SERVICE CANADA NEWS
Tax changes to expect when you’re expecting
Congratulations! If you have a new baby or have a baby on
the way, there are plenty of credits and benefits you may be eligible to
Benefits Application – Save time and paperwork! When registering the
birth of your newborn, the mother of the child can also consent to use the
Automated Benefits Application (ABA), which allows you to automatically
apply for child tax benefits at the same time. If you live in a
participating province, you can consent to use the ABA on your child's
birth registration form. You will be applying for:
Your child will also be registered for the goods and
services tax/harmonized sales tax (GST/HST) credit.
Account – If you do not live in a participating province, you can
apply for the Canada child and family benefits by using the Apply for
child benefits service through My Account or by completing and mailing
Canada Child Benefits Application to your tax centre
Explanations of these benefits:
child tax benefit (CCTB) – The CCTB is a tax-free monthly payment made
to eligible families to help them with the cost of raising children under
18 years of age.
child care benefit (UCCB) – If you have children under the age of 18,
you may be entitled to this taxable benefit, which supports child care
choices for families. For the 2015 tax year, under UCCB, families will
receive $160 per month for each child under 6 and $60 per month for each
child aged 6 through 17. Payments are issued monthly.
and territorial programsMost provinces and territories have child
and family benefit and credit programs that combine with your Canada child tax benefit and the goods and services
tax/harmonized sales tax (GST/HST) credit.
credit – Families with low or modest incomes can receive this tax-free
quarterly payment to offset some of the GST/HST they pay.
income tax benefit (WITB) – Low-income families that are in the
workforce can claim this refundable tax credit to get personal tax relief.
With a child as your eligible dependant, you may now be able to claim this
tax credit or the amount claimed may increase.
amount – If you or your dependant has a severe and prolonged
impairment in physical or mental functions, you or your dependant may be
eligible for the disability tax credit (DTC). To determine eligibility,
you must complete Form T2201,
Disability Tax Credit Certificate and have it certified by a medical
practitioner. Canadians claiming the credit will be able to file online
regardless of whether or not their Form T2201 has been submitted to the
CRA for that tax year.
disability benefit (CDB) – The CDB is a tax-free benefit for families
who care for a child under age 18 who is eligible for the disability tax
education savings plan (RESP) – You can start saving for your child’s
future now. An RESP is a contract between you (the subscriber) and another
individual or organization (the promoter) that allows you to make
contributions toward your child’s future education. Programs such as the Canada
education savings grant (CESG) and the Canada
learning bond (CLB) are other great incentives to create an RESP for
Four reasons why you should still take CPP early
I’ve written extensively about the issues around taking CPP early. It’s one of the big conundrums of Canada Pension Plan and my conclusion is that it still makes sense to take CPP as early as you can in most cases. Here’s four questions to ask yourself in determining if it makes sense to take CPP early.Will you still be working after 60? Under the old rules, you had to stop working in order to collect early CPP. The work cessation rules were confusing, misinterpreted and difficult to enforce so it’s probably a good thing they will be a thing of the past.
Starting January 1, 2012, you can start collecting CPP as soon as you turn 60 and you no longer have to stop working. The catch is that as long as you’re working, you must keep paying into CPP even if you are collecting it. The good news is that paying into it will also increase your future benefit.What is the mathematical break-even point?
Under the old rules, the decision to collect CPP early was really based on a mathematical calculation of the break-even point. Before 2012, this break-even point was age 77. With the new rules, every Canadian needs to understand the math. Here’s the example of twins that I used before, with the break-even point updated to 2015 values.
“Janet and Beth are twins. Let’s assume they both qualify for the same CPP of $502 per month at age 65. Let’s further assume, Beth decides to take CPP now at age 60 at a reduced amount while Janet decides she wants to wait till 65 because she will get more income by deferring the income for 5 years.
Under Canada Pension Plan benefits, Beth can take income at age 60 based on a reduction factor of 0.58% for each month prior to her 65th birthday. Thus Beth’s benefit will be reduced by 34.8% (0.58% x 60 months) for a monthly income of $327.30 starting on her 60th birthday.
