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canada revenue news and videos
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Posted on January-21-16 5:52 PM
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
receive. Important facts - Automated
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. - My
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
Form RC66,
Canada Child Benefits Application to your tax centre
Explanations of these benefits: - Canada
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.
- Universal
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.
- Provincial
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.
- GST/HST
credit – Families with low or modest incomes can receive this tax-free
quarterly payment to offset some of the GST/HST they pay.
- Working
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.
- Disability
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.
- Child
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
credit.
- Registered
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
your child.
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Posted on January-20-16 3:19 PM
2016 Tax Tips
for 2015 Filing Year
Did you know
that last tax filing season, the average tax refund was just under $1,800, or
about $150 a month? That’s a lot of money to give to the government on an
interest-free basis. Yet that’s what almost 17 million tax filers did and CRA
paid back approximately $30 Billion dollars. Astute tax filers will want to get
that money back working for their own futures quickly this year. If that
includes you, do file your tax return early and accurately. But make sure you
have all your documentation, first. Make a point of acquiring and reviewing tax software if you are
NETFILING this year. If you hire a pro, make an appointment as soon as possible
to determine what is needed to meet new tax filing rules and discuss what has
changed in your personal affairs. Births, deaths, marriages, divorces, new jobs
and job terminations – all can impact the tax return. |
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Posted on July-23-15 6:04 PM
Tax Specialists Brief your Clients About CRA Fraud And E-Mail
Scams
It’s a warm
summer day. You’re relaxing in the yard and wondering what could possibly make
this day better. And then, out of the blue, you receive an e-mail from Canada
Revenue Agency stating that they’ve discovered they owe you money! Could
this be true? Or, do you need to wake up and smell the coffee . . .
.? There are two scams in particular to brief your clients about: Refund
and Collection Scams.
Refund Scams. Even though hundreds of millions of
individuals use e-mail daily, CRA does not. So it’s pretty
much guaranteed that the e-mail you just received asking for your
banking information so that CRA can deposit the funds into your account, is not
legitimate. In fact, when you go to check that the funds have been
deposited, you will find that you have become a victim and all your funds are
gone. While scams like this are not new and have been happening probably as
long as there has been e-mail, they seem to have been especially aggressive
this year; CRA currently lists 22 variations of e-mail scams that are
being used to extract money from your clients fraudulently. In addition to e-mail schemes, scammers also use text messages, online
form submissions and, in some cases, good old snail mail! So, a key tax literacy message for your clients is this: CRA does not
communicate with taxpayers by electronic means outside of the “My Account” and “My
Business Account” portals on their website. Collection Scams. Reports of telephone calls purportedly
from CRA Collections have been making the news recently. According to the CRA
newsroom, these calls are very aggressive in nature and go as far as
threatening court charges, jail or deportation. The caller demands immediate payment
by credit card and, if no credit card exists, demands the immediate purchase of
a prepaid credit card. So what should your clients do if they receive one of these types of
communications? CRA recommends that anyone potentially the victim of a fraud ask
themselves these questions: - Is there a reason that CRA may be calling? Do I
have a tax balance outstanding?
- Is the requestor asking for information I would
not include on my tax return?
- Is the requestor asking for information I know
the CRA already has on file for me?
- How did the requestor get my e-mail address or
telephone number?
- Am I confident I know who is asking for the
information?Remember, you can always turn the tables. Ask the caller for the amount
on line 150 of your latest tax return. If they can’t or won’t answer that
question, they are not from CRA.If you or your clients have received suspected fraudulent communications
from someone, contact the Canadian Anti-Fraud Centre at www.antifraudcentre-centreantifraude.ca
or toll-free at 1-888-495-8501.
- http://www.cra-arc.gc.ca/ntcs/frdlntmls-eng.html
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Posted on July-22-15 6:35 PM
Bank of Canada cuts rates again
OTTAWA (Reuters) - The Bank of Canada cut its benchmark interest rate by 25
basis points to 0.5 percent on Wednesday, saying an unexpected economic
contraction in the first half of the year had added to excess capacity and put
downward pressure on inflation. "Additional monetary stimulus is required at this time to help return
the economy to full capacity and inflation sustainably to target," the
central bank said in the interest rate decision that accompanied its quarterly
Monetary Policy Report. Bank of Canada Governor Stephen Poloz had expected a recovery by now from
the oil price crash that hit Canada's oil-exporting economy in the first
quarter, but that projection proved far too optimistic. The bank now expects the economy to have shrunk at an annualized 0.5 percent
in the second quarter instead of growing by 1.8 percent as Poloz had projected
in April. It contracted 0.6 percent in the first quarter. The bank did not use the word "recession" but the projection of
negative growth in both the first and second quarters meets a widely accepted
definition of a recession. The market had been split on whether the bank would cut rates for the second
time this year after holding them steady for about four years. The bank had
delivered a surprise cut in January that was designed to counter the dive in
oil prices, and markets had reacted sharply to that move. They did so again on Wednesday with the Canadian dollar dropping to a
six-year low, and Canadian government bond prices rising sharply and
outperforming U.S. Treasuries. [CAD/] The Canadian dollar tumbled to its weakest level - C$1.2929, or 77.35 U.S.
