Canada Revenue Agency Checks Funny Income Tax Numbers

Posted on April 30, 2009 by Barry Welford

Taxman puts mathematical quirk to work in spotting fudged returns was the way the Vancouver Sun more eloquently described it.

The Canada Revenue Agency is using a little-known statistical phenomenon named after the late American physicist, Frank Benford, to help identify which tax returns to examine more closely. Benford’s “law” holds that in a series of naturally occurring numbers, the number 1 will appear as the first digit more often than other numbers. Whether the figures are street addresses, expense reports or tax deductions, the “loneliest number” leads off about 30 per cent of the time.

This is how Frank Benford stumbled on his law.

Frank Benford was a research physicist at General Electric in the 1930s when he noticed something unusual about a book of logarithmic tables. The first pages showed more wear than the last pages, indicating that numbers beginning with the digit 1 were being looked up more often than numbers beginning with 2 through 9. Benford seized upon this idea and spent years collecting data to show that this pattern was widespread in nature. In 1938, Benford published his results, citing more than 20,000 values such as atomic weights, numbers in magazine articles, baseball statistics, and the areas of rivers.

In recent years the value of this and similar patterns as an auditing tool has been recognized by forensic accountants, in part because faster and cheaper computers allow first-digit analysis to be performed easily on large amounts of data. The CRA says it is now using the first-digit rule in certain circumstances to combat what it politely calls “non-compliance” in tax returns. The agency has shown particular interest in using it to analyze corporate tax returns.

Perhaps Benford’s law could become even more useful as more Canadians file their tax returns electronically. Make sure that your numbers do not look too funny if you are rushing to complete your tax return online before the deadline.

Tax deadline looms: Hope you’re ready (financialpost.com)

Technorati Tags: Accounting, Canada Revenue Agency, Tax, tax return

Knee Deep in Debt

Posted on April 27, 2009 by Barry Welford

In doing research on the previous post titled, Making Money Go Further, I was struck by the title, Knee Deep in Debt. This is actually a most useful article from the Federal Trade Commission in the US. It is very straight advice for those who perhaps are struggling and feel they are mired in debt.

As it mentions, many people face a financial crisis at some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn’t have to go from bad to worse.

They then discuss a number of options that may be helpful depending on the level of debt, the amount of personal discipline, and the prospects for the future. The options that they cover in some detail are:

Realistic Budgeting - The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.
Credit Counseling from a reputable organization - If you’re not disciplined enough to create a workable budget and stick to it, can’t work out a repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization.
Debt Management Plans – A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money.
Debt Consolidation – You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. These loans require you to put up your home as collateral. If payments are not made on time you could lose your home.
Bankruptcy – The debt management option of last resort because the results are long-lasting and far reaching.

As they caution, if you’re thinking about getting help to stabilize your financial situation, do some homework first. Find out what services a business provides and what it costs, and don’t rely on verbal promises. Get everything in writing, and read your contracts carefully.

A good agency will cover not only debt counseling, but will review the family budget and advise on the best way to manage personal finances and pay off credit card debts. It provides detailed financial education on money management, household budgeting and other issues that affect credit ratings.

Rebuilding your tarnished name (cbc.ca)
Patient Money: When the Medical Bills Swell, Seize Control (nytimes.com)

Technorati Tags: Bankruptcy, Credit card, Credit counseling, Federal Trade Commission, Personal Finance

Making Money Go Further

Posted on April 27, 2009 by Barry Welford

Making Money Go Further by searching for bargains and freebies was the advice from the Miami Herald.

On a recent Thursday evening on the big-screen TV set on CNN, a panel of financial experts predicted more financial woes for families. The experts’ consensus: An increasing number of families can’t afford the costs of their lifestyles.

Not so for the Williams family. Randol Williams says,“There really is no deep formula to how we do things. We’re not worried, because we just know how to make money work for us.”

Money is tight for us all, especially for older people relying on interest rates from savings. But there are some simple and straightforward things we can all do to make our money go further.

As a first step, make a budget and stick to it but be realistic and allow for a little occasional unplanned spending. Nevertheless avoid impulse buying. This can destroy even the most carefully planned budget. Make sure that any spare money at the end of the month is transferred to a savings account.

Are your savings working as hard for you as they might? There are many websites which allow us to check out what banks and building societies are paying and even though rates are now lower than they have been for a very long time, you can still get some relatively good rates. And if you are relying on the income from savings, it is important to get the best rate possible.

Many banks and building societies offer introductory rates for new customers for a limited period of time. These can be attractive but make sure you review the rates before the end of the introductory period. And don`t be afraid to move your money around to chase the best rate.

