Tag Archives: Money

Tax-bill jump riles homeowner

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A family of five got a nasty shock from Winnipeg’s city hall this festive season. Starting in the new year, their monthly Tax Installment Payment Plan (TIPP) bill is going up 31 per cent.

“They sent us a letter a week or so ago — our TIPP went from $169 to $221,” said Ken Thoroski, who lives in St. Vital.

“I thought there might be some kind of mistake.”

The city says it’s no mistake — the increase is for their own good.
“Given the recent increase in assessed value for many homes in the city, the assessment and taxation department is anticipating an increase in taxes for some homeowners,” a 311 operator told Thoroski in an email.

While any increase in property taxes won’t be decided until spring when city council sets the municipal budget, the TIPP program isn’t waiting.
“In order to diminish the impact of a possible tax increase, the department is estimating your possible 2010 taxes and setting your monthly TIPP payment accordingly” starting Jan. 1. Once the mill rate is set in the spring, the department will know exactly what Thoroski’s taxes will be for 2010 and adjust his monthly TIPP up or down as necessary, the city said.

“It’s wrong,” Thoroski said. “They’re hitting you as hard as they can up front.”

The TIPP program allows property and business owners to make consecutive monthly payments for taxes rather than a single annual payment.

It starts on Jan. 1 of each year and payments are made on the first banking day of each month by automatic withdrawal from an account with chequing privileges at a financial institution.

Thoroski said upping his TIPP payment by so much before the new rate is set isn’t much of a privilege.

“You’re going to pay for 12 months and they hit you hard up front so they’re way ahead and pay you back later,” Thoroski said.

“It’s putting more money in their coffers,” continued the married father of three.

No one is forced to be on the TIPP program, which was designed to help people budget their property and school taxes, said the city’s head of assessment and taxation.

“If they have a real concern with how they’re being requested to make payments when taxes aren’t due, then send us a letter asking us to remove them from TIPP,” Nelson Karpa said. The city will then send the tax bill in the spring and the family can pay it at the end of June when the full amount is due, he said.

Still, the increase in property taxes riles Thoroski, who says the city won’t address his complaints about the sidewalk flooding on his street and noisy, over-lit service stations near his home.

Karpa said an increase in property taxes follows the 2008 reassessment, in which the market value of some homes in Winnipeg increased by as much as 100 per cent from five years earlier.

“There was a pretty dramatic increase in the value of real estate,” Karpa said. The average property value increased 67 per cent, he said.

“We simply report on what the market has done.”

Homeowners whose assessment increase is above the city average will likely see their property taxes increase.

The market value of Thoroski’s home increased 78 per cent from 2003 to 2008, according to the city’s property assessment website.

If city council succeeds in freezing property taxes again, homeowners with assessment increases below 67 per cent could see their property taxes drop.

http://www.winnipegfreepress.com/local/tax-bill-jump-riles-homeowner-79968637.html

Property Tax Assessments to be Mailed Soon
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Taking losses on rental property

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The taxman gets jumpy and may sniff around if you deduct losses from a rental property. Here is a reason why your losses may attract some unwanted attention.

Losses from a rental operation can be applied against other income such as wages. In essence, your rental loss is a tax deduction that nets you a refund and the taxman doesn’t like to hand out refunds unless there is a legitimate reason.

To be fair, the Canada Revenue Agency isn’t out to disallow all rental losses, per se. Rather the agency tries to distinguish between deductible losses from real rental operations and non-deductible losses where the operation involves a strong personal element. For instance, the tax courts have made it quite clear the CRA cannot disallow rental losses from legitimate rental operation. The key considerations are: Why did you buy and rent the property?

Was it a bona fide commercial activity, i.e., to make money, or was it a personal endeavor? If it was a commercial activity, the train stops there and the losses should be deductible.

The tax courts have also agreed losses from rental operations that involve a personal element are non-deductible if the operation isn’t conducted in a business-like manner. And what do ‘personal element’ and ‘business-like manner’ mean?

Say you owned a house with two bedrooms; your parent lives in one and while living in the same house, you rented the other bedroom to your girlfriend. Consequently you claimed rental losses from deducting a percentage of the house expenses against the rented bedroom. Is there a personal element involved? If yes, was the rental operation conducted in a business-like manner? If no, the rental losses are denied.

In Slagado versus the Tax Court of Canada, Nov. 5, 2008, involving the above facts, the judge quickly concluded there was a clear personal element because the taxpayer had rented out his bedroom to his girlfriend and they shared its use. Was the rental conducted in a business-like manner?

The taxpayer had charged annual rent of $1,950 for 2003 and 2004 and claimed rental losses of $5,827 and $3,426 for those years. It turned out his girlfriend didn’t even live in that property during 2003. The judge concluded there wasn’t a business-like arrangement because rent was charged to a non-existent tenant.