cents - since March 2009 against its U.S. counterpart, hurt also by predictions
that the U.S. Federal Reserve will raise rates this year. "The currency is in uncharted waters here," said Derek Holt, vice
president of economics at Bank of Nova Scotia, citing a risk that the Canadian
dollar weakens to as low as C$1.30 against the greenback, then diving to
C$1.40. "If the Fed is hiking, we think by September, and the Bank of Canada
appears to be leaving the door open to additional rate stimulus, all bets are
off." The bank said excess capacity in the economy grew significantly in the first
half and would continue to do so in the third quarter, even with expected
economic growth of 1.5 percent. It therefore pushed back to the first half of 2017 its projection of when
full capacity will be reached and inflation return to the bank's 2 percent
target. Its previous projection had been for the end of 2016. The bank acknowledged elevated vulnerabilities from a hot housing market in
Toronto and Vancouver and from rising household debt, a key factor that had
spurred some economists to advise against a rate cut. It said, however, that
the economy was undergoing "a significant and complex adjustment" and
required additional stimulus. It continued to see a soft landing in housing. Perhaps the biggest disappointment for Poloz, former head of the federal
export agency, has been what the bank said was a "puzzling" weakness
in non-energy exports. He had hoped such exports would help overwhelm the
negative effects of lower oil prices on business investment and incomes. But the bank said its base-case projection assumes "that this
unexplained weakness is temporary and that the relationship between exports and
foreign activity will reassert itself in the coming quarter". The bank said the main dangers to its
inflation outlook were a larger-than-expected decline in oil and gas
investment, weaker non-energy exports, imbalances in the Canadian household
sector and stronger U.S. private demand. |
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Posted on July-22-15 6:28 PM
Selling
the US Vacation Property
With real estate prices
soaring in the US and the Canadian dollar falling in value against the greenback,
Canadians who invested in a vacation property in the US may be tempted to sell
their US cottage and purchase a Canadian cottage instead.
But it’s
important to understand the tax consequences on both sides of the border before
they do. Here’s
an example to illustrate: Sarah and George purchased a home in
Phoenix in 2011 for $190,000US ($191,000CAN), including costs. Today, the home
is worth $290,000US (about $358,000CAN). This represents an accrued gain of
$167,000CAN (a $100,000 US gain in the States). The value of the couple’s home
in Canada, meanwhile, has increased only $20,000 over the same time
period. What are the tax consequences if the couple sells the US property and
uses the proceeds to purchase a cottage closer to home? The disposition
of the US property will create a taxable capital gain to be reported on a US
return ($100,000 US). In Canada, the capital gain could be minimized by
designating the US property as the couple’s principal residence for all but one
year from 2011 to 2015. However, the elimination of the capital gains tax on
the Canadian return comes at a price. If the gain is taxable in Canada, the US
taxes paid could be claimed as a foreign tax credit. But if
the gain is tax-free in Canada, the foreign tax credit cannot be claimed. At
the same time, claiming the US property as a principal residence means the gain
on their Canadian home becomes taxable. Since
the US tax cannot be eliminated, the only way to ensure that the same gain is
not taxed in both jurisdictions is to make sure that at least $100,000US of the
capital gain is taxed in Canada in the year of sale. That’s about $123,000CAN,
depending on the exchange rate at the time of the sale.
With a
$167,000CAN gain, 26% of the gain could be exempted and the couple could still
claim the foreign tax credit. By choosing to designate the US property as their
principal residence for one year, 33% ([1+1]/6) of the gain would be exempt in
Canada, limiting the foreign tax credit claim. By
choosing not to designate the US property as their principal residence, 1/6 of
the gain would be exempt, allowing the full foreign tax credit. Of
course, in this or any other case, the actual amount of taxes payable in the US
and Canada would have to be determined to ensure that choosing not to claim the
principal residence exemption for any of the years owned results in the lowest
overall taxes payable. This
type of transaction, therefore, should be reviewed well in advance by a Tax
Services Specialist to get the best tax results over time for the sale or
deemed disposition of both residences. |
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Posted on July-22-15 6:21 PM
Five
Steps To Calculating 2015 TFSA Contribution Room
A new version
of form RC343 has been released by the CRA to calculate TFSA contribution room
for 2015, taking into account the new 2015 contribution limit of $10,000.
