Legal Fees (Assorted Topics)

yes plus a precentage baced on the avrage prime rate of the year roughly prime plus 2%.

propat

call i keep rereading the legeslation hopeing to find that big gold nugget in the sand and have found no changes relevent to our situation past 1999.

propat

So deemed taxes is the same as the tax rate for that year then......

teen that is part of your QRLSP calculations.

propat

COD you are losing me with the Deemed Taxes. What is that?

I am just relaying what the CRA agent told me today. Lawyer fees are applied to the year of the settlement as is the total retro payment.

no prob teen but im telling you the further you go back the more likely you will have to take it in one year as the QRLSP calculations are high and compounded.ya see i only went up one tax bracket to take it in that year.if i were to take the two years retro in the lower tax bracket of the past years with the deemed tax added it would have had me paying more money.bud this is how it works.just so all will know and not get the shock sometime next year when they are told by the CRA that the QRLSP calculations are not to their advantage.

propat

Teen are you saying that there are no longer Deemed taxes in the retro calculations , Has the QRLSP legislation changed, have they changed how retros are being calculated, since 2002? Usually when CRA tells you that the QRLSP calculation is of no Benifit its because, they added the deemed taxes and they were so bad, that you need, to have your return done in the current year.

Teen, I had a different line from CRA, the even read to me the line,
for the lawyers fees, they are for the actual years worked, so the lawyers worked 5 years on this, you can divide by 5 the total fees a report them to each year concerned to be deducted, That was I they told me, so we need a letter with the fees to say for what year the service provided was done.

Cheers.

But propat how could the calculations be done correctly when the legal fees have not even been determined?

Also how far back was your CPP D? And CPP D is a different situation to thIs situation with SISIP.

I guess I'm just putting my faith in the fact that I will have an advantage with the QRLSP and lawyer fees as I will be getting 12 years of retro. That's a very substantial amount that I just can't believe CRA will tax me in one year.

Sorry I should not have worded my previous post about stopping the "one year taxed" mantra. That was not right and I'm sorry for saying it. If it upset you I'm sorry.

i dont have to take it out teen ive been their CRA calculated my QRLSP for my cppd and said they were taking it in one year as the QRLSP CALCULATIONS were of no advantage to me.so many will be told this directly from CRA.i could not mention it now but im telling everyone to expect this as it will be the case for many.

propat

Propat please stop saying "take the tax hit in one year" mantra out of the situation.

Until CRA takes your QRLSP and does the calculations for your new tax rate for 2013 you can't really say we will take a tax hit in one year.

According to the QRLSP if the income for the year is over $3000 dollars then a new tax rate will apply. So if anyone's LTD is over $250 per month CRA will calculate a new tax rate from their starting year to 2013.

No.

The legal fees will only be deducted in taxation year 2013.

The CRA will take the QRLSP figures for each year. Look at the tax rate and carry it forward.

So only the tax rates carry forward to 2013 where they will apply that tax rate on your 2013 total income.

Your 2013 total income will be your regular taxable incomes and retro payment less the legal fees. EG.

We will use Mr. Bloggins for this example for retro payment from LTD. Mr. Bloggins is going to get $175, 000.00 retro

Retro $175, 000.00
Legal Fees 17.5% -30, 625.00

New Retro amount $144, 375.00
normal tax applied 40% -57, 750.00
on retro
$86, 625.00
15% SISIP withhold -13, 000.00

Check in hand from SISIP $73, 625.00

Now 2013 tax return. Mr. Bloggins normally has an annual income of $50, 000 and he paid an income tax of $17, 500.00.

Total income $225, 000.00
Other deductions -$30, 625.00

New total income $194, 375.00

Total income taxes paid $88, 250.00

So with the QRLSP sheet CRA will calculate the tax rate moving forward to 2013 and apply that new calculated tax rate on the $194, 375.00.

yup anyone that has a large monthly ammount going over a long period of time will have to take this in one year and likley have their top federal tax rate doubled.then their provincial tax rate incrased as well.deemed tax in this case should be eliminated.

propat

yes Teen is right , every persons tax situation will be different depending on length of retro , how much retro, how much income was accumulated in the prior years, the CRAs Deemed tax penalty % that is applied for those years, and the compouded effect of that. That will deternine the effect of the Deemed taxes. propat posted 1 of my tax returns, the main purpose was to show the effects of deemed taxes. and the % that can quickly accumulate over many years, that I encountered.

call i seem to be reading it the same.

propat