The above case is a reckless example of an illegitimate rental operation. The case of Landriault & Bercier versus the Tax Court of Canada, July 29, 2009, is more typical of rental losses that fail the smell test.

The taxpayers, a married couple, lived on the lower floor and rented the upper floor to their son at less than fair market value. They claimed rental losses of $7,523 and $4,836 for 2003 and 2004.

The judge concluded there was a personal element because the tenant was their son. Since the rent was below fair market value and the couple could not expect to make a profit at that rent level, there was no evidence the rental activities were carried out in a business-like manner.

He concluded the operation was a family arrangement to charge minimal rent to help defray the operating costs of the property and he denied their losses.

http://nnsl.com/northern-news-services/stories/papers/nov30_09wong.html

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Katz must trim labour costs

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Mayor Sam Katz says he has no plans to raise property taxes until the city has done everything it can to cut costs and reduce waste.

I’m glad he’s reiterating that publicly because we still hear from some quarters that city hall has already cut spending to the bone and has no choice but to increase taxes.

“From the city’s point of view, we still have work to do in-house where I think we can do things better, we can save money in certain areas, we can be more efficient,” Katz said this week during an editorial board meeting with the Winnipeg Sun. “I always said when we have that in order then I will look at property taxes.”

It’s a myth that city hall has cut spending to the bone. The city has made some cuts but spending is still wildly out of control in some areas, including labour costs. City hall’s single biggest expense is labour costs. Salaries and benefits made up 53% of total costs at the city last year, according to the city’s 2008 annual report. Despite claims by some city officials and councillors that city hall is doing everything possible to contain costs, those labour costs have skyrocketed over the past five years.

In 2003, the average number of employees at the city was 8,385, costing taxpayers $465 million in salaries and benefits. In 2004, the year Katz became mayor — albeit halfway through the year — that number jumped to 8,788 employees at a cost of $496 million.

The size of the workforce continued to grow over the next two years and by 2006 there were 8,836 employees at a cost of $531 million. The average number of employees began to fall somewhat after that, but costs didn’t.

By 2008, there was an average of 8,402 employees. But total salaries and benefits soared to a staggering $565 million. That’s where costs are out of control. And that’s where Katz and city council have to get their act together before they can even talk about raising property taxes.

Labour costs have grown by $100 million over five years. That’s a 21% increase, or twice the rate of inflation. It’s completely unacceptable. Most city workers, including middle managers, are represented by one of eight unions. Trouble is, the city refuses to negotiate aggressively during labour talks and agrees to contracts that drive up employee costs at twice the rate of inflation.

“When you look at anytime we renew any agreements, they exceed inflation,” Katz confirmed.

But when is the last time we’ve seen the city really take on the unions during collective bargaining, like the city of Toronto did this year?

We want labour peace, but not at any cost. We certainly can’t have taxpayers shelling out 21% increases over five years for salaries and benefits.

So I agree with Katz, the city still has some work to do before it can say it has no other recourse but to raise property taxes.

Which is why Katz, when asked, says he has no plans to jack up rates next year.

“Are you asking me if I intend to specifically support increasing taxes? No, I haven’t landed on that at this stage in the game,” said Katz.

“Is it a possibility? Yes, but I’m definitely not there at this stage in the game.”

My bet is he won’t be come 2010.

http://www.winnipegsun.com/news/2009/10/28/11551721.html#/news/columnists/tom_brodbeck/2009/10/28/pf-11548351.html

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New Tax Rules Tax Rulings

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That way the IRS can deduct more taxes from my paycheck throughout the year so i can get more money back at the end of the year. it’s kinda like a savings account you could say. Makes good sense to me. But with every new year comes a new set of tax laws. this year the “AMT” or alternative minimum tax was passed and this is going to affect many middle income families. Under the regular IRS rules, you start with your gross income and subtract deductions like state taxes you paid, and exemptions like child credits. Eventually, you arrive at your taxable income. Under AMT rules, you still start with your gross income, but many of the usual deductions and exemptions are disallowed. Suddenly, your taxable income is alot higher. Some key breaks are lost so here’s a list of them. state and local income taxes and property taxes, unreimbursed business expenses, child-tax credits, tax-preparation fees, legal fees, home-equity loan interest just to name a few. The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax. But for various reasons the AMT reaches more people each year, including some people who don’t have very high income. I have a professional tax consultant do my taxes every year because it has just become so complicated i can’t afford to make mistakes so i recommend this same advice to most people out there unless you can stay on top of the ever changing tax laws

http://www.afatherslifeonline.com/2008/01/new-year-brings-new-tax-laws.html

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