1. Start
with your TFSA contribution room as of January 1, 2014 2.
Subtract any TFSA contributions made in 2014 3. Add
any TFSA withdrawals made in 2014 4. Add
$10,000 (your new TFSA contribution limit for 2015) 5. If
you’ve already made TFSA contributions for 2015, subtract those Here’s an example: Joni
had TFSA contribution room of $12,000 as of January 1, 2014, including
the $5,500 of new contribution room for 2014. She made a $10,000 TFSA
contribution in 2014 and withdrew $15,000 that same year. She has not made any
contributions in 2015 yet. Following the steps outlined above, her 2015
TFSA contribution room is: 1.
$12,000 2. -
$10,000 3. +
$15,000 4. +
$10,000 5. - $0 Total:
$27,000
Beware of TFSA Traps: The biggest trap, other than holding non-registered investments outside a
TFSA when there is contribution room available, is recontributing to the TFSA
in the same year as the withdrawal is made. Withdrawals do increase TFSA
contribution room, but not until the beginning of the following year. In the
example above, after her $10,000 contribution, Joni’s TFSA contribution room
for 2014 was reduced to $2,000. Her $15,000 withdrawal did not open up
contribution room until January 1, 2015. If Joni had re-deposited the $15,000
in 2014, she would have had a $13,000 excess contribution. All excess
contributions are subject to a 1% penalty tax for each month they remain in the
TFSA. For
these reasons, it’s important for wealth advisors to encourage their clients to
seek their assistance or consult with A Tax Services Specialist before
withdrawing money or recontributing it to a TFSA. |
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Posted on July-22-15 6:16 PM
 Adjusted
Family Tax Cut: Was Spouse A Student?
Last week, CRA reminded families to apply
for the generous new Universal Child Care Benefit (UCCB) being delivered to
families this week. But there may also be more good news: enhanced Family
Tax Cut dollars available for the 2014 tax filing year for families in which
one spouse was a full- or part-time student... $2 to $750 more in fact. The
calculations for the Family Tax Cut have recently been adjusted to take into
account the unused portion of tuition, textbook and education credits
transferred from a spouse or common-law partner. The result is an additional
refund of somewhere between $2 and $750, according to the CRA, which will do
the calculation automatically if it looks like the family might qualify for the
adjustment. To be
sure, however, qualified Tax Services Specialist should be
consulted to review the calculations for their clients who have made a
tuition, textbook and education credit transfer to their spouse on line 326 of
the 2014 T1 return and determine if any other adjustments should be made to the
tax return. Then, find out what your estimated Family Tax Cut will be in
2015 to maximize your investment planning opportunities. |
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Posted on July-10-15 4:22 PM
Reminder: Some families Will Win UCCB Lottery
July 20
Following are the key points about the UCCB benefit:
- The UCCB is increasing for
children under 6, from $100 per month per child to $160 per month, effective
January 1, 2015.
- The UCCB is also being
expanded to include a benefit of $60 per month for each child aged 6 through
17, effective January 1, 2015.
- Because these enhanced
benefits were announced in April 21 , 2015 but made effective retroactive
to January 1, 2015, families who qualify for the UCCB will receive a lump sum
for the additional amounts, payable on July 20, 2015.What does that mean? Parents with children
under age 18 living at home will be receiving a lump sum of $420 per child with
their July Child Tax Benefit payment. This amount represents the additional $60
per month per child payable as of January 1, 2015.This is a great opportunity for families who
will be winning the UCCB lottery to invest the lump sum in an RESP or TFSA for
maximum growth and tax savings.
