In this video, I am sharing 6 things
you need to watch out for
before 2020 ends
So you can keep more money in your pocket,
pay less tax and prepare well for next year.
and we are starting Right Now!
Hey guys!!
It’s Thomas here!!
This channel is to help Canadians
to make better choices on their
Retirement, Wealth, and Insurance
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2020 is coming to an end
let’s be honest,
it’s been a difficult year for everyone
but we can certainly make the most of it
so we can be off to a much better start in 2021.
The first thing to think about is the CERB.
CERB has ended last week as of December 2nd
which means you can only transition to either
EI or CRB if you qualify.
As a reminder,
EI gives 55% with at least
$500 per week for 26 weeks up to 45 weeks
and CRB gives a flat $500 per week
for 26 weeks only
I’ve talked about the difference between the two
and the top 10 FAQs
for greater detail,
I’ll leave a link to them here
so be sure and check them out.
Another reminder is that if you received CERB
but then you realized
you received more than you should have,
then you will need to pay this back
by December 31, 2020.
now this could happen when
You applied for the CERB not knowing
that you actually didn’t qualify
Or back then some people might apply
to both CRA and Service Canada at the same time
And since the The Canadian government
wants to roll out the benefit asap.
They don't have time to verify every transactions
so you might end up getting double payment
Either way if you are one of these two,
you can log back into the CRA portal to pay it back
Or you can visit the canada.ca website.
they will have more information on how to return it
The next thing to think about is
budgeting for your taxes.
If you want to pay less tax,
then you need to start thinking about it NOW.
EI and CRB are taxable benefits.
For CERB, there was no tax withheld on the $2000
so you are responsible for
all the tax on that income.
For EI and CRB,
10% is withheld but this might not be enough
chances are you will need to pay more taxes
for those benefits in April 2021
Now if you were an employee, working 9 -5
This may have been something
you didn’t have to worry about before
because taxes are already deducted
from your paycheck for you.
The amount of money you take home
you already prepaid the government.
in this case, if you receive benefits
make sure you are aware that you
need to write a cheque back to CRA
Also If you were laid off this year,
even for just a portion of the year,
you may have received additional payments
such as severance and vacation paid out
so there are chances that you are
actually making 10-30% more compare to the other years
Here’s an example
Sam worked for the first 4 months of 2020
and then he got laid off
fortunately, his got his severance package
and remaining vacation paid out.
He then qualified and received 2 months of CERB
and he also found a new job as well.
so with all the income combined
He is likely making more than he was in the previous years
which also means he will need to pay more taxes.
Now if Sam predicts that
even though his income is higher this year,
expect it to return to normal or be lower next year,
what he can do is to contribute to his RRSPs first
Reduce his taxable income this year
and take it back out next year
to balance out the tax consequences
To budget for your taxes
My recommendation is
to put a portion of your money aside.
Don’t touch it
and save it for next year’s tax season.
On the topic of RRSPs,
that leads me to my third point
which is to think about RRSP.
RRSP will help you with your 2020 taxes
Banks usually tell you that
you have until February to contribute RRSP
however I don’t recommend waiting
Here’s why:
You’ll spend the money if you don't put it away!
Especially around this time of year.
You have Christmas. boxing day. new year.
The environment will make you want to spend money
So instead of waiting until February to put in one lump sum,
start now and break it
up into three months if you want.
Trust me,
it’s less painful to watch that money move away.
If your income is high this year,
use that RRSP to offset your income
then if next year, you still don't have income,
you can always take it back out from the rrsp
so you can average tax burden into 2 separate years.
Also For anyone who is 71 now,
be sure to talk to your bank
or carrier who manages your RRSP.
because at the end of age 71,
it is mandatory that our RRSPs change to an RRIF
meaning you are forced
to take some of your money out.
The question is do you want to take it out as a lump sum?
Or do you prefer a monthly payment?
It’s a good idea to talk to the carrier to plan it out.
Otherwise, they will plan it for you.
If you have questions about your RRSP,
not sure if your account is on track?
Feel free to reach out,
more than happy to go though it together
and make recommendation on what will work best for you!
my contact is also
in the description below for a free consult.
The 4th thing to consider is your TFSA.
If you are making a lot of in and out
transaction to your TFSA,
make sure to watch out for your room
because you will get taxed
if you exceed your contribution limit.
Basically, if you always max out your TFSA this year
and took some money out this year,
you can’t put it back in until 2021
So echoing back to my previous point
about RRSPs though,
a lot of people will take money out of a TFSA
and put it into an RRSP in February.
I recommend doing this now in December
so the room can reset on January 1,
then by the time, April comes aro
und and you get your tax return,
you can then put it back into your TFSA.
Otherwise, you will need to wait
for a full calendar year to put it back in.
Okay, number 5. Save and don’t spend!
DUH!
it is a DUH! but many many people forget about it.
a lot of people might think that
just because you didn’t do any traveling this year
that you have extra money to treat yourself.
But here’s my friendly reminder:
Don’t buy things just because it’s on sale!
Instead, save that cash smartly
by investing it into things that will give you a return.
That could be putting it into an investment,
or it could also mean investing in yourself too!
like taking a class or reading a book
And now I’ll end with my last point
which is to make a difference.
Let me ask you this:
What will you be doing differently in 2021?
What are you doing today
that you will do differently than yesterday?
Especially looking back at 2020,
It is indeed a difficult year for a lot of people!
And to the rest of us, this year is very different!
I hope you’ll take the time
to self reflect on what you’ve done well in,
where you can improve
and find what’s important to you
as we head into 2021.
Time goes by fast and life is short.
For me,
I always challenge myself to do something new each year.
so in 2020, that was starting my YouTube journey!
It’s something different and
definitely very challenging thing for me to do
so yeah I want to say thank you to you!
thank you so much for being
on this journey with me.
so what are your goals for next year?
Tell me in the comments below!
And stay tuned in my next video
where I will be giving my thoughts on 2021
and how to prepare for it
from a financial perspective.
If you found this video helpful,
really appreciate it if you can
give it a thumbs up!
Thanks so much for watching!
And I will see you in the next video!