You will also find it possible to get a better rate if you can afford to tie up your money for a longer period of time. If you have some money you know you are not going to need for some time, transfer it into a fixed rate account. But always ensure that you have some cash at hand for emergencies and the unforeseen.

And while you are reviewing your savings, see if you can get the taxman to help out. If you are not a tax payer make sure you have registered to get your interest paid gross. Or if you are, like most of us, required to pay tax, are you fully using your TFSA tax allowance which allows you each year to save or invest a given sum in an TFSA and get interest paid tax free. (TFSA or Tax Free Savings Account is the term in Canada and other countries often have a similar way taxpayers can generate at least some interest or gains tax-free.)

It might also be a good idea to review how much you are paying on your utilities like gas, electricity, telephone and broadband. Again there are many price comparison websites that will allow you to do this. Like banks, many of these companies will give great deals to new customers and if you bundle their products together. Remember it`s your money so do your research and switch to save it.

And finally you will probably find it cheaper to buy as much as you can online or to pay for regular bills by direct debit. These are normally safe and secure means of buying and paying for things. So why not give it a go if it will save money.

Saving money to make your cash go further is not difficult. It is mostly a matter of common sense. You can almost think of any money you don’t have to spend as free cash.

Technorati Tags: bargains, Budget, Miami Herald, Price comparison service, tax-free savings account

Perfect English Tea

Posted on April 25, 2009 by Barry Welford

April has been a month to think about taxes and also about tea. Not just because April 23 is St George’s Day, St George being the patron saint of England. We read that now is a time to think about Cricket, tea dances, and fish’n’chips, particularly in London’s East End. Apparently there is no doubting Tower Hamlets’ ‘Englishness’ as the perfect place to head for a nice cuppa and a rousing chorus of Jerusalem if you are in London.

On the other hand, in the USA April has seen Tea Party Protests on Tax Day, April 15.

“This isn’t about Democrats. This isn’t about Republicans. This isn’t about Libertarians, Green parties. This is Americans joining together no matter who you are, what you are. We’re fighting for our freedoms,” said Israel Lakey of Mount Cobb. Like the tea party in Scranton, more than 750 similar events were held across the country.

The protests were reminiscent of the famous Boston Tea Party when,in 1773, colonists dumped tea in the Boston Harbor, rallying against the British government’s Tea Act. “In history, the Boston Tea Party, taxation without representation. Which I truly feel we don’t have representation for the common man in Washington D.C. So today is the perfect day, being that it’s tax day,” Lakey added.

If you’re not into protesting but just want to relax with a nice English cuppa, then it may be that you live close enough to one of these delightful places that serves a traditional English afternoon tea, perhaps even with hot scones and Devon clotted cream.

Broad House Hotel, Wroxham, Norfolk, UK
Bettys Café Tea Rooms, York, UK
Some Grand Hotels in London – The Ritz, The Berkeley, Claridge’s, The Dorchester Hotel and The Savoy Hotel
Other fine restaurants in London for Afternoon tea
High tea restaurants in Victoria, BC
Yorkshire Tea Shoppe, Fort Langley, BC

Failing that you can always order teas online and make your own cuppa. If you are a traditionalist, then you will be using loose leaf teas and a brown earthenware teapot. That will probably be black tea for the traditional English cup of tea, but even that gives you a wide variety of choices. Some swear by the comforting rituals of afternoon tea, but you will find that even a simple cuppa made with a tea-bag is a refreshing break. .. and now back to the taxes, since in Canada we have till April 30.

Five great American tearooms (cnn.com)

Technorati Tags: afternoon tea, Boston Tea, cuppa, high tea, tea, teapot

Freedom 55 No Longer Just Financial

Posted on April 20, 2009 by Barry Welford

It is some time since Darren Barefoot, that well-known Vancouver writer, suggested You’d Be Wise to Avoid Freedom 55 Financial. He was somewhat irate about his dealings with Freedom 55 Financial, which is a division of London Life Insurance Company.

The Vancouver Sun today is on the same theme as it suggests Companies are shifting to an older workforce.

Freedom 55 is a thing of the past, and many Canadians aren’t banking on Freedom 65, either. This means a shift to an older workforce, and while it is creating challenges for everyone involved, the trend is also benefiting employers by staving off an anticipated shortage of skilled workers as boomers age.

Barbara Jaworski, CEO of Toronto’s Workplace Institute, which provides consultation and training on mature worker issues explains, “The challenge for employers is to accommodate new sorts of issues that perhaps they’ve never had to deal with in the past.”

