With the yearend approaching, now is a good time to remind clients of tax-saving practices that must be implemented before Dec. 31. Tax advisors say it’s not too late to bring clients up to speed on some of the strategies that can save them money.

“The first tip for investment-portfolio planning would be to take advantage of any accrued tax losses by triggering them before yearend,” says Heather Evans, a tax lawyer and partner at Deloitte & Touche LLP in Toronto.

If a client’s investment portfolio has taken a loss and he or she plans to sell some securities, that should be done before yearend so the loss can be used to shelter gains on other securities, Evans says. This year’s “magic date” — by which securities should be sold to ensure the trade settles before the end of the year — is Dec. 24.

Evans also recommends clients make sure they claim all their carrying charges, such as investment-counselling fees and interest.

“If you borrow to invest in the market, that’s an eligible expense,” she says, “because you incur interest costs for the purpose of earning investment income. And you can claim that interest on your tax return.”

Clients who are self-employed can claim business expenses, such as rent and car expenses, but they must be incurred in the calendar year in order to offset income. Evans recommends that discretionary expenses, including gifts for employees, should be paid in late December instead of early January.

AVOID GETTING REFUNDS

Clients who regularly get a large income tax refund should take steps to avoid getting any refund at all, says Jamie Golombek, vice president of tax and estate planning at AIM Funds Management Inc. in Toronto. “It’s a sign of poor tax planning,” he says, “because you’ve essentially lent money to the government interest-free for over a year.”

Golombek recommends that clients who are employees apply to the government in advance to take into account issues such as RRSP contributions, child-care deductions, interest expenses and charitable donations, and have the employer reduce the amount of taxes that are deducted.

Clients can get a head start for 2008 by applying early and filling out the Canada Revenue Agency’s Form T1213, which will authorize the employer to reduce taxes. “Instead of getting a refund in April ’09, you get your refund throughout the entire 2008,” says Golombek. “That’s a process you can begin in December.”

Older clients with RRSPs should be reminded that the RRSP age limit has been increased to 71 from 69 this year; those who turned 71 in 2007 must convert their RRSPs into RRIFs. Although the RRSP contribution deadline is Feb. 29, 2008, some clients will be affected now.

“If you’re turning 71 this year, you won’t have an RRSP next year, so you don’t have the extra 60 days,” Golombek says. “You have to make your final RRSP contribution by the end of the year in which you turn 71.”

As for RESPs, Golombek points out that there is no real deadline anymore because there is an unlimited carry-forward period for contributions.

CONTRIBUTE TO RESPS

But if a client has a child who turned 15 sometime this year but has never contributed to an RESP, it’s the client’s last chance to put in at least $2,000 to qualify for the maximum Canadian education savings grant for this year and to create eligibility for the next two years, Golombek says. The annual $4,000 RESP contribution limit was eliminated this year and the lifetime limit was increased to $50,000 from $42,000.

If a client is planning to buy a home under the first-time homebuyer’s plan, Golombek recommends you advise them to delay withdrawing the money until January, which will defer the repayment period by an additional year. If the money is withdrawn in December, mandatory repayment starts in 2009; waiting until January means the repayment can be delayed until 2010. “It gives you the extra year just by waiting a few weeks,” says Golombek.

You can also ensure your clients have receipts for this calendar year’s expenses, which can include:

> charitable donations

> child care

> adoption

> medical care

> moving the household

> public transit

> the $500 children’s fitness tax credit.

Encourage clients to have their affairs in order. Many small-business people and self-employed individuals fail to claim a lot of expenses, Evans says, simply because they forget about them. She urges advisors to tell clients to be organized and have a system in place to track expenses throughout the year.

@page_break@It’s a lot easier than trying to collect them all at yearend. IE