Our firm is a tax boutique with all kinds of clients and all kinds of tax issues. They may be corporations, individuals of high net worth, business people, and entrepreneurs running smaller enterprises. They can also be retired professionals.
One of our clients is a retired doctor from Alberta who owns several Canadian properties. He moved from Alberta to Ontario so he could be close to his sister, but he still owns that property in Western Canada. However, the Canada Revenue Agency is not satisfied that his Ontario residence is his primary residence – it is – and demands back taxes.
Unfortunately, the CRA often takes the view that one is guilty until proven innocent, which is why so many people require professionals like lawyers and accountants to help them in their tax dealings with the federal government.
We also have clients with stories that are heart-breaking. And make no mistake, the CRA is anything but a purveyor of mercy when it comes to taxes. It doesn’t matter if you are a multi-millionaire or a single mother with kids whom they deem to be in tax arrears.
Regardless who you are and your particular situation, one thing everyone has in common is that no one wants to be audited. According to the CRA’s Annual Report to Parliament, in fiscal year 2020-2021 the agency conducted 245,000 audits of individual tax returns and another 41,000 audits of small- and medium-sized businesses. Generally speaking, the CRA can only audit someone up to four years after a tax return has been filed. However, in some cases — such as in suspected fraud or misrepresentation — the CRA can go farther back and, in fact, there is no time limit for such a re-assessment.
Of course, many of our clients are self-employed, but as mentioned we also represent professionals and businesses who are required to keep their own books, as well as clients who operate other cash-based businesses. It just so happens that these groups are usually audited more often than others. So, if you belong to a group that is already under some scrutiny, it’s important to audit-proof your business.
How do you do that?
Indeed, one of the most common questions we get asked is “How do we avoid audits by the CRA in the future?” Well, there is no simple way. It’s not like taking a pill. But I have compiled a list of ten tips that should help you to remain audit-proof. Let’s have a look at them:
Check and double-check your return after you complete it. This is especially true if you do the return yourself. Keep in mind where this return goes. It goes to the Canada Revenue Agency. If they discover a mistake – even if it’s an honest mistake on your part – they may conclude it was done for a reason. I have many examples of well-documented transactions being rejected due to the taxpayer’s failure to file a routine election. This is why it’s better to avoid mistakes as much as possible.
Keep detailed records. I cannot stress this enough. The fact is some expenses and deductions are audited more than others. I had a client recently who was reassessed vehicle benefits because he didn’t have a log book. It was a huge headache, but we got him his relief. Ensure that you keep meticulous records of all these expenses.
Make a point of filing correctly the first time. Amended returns can and often do draw scrutiny to your filing position. I have seen people forget to report a sizeable deduction. Once it was reported on an amended T2, the CRA conducted a full-scale audit. And this is a large public corporation.
Properly document any unusual changes to your filing position. What exactly does that mean? If you are suddenly earning double the income from one year to the next, or you are claiming an unusual capital expense, do not be afraid to explain it in your return.
Try not to claim unrealistic deductions. Home office expenses, especially these days in the post-Covid world, are often claimed. But if you are claiming half of all your home expenses, you may be audited. Likewise, if you ascribe 100% business use to a vehicle, you may be audited for that.
As much as possible, try to fly under the radar. In other words, do not make it easy for the CRA to single you out as a person or business that should be audited. Examples of not doing this could be things like excessive charitable donations, very low income while living in a mansion, or participating in tax shelters. All of these will raise red flags that may result in an audit.
File on time. This is pretty basic, but you would be surprised how many people and businesses file late. There really is no excuse not to comply. Late returns are never a good idea and opening the door to a potential audit is only one of the reasons to avoid doing this. It is always better to file on time. Continue Reading…
Investing in Dividend Kings (aka Dividend Aristocrats) has come back into style again in as we approach the mid-way point of 2023. After a decade of cheap money-fuelled growth for unprofitable tech stocks the market has now clearly shifted toward the free cash flow darlings that I prefer.Click here to jump directly to my 2023 picks.
After the first few months of 2023, the Canadian market has continued to quietly chug along relative to the more volatile numbers seen in much of the world. For dividend-focused investors, the day-to-day market gyrations are irrelevant.
Reliable (if small) long-term stock appreciation, combined with juicy dividends, are why Canadian dividend kings hold a sacred place in my portfolio. We may very well be in a “sideways” market for a while, and in that situation, holding stocks that spin off gobs of dividend cash is an excellent way to position oneself.
While it looks like inflationary pressures are beginning to ease, top line revenue numbers continue to look good for the vast majority of Canada’s dividend all stars. Real returns though are dependent on profit margins and the ability to keep costs controlled. So far so good for the major Canadian blue chippers on this dividend kings list.
With most of Canada’s best dividend stocks being part of long-time market oligopolies, we see that they have been able to maintain or even grow their profit margins – meaning more profit for shareholders.
With little-to-no news of dividend cuts (or even pauses), dividend-focused investors have likely found it much easier to navigate the stormy market waters relative to growth stock enthusiasts.
Top Canadian Dividend King Pick for 2023: National Bank
Our 2021 top Canadian dividend king pick was Enbridge. I simply felt that given the company’s track record of producing solid returns and rewarding shareholders, the valuation was substantially off.
The stock rewarded me with a capital gain of over 21%, plus the 8.1% dividend (at time of purchase) for an overall return of roughly 29.5%. That compares favorably to the overall return of the TSX (27%) and 25% for CDZ – the Canadian dividend aristocrats ETF.
For 2022 our Canadian dividend king was National Bank (NA).
So… you might be surprised to learn that my Canadian dividend king pick for 2023 is (*drumroll*) National Bank!
Yes – I’m sticking with Canada’s fastest growing bank! I continue to believe in my investing thesis, the market just needs time to bear out the underlying fundamentals. So far so good, as National Bank shares are up nearly 11% year-to-date (and that doesn’t even take into consideration the juicy 4% dividend).
National Bank’s latest quarter earnings report saw a $2.35 EPS, and that represented a strong earnings beat. The Bank’s Canadian operations continue to hold impressive profit margins – and given the strength of Quebec’s regional economy (National Bank’s home base) I don’t see any reason why this won’t continue to be the case.
Out of all the Canadian banks, National bank has been the most generous with its dividend raises over the last 3- and 5-year periods – BUT even with all that dividend generosity, it still has a fairly low payout ratio. That bodes well for the long-term, and certainly means there is no dividend cut in store for 2023.
While Provision for Credit Losses (PCLs) will hold the banks a bit in 2023, I don’t see this as a significant headwind overall. I wrote more about the loan loss provisions that the financial institutions were setting aside in my investing in Canadian bank stocks article.
The banks should continue to benefit from the growing interest rate spreads, and their cautious building of reserves is the exact reason why they are such solid long-term investments.
My insights on National Bank – as well as the 2023 Canadian Dividend Kings list below – are based on my own research, but also relied heavily on the advice and tools provided by Dividend Stocks Rock.
DSR not only provides excellent written advice, but also a ton of free webinars, and ideal tools for analyzing both the Canadian and American dividend markets. Read my DSR review for an in-depth look at just why I’m such a big fan of what fellow Canadian Mike Heroux has put together.
Don’t just take my word for it, see what Mike Heroux has to say about National Bank after the latest round of bank earnings reports in 2023. Mike used to work for National Bank for many years, so if you’re looking for someone that understands all aspects of this company – it’s him!
Dividend Aristocrats and Dividend Kings Offer Stable Growth
In fact, many studies (such as Vanguard) have proven that dividend growers are likely to outperform the market and do it with less volatility. Dividend growers such as the best Canadian dividend aristocrats will continue to increase their dividend in 2023.
Canadian companies with a long history of dividend growth will generally show a strong business model and robust financials. They have gone through many recessions and never stopped increasing dividend payments. In times of confusion and fear, you can go back and look at how companies went through the past crisis and kept their dividend streak alive.
I use the dividend strategy for my leveraged portfolio, a significant portion of my RRSP, and our corporate portfolio. We currently collect a little over $73,000/year in dividends and if you are interested, you can follow my latestdividend update here.
In the past, I’ve written a number of articles on dividend growth stocks, I’ve never properly categorized them. Here are the most common dividend terms as they relate to the U.S. stock market:
A Dividend Achiever is a company that has increased its dividend at least 10 years in a row;
A Dividend Contender is a traded company that has raised dividends for 10 to 24 consecutive years.
A Dividend Champion is a company that has increased its dividend at least 25 years in a row (regardless if it is part of the S&P 500 or not);
A Dividend Aristocrat is a company that is part of the S&P 500 and that has increased its dividend at least 25 years in a row;
A Dividend King is a company that has increased its dividend at least 50 years in a row. The true cream of the crop.
Dividend Aristocrats and Dividend Kings in Canada
Here in Canada, we have a relatively small market and an even smaller list of quality dividend stocks. In a previous article about the top Canadian dividend growth stocks, you will see a number of dividend achievers (10 years+ ), a handful of dividend aristocrats (25 years+), but no dividend kings in Canada (although FTS (48) and CU (49) are getting close).
While I used the terms dividend achievers and dividend aristocrats for the Canadian stock market in the previous section, I must highlight that the official definition of the Canadian dividend aristocrat differs from the one established in the U.S.
In order to be considered as a S&P Canadian Dividend Aristocrat, the company must have increased its dividend payout every year for five years – Therefore, we are looking at stocks that have a good potential for raising its dividend but still pretty far away from 25 consecutive years.
Dividend Kings List
In a few years, we will be able to have a shortlist of Canadian dividend kings (including Fortis and Canadian Utilities). In the meantime, where do we find these elusive dividend kings? You’ll have to look at the biggest market in the world – the US! In the US, there are 30 dividend kings that have increased their dividend at least 50 years in a row. Continue Reading…
Budgeting is hardly exciting, but it’s key to getting finances under control. However, making a budget and sticking to one isn’t always easy. That’s why we could all use some help now and then.
Consider using budgeting and financial planning apps to maintain disciplinary action. Here are the best budgeting apps on the market.
YNAB earns a spot on this list because of its proactive budgeting approach. It offers the ability to sync bank accounts, import data, and manually enter transactions.
Once users sign up, they can create a budget and assign each transaction to a purpose. For instance, they might like to use the app for car payments or mortgages.
The app’s goal is to get users one month ahead. That way, they spend money they earned over a month ago. Essentially, the app gives customers a complete budget overhaul. It also provides users with top security to protect their information and gives them additional resources for staying on track.
This app costs US$98.99 per year or $14.99 per month and offers a 34-day free trial. [All figures below are in US$]
Goodbudget has a free version with ads. Or, users can pay for an ad-free version that costs $7 per month or $60 annually.
Goodbudget is a useful budgeting app that allows users to create and stick to budgets – and keep track of their debt to pay it down faster.
In addition, it helps with money management. That way, users know where their funds are and how they perform.
Users also have easy access to their accounts, as they can use them on the web and on multiple phones. In turn, people can easily share their accounts with others and stay financially connected. This is valuable for some, as it prevents miscommunication and mishaps.
The app also syncs each transaction to the cloud. And some reports show the finances in greater detail – as well as pie charts and other updates to track spending.
Mint is another great budgeting app, as it has high ratings in the App Store and Google Play. It’s also free and syncs with various bank accounts, including checking and savings, loans, credit cards, and more.
Mint works by tracking users’ expenses and placing them within budgeting categories. You might have categories of your own ready to go in a spreadsheet. Mint lets users more fully personalize their categories and set limits to maintain their budgets. Once users approach those limits, Mint will notify them within the app. Continue Reading…
To help you create a budget and stick to it for achieving your financial goals, we’ve gathered advice from 18 professionals, including CEOs, founders, and VPs. From leveraging public accountability to reviewing and adjusting your budget regularly, these experts share their top steps to take for effective budgeting and saving.
Leverage Public Accountability
Negotiate Lower Fees
Celebrate Budgeting Successes
Automate Your Savings
Identify Cost-Cutting Opportunities
Track Expenses and Income
Eliminate Unnecessary Expenses
Create a Realistic Budget
Prioritize Necessary Expenses
Monitor Financial Metrics
Automate Savings Consistently
Use the 50/30/20 Rule
Utilize a Monthly Bill Calendar
Limit Online Shopping Access
Establish a Purpose and Set Goals
Use Cash Stuffing With Discipline
Create Organized Sub-Budgets
Review and Adjust the Budget Regularly
Leverage Public Accountability
In my personal journey toward financial wellness, one of the most effective strategies I’ve employed is leveraging public accountability to create a budget and stick to it. I started by sharing my financial goals with my circle of trusted friends and family, which made the goals feel more real and tangible.
Whenever I felt tempted to stray from my budget, the thought of explaining my overspending to them motivated me to resist. In fact, one time I was really close to buying an expensive gadget on a whim, but the idea of having to admit this unnecessary expense to my accountability partners made me rethink, and I decided against it.
Using public accountability in this way can be a powerful tool to reinforce your commitment to your financial goals, and I encourage you to try it. — Antreas Koutis, Administrative Manager, Financer
Negotiate Lower Fees
One example of a strategy not commonly undertaken when creating a budget is to negotiate lower fees on existing bills such as cable, internet, or cell phone plans.
As the market becomes increasingly competitive, companies are more likely than ever before to reduce customer bills if they know they may otherwise lose that customer’s business.
This can lead to significant savings without having to decrease spending on existing items. With the resulting saved money, you can then allocate it towards your financial goals, more easily allowing for what was once considered unattainable! — Carly Hill, Operations Manager, Virtual Holiday Party
Celebrate Budgeting Successes
Creating a budget and sticking to it, in my opinion, is difficult work. Celebrate your accomplishments along the way. In the long run, I believe that this will make it easier for you to stay on your budget and will help keep you motivated.
Treat yourself to a small reward if you reach a savings goal or pay off a debt, for example. Just make sure the prize is within your financial constraints! — Bruce Mohr, Vice-President, Fair Credit
Automate your Savings
A lot of people tell you to pay yourself first. I think a better approach is to save for yourself first. Set up automatic transfers to your various retirement and savings accounts. That way, the money isn’t just sitting in your checking account and tempting you.
This works even better when you have high-yield savings accounts and retirement funds that aren’t linked to your main bank account. Spending habits are hard to break, but it can be easier to form new ones if you automate your savings. — Temmo Kinoshita, Co-founder, Lindenwood Marketing
Identify Cost-Cutting Opportunities
Of course, the goal of budgeting is to save money, but one step you need to take in order to be successful and reach your financial goals is to look for ways to save. You can do this by reviewing your budget and pinpointing areas where you can cut costs to save money.
For example, if you find that you spend a lot of money on going out to eat, you can cut down spending here and instead cook your meals, which ultimately will be the cheaper alternative.
You may also cancel subscriptions you don’t use or negotiate your bills with your service providers to see if you can get a discount. Overall, there are multiple ways to cut down your spending and save money—you just need to figure out which areas you can negotiate or compromise! — Bill Lyons, CEO, Griffin Funding
Track Expenses and Income
You can find areas where you might be overspending or where you can reduce expenditures by keeping track of your expenses and income. Additionally, you may utilize this data to make wise decisions on future purchases and investments, ensuring that you are deploying your resources as effectively and efficiently as you can.
You may keep yourself motivated and on track to accomplish your goals by routinely evaluating your financial accounts and your progress toward them. Additionally, it can assist you in seeing future difficulties or obstacles, enabling you to modify your plan and change the route as necessary. — Michael Lees, Chief Marketing Officer, EZLease
Eliminate Unnecessary Expenses
A major problem people have when sticking to a budget is the little purchases they make along the way. Many of us are guilty of ordering takeout after a long day of work, picking up a daily Starbucks order, or wasting groceries.
While these small purchases may seem innocent enough, they quickly add up and get you off track toward reaching your financial goals. Before making a purchase, ask yourself, do I need this? Or if you need extra motivation, consider how many hours of work it takes you to purchase these daily items.
By cutting out or at least reducing some of these mundane purchases, you’ll notice your bank account feeling a little healthier and lower stress knowing you have enough money to put towards your financial goals and still pay your bills. — Brandon Brown, CEO, GRIN
Create a Realistic Budget
Often, I see people attempting to budget just for the sake of budgeting without considering its implications on their overall lifestyle. If you want to religiously follow your budget, make it realistic. Realistic financial goals will provide you with a head start in creating an achievable and sustainable budget.
Create a budget that takes into account not only your financial goals but also your lifestyle behavior and the situation you are in right now. If you regularly eat out, set aside money for that based on how much you anticipate spending and how much you are willing to spend.
Moreover, don’t make your spending plan too strict. What’s the purpose of working if you can’t occasionally treat yourself to a sumptuous meal or a new pair of boots? After all, you deserve to feel human.
If you don’t make room for the things you want, you’ll eventually give in and ruin your spending plan. Just make sure to plan ahead and remember that the ultimate goal is financial security and independence. — Jonathan Merry, Founder, Moneyzine
Prioritize Necessary Expenses
Pay all your bills before buying anything discretionary. When you’re trying to save money, it’s essential to cover all necessary expenses before you try setting money aside. This way, you have a better idea of how much money you have left for casual spending and savings.
Paying any obligations first allows you to avoid surprise expenses after you’ve already started spending, which in turn helps you avoid having to pull money out of your savings. The best way to stick to your budget is to pay what you need to first. — Max Ade, CEO, Pickleheads
Monitor Financial Metrics
Entrepreneurs should track financial metrics to monitor their success. A metric for entrepreneurs to measure is customer lifetime value, which is the total amount of revenue that one customer generates during their entire interactions with the business.
Monitoring this metric helps entrepreneurs understand how much revenue can be expected from a single customer and what marketing strategies are most effective at keeping them engaged.
Additionally, tracking customer lifetime value allows entrepreneurs to maximize their returns on investment as they can target customers who spend more money and reward existing customers who have already demonstrated loyalty and commitment. — Julia Kelly, Managing Partner, Rigits
Automate Savings Consistently
Automating savings is a surefire way to help you stick to saving money and reaching your financial goals. Too many situations can thwart your best intentions to regularly add to your savings yourself: mainly forgetfulness since an additional task is the last thing anyone needs.
If you don’t automate, you may rationalize not regularly adding to your savings account because of an extra purchase you think you need or deserve. That could snowball into a pattern of doing it less than you initially wanted or not at all.
“Out of sight, out of mind” is an advantage of automating your savings: If you don’t see that money sitting in your checking account, you won’t spend it.
Disabuse yourself of the notion that you need a large amount of money for an automatic savings plan. Start with $5, $10, or $20 at a time. You can increase that by looking for ways to decrease your expenses, such as comparison shopping for your car and home insurance or requesting lower interest rates on credit cards. — Michelle Robbins, Licensed Insurance Agent, Clearsurance.com
Use the 50/30/20 Rule
To create a budget and stick to it, prioritize your expenses and allocate your income with the 50/30/20 rule. This rule suggests that 50% of your income should go towards necessities like rent, utilities, and groceries, 30% should go towards discretionary spending such as dining out and entertainment, and 20% should go towards saving and paying off debt. Continue Reading…
It’s never too early to start looking forward. I’ve been doing this on my site for some time and doing a bunch of assumptions and simulations on what our financial independence retire early might look like.
I also have interviewed many Canadians who are financially independent and/or retired early in my FIRE Canada Interviews.
Having some plans on your hands is better than no plans at all. Furthermore, having some quantitative targets available will allow you to set up different financial milestones and goals each year. Doing so will help you to stay focused and work your way to achieve them.
For those not familiar with Cashflows & Portfolios, it’s a site started by two long time Canadian bloggers, Mark and Joe. Mark runs My Own Advisor, which I started reading before I started this blog. Joe was the brain behind Million Dollar Journey, which I have been following for over a decade.
All three of us believe we need to retire the term: retirement. To be more specific, we believe it’s time to change the ‘traditional’ definition of retirement. It is also important to make sure you know what you’re retiring to.
Back in the day, when you turned 60 or 65, and once you had grown tired of working by already clocking decades of company time – trading those years in the workplace for your workplace pension to supplement income for your senior years.
Well, workplace pensions are dwindling and more and more, pursuing retirement in any traditional sense seems rather unhealthy today. A traditional retirement can be unhealthy physically, emotionally and financially.
On a physical level, retirement has traditionally meant a decrease in activity. You no longer have a driving reason to get out of bed in the morning, grab a coffee and get to the office – so you take it easier. That may not be beneficial to your wellness and based on my personal fitness experiences, not something that appeals to me.
On an emotional level, retirement for some could lead to social isolation. Potentially, you’ve identified and linked your self-worth to your organization, your co-workers and your manager.
Retirement means you’re leaving your workplace but the organization will undoubtedly continue to work without you being there. Unfortunately, life just works that way; it doesn’t stop for anyone. So, I believe it’s important to maintain a modest level of stimulation at any age, including retirement.
Not remaining socially engaged with other people in retirement could lead to mental health struggles.
Finally, retirement is not cheap, financially. Unless you have a workplace pension (and let’s face it, many Canadians don’t, me included!), you’ll need to rely on your disciplined, multi-decade savings rate to maximize your retirement income stream at age 40, 45, 50 or 55 – by giving up your regular paycheque.
Sure, while there are other retirement income streams to enjoy eventually, like Canada Pension Plan (CPP) and Old Age Security (OAS), many readers of this blog probably don’t want to wait until ages 60 or 65 to tap those income streams respectively.
Let’s get one point straight, it’s a privilege to be able to retire early at age 40, 45, 50 or 55. Early retirement isn’t for everyone and those who can “retire” early typically enjoy some sort of privileges in their lives. Such privileges need to be highlighted more within the FIRE community.
The reality is that you do need to have a certain level of income to build up enough assets by your 40s so your portfolio can withstand some drawdowns in the subsequent decades. A relatively high savings rate combined with a certain level of income will help and is in my opinion crucial. Continue Reading…
Posted By 