She has even coined the term KAA-Boomer!, which she explains as follows:

KAA-Boom is for 45+ Baby Boomers who are interested in their health, lifestyle, people, learning and experiencing their second adulthood. Businesses should be paying attention to demographics, why workforce strategies need to be rethought and why action should be taken now! See how the Best Employers for 50 Plus Canadians do it!

As she notes the oldest baby boomers showed little interest in leaving the workforce even before the economic crisis gutted their investments and pension plans. Deferred retirement is more about baby boomers wanting to stay engaged. Financial necessity has made the option to stop working even less attractive.

Freedom 55 is perhaps linked to what used to be the traditional work life pattern where you started working at say 15 and at three score years and ten (70) you would be lucky to be alive. With many living beyond 90 now and being in good physical shape, life is completely changed. Now it is time for postponing retirement and thinking instead about a second career. Freedom 55 may still be the brand for some but many more will be seeking Second Life 55 or Engagement 55. It’s an inviting prospect.

Boomerang staff will keep coming back (telegraph.co.uk)

Technorati Tags: Baby Boomer, Darren Barefoot, Freedom 55, London Life Insurance Company

Seniors Search Service In China

Posted on April 15, 2009 by Barry Welford

Perhaps once more China is leading the way as China’s largest search engine tailors a portal for older Web surfers.

One can still debate the logic of the country’s leading search engine launching a portal geared specifically for older Web surfers. Trekking out to 123.baidu.com — instead of the flagship www.baidu.com — opens a page with oversized fonts, few ads, and links to sites dedicated to things like tai-chi, revolutionary-song downloads, and calligraphy, all common interests for older people in China.

The portal, which labels itself “Baidu elderly search,” also includes a classical Chinese poetry forum that older Chinese are far more likely to appreciate than the younger generation. According to IDG News Service, older Internet users are still rare in the world’s most populous nation. Less than 6% of China’s Internet users are over 50, according to the China Internet Network Information Center.

That isn’t to say that similar facilities do not exist in the west, since you can find SeniorsSearch, one of the Senior Friendly Web Sites, which is available to Wired Seniors Members.

Providing seniors-friendly websites is not something that Google has ventured into even though Seniors are the fastest growing segment of the population. Baidu hopes the new site will give the company another property in its arsenal as it continues to fend off the challenge from Google. Baidu seems to already have other demographic groups covered; it launched search engine for “youth” in 2006.

China has so often been ahead of the western world as we can see from the biography* of Joseph Needham. This English intellectual from my alma mater, Caius College in Cambridge, wrote Science and Civilization in China, a twenty-four-volume masterpiece, which is known as the most important set of books telling the west what Chinese have contributed to the world.

The 17th-century philosopher-statesman Francis Bacon declared that nothing had changed the world more profoundly than three great inventions: gunpowder, printing and the compass. But what the philosopher didn’t know was that all the three had already been conceived of and successfully employed by a single people — the Chinese.

China has an astonishing history of invention and technology, and the extraordinary rise of the Chinese nation continues to this day. There will probably be many other innovations in the online search world where China will have something to teach the rest of us.

* The full title of the book is Bomb, Book and Compass: Joseph Needham and the Great Secrets of China. by Simon Winchester.

Technorati Tags: Baidu, China, Francis Bacon, Google, Searching, Web search engine

Frozen UK Pensions Good News – The Case Moves To The 17-judge ECHR Grand Chamber

Posted on April 13, 2009 by Barry Welford

The Frozen UK Pensions Case concerns the inequity in state pension treatment for some UK pensioners. Whereas half of UK state pensioners living outside the UK have pensions that are exactly the same as those for UK residents, the other half (in Canada, Australia and South Africa and other Commonwealth countries) have pensions that are frozen at the rate that applied at the time they left the UK. The case continues to progress to what everyone hopes will be an equitable conclusion despite the opposition of the UK government.

In November 2008, although the chairman of the 6-judge Lower Chamber of the European Court of Human Rights stated that he felt the arguments put forward were right, his five colleagues did not agree. The Consortium believed that the lower chamber’s majority findings were legally flawed, in particular for treating the case as a non-contributory ‘social security’ matter rather than a contributory pension issue. Accordingly the Consortium decided to ask for a referral to the Grand Chamber.

Tony Bockman, chairman of The International Consortium of British Pensioners (ICBP), has now informed members that a panel of five judges of the Grand Chamber of the European Court of Human Rights (ECHR) has accepted that the case should be referred to the 17-judge Grand Chamber. Since only ten per cent of applications for referral to the Grand Chamber are successful, this is deemed to be a favorable sign.