Let’s fast forward 5 years. Now, Beth and Janet are both 65. Over the last 5 years, Beth has collected $327.30 per month totaling $19,638. In other words, Beth has made $19,638 before Janet has collected a single CPP cheque. That being said, Janet is now going to get $502 per month for CPP or $174.70 per month more than Beth’s $327.30. The question is how many months does Janet need to collect more pension than Beth to make up the $19,638 Beth is ahead? It will take Janet 113 months to make up the $19,638 at $174.70 per month. In other words, before age 74.4, Beth is ahead of Janet and after age 74.4, Janet is ahead of Beth.”
This math alone is still a very powerful argument for taking CPP early. Another way to phrase this question is, “How long do you expect to live?”
Note that under the new rules, the mathematical break-even point will change again in 2016, when the reduction factor will increase from 0.58% per month to 0.6%. So for the above example, in 2016, Beth would get $321 instead of $327.30 at age 60. This will move the break-even point from age 74.4 to age 74.When will you most enjoy the money?
When are you most likely to enjoy the money? Before age 74 or after age 74? Even though the break-even point is three years sooner, for most people, they live the best years of their retirement in the early years. I call these the ‘go-go’ years (which is one of three phases of retirement).
Some believe it’s better to have a higher income later because of the rising costs of health care. Whatever you believe, you should plan for. It might be worthwhile to look around your life and see the spending patterns of 70, 80 and 90 year olds to assess how much they are really spending. Are they spending more or less that they did when they were in their active retirement years.What happens if you Leave money on the table?
Let’s go back to Beth who could collect $327.30 at age 60. Let’s pretend that she gets cold feet and decides to delay taking CPP by one year to age 61. What’s happened is that she ”left money on the table.” In other words, she could have taken $3,927.60 from her CPP ($327.30 x 12 months), but chose not to, to be able to get more money in the future. That’s fine as long as she lives long enough to get back the money that she left behind. Again, it comes back to the math. For every year she delays taking CPP when she could have taken it, she must live one year longer at the other end to get it back. By delaying CPP for one year, she must live to age 75 to get back the $3,927.60 that she left behind. If she delays taking CPP until 62, then she has to live until 76 to get back the two years of money she left behind. Why wouldn’t you take it early given this math? The main reason is that you think you will live longer and you will need more money the older you get.My two cents
I think if people understand the math of Canada Pension Plan, most people will take it early. In 2012, you can take it early even if you are working. The bad news is you will get hit with a bigger reduction with the new rules. Some say its also bad news because you will have to keep paying into CPP if you are working (under the new rules). To me, that’s not such a bad thing because paying into it also increases your future benefit so it’s not like you are not going to get your money back. I don’t think the increased reduction is enough of a deterrent because a bird in your hand is better than two in the bush.
|How to Do Payroll – Employment Deductions (EI)
When it comes to EI deductions, some small businesses risk overpayment, others underpay and some opt out (legally). How can you ensure you’re getting it right?
What is EI
“Employment Insurance provides temporary financial assistance to unemployed Canadians who have lost their job through no fault of their own, while they look for work or upgrade their skills” (source: Government of Canada). It also assists Canadians with maternity, parental, sickness and compassionate care benefits.
If you are self-employed (operate your own business)
You have the option to contribute to EI or opt out of making payments. Remember if you don’t opt in you won’t be eligible should you ever require payments. It’s also important to note if your business were to fail you would not be eligible for EI payments.
So is it worth it for you? Each situation is unique, Larry MacDonald
of MoneySense magazine says it’s worth considering if you see yourself needing time away from work. Otherwise, “if you think it’s unlikely you would ever take much time away from your business it’s probably not worth the cost” Employment issuance: The entrepreneur’s dilemma.
As per Canada Revenue, there are five types of EI special benefits:
· Maternity benefits
· Parental benefits
· Sickness benefits
· Compassionate care benefits
· Parents of critically ill children benefits
Be aware “some individuals who work independently and are not hired as employees cannot register for these EI special benefits for self-employed people because they are already eligible to receive benefits through the regular EI program” Canada Revenue
. Learn if you qualify and how to apply here
If you run a family business
Do your research to determine what’s right for you and your individual situation. If you’re not sure about the status of your company’s employees and whether they would qualify for EI should they need it, you can request a ruling from the CRA. Learn more in Should your family-run business pay into EI for relatives?
