipment and technology and security measures to protect the business and it's information.  Clear remote working policies will need to be set including confidentiality agreements and compensation terms, vacation allowances and expense eligibility. 

3. Aligning employer and staff - some workers will want to return to the office but there will be those who prefer to remain at home.  The company needs to take into account each employees risk tolerance and remote working environment.  Not all employee situations are the same and can change, so employers and employees should be willing to be flexible as needs change. 

4.  One of the upsides of having remote workers is the ability to choose new employees from a wider pool of candidates anywhere in the world.  However these workers also come with additional responsibilities for the employer including adhering to different labour laws, tax laws and employment benefit obligations so it is important that the employer is familiar with the rules in each country where employees are working.  It is the new reality that many employees have made the change to work remotely and are looking for work that allows them to do that.  Employers need to pivot to accommodate these workers if they want to hold on to their talent and acquire new staff.  At the same time companies need to create an inclusive culture so that everyone feels part of the work team and this can include attending meetings in the office from time to time to keep in touch as face to face contact is invaluable.

From an article by Sophie Nicholls Jones

Recent and Outlandish Covid-19 Scams

By Randall Orser | Covid-19 , Personal Finances , Scams

During the pandemic fraudsters are endlessly devising new scams to trick us into parting with our money.  Jeff Thomson from the Canadian Anti-Fraud Centre says that " Fraudsters are always targeting Canada with new and old scams.  In 2019 the CAFC received more than 20,000 fraud reports involving more than $43 million in losses.  

Some of the most outlandish scams that have hit the news include: 

  • Homeland Security Agents intercepting a number of fake Covid-19 tests inside a parcel.  Toronto police tracked down the the sender and charged him with fraud and possession of a forgery device.  
  • A Toronto resident received a text message inviting her to click on a link to claim $1375.50 in emergency relief funds and her personal information was stolen.  
  • A California actor who promised a $300,000,00 return on investment to anyone who invested $1 million to back his fraudulent coronavirus cures.
  • An American company offering a coronavirus protocol kit containing tea and cannabinoid tinctures.  The FDA stopped this company from selling a product that claimed to prevent, treat or cure the virus.

Here are some of the latest scams to watch out for:

  1. Social Insurance Number scam - Getting a call from someone pretending to be from Service Canada who says that your SIN has been compromised.  This is the latest variation on the caller id scam when fraudsters disguise the ID display on a phone to trick victims into answering the phone.  Do not provide any personal information to this person as you could be at risk of identity fraud.  If you get such a call hang up then call the number on your account statement or government website to verify.  
  2. Email money transfer fraud - Often seen as a safe and secure way to transfer funds there were 371 million e transfers in 2019 worth more than $132 billion according to figures from Interac Corp.  However the method is not foolproof, the anti-fraud centre received 163 reports in 2018 of bank accounts being compromised and money e transferred out.  
    • To protect yourself from this make sure your password is strong and do not share it with anyone.  
    • Use one password per website and continually change them, choose security questions that are not easy to guess.
    • Use filters to protect from viruses and spyware.
    • Look for strange passwords such as $ being used after the amount.  
    • If you accidentally fill out personal information in a link from a phishing scam change your online banking password and inform your bank immediately.
  3. Bank Investigator Scam - There are many variations of this scam but generally victims receive a call from someone posing as a store employee inquiring about a recent purchase on a credit card and are asked to call the number on the back of their card to verify the the validity of the call.  When victims believe that they have hung up, the original caller who has not disconnected redirects the victims to imposters. To protect yourself from these type of scams.
    • As most of these calls occur early in the morning often when a victim is still sleeping so it is important that you always stay alert when dealing with your finances.
    • Do not assume that phone numbers on your call display are accurate, it easy for scammers to use call spoofing technology.
    • Financial institutions will never ask you to transfer funds to an external account for security.
    • Never give remote access to your computer systems to unknown callers.
  4. Scams targeting lawyers and trust funds - In these scams fraudsters pretend to be a client or someone authorized to give instructions on a client's behalf.  In one case a company was tricked into transferring almost half a million dollars held in trust to a different account than the original set up for the client.  In this case the email used by the trickster was identical to the one used by the client.  To protect yourself:
    • As any client or lawyer's account can be hacked, lawyers or other financial professionals should ensure that any changes to payment instructions should be confirmed by direct contact with the client.
    • Due diligence protocols should are established for transferring funds and it should be ensured that all staff receive training and adhere to the rules.
    • Be on high alert for scams during vacations.  Arrange for a competent staff member to supervise your practice and provide your contact information to your staff.