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Posted on May-15-15 6:42 PM
Everything You Need to Know
About RRIFs Written by Jim Yih
Most Canadians choose a
Registered Retirement Income Fund (RRIF) as their retirement income option. A RRIF is a
comfortable transition because of its similarity to an RRSP. A RRIF provides a
high level of control over the investments in your retirement plan, the
advantage of tax-free growth of assets within the plan, as well as maximum
flexibility in establishing an income stream. RRIFs come in a number of shapes and sizes. The first decision is
income The first thing you will
need to determine is how much income you need or want. This
decision will have the greatest impact on the longevity of your money. If you
spend too much too fast, you will run out of money. Even if you don’t need or
want the extra income, you have the minimum income rules to contend with. You can tailor your income
to your needs, subject to minimums imposed by the federal government. If you
need steady monthly, quarterly, or annual income, it’s available. If you
require a large lump sum for a major purchase, travel, or some other purpose,
that’s available too. RRIF withdrawal rules This table outlines the minimum withdrawals on
RRIFs established after 1992, as set by the government. Before age 71, the
minimum percentage payout is worked out in the following way: 1÷(90 – your
current age). RRIF minimums were once again changed in 2015 So if you’re 65, your minimum withdrawal would be
1÷(90-65)=4%. With a $100,000 RRIF, that amounts to $4,000. Once you reach age
69, the following schedule applies: Age 2015 and later 1992 to 2015 Pre 1992 65 4.00% 4.00% 4.00% 66 4.17% 4.17% 4.17% 67 4.35% 4.35% 4.35% 68 4.55% 4.55% 4.55% 69 4.76% 4.76% 4.76% 70 5.00% 5.00% 5.00% 71 5.28% 7.38% 5.26% 72 5.40% 7.48% 5.56% 73 5.53% 7.59% 5.88% 74 5.67% 7.71% 6.25% 75 5.82% 7.85% 6.67% 76 5.98% 7.99% 7.14% 77 6.17% 8.15% 7.69% 78 6.36% 8.33% 8.33% 79 6.58% 8.53% 8.53% 80 6.82% 8.75% 8.75% 81 7.08% 8.99% 8.99% 82 7.38% 9.27% 9.27% 83 7.71% 9.58% 9.58% 84 8.08% 9.93% 9.93% 85 8.51% 10.33% 10.33% 86 8.99% 10.79% 10.79% 87 9.55% 11.33% 11.33% 88 10.21% 11.96% 11.96% 89 10.99% 12.71% 12.71% 90 11.92% 13.62% 13.62% 91 13.06% 14.73% 14.73% 92 14.49% 16.12% 16.12% 93 16.34% 17.92% 17.92% 94 18.79% 20.00% 20.00% 95+ 20.00% 20.00% 20.00% The second decision is what
to invest in Financial institutions
offer plans that can hold Guaranteed Investment Certificates (GICs), mutual
funds, cash, or other financial instruments. Alternatively, you can establish a
self-directed RRIF to include a combination of individual securities in your
plan, such as stocks, bonds or Treasury bills (in addition to the investments
mentioned above). RRIFs offer investment
flexibility. You can hold the same investments that are eligible for an
RRSP. Shares of Canadian corporations, corporate and government bonds, Canada
Savings Bonds, Treasury bills, mortgages, GICs, term deposits, covered call
options, warrants, rights, and mutual funds that invest in eligible securities
are all qualifying investments. You can also hold a limited percentage of your
RRIF in foreign investments. Just like an RRSP, a RRIF lets you retain control
over your investments, rather than handing over your money to a third party. The longevity of your RRIF
is simply based on how much money you make in investment return and how much
you take out for income. It does not take a lot of mathematical know how to
figure out that if you earn more money than you withdraw in income, the RRIF
will grow. For example, if you invest
in a GIC RRIF at 6% and you take out the minimum (4.76%) at age 69, your RRIF
should grow by 1.24%. At age 72 given the same investment return, the minimum
is now 7.48%. This means your RRIF will deplete in value by 1.48%
(7.48%-6.00%). What will happen to your
RRIF when you die? You can leave your
remaining RRIF assets to your heirs upon your death by designating the proper beneficiary.
Not all other retirement income options provide for this. Naturally, your
desire to provide an estate for your spouse, beneficiaries or charities may
have an impact on how you set up your RRIF. While this may or may not be an
issue, income and investments should remain the priorities. RRIFs are flexible One of the benefits of the
RRIF is the flexibility you have in dictating income. These are some common
types of RRIFs. - Minimum income RRIF – This RRIF provides the
minimum level of income. Typically, people who choose the minimum income RRIF
are those who do not need the money and want to defer taxable income for as
long as possible. Remember, if this is the case, you can base the RRIF on the
age of your younger spouse.Furthermore, remember the RRIF minimum income is
based on the value of the RRIF on December 31 of the previous year. Sometimes
this can make income planning difficult because you really don’t know what your
income will be until the last minute.
- Capital preservation RRIF – Preserving capital and
paying out a fixed level of income are the goals of this RRIF type. In this
case, you will withdraw your investment returns each year (subject to
minimums). If you are using mutual funds, you might elect a reasonable target
return like 8%, for example, with the hopes and intentions of earning 8% to
maintain the capital.
- Level income RRIF – If you want to provide
income for a specific period of time such as to age 90, this RRIF would be the
right choice. In this instance, you would determine the amount of income you
could derive so that the entire asset would be depleted by the time you reach
90 years of age. You can use age or time frame.Have as many RRIFs as you
wantYou can have as many RRIFs
as you want. You can have one that pays a level income for the next 5 years to
bridge income until government benefits. You can have another that is a capital
preservation RRIF for a more stable long term level of income.Generally, many people
consider consolidating into one RRIF. With a single RRIF, you can easily manage
your investments and you’ll only have to worry about one minimum withdrawal.
Several RRIFs require more time and energy, and you’ll have to arrange to
withdraw at least the minimum from each one.Withholding tax detailsRRIF income is subject to
government withholding tax rates. Just like your employer withholds
taxes and remits them directly to the government, your RRIF administrator is
required to do the same. Minimum income RRIFs are not subject to withholding
tax, but you can request any level of withholding tax desired. In all other
circumstances, there is a 10% withholding rate on withdrawals less than $5000,
20% on withdrawals between $5000 and $15,000 and 30% tax on withdrawals over
$15,000.As you can see, there are a
lot of issues to deal with when it comes to planning your RRIF income. Take the
time to plan wisely.
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Posted on May-15-15 6:39 PM
Enjoy the benefits of filing on time and online Did you know?
Filing your income tax and benefit return and
paying what you owe on time helps you avoid possible interest and penalty
charges, and ensures that your benefits won't be delayed. Important facts - You
have until midnight on or before April 30, 2015, to file your 2014 income
tax and benefit return.
- If you
or your spouse or common-law partner is self-employed, you have until
midnight on June 15, 2015, to file your return.
- Any
balance owing must be paid on or before April 30, 2015—even if your return
is due on June 15, 2015.
What happens if I don't file on time? When you file your yearly tax return, you are
letting the Canada Revenue Agency (CRA) know your current tax situation.
Without that information, the CRA can't be sure that you are still eligible to
receive certain benefit payments. If you don't file on time, your benefit and
credit payments (for example, the Canada child tax benefit and the goods and
services tax/harmonized sales tax credit) may be interrupted. Also, if you have a balance owing and you don't
file your return on time, we'll charge you a late-filing penalty. The penalty
is 5% of your 2014 balance owing, plus 1% of your balance owing
for each full month that your return is late, to a maximum of 12 months.
If we charged a late-filing penalty on your return for 2011, 2012, or 2013,
your late-filing penalty for 2014 may be 10% of your 2014 balance owing,
plus 2% of your 2014 balance owing for each full month that your return
is late, to a maximum of 20 months. In addition to the late-filing penalty, if you
have a balance owing for 2014 you'll be charged compound daily interest
beginning May 1, 2015, on any unpaid amounts owing for 2014. Even if you can't pay all of your balance owing
right away, you should still file your return on time. You can set-up a
pre-authorized debit agreement using the My Account service, or call us at
1-888-863-8657 to make a payment arrangement. By filing on time, you'll avoid
the late-filing penalty. CRA online services make filing easier and
getting your refund faster The CRA's online services are fast, easy, and
secure. You can use them to file your income tax and benefit return, make a
payment, track your refund, receive your notice of assessment, and more. Did
you know that the Government of Canada is switching to direct deposit for
payments that it issues? This includes your tax refund and benefits payments?
Sign up for direct deposit today! For more information, go to www.cra.gc.ca/getready |
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Posted on April-16-15 5:52 PM
Tax
time 2015: 10 myths about taxes that mislead Canadians
A certain amount
of folklore has developed over the years around the income tax system and the
filing of tax returns, but many of those age-old perceptions are no
longer accurate. Filing deadline File by April
30 or face potential penalties. Here are some
common myths — and the corresponding facts that could mean extra money in
your pocket or at least prevent you from running afoul of the Canada Revenue
Agency's rules. Myth 1: The person
whose name or social insurance number is on the tax slip is the person who must
report the interest in a joint account. Not necessarily.
"Income earned in joint accounts must be reported by the person who earned
the capital in the account," says tax expert Evelyn Jacks in Jacks on Tax.
"Where more than one person contributed capital in their own right, then
the income in the account must be allocated based on the capital provided by
each contributor." Myth 2: The CRA
completely agrees with the information you submitted in your return if it sends
you back a Notice of Assessment that doesn't dispute what you submitted. A Notice of
Assessment is just the result of a quick assessment that will have fixed
mathematical mistakes you may have made, but it doesn’t mean that the CRA has
examined and OK'd everything you’ve submitted. "The fact that a particular
claim is allowed at this point does not mean that the CRA … is
'letting' you claim it," notes KPMG in its annual tax planning guide.
"It merely means that the CRA has not addressed the issue in any
detail." The tax agency generally has three years after the Notice of
Assessment is sent to review your file.
Myth 3: Gifts from your employer are never taxable. Modest gifts from
the boss do escape the tax collector's attention but only within strict
limits. Non-cash gifts worth a total of less than $500 a year aren't
taxable if they're given to mark birthdays, holidays or similar special
occasions. Your boss can also give an employee up to $500 in a non-cash gift
once every five years to mark long service or an employment anniversary with no
tax consequences to the employee. The boss can also provide a tax-free party or
social event worth up to $100 per employee. Cash gifts are always taxable.
Myth 4: I should
have refused that pay raise because it will bump me into a higher tax
bracket. Federal tax
brackets - 2014 tax year: - Up
to $43,953 — 15%
- $43,954-$87,907
— Tax Rate 22%
- $87,908-$136,270
—Tax Rate 26%
- $136,270
— 29%
Source: CRA Canadians face
four federal tax brackets and up to six brackets provincially. But
"bumping into the next bracket" means just that one's income in the
higher bracket will be taxed at the higher rate – not that the higher rate will
apply to all of the person's income. "All of the
money you earned below the new tax bracket remains taxed at the lower
rates," points out Edmonton-based financial educator Jim Yih in
his Retire Happy blog. "The bottom line is you should never, ever, ever
turn down money. Enjoy every pay increase you receive without tax worries, and
remember that those higher paycheques mean more money in your pocket." Myth 5: The U.S.
does not impose withholding taxes on U.S. investments if they're held in
registered Canadian accounts. The U.S. does not
recognize the registered status of TFSAs so any dividends paid by U.S. stocks
will face a withholding tax of up to 30 per cent. Retirement accounts like RRSPs
and RRIFs are exempt from U.S. withholding taxes. Myth 6: Employment
insurance income received during maternity leave is not taxable. Not true. All EI
benefits, including maternity benefits, are taxable. "In most cases,
Service Canada withholds less than the lowest tax rate so you may have tax
obligations at the end of the year," says Cleo Hamel, a senior tax analyst
with H&R Block. Myth 7: If you
file your taxes online, your odds of being audited increase. Since it's not
possible to file paper receipts or tax slips online, the Canada Revenue Agency
does sometimes ask people who file online to send in supporting documents. But
the CRA says this is just "routine verification" and not an audit.
"When the CRA flags a file for audit, the criteria are broad,
complex and not based on filing method," the agency says. Myth 8: The Canada
Revenue Agency doesn't pay snitches. The tax department
has always encouraged reliable tips about Canadians who might not be paying
what they should. But it has never rewarded tipsters whose information led
to recovered taxes — until now. In 2014, the CRA announced it would
start to pay people whose tips pan out cash rewards of five to 15 per cent of
the extra tax collected. For now, the new snitch line (1-855-345-9042) is just
aimed at those whose funnelling of money offshore results in unpaid tax
revenue of at least $100,000. Myth 9: You can't
take advantage of the RRSP Home Buyers' Plan unless you have never owned a home
before. Ottawa requires
users of the Home Buyers' Plan to be "first-time buyers." But it
defines this as people (and their spouses) who have not owned a principal
residence in the five calendar years up to and including the current year. For
those who owned a home more than five years ago, they can still withdraw up to
$25,000 tax-free from their RRSPs ($50,000 for a couple) to help them buy a
home. Myth 10: Everyone
hates doing their taxes. Not true, if the
pollsters are correct. A 2013 survey commissioned by Thomson Reuters
and the maker of a tax software program asked 1,009 Canadians if they
liked filing their taxes. A significant minority — 41 per cent — said yes.
It's worth noting that the survey did not ask if people liked paying
their taxes. |
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Posted on April-16-15 5:49 PM
Brush Up on Claiming Medical Expenses Claiming medical
expenses can itself be painful: There are so many receipts and tiny numbers
involved with making the claim!
Nonetheless it’s
definitely worthwhile for taxpayers and their advisors to be aware of how they
can save money in this area. Medical expenses themselves are common, yet most
of us don’t know exactly what’s deductible, so there are lots of misses when
claiming these common costs. Get ready for some “aha moments” as we look
closely at claiming medical expenses.
Most people know, for example, that they can claim medical expenses for their
nuclear family: mom, dad and their minor children; but you can also claim for
others who are dependent on you: children over 18, grandchildren, parents,
grandparents, siblings, even uncles, aunts, nephews and nieces if they are
resident in Canada.
There are also a host of interesting costs that are deductible, provided they
are unreimbursed by a medical plan. So, for example, if you are on a medical
plan at work, and it covers 80% of all these costs, you can claim the 20% that
is not covered by the plan. Furthermore, the
premiums for private medical plans are claimable too, including those provided
by an employer. Check pay stubs and Box 40 of the T4 slip for the premiums in
this case. Generally, the
costs of visiting the following medical practitioners are eligible:
• dentist or dental hygienist • medical doctor or practitioner • optometrist • pharmacist • psychologist
or psychoanalyst • chiropractor • naturopath • therapeutist
or therapist • physiotherapist
• chiropodist (or podiatrist) • acupuncturist •
dietician • nurse,
including a practical nurse whose full-time occupation is nursing • audiologist
Eligible medical treatments include: • medical and
dental services, eyeglasses, hearing aids and their batteries • attendant or
nursing home care • ambulance fees
• guide dogs or dogs to manage severe diabetes, including care and travel for
training • prescribed
alterations to the home to accommodate disabled persons • cost of training a
person to provide care for an infirm dependant • lip reading or
sign language training • tutoring services for a patient with a learning
disability or mental impairment • drugs and lab
tests prescribed by a medical practitioner and recorded by a pharmacist • private
health plan premiums, including group insurance premiums, Blue Cross premiums,
and travel insurance costs |
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Posted on April-16-15 5:33 PM
 Tax error? What to do when you have to refile
Make the most of tax
time and get the biggest return possible with these often missed credits and
deductions. Taxes aren’t fun to deal with at the best of times, but you may find
yourself even more irked if you get a T4 amendment in the mail. The good news is that it’s not uncommon to receive such a notice. “Amended T4s are generally sent out to correct errors,” says James Bell,
director of Tax Solutions Canada, who worked at the Canada Revenue Agency
for 22 years before starting his company in 2013. Those errors are on behalf of
the employer, which means there’s nothing you can do to prevent getting one. “T4s get amended because of an oversight on the part of the employer,”
Bell says. “It’s a routine occurrence,” he adds. “It happens all the time.” Reasons a “Statement of Remuneration Paid” could be amended are
wide-ranging; examples include improper classification of an amount (such as
the under- or over-reporting of income), improper calculation of benefits to
employees who participate in a stock-purchase plan, or the lack of inclusion of
other taxable benefits or an incorrect tally of those benefits. While amendments are common, they can still make people nervous. “Amendments are straightforward, and it’s very routine for people to
receive these things, but it can cause a lot of confusion and upset and
misunderstanding,” Bell says. “Most people are puzzled about why they would get
an amended T4.” Caroline Battista, a senior tax analyst at H&R Block, says that it helps to understand
what your taxable benefits are should you ever be faced with an amendment. “I would hazard a guess that at least 50 per cent of the time if you ask
people what their taxable benefits are, they don’t know,” Battista says. “Know
what your taxable benefits are, especially when you’re getting a new job.” Here are some examples: let’s say you win a $10,000 trip or NHL playoff
tickets through work. “You’re still paying tax on the value of that trip or
those tickets,” Battista says. The parking spot that’s you get as a perk? You have to pay tax on the
value of that, too. Battista notes that if you’ve already filed your taxes but then receive
an amended T4, you need to submit an adjustment with that new slip. She says
it’s easy to do electronically via the CRA’s My Account. Those forms can be
mailed in too. If you don’t understand or disagree with the amendment, Bell suggests talking
to your office’s payroll or HR department first. If you still don’t agree with the amendment, then you can file a notice
of objection to dispute it. “The CRA has a formal dispute mechanism in place for you,” Bell says.
“It’s important to make sure that, if there is a dispute and you don’t
understand it or disagree with what employer has done, you protect yourself by
filing that notice of objection. It’s the only formal way to protect your
rights, and that’s what you should do. You do have a formal legislative process
to go through to make your case with the CRA.” Whatever you do, if you receive an amendment, make sure you get it
sorted out. "There’s no need to panic at all,” Bell says. “However, it’s
something that shouldn’t be ignored; they really do have to deal with it.” The sooner the better: “Deal with it right away,” Battista says. “An
amendment doesn’t mean it’s been done or that the CRA has refiled for you.
Don’t just think the CRA will process it; deal with it because you will be
charged interest from the time you get that slip. Once you get an amended slip
it’s considered your responsibility.” |
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Posted on February-09-15 6:54 PM
Who Is Affected by the Ontario Retirement Pension Plan? With the Ontario Retirement Pension Plan taking shape, the provincial government is giving Ontarians the chance to weigh in on the proposed provincial pension plan. The Ontario Liberals released a consultation paper on “key design questions” of the ORPP, such as low-income earners and the self-employed. The discussion paper provides more details on the ORPP, including who’s covered. Who’s Covered by the ORPP?When the ORPP is in full swing, the provincial government anticipates three million people to make $3.5 billion each year in contributions. The ORPP looks to be mandatory for everyone except those with defined benefit pension plans and newer target benefit plans. Unlike defined contribution pension and group RRSPs, defined benefit pension plans provide you with a retirement benefit for your lifetime based on your earnings and your years of service. Target benefit plans are a middle ground between defined benefit and defined contribution – they act much like defined benefit, but your benefit could be reduced based on how the plan’s investments perform. Employers that offer alternative retirement savings plans, such as defined contribution pension plans, group RRPSs and pooled PRPPs, would be forced to join the ORPP. This would be quite a financial burden for employers, who would have little incentive to continue to offer these plans, if they must also pay into the ORPP. The government looks to be open to discussion, mentioning employers may be able to adapt their pension plans to be exempt from the ORPP. Self-Employed IndividualsWhen the ORPP was first proposed, many self-employed individuals were concerned about the financial burden it would put on their business. According to the Ontario Ministry of Finance , 700,000 people in Ontario reported self-employment income in 2011. Currently, self-employed individuals don’t have the option of opting out of the CPP. If you’re self-employed, you must contribute both the employer and employee portion of the CPP. If you’re self-employed in Ontario you can breathe a sigh of relief. It doesn’t look like you’ll be forced in to joining the ORPP. Self-employed individuals are ineligible to join because of the federal Income Tax Act. However, the provincial government is looking into a voluntary opt-in. This seems like a win-win situation for the self-employed. The ORPP would provide self-employed individuals with some stability in income in their retirement, provided they choose to join. Unlike the self-employed, small business owners would be forced to join. When you’re starting up a business, cash flow is key. Forcing small business owners to join the ORPP could result in tough decisions. While many large employers are in the position to absorb the added cost of the ORPP, small businesses struggling to stay afloat may have to freeze wages or lay off employees to balance the books. Low-Income EarnersThe ORPP looks to be similar to the CPP in many respects, including how low-income earners are treated. Similar to the CPP, if you earn below $3,500, you will not be required to contribute to the ORPP. Similar to the CPP, the ORPP will count as taxable income toward means-tested government benefits like the Guaranteed Income Supplement. Instead of helping low-income earners, the ORPP could result in claw-backs to the GIS. Not only will low-income earners lose a portion of their GIS, they’ll also be forced to start contribution to the ORPP. With many of these folks struggling to pay for the necessities of life like rent and food, contributions to the ORPP will take money out of the pockets of those most in need. There’s still plenty of time to weigh in on the newly-proposed ORPP. |
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Posted on February-06-15 12:32 PM
ORPP is now a Legislative Requirement Bill 56, an Act to require the establishment of the Ontario Retirement Pension Plan was introduced and received first reading in the Ontario Legislature on December 8, 2014. With this Act, the Ontario Government is now committed to the implementation of the Ontario Retirement Pension Plan (ORPP) no later than January 1, 2017. While the legislation is short on detail, it is specific on the broad base structure of the Plan and the requirements that will be part of the final legislation. The Act requires:
• Establishment and implementation no later than January 1, 2017
• An obligation to create an administrative entity to administer the Plan
• Implements a requirement for any Employer, public body or the federal government to provide information, including personal information, deemed required by the Minister
• The collection of information is exempt from subsection 39(2) – Freedom of Information and Protection of Privacy Act The legislation also establishes basic requirements of the Ontario Retirement Pension Plan:
• Maximum contribution rate of 3.8% combined from employee and employer
• Maximum threshold equal to $90,000 (in 2014 dollars), adjusted to reflect increases established from 2014 to 2017 under the Canada Pension Plan.
• Minimum threshold to be established
• The obligation to deduct contributions from salary and wages will provide for transition rules concerning the rates. The Ontario Government intends, through questionnaires and public consultations, to collect the feedback of Ontario residents and employers on the final aspects and implementation of the Ontario Retirement Pension Plan |
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