Already on ArticleSlash?

Forgot your password? Sign Up

Vacation Pay - How to Shelter it From Taxation

Rick Henderson
 


Visitors: 1,157
 4 votes

Vacation pay is an important consideration with job termination that can add up to a substantial amount of money. Depending on your current income level and your length of service at your employer, a few weeks of vacation pay can easily attract the top level of taxation. This means you can easily lose half your vacation pay away to taxation. Some employers will give you the option of receiving your pay over x number of weeks verses a lump sum payout.

One solution for sheltering your vacation pay out from taxation is to have your pay put directly into your Registered Retirement Savings Plan. (R. R. S. P. ). To perform this transfer you must have the contribution room. his is a simply process that is offered to most member who are terminated from employment. If it is not listed as an option in your termination papers you may simply have to ask your human resource contact person for it.

To perform this transfer requires you to know a couple important items of information. The first item of information is to find out if you have enough room to transfer your vacation pay to your R. R. S. P?

This information can be found on your last notice of assessment you received when you filed your last tax return. Be aware that over contributions would be penalized at a significant rate.

Your written financial plan should take into account the possibility of job loss and how to shelter your possible vacation pay from taxation. Think about this before you decide to fully top up your RRSP contribution limit as it may force you to take your vacation pay as income in a lump sum which could cost you thousands of dollars in unnecessary taxation.

Rick Henderson is a well known author, speaker and educator. his website is a library full of retirement planning strategies. His latest book 90 Days to Retirement is available free through his website http://www.financialideas.ca Rick also offers second opinions about your retirement plan to give you peace of mind and ensure you avoid the most common mistakes most investors make.

You can request his latest “CD" isn't it time you got a second opinion about your wealth by visiting http://www.financialideas.ca and clicking any email link and type “CD" in the subject

(403)

Article Source:


 
Rate this Article: 
 
The Importance Of Differences Between Taxation And Accounting Rules
Rated 2.8 / 5
based on 4 votes
ArticleSlash

Related Articles:

How Taxation Training in Adelaide will Help You Out

by: Ethan Cox (September 08, 2017) 
(Business/Accounting)

New York Department of Taxation

by: Ian K Jackson (July 10, 2013) 
(Finance/Taxes)

Living Trust Taxation Tips

by: Dean Forster (May 27, 2007) 
(Finance)

Living in Australia - Superannuation, Taxation

by: Gordon Chong (April 25, 2007) 
(Finance)

NY Department of Taxation Income Execution

by: Ian K Jackson (September 26, 2014) 
(Finance/Taxes)

Taxation the Current State of Play

by: Alvin Yakatori (July 10, 2008) 
(Finance/Taxes)

Albanian Taxation System - What Happens Inside?

by: Eduart Gjokutaj (June 18, 2007) 
(Finance/Taxes)

Green Taxation for disposable supplies

by: Robert James Daniel (August 20, 2009) 
(News/Environmental)

Tax Return Outsourcing - Reduce Your Burden Of Taxation

by: Michelle Barkley (February 18, 2008) 
(Finance/Taxes)

The Importance Of Differences Between Taxation And Accounting Rules

by: Eduart Gjokutaj (June 27, 2007) 
(Finance/Taxes)