Press release from Marketwire
REPEAT-BMO Nesbitt Burns Tax Study: Ninety-Four Per Cent of Canadians Say They File Each and Every Year
- Canadians paid more than $119 billion in federal income taxes in 2012 - Do-It-Yourself approach gaining in popularity: almost half prepare their own income tax returns - Knowledge Gap: many Canadians lack insight on tax implications of RRSPs, charitable donations, capital gains and dividend income
Wednesday, April 03, 2013
REPEAT-BMO Nesbitt Burns Tax Study: Ninety-Four Per Cent of Canadians Say They File Each and Every Year09:03 EDT Wednesday, April 03, 2013
TORONTO, ONTARIO--(Marketwired - April 3, 2013) - According to a BMO Nesbitt Burns study released today, Canadians are conscientious and responsible with their taxes, with 94 per cent reporting they file a personal income tax return each and every year.
According to the Federal Department of Finance, Canadians paid more than $119 billion in federal income tax in 2012.
The BMO Nesbit Burns study also revealed that almost half of Canadians are "Do-It-Yourselfers", preferring to prepare their own tax returns rather than relying on someone else - such as a tax professional or family/friends - to do it for them. Interestingly, more than a third of Canadians (35 per cent) will be using tax software to file their returns this year - an indication of the country's growing adoption of and comfort with technology.
"It's commendable that the overwhelming majority of Canadians are doing the responsible thing and filing annually," said John Waters, Vice President, Head of Tax & Estate Planning, BMO Nesbitt Burns. "It's not only the responsible thing to do, but also the smart option given the penalties that you can incur should you owe money and don't file."
Mr. Waters also noted that, while it is encouraging that so many are choosing to prepare their income tax returns themselves, some might still be missing out on valuable tax savings.
When Canadians were asked about their level of knowledge about how various investments are treated from a tax perspective, the study found the following:
- More than half of Canadians (58 per cent) are not sure about how capital gains are taxed, while almost two-thirds (62 per cent) are not knowledgeable about how dividend income is taxed.
- One-third (33 per cent) lack knowledge on how charitable donations are taxed.
- One-quarter (25 per cent) have trouble understanding the tax implications of a Registered Retirement Savings Plan (RRSP) and 36 per cent lack knowledge on the tax implications of a Tax Free Savings Account (TFSA).
"While many Canadians are familiar with the basics of tax preparation, there appears to be a knowledge gap - particularly on investment income," said Mr. Waters. "If you prepare your own return, ensure you become as familiar as possible with the tax system so you can spot opportunities to reduce the amount of tax you pay and determine strategies for next year and beyond. For those who want to be sure they're taking advantage of all applicable tax credits and deductions and don't have time to study the tax system, consider hiring a tax professional or speak with your financial advisor who can help determine the best strategy for you."
BMO Nesbitt Burns offers the following tips to help Canadians reduce the amount of tax paid on capital gains and dividend income:
Offset capital gains with capital losses: If an investor realizes capital losses in the same taxation year that a significant capital gain is triggered, the tax liability on the capital gain can be reduced. Consider selling certain investments with accrued losses to offset capital gains realized earlier in the year - provided that the sale makes sense from an investment perspective.
Spot tax deductions: The extra cash flow from the sale of an investment could be directed towards a larger RRSP contribution, especially if you have significant unused contribution room carried over from prior years.
Defer a portion of gains: If proceeds of disposition from a sale triggering a capital gain are not all receivable in the year of the sale, it may be possible to defer a reasonable portion of the gain from taxation until the year when the proceeds become receivable.
Consider income splitting: Income splitting allows you to spread income amongst family members who are taxed at a lower rate (subject to possible attribution rules). Some valid income-splitting strategies include: pension splitting between spouses or common law partners; an interest-bearing loan to family members in a lower tax bracket; and gifts to adult family members (such as a parent or adult child).
For more information on BMO Nesbitt Burns, visit www.bmo.com/nesbittburns.
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The online survey was conducted with a sample of 1,002 Canadians between March 15th and March 19th. The margin of error for a probability sample of this size is +/- 3.1%, 19 times out of 20.
FOR FURTHER INFORMATION PLEASE CONTACT:
Rachael McKay, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver