Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

3 days or less left for key End-of-year Investing and Tax actions, CERB repayments

Posted By |

While most people will be glad to put paid to the year 2020, there remain three business days and several actions on the investing or tax front must happen before December 31, or even today (Tue., Dec 29) if you want trades to settle in time to qualify as a year 2020 taxable event (capital gains or losses, chiefly).

Allow time for trade settlements

According to this piece from Taxtips.ca, the last trading date for 2020 for Canadian and US publicly traded stocks will be Tuesday December 29th in order to record the gain or loss in the 2020 taxation year.  Canadian stocks purchased or sold after this date are settled in 2021, so any capital gains or losses on sale apply to the 2021 tax year instead of to the 2020 tax year. 

The Canadian market was of course closed on Monday and reopens at 9:30 am today (Tuesday), although the US market was open on Monday too.

Courtesy RBC Direct Investing, where our family does much of our banking (with some editing):

2020 Year End Registered Retirement Savings Plan (RRSP) Withdrawals    

For an RBC Direct Investing RRSP withdrawal to be applied for the 2020 tax year, you must submit your online cash requests before Thursday, December 31 by 4:00 p.m. ET.

If you are requesting an in-kind withdrawal please ensure to call an Investment Services Representative prior to 3:00 p.m. ET on Thursday, December 31.

Note: RRSP withdrawals requested after these times will be applied to the 2021 tax year.

2020 Registered Education Savings Plan (RESP) Online Contributions Deadlines

Please note, to make a contribution to an RBC Direct Investing RESP account from an RBC bank account and still claim an applicable government grant for 2020, you must submit your request online before Thursday, December 31 by 7:30 p.m. ET.

If you are contributing from your non-registered RBC Direct Investing account to your RBC Direct Investing RESP account, the cut-off time is 4:00 p.m. ET on Thursday, December 31.

Kindly note online contributions are automatically split equally among plan beneficiaries.

2021 Tax Free Savings Account (TFSA) Contribution Limit
The annual TFSA contribution limit for 2021 is $6,000 Canadian dollars. Any unused contribution room from previous years carries forward.

Please be aware that due New Year’s Holiday, our normal trading hours will be impacted as follows:

Thursday, December 31
– GICs will close at 11:30 a.m. ET
– All other fixed income will close early at 1 p.m. ET

Friday, January 1
– Both Canadian and U.S. markets are closed
– Foreign exchange transactions will not be processed until Monday, January 4

Monday, January 4
– Markets resume normal trading hours

Last day to place trades for 2020 settlement
– Canadian and U.S. equities: Tuesday, December 29
– Canadian and U.S. options: Wednesday, December 30

That’s the input from RBC.

CERB repayment deadline

This year there are also some actions needed on the government grant Covid front, chiefly involving CERB and related programs. CIBC Wealth’s Jamie Golombek had a good summary of this in Saturday’s Financial Post: Click here.

Golombek says Canada Revenue Agency recently sent out 441,000 “educational letters” warning individuals that they may not be eligible for CERB:  individuals whom the CRA said it was “unable to confirm … employment and/or self-employment income of at least $5,000 in 2019, or in the 12 months prior to the date of their application.” Continue Reading…

How Travel prepares you for the unexpected

Posted By |
Lake Atitlan, Guatemala

By Billy and Akaisha Kaderli

Special to the Financial Independence Hub

Even before we met, as individuals, Billy and I have always loved to travel.

I have written about my cross-country adventure on the back of a motorcycle when I was 19. Billy also traveled with his van to Guatemala in the 1970s and back again to his hometown of Cincinnati, Ohio.

As a couple we lived and journeyed through Europe for six months before we purchased our restaurant in Santa Cruz, California.

These trips were life-changing experiences and we just got hooked on adventure.

When we left the traditional work force in 1991, we sold everything and began to travel the world. These experiences forced us to be flexible even when we didn’t want to be.

Power outages

For instance, when we lived on the tiny island of Nevis, West Indies, every afternoon or early evening, the power in our home would go out. It could happen at 4pm or at 7:30, but it would happen. Lights would go out and the TV would click off (right as the plot thickened in the movie we were watching). The pump bringing water to the kitchen sink or toilets wouldn’t work without the electricity, so things like doing the dishes, taking a shower or using the restroom had to be prepared for in advance.

We read books by flashlight or had discussions on future travel plans.

No running water!

Speaking of taking a shower, in Nevis we shared the Governor of Nevis’s home with other housemates who were opening the Nevis Four Seasons Resort on the island.

Aside from us and Billy’s best friend who was the head chef, all the rest of the roomies were young twenty-somethings and used to First World Living. One young woman would start her hot shower, go to the kitchen, toast bread, smother it in peanut butter and jelly, eat the sandwich, then return to a steam-filled bathroom with the water still running and take her hot shower.

As natural water-savers ourselves, we thought this was over the top.

However, we had no idea how much so, until one day … we found out the cistern was empty. The only way the tank was filled was by rain that fell or by water trickling out of the city’s pipes from 10 am to 11 am daily. And by trickle, we mean drizzle by drop.

Our spectacular house in Nevis, West Indies with a view of the Atlantic Ocean

We were out of water, with all the conveniences that running water brings to living, so how were we going to take a shower?

Being in the tropics, rain came fairly regularly, like every other day or so. One morning around 9:30, it was a typical tropical downpour. Billy and I saw the flooding of water through the gutters and into our rain barrels and we both grabbed towels and soap. Moving a barrel and standing under the drainpipe of the gutter we lathered up and enjoyed this pleasure of a beautiful shower out in nature. The jungle and sugar cane fields pushed up against our house, and we had a straight shot of Nevis’ volcano. Spectacular.

Then … the rain stopped.

Oh Lord. There we were, soaped up, naked, and out in our back yard when the maid popped in for her thrice weekly cleaning. Continue Reading…

Why choosing the right Finance App is so important

Posted By |

By Emily Roberts

For the Financial Independence Hub

So many areas of our lives were impacted by the Coronavirus pandemic that it’s easier to pick one that wasn’t massively altered by locking down, staying at home and avoiding touching strange surfaces at all costs. It should come as no surprise that there has been a massive increase in the use of personal finance apps in 2020, with 59% of people in the UK using a mobile banking app.

But picking the right finance app for you will depend on what you need it for. Are you in desperate need of some guidance for managing debt repayments? Or are you looking for the perfect platform to manage your investment portfolio? Or are you simply looking for something that will help you keep track of your day to day spending?

Staying on top of your invoices

Any freelancer will tell you that getting the work is only part of the battle; the biggest challenge is getting paid. If you run your own business or you’re set up as your own limited company, you need a finance app that helps you stay on top of your invoices, manage your budgeting and accounting, and help calculate your tax returns. Software like FreeAgent, Coconut, Paymo or Fyle all offer different kinds of banking and finance support for freelancers and self-employed people so you can keep track of work going out and money coming in.

Easy access to your investment portfolio

If you have an investment portfolio set up, you’re going to want to be able to access it at all times to see how well your money is working for you, and to check if any urgent changes need to be made. Some investment apps are set up to help you get started, others are aimed more at the veteran investor who knows exactly what they’re looking for. Continue Reading…

Study: Coronavirus Pandemic creating Tax Problems that could get worse in 2021

Posted By |

By Mike Brown, LendEDU

Special to the Financial Independence Hub

Americans struggling to repay their 2019 taxes in the midst of a recession has been just another issue to deal with during the coronavirus pandemic.

Recognizing this, the Internal Revenue Service (IRS) actually extended the filing and payment deadline for 2019 tax obligations from April 15, 2020, to July 15, 2020.

The extension may have temporarily stopped the bleeding, yet there’s a looming tax debt crisis that has the potential to boil over in 2021 when 2020 taxes are due.

That’s because millions of Americans took to relying on unemployment benefits, retirement funds, or stock sales to stay afloat amidst the pandemic recession.

All of those things could lead to a heavier tax obligation in 2021, and with many people still out of work and struggling to get by, the country could be looking at staggering tax debt numbers next year.

The U.S. tax gap (total outstanding tax debt) currently hovers around $400 billion, but that figure could approach crisis levels after next year’s tax season.

To capture the struggles from the 2020 tax season and also the fears regarding the 2021 tax season, LendEDU surveyed 1,000 adult Americans to better understand what the average taxpayer has been dealing with during these unprecedented times.

Observations & Analysis

All data is based on an online survey of 1,000 adult Americans commissioned by LendEDU and conducted by research firm Pollfish. The survey was conducted on December 1, 2020. For some questions, the answer percentages may not add up to 100% exactly due to rounding.

17% of Americans laid off because of Pandemic unable to pay all 2019 Taxes

As mentioned above, the IRS extended the deadline to pay 2019 taxes by three months given the financial hardships experienced by many as a result of the coronavirus pandemic and recession.

However, paying all taxes owed by the July 15th deadline was still impossible for many Americans, especially those who have lost jobs due to the pandemic.

Amongst respondents who have lost their jobs during the coronavirus pandemic, 17% were not able to pay their 2019 taxes on time and in full.

Many still haven’t filed Tax Returns

Even if you are unable to fully pay all tax obligations by the filing deadline during any given year, you should always file your tax returns on time.

When dealing with the IRS, a failure-to-file penalty is much worse (5% of unpaid taxes for each month your tax return is late, up to 25%) then a failure-to-pay penalty (.5% of unpaid taxes for each month you don’t pay, up to 25%).

Yet still, data from our survey found many Americans that couldn’t pay all their taxes on time also didn’t file on time.

32% of taxpayers who couldn’t pay all 2019 taxes on time didn’t file their taxes by July 15th either. Even worse, 72% of these taxpayers who missed the July 15th filing deadline still have yet to file their tax returns for 2019, which could lead to serious financial and legal troubles.

Amongst respondents who at least have filed their 2019 tax returns despite not being able to fully pay all taxes by July 15th, here’s how many have been able to finally repay all 2019 taxes owed…

 

 

 

 

 

With 53% of applicable taxpayers still having tax debt from 2019, we wanted to see how much they have left…

For American taxpayers that still have some amount of tax debt from the 2019 tax year, the average amount remaining is $3,662.

If you are someone that is currently repaying tax debt, you may want to learn more about tax relief as a possible way to settle or reduce your tax bill.

The data from our survey makes it clear that repaying 2019 taxes has been unusually tough, and mass unemployment brought on by the coronavirus pandemic has been a big reason for the struggles.

But the coronavirus pandemic’s impact on the tax system won’t end in 2020 and likely will be more damaging in 2021 as taxes from this unprecedented year will be owed.

Over half worried about next year’s Tax Debt

The 2021 tax season is shaping up to be a brutal one as the full financial ramifications of the coronavirus pandemic and recession develop. Continue Reading…