Even small-scale investors can benefit from tax-saving tools like TFSAs and charitable stock donations

By Sean Davidson, CBC News Posted: Jan 28, 2014 11:51 AM ET Last Updated: Mar 01, 2015 10:36 PM ET

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Even though 2014 is behind us, there are still opportunities for the savvy investor to protect his or her portfolio from the taxman — perhaps by getting caught up on some oft-overlooked paperwork or thinking ahead to 2015 and beyond.

Marc Lamontagne, a certified financial planner with Ottawa-based Ryan Lamontagne Inc. is, for instance, making sure his clients fill out their T1135 forms.

If they don’t, it could lead to a pretty harsh penalty of up to $2,500 a year, Lamontagne said in an interview with CBCNews.ca.

The T1135, or Foreign Income Verification Statement, was reworked in 2013 as part of Ottawa’s crackdown on those who hide money overseas. It applies to individuals who have more than $100,000 in non-Canadian securities — perhaps rental property in the Caribbean, or cash in foreign bank accounts, or stock in a foreign company that’s traded on a foreign exchange.

Filling out the form is the most important thing, said Lamontagne. You don’t need to give details if the interest or dividends show up on a T3 or T5, but you need to file the form.

Safety deposit boxes are no longer tax deductible, as of March 21, 2013, for companies and Jan.1, 2014, for individuals. It’s a very small change, but one that will affect a lot of people says Lamontagne.

Because stocks and other securities are no longer issued on certificates, investors no longer need safe places to store all that paper or the long-standing deduction that went with them.

It was only a matter of time, says Lamontagne, before some clever government accountant thought to eliminate it.

As of Feb. 9, 2015, individual taxpayers can file their tax returns online. Corporations and partnerships must still mail the form into the Canada Revenue Agency’s foreign reporting unit in Ottawa. The government expects to make electronic filing available to corporations and partnerships in the future.

The rules for reporting foreign holdings have, Lamontagne concedes, always been a bit confusing to some investors. But those individuals would do well to start sorting out the confusion, because the government has been cracking down.

If you own a house in Florida for personal use, that’s not a problem. But if you’re renting it out, you need to start reporting it, Lamontagne said.

TFSAs a good investment vehicle

The start of a new year often sees investors putting as much money as possible into RRSPs in order to reduce their taxable income before the contribution deadline, which this year falls on March 2. But this is also a good time to think about tax-free savings accounts. since with every Jan. 1, we all get another $5,500 in allowable contributions, up from the prior limit of $5,000.

If you have any interest or dividends or capital gains, non-registered money or even money in a savings account, put it in [a TFSA], says Lamontagne.

If you own foreign property or investments make sure to file a T1135 form and that you understand which of your assets need to be reported for tax purposes, says financial planner Marc Lamontagne. (Courtesy of Marc Lamontagne)

Experts have long noted that TFSAs are not fully understood or exploited by many Canadians.

Some people think they are only meant for investment income; others don’t understand exactly how contributions work.

If you don’t use [your contribution room], you don’t lose it, says Lamontagne.

Any unused contribution amounts are carried forward into the next year and accumulate.

For instance, this year, somebody who never made any contribution [to a TFSA] would be allowed to put in $36,500, Lamontagne said.

Someone who has that kind of money in a standard savings account would do well to move it into a TFSA, he says, where the interest and investment income it generates remain sheltered from tax.

Why pay taxes? Lamontagne asks, when TFSAs are really, very flexible.