Employment Insurance can’t be collected by most relatives in family-run businesses. If you hire employees for your small business.
When you open a small business, you are responsible for paying your employees accurately and remitting payroll deductions. EI premiums are one of those deductions. What you can do
You have a choice – You can do research to determine the EI requirements for your small business and hope you get it right or you can rely on certified payroll professionals can help you determine your needs and provide accurate, reliable payroll with or without EI deductions.
RDSP Planning for the Disabled Smart Year End Move
Registered Disability Savings Plans (RDSPs) have been around since 2008 and they remain a lucrative savings plan for the disabled.
Contributions are not deductible, but income accumulates in an RDSP tax free. Later, contributions are withdrawn from an RDSP on a tax free basis, but all other amounts—accumulated investment income, and the grants and bonds provided by government to enhance savings are taxable in the hands of the beneficiary as withdrawn. Those government “sweeteners” should be discussed before year end to maximize investment advantages.
Here’s how they work: the Federal government will provide direct financial assistance to RDSPs in two ways.
1. Canada Disability Savings Grant will match RDSP contributions as follows:
Family Net Income (2013)Up to $87,123Over $87,123First $500 – 300% (maximum $1,500)First $1,000 – 100% (maximum $1,000)Next $1,000 – 200% (maximum $2,000) Therefore, $1,500 contributed to RDSP generates
$3,500 CDSGTherefore, $1,000 contributed to RDSP generates
Family income is calculated in the same manner as it is for Canada Education Savings Grant purposes except that in years after the beneficiary turns 18 family income is the income of the beneficiary and their spouse or common law partner.
There is a lifetime maximum of $70,000 that will be funded under the CDSG and an RDSP will not qualify to receive a CDSG from the year in which the beneficiary turns 49.
2. Canada Disability Savings Bond. Unlike the CDSG, there is no requirement that a contribution be made to a RDSP before a savings bond contribution is available.
The maximum annual CDSB entitlement is $1,000 and is earned where family income does not exceed $25,356 in 2013. The CDSB amount is phased out completely when family income is $43,561.
There is a lifetime maximum of $20,000 for CDSBs. Like the CDSG, CDSBs will not be paid after the beneficiary of the RDSP turns 49.
Paying attention to net income levels is important, to maximize government participation in these savings plans. An RRSP contribution can help reduce net income. See a Distinguished or Master Financial Advisor for assistance with the estimated tax calculations and an RRSP deposit.
Rules and Regulations Governing the Hiring of Foreign Workers Tightening
Canada has always been a country characterized by immigration. While there has been a consistently steady stream of individuals coming from all over the world, what have changed are the avenues available to enter the country.
Increasingly immigrants are likely to have first worked in Canada under a temporary work permit. This is because the immigration system is becoming increasingly employer-driven, aimed first and foremost at alleviating both cyclical and chronic labour shortages.
Temporary foreign workers enter Canada through the country’s Temporary Foreign Worker Program (the “TFWP”). As I have noted on several occasions, the TFWP has expanded exponentially over the last decade. Specifically, the number of temporary foreign workers in Canada has increased from approximately 60,000 to over 250,000 per year. The growth has been so significant that the number of temporary foreign workers has surpassed the number of economic permanent residents entering Canada per year.
At the same time, the rules and regulations governing the entry of temporary workers in Canada have tightened significantly. This has meant that employers are increasingly liable both for the process followed in hiring foreign workers and for the manner in which they are treated while in Canada.
Human Resources and Skills Development Canada (“HRSDC”) has just announced new rules governing the recruitment of foreigners. This includes lengthened recruitment times, a requirement for employers to broaden their search for workers, as well as the imposition of fees associated with a request for a Labour Market Opinion.
In addition to the regulatory changes, employers are also increasingly under scrutiny with respect to the manner in which they treat foreign workers, both in their hiring and employment. This includes various factors such as wages, hours of work, as well as workplace health and safety. Not only are employers expected to promise to adhere to the conditions of employment agreed to at the time of the hiring of a foreigner, they will also be at risk of an audit by HRSDC and/or Immigration Canada.
The new rules and regulations should not be discouraging to employers hoping to hire foreigners. Rather, these changes are part of a natural evolution of a program which has grown by leaps and bounds. Canada will continue to facilitate the entry of thousands of temporary foreign workers, if for no other reason than the fact that there continues to be chronic shortages of skilled labour in various aspects of the country.