The Grand Chamber of the European Court of Human Rights (ECHR) will hear the discrimination case on 2 September 2009. The legal action is in the hands of London human rights lawyers Timothy Otty QC and Ben Olbourne of 20 Essex Street. More details on the ECHR hearing can be found on the Pension Parity UK website. The website also provides a great deal of information documenting the facts on this most inequitable situation.

Other Previous Posts

Technorati Tags: ECHR, European Court of Human Rights, UK government

Money Management Made Easy

Posted on April 12, 2009 by Barry Welford

If you are wondering how to manage your money better, a CNN Living article highlights where to find easy money management. The software described is in general free and is usually much more rudimentary than the Personal Finance Software For Seniors that we discussed in a previous post. They may offer everything from displaying spending patterns at a glance to suggesting ways to save.

The three mentioned in the article are:

Mint.com: Keeps track of a great deal of financial information from savings to mortgages, student loans and credit cards. It also helps users save money by directing them to credit cards that offer lower interest rates. It displays investment performance and allows users to compare their portfolio to market benchmarks to see whether their investments are meeting their growth goals. Mint.com has an iPhone application as well as a feature where users can text to receive real-time balances.
SmartyPig.com: Users can open an account for free, set a savings goal and then stash that extra cash. The site lets the user know exactly how much he or she needs to save over the allotted time in order to reach his or her goal. SmartyPig recently launched a mobile site.
Thrive.com: This bundles all of the user’s financial data to help formulate a budget. It also helps its users analyze their financial information and calculates their financial health, aiding them in predicting their financial stability in the long term.

If you want to do a little more research, then Google has many more free money management software offers. Here are the top ranking ones for Google. Of course if you need fast cash to add to your budget for an unexpected emergency, then that is not covered by such software.

AceMoney Lite: AceMoney Lite is a freeware version of the fully featured personal finance manager. It has all the features of its big brother except multiple accounts management. It supports all the features required for home or even small-business accounting needs.
ManageMe: Money Management for Everyone from India indicates that Geographies don’t matter. Whatever part of the world you may be spending in, your accounts stay in your base currency and help you manage your expenses better.
GnuCash: GnuCash is an open source personal and small business accounting package. If you are familiar with the likes of Money or Quicken you will think you have stepped back in time when you open up GnuCash. This is mainly for two reasons. First, the user interface is very basic. This doesn’t mean it’s poor software, it just means the developers concentrated on the stuff that really matters.
IngenMoney 3: This hasn’t been updated in a while now but it is still not a bad piece of software. This is a calendar-based money management application that is good for basic finances and keeping up to date with bills and day to day spending. It also throws in some extra features such as a calculator and, inexplicably, an MP3 player. It does not handle QIF or OFX files so it is quite limited. It can be handy for keeping budgets though.
Easy Cash Manager: This is a simple book-keeping program. You can use the program to keep records of your incomes and expenses. It has only the functionality that you need for very simple bookkeeping, so it is easy to use.
Abassis Finance Manager: Main Features are that you can easily create a personal budget and then track your expenses in detail. It suggests that you can then manage and get rid of debt and improve your savings account.
GFP – Personal Finance Manager: GFP aids personal finances administration with a variety of reports, charts and allows filtering data on screen to highlight important information for your financial health.

Which software meets your needs best is a very personal decision. If you find a particular software works well for you, why not add your comments here on its features. You may help someone else who is checking on alternatives.

Technorati Tags: free, Mint.com, SmartyPig, software, thrift

RRIFs Deadline April 14 For Canadian Seniors

Posted on April 10, 2009 by Barry Welford

Gordon Pape is trying to spread the word that a Deadline looms for seniors to put money back into their RRIFs.

Finance Minister Jim Flaherty granted seniors a one-time reduction of 25% in the minimum RRIF withdrawal requirement for 2008. But the country’s financial institutions had trouble getting their computer systems to accommodate the reduction. Relatively few seniors were able to take advantage of the supposed tax break.

Ottawa decided to allow people to repay up to 25% of their 2008 RRIF minimum withdrawal and claim a tax deduction for that amount. The legislation allowed for RRIF recontributions to be made up to 30 days after the law received parliamentary approval, which occurred on March 12th. Because Easter Sunday and Easter Monday fall on the 13th and 14th, Pape concludes that you have until April 14th to put money back into your RRIF.

You can check the full article for what tax savings may apply in your case.

As others have noted, normally with RRIFs, you have to get it right the first time.

