Wednesday, October 21, 2009

Proposed TFSA Changes: Million Dollar Journey

Proposed TFSA Changes: Million Dollar Journey

Posted: 21 Oct 2009 03:30 AM PDT
A reader emailed me an article regarding proposed TFSA changes made by our Finance Minister, Jim Flaherty.  Before you get too concerned, there aren’t any major changes to benefits, but proposed changes to close any loop holes.
Before I get too far ahead of myself, lets get back to basics.  A tax free savings account (TFSA) is an account where investments can compound tax free.  Tax refunds are not offered on deposits, but amounts can be withdrawn from the TFSA without any taxation or conflict with seniors benefits.  The deposit limit increases by $5,000 per year (over age 18).  For more details, check out my original post about TFSAs.
With the basics out of the way, as mentioned, the Finance Minister has proposed a few changes to the TFSA:
  • Make any income attributable to deliberate overcontributions and prohibited investments subject to existing anti-avoidance rules in the Income Tax Act.
  • Make any income attributable to non-qualified investments taxable at regular income tax rates.
  • Ensure that withdrawals of deliberate overcontributions, prohibited investments, non-qualified investments or amounts attributable to swap transactions, or of related investment income, from a TFSA do not create additional TFSA contribution room.
  • Effectively prohibit asset transfer transactions between TFSAs and other accounts.

Over Contributions

Over contributions in the TFSA are currently charged an interest of 1% per month. Even though this fee is hefty, some are intentionally over contributing in an attempt to surpass the penalty in profits. For example, if someone bet the index in March 2008 by over contributing to a TFSA, the investment gain would easily beat any penalties charged.
What do the proposed changes mean?  Simply that if the investor intentionally over contributes, invests and makes a profit, the gains will be completely taxed away.  Basically the changes will eliminate the incentive to over contribute.

Non Qualified Investments

What is considered a non-qualified investment?
  • Shares of the capital stock of a corporation in which the holder has a significant (10% or greater) interest
  • Investments in entities with which the holder does not deal at arm’s length
  • Land
  • General partnership units
What are the new penalties for non-qualified investments?  According to the Globe Investor
Any gains on prohibited investments, such as shares of a company in which you own a significant interest, will be taxed at 100 per cent while any secondary income related to non-qualified investments, such as land or general partnership units, will be taxed at regular rates.

Asset Transfer

Basically, this new rule prohibits the transfer from registered and non-registered accounts (non-cash) to a TFSA.
The proposed amendments would effectively prohibit asset transfer transactions between registered or non-registered accounts and TFSAs. The prohibition would apply to transfers effected between accounts of the same taxpayer or that of the taxpayer and an individual with whom the taxpayer does not deal at arm’s length.
Generally speaking, the proposed changes will not affect the everyday investor, but perhaps those who like to push the rules to the limit.  What are your thoughts on the new rules?
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Normal is Broke

Living With A Chain

How to Get a Job when No One is Hiring

When the jobs are hidden

To get a job, you have to find the openings that no one's advertising, and really impress your potential employer.

By Jia Lynn Yang, writer-reporter

NEW YORK (Fortune) -- David Perry, a longtime headhunter, says you're wasting your time if you're looking for job postings online. And he should know: he's often the guy on the other side helping companies lure new talent. Perry, who's based in Ottawa, says that in the last 22 years he has accomplished 996 searches totaling $172 million in salary. And the bottom line in today's economy, he says, is you have to tap the "hidden job market."

Perry's also the co-author of "Guerrilla Marketing for Job Hunters" and he recently spoke with Fortune.

What's the "hidden job market"?

When companies say, 'We have a hiring freeze,' that doesn't mean they're not hiring. It just means they're not adding headcount. Every year there's 20-25% turn over. So in a 1,000-person company, 200 or 250 people are going to turn over, either through attrition, or someone moves. Those companies are still hiring but they don't want to tell you.

So how do you find these jobs?

What you have to do in a recession is map your skills to employers to where you know they have a problem you can solve. My advice to job hunters is pick 10 to 20 companies, no more, and pick companies you're interested in, and that you think you can add value to. That requires researching companies, and so that list may take you two weeks. If you're trying to crack the hidden job market and you know the job position you want reports to vice president, find that vice president on LinkedIn and look at his profile to see who else he's connected to and go ask them, 'What's this guy like to work for?' Do the research before you even pick up the phone.

How can you get someone's attention?

We can go into billboards, sandwiches - that stuff only works once. It's only for one person who figures it out once, once in a city. If you're looking for fun stuff, we have this thing called the coffee cup caper, 30% of the time it will result in an interview. You send an employer a coffee cup with a little $5 swipe card with a little note that says, I'd like to get together and talk with you over coffee. I'll be calling soon. And you send it by U.S. post two day delivery, and that gets registered. So when they've signed for it, you wait about 20 minutes and then you call them. And then you go, Hi, I know you just got my package.' You're proving you're imaginative and creative.

What something people should avoid during a job interview?

This drives me insane: I've seen people mentally deciding in the interview whether they want the job. That's the last place to decide. You go into an interview, and you sell like your life depends on it. You've got to get the job first. I've seen it thousands of times. There's this point in the interview, where people go 'Hmm, do I really want this? You can see their body change. The employer picks it up and it's gone. If the employer is telling you, 'I love you,' and you're not saying 'I love you too,' it's over with.

How about following up afterwards?

If you really like the opportunity, don't go home and write thank you very much. Go back and write a letter that says, upon further reflection of what we were talking about, here's what I bring to the table, here's how I see myself fitting into the organization, including a 30-60-90 day plan.

How can someone attract a recruiter's attention?

You have to go to ZoomInfo and LinkedIn and create a profile. All corporate recruiters and probably 20% of the headhunters in America have ZoomInfo accounts. When we start a search, companies aren't going to advertise. The headhunter goes to ZoomInfo, types in requirements that we need, like skillset, degree, city, functional title, and up will come anywhere from a hundred to several thousand people who fit that criteria. Then we go to LinkedIn and run the same search. If you're in ZoomInfo with a picture, we're going to call you first. Just reverse engineer what recruiters are doing so you get found.

How can you really impress a potential employer?

It hasn't worked in years just to bring in your resume, except only in the most junior positions. I concentrate on directors to CEOs, and the last interview for us regardless is always a Power Point presentation of what you've learned, pain points, and how you intend to fix that. Everyone talks about being a great leader and great communicator, so prove it. Don't go into an interview and treat it like it's just another business meeting. Your career is your biggest asset now - because it's certainly not your house. To top of page


August 2008 Dave Ramsey on Barack Obama

This was aired in August 2008. So was Dave right???