Given the changes, employers that implement a formal process for the recruitment, hiring, as well as the employment of temporary foreign workers will be in a good position to continue to hire foreigners.
Investing in the process for the hiring of foreign workers will specifically help to ensure that employees are secured in a timely manner and that the relationship between an organization and both HRSDC and Immigration Canada remains positive and productive.
Regulatory Amendments Relating to End of Mandatory Issuance of SIN Cards Now in Force
Among other things, these Regulations align the regulatory framework with legislative changes enacted in the Jobs, Growth and Long-term Prosperity Act (“JGLPA”) which end the mandatory issuance of Social Insurance Number (“SIN”) cards (cards may continue to be issued on a discretionary basis). Operationally, this will be achieved by March 31, 2014.
As previously reported, the relevant provisions in the JGLPA regarding the end of the mandatory issuance of SIN cards came into force on March 1, 2013.
Under these changes, the SIN will still be required by employers, but there may be no physical SIN cards. SIN cards which are already in circulation will remain valid.
VALIDATING A SIN MANUALLY
It is the employer’s responsibility to ask to see the SIN card and it is the employee’s responsibility to provide the SIN card. The name on the payroll records must be the same as the name on the SIN card.
Most payroll systems perform a validity check on the SINs of new employees as they are added into the system. Where there is no such system check, the following manual calculations should be performed.
Alternatively, employers can use the CPA’s online Social Insurance Number Verification Tool.
Example: SIN # 193-456-787
Social insurance number digits
1. SIN to verify
2. Extract the digit in the first four odd numbered positions and add across
3. Extract the digit in each even numbered position, 2, 4, 6, 8
4. Double the extracted digits
5. Add each of the digits in the above step considering a two digit number as separate numbers
6. Add the two sums above (step 2 and 5)
7. Round to the next highest number ending in 0
8. Subtract the sum in step 6 from this next highest number (50-43)
9. Last digit from SIN
Since the result of step 8 is the same as the last digit of the SIN, the number is a valid SIN.
RESPONSIBILITIES OF SIN HOLDERS
By law, Canadian citizens, newcomers to Canada and temporary residents must have a Social Insurance Number (SIN) to work in Canada or to receive benefits and services from government programs.
You must provide your SIN to your employer within three (3) days of starting your new job.
Since it is not against the law to ask for an individual's SIN, many private sector organizations do request your SIN. Businesses might ask for your SIN as identification or to check your credit rating. However, because your SIN card is not a piece of identification, you should not show your SIN card or provide your number unless you are satisfied it is necessary. Your SIN is issued only to you and you have to protect it.
There are theft and fraud crimes related specifically to the SIN, which are punishable by a fine, imprisonment, or both. It is a crime to:
knowingly apply for more than one SIN
use somebody else's SIN to deceive or defraud
lend or sell a SIN
manufacture a SIN card
As a SIN holder, you have four key responsibilities to protect your SIN:
1. Never give out your SIN unless you are sure it is legally required or you are satisfied it is necessary.
You must provide your SIN to take part in some government programs and/or services. For example, the Canada Revenue Agency requires your SIN when you file your income tax, or when you apply for Employment Insurance (EI), Quebec Parental Insurance Plan (QPIP) or Canada Pension Plan (CPP)/ Quebec Pension Plan (QPP) benefits.
You must provide your SIN to your employer for income tax and benefit purposes. You must also give it to financial institutions for accounts that pay interest.
Other than for purposes listed above, it is your decision when to share your SIN information and with whom.
2. Take steps to protect your SIN, your SIN card and other personal information from theft.
Your SIN is confidential and contains important information. If it is stolen along with other personal information, your SIN could be used by someone else to gain access to a wide range of benefits, services, and information in your name.
Keep your SIN card in a safe place, like a safety deposit box. Do not carry it in your wallet or purse unless you know you will have to show it that day (for example, when starting a new job).
3. Inform Service Canada and other appropriate authorities if you believe your SIN is being used illegally.
Stolen, lost or borrowed SINs are used to defraud governments, businesses and individuals. If someone else uses your SIN to work illegally or to obtain credit, you may be asked to pay additional tax for income you did not earn or encounter difficulty when you apply for credit.