At age 71, they yank away your retirement investing safety net. Arrange your registered retirement income fund (RRIF) so that you’re protected as much as possible against the kind of stock market drop we’ve seen in the past six months. By the end of the year in which you turn 71, you must convert your registered retirement savings plan into a RRIF. With RRSPs, you have some protection if the markets go wrong. You can toss in some extra cash if you have the contribution room, and for many people there’s the comfort of knowing they have years to go before they dip into their retirement savings.

With a RRIF, however, you can’t put any new money in and you must withdraw a set minimum amount of money every year. Investing mistakes matter more with RRIFs, which means it’s crucial to build them properly at the beginning.

Financial adviser Peter Andreana suggests a 3 segment approach:

A high-interest account with three years of living expenses.
A somewhat riskier mix of cash, bonds and stocks.
Mostly stocks, but some bonds.

As time goes by and a client starts to use up his or her cash to cover living expenses, the advice is to move some money from Segment Two into Segment One, and from Segment Three into Segment Two.

The goal is to balance the long-term growth potential of the stock market while maintaining short-term cash security. The closer you are to needing the money, the more conservative you must be. Given the lack of flexibility in RRIFs, it seems a prudent way to cover your financial retirement needs.

Technorati Tags: Gordon Pape, Registered Retirement Savings Plan, rrif

Paper Money Currency – Urstromtaler, Cheers Or Plenty – Take Your Pick

Posted on April 9, 2009 by Barry Welford

One meaning of currency is general acceptance or use. Plastic is taking a bit of a beating recently so perhaps it is better to go back to paper. Bank notes are of course generally accepted for what they are worth. If you are into bank note collecting, you may even be willing to pay more for attractive world paper money or rare United States currency. What about something printed up by your neighbour?

Well apparently communities are now printing their own currency in order to keep cash flowing. It’s a Depression-era idea that aims to help consumers make ends meet and support struggling local businesses.

paper money currency

It works like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at local stores that accept the currency. Here are some of these paper money currencies you may be aware of in the USA:

Detroit Cheers
Ithaca Hours in New York
Plenty in Pittsboro, North Carolina and
BerkShares in Massachusetts.

The BerkShares system started in 2006 and is the largest of its kind in the country with $2.3 million worth of BerkShares in circulation.

There are an estimated 75 local currency systems that have sprung up recently in the U.S., according to Michael Shuman, author of “The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition”

Such paper money currencies are not found only in the USA. In England you have the Lewes Pound. Again it is a complementary currency, redeemable for goods or services with local traders. It is certainly not intended to replace sterling, but it raises awareness of the importance of shopping locally. It can be bought or redeemed for sterling at any of the issuing points in Lewes, which is located in East Sussex.

In Magdeburg, Germany, they are also very proud of their local currency. It is called the Urstromtaler and is used alongside the normal currency, which is the euro. Even two years ago there were more than 200 businesses using the regional currency, including shops, bakeries, florists, restaurants. There was even a cinema that accepted Urstromtaler.

Of course the grand-daddy of them all is to be found in Switzerland. It’s the WIR, now over 75 years old. For an explanation in English, you can check out the WIR Economic Circle Cooperative. It notes that the WIR is a successful Swiss local currency for business to business transactions based on mutual credit:

The WIR credit clearing association, now called the WIR Bank, also provides conventional banking services. WIR is an important case for monetary reformers and free exchange advocates to study. While there may yet be some deficiencies in its operating policies, WIR has proven over a long period of time the effectiveness of direct clearing of credits between buyers and sellers as an alternative to conventional bank-created debt-money.

Clearly something that has achieved general acceptance and use for 75 years has earned the right to be called a currency. Let’s hope the Cheers, Hours and Plenty earn their place in the paper money currency Hall of Fame.

Fear of money (news.bbc.co.uk)

Technorati Tags: Banknote, BerkShares, Currency, Lewes Pound, Urstromtaler, WIR Bank

Search the Internet for related articles:

Senior Money Memos

Personal Finance From A Senior Perspective

Monthly Archives: April 2009

Canada Revenue Agency Checks Funny Income Tax Numbers

Knee Deep in Debt

Making Money Go Further

Perfect English Tea

Freedom 55 No Longer Just Financial

Seniors Search Service In China

Frozen UK Pensions Good News – The Case Moves To The 17-judge ECHR Grand Chamber

Money Management Made Easy

RRIFs Deadline April 14 For Canadian Seniors

Paper Money Currency – Urstromtaler, Cheers Or Plenty – Take Your Pick

Related articles by Zemanta

Related articles by Zemanta

Related articles by Zemanta

Related articles by Zemanta

Related articles by Zemanta