Identity theft and fraud are big concerns for Canadians so it is important that everyone is aware of ways that they can protect themselves.

From an article by Margaret Craig-Bourdin

Why the Pandemic is Open Season for Scammers

By Randall Orser | Covid-19 , Personal Finances , Scams , Technology

Did you find that during the first few months of the pandemic you got a lot less scammer phone calls?  Now the scammers are back in full force exploiting people's fears about the pandemic.  Everything from free masks (you just pay the shipping), fake testing kits, miracle cures and even cleaning services claiming to rid your air vents of the virus.  Between March 6 and April 23rd the Canadian Anti-Fraud Centre logged 643 fraud reports and 158 confirmed victims, though this is probably less than the true total as many people are too embarrassed to report that they have fallen for a scam.

The pandemic has created perfect conditions for con artists as people are alone, anxious, on-line, watching frightening news and worrying about their jobs, finances and relatives who are at high risk.  Jeffrey Thomson a CAFC criminal intelligence analyst says "It's prime time for fraudsters, an extortion scam is trying to create fear and anxiety in people to get them to react.  Now people are more likely to be constantly in that state."  

One of the most common scams is getting a text or email from someone claiming to be the government directing you to provide your SIN and banking information to claim the CERB.  As Thomson says successful scams are a game of numbers and as this one is going out in huge amounts it is taking more victims.

Phishing, extortion and emergency scams are also on the rise.  Most common are a brand offering you loyalty points in exchange for your banking information or someone impersonating a friend or relative stuck abroad and needing you to send money.  Here are some of the warning signs that you should be looking for to avoid getting scammed.

  • Be suspicious if you did not initiate contact and don't respond to unsolicited messages that sound a bit fishy.
  • Think twice before clicking any links in a text or an email from an unknown source.
  • If a friend messages via social media for financial help call them to confirm.
  • Verify any websites claiming to be the government.
  • Make sure the seller is reputable when shopping on line.
  • If a deal on Covid-19 products seems too good to be true, it probably is.

If you do fall victim to a scam collect all the details and events in chronological order and report them to the police, the CAFC, the credit bureau and your bank and credit card providers.  Even if you cannot recover your own money you may help other Canadians to avoid losing theirs.

From an article by Sinead Mulhern

Will Covid-19 Change Grocery Shopping Forever?

By Randall Orser | Covid-19 , Retail

Before Covid-19 many of us enjoyed grocery shopping often making multiple trips a week to get fresh ingredients for a special meal.  Today, what was a simple chore has become a stressful challenge as many Canadians feel like they are preparing themselves for a battle wearing a mask, hand sanitizing, lining up to enter the store, following store aisle signage and keeping six feet away from other shoppers. 

Supermarkets have had to work hard to navigate Covid-19 and plan for the future.  From dealing with panic buying, empty shelves and customer complaints to the present foot traffic restrictions, taped markings on floors, dedicated hours for vulnerable shoppers to one way shopping aisles and plexiglas screens separating cashiers from customers.

Not only shoppers are nervous, store employees who have been designated front line workers have been at a heightened risk since the pandemic started.  Safety measures for them only arrived gradually and well after community transmission was underway.  As a way of recognizing the risk that their employees were working under, four of Canada's main grocery chains increased their hourly wages.  In addition the federal government announced it would allocate $3 billion to top up the wages of frontline workers and another billion came from the provinces.  However it is unclear how much will go to grocery workers and how long it will be for.  

The biggest change in the grocery market is that people have changed to buying on-line.  Many of us will remember at the start of the pandemic trying to order a food delivery and finding that all delivery slots were filled for an endless number of weeks. Before the pandemic only 4% of Canadians shopped for groceries on-line this has now jumped to 22% and grocery subscription and meal kit services are also booming.

Grocery stores have had to adapt rapidly on multiple fronts, expanding on-line shopping infrastructure, monitoring inventory more closely, and increasing health and safety measures for shoppers and employees.  They are also having to fend of competition from new players in the direct to consumer market from restaurants, food delivery services, farmers markets and individual markets.  Grocery store business could be forever changed by the change in customer preferences which may grow stronger rather than decline during and when the pandemic is over.

From an article by Rebecca Tucker