If you suspect your SIN is being used illegally or there is a risk it will be used inappropriately, follow the following steps:
a) Figure out if any criminal activity (for example, theft or fraud) has taken place. If yes, contact:
o Your local police
o The Canadian Anti-fraud Call Centre at 1-888-495-8501 (This national anti-fraud call centre provides advice and assistance about identity theft.)
b) Contact Service Canada:
o in person at a Service Canada Centre (office locations are available on the Service Canada website or at the number below)
o by calling 1-800-206-7218 (English) or 1-800-808-6352 (French) and select option “3.” (1-506-548-7961 from outside Canada.)
c) Contact Equifax (1-800-465-7166) and TransUnion (1-800-663-9980 of 1-877-713-3393 for residents of Quebec), Canada 's two national credit bureaus to:
o request a free copy of your credit report (one free report issued per year) so you can review your credit rating for any suspicious activity
o consider whether to request that your credit file be flagged to indicate that your personal information has been put at risk and may be vulnerable to fraud.
d) Inform your bank and creditors by phone and in writing to reduce your financial risk.
4. Ensure that your personal information on the SIN Register is accurate, complete and current. Contact Service Canada when:
you change your name (through marriage, adoption or a legal change of name)
your citizenship status changes
your SIN card is lost or stolen
you suspect that someone is illegally using your SIN
there is a death of a family member
you discover that information on your SIN record is incorrect or incomplete.
For more information on how to update your information in the Register, visit the Service Canada website or call toll-free 1-800-206-7218 (English) or 1-800-808-6352 (French) and select option “3”. Agents are available Monday to Friday from 8:30 am to 4:30 pm (local time), except statutory holidays.
If you are calling from outside Canada, the number is 1-506-548-7961 (long distance charges apply), from 8:00am to 8:30pm (Atlantic time).
GOVERNMENT ISSUANCE OF SIN NUMBERS
The following chart provides an illustration of the province or provinces of issuance depending on the beginning of the social insurance number. Sin beginning with Province of issuance 0NEVER1Atlantic and Canadians outside of Canada2Quebec3Quebec4Ontario5Ontario6Prairies – Alberta, Manitoba, Nunavut, Northwest Territories and Saskatchewan7British Columbia and Yukon8NEVER9Temporary - Work permit must also be provided with expiry date
A SIN beginning with the number 0 or 8 should NEVER be accepted. If presented with a SIN card beginning with these numbers, contact Service Canada or the RCMP immediately.
TEMPORARY SINS (900-SERIES)
SIN cards beginning with the number 9 (also referred to as 900-series SINs) are not considered permanent and are issued to temporary foreign workers who are neither Canadian citizens nor permanent residents. These SINs are valid only until the expiry date printed on the front of the card.
Expiry dates on 900-series SINs were introduced in March 2003 to illustrate the end of the person's authorized ability to work in Canada, to a maximum of five years.
A 900-series card holder without an expiry date must provide valid immigration documents to obtain a new temporary or, if applicable, a permanent card. (900-series SIN cards without expiry dates were no longer issued after April 3, 2004.)
Remember, employers must see the employee’s SIN card within three days of hiring. If the SIN begins with the number 9, employers must now do two things:
1. Inspect the card to ensure it has not expired. If there is no expiry date, the card is no longer valid.
2. Review the valid work permit issued by Citizenship and Immigration Canada (CIC) to ensure the employee is authorized to work. Review the terms and conditions of the work permit, which will include dates, authorized locations and any restrictions. (For example, foreign students are often provided with a temporary SIN allowing them to only work within a certain distance from campus.)
If the work permit has expired or will be expiring within the next four months, the employee must apply for an extension of the work permit with CIC. Once the work permit is approved, an application can be made for an extension of the SIN.
A work permit is needed for most temporary jobs in Canada. However, there are some temporary jobs that do not need a temporary work permit based on the job function. Some examples include foreign athletes and coaches, clergy, performing artists, public speakers and full-time students working on campus. For a list of all the jobs that do not require a temporary work permit and the requirements for each job, please visit the CIC website at: www.cic.gc.ca/english/work/apply-who-nopermit.asp