As previously announced, changes are to be made to the Canada Pension Plan over the next 5 years, with the goal of increasing the amount of CPP retirement benefits available to contributors. The next...
The federal government provides a detailed online retirement income calculator which can be used by taxpayers planning retirement. The online calculator allows users to input income amounts from vari...
The overall inflation rate was unchanged for the month of September, with that rate matching the 1.9% year-over-year increase posted for the month of August 2019. The greatest contributor to the infl...
The most recent release of Statistics Canada’s Labour Force Survey shows a sharp increase in job creation for the month of September. During that month employment rose by 54,000, mainly in full-...
The Canada Revenue Agency (CRA) formerly provided taxpayers with a listing of prescribed interest rates for leasing, with such listing including the applicable rate for the upcoming month, as well as ...
The federal government has announced the Employment Insurance premium rates and amounts which will be levied during the 2020 calendar year. For 2020, the Employment Insurance premium rate is decrease...
The federal government has announced the Old Age Security (OAS) and related amounts which will be paid during the fourth quarter (October 1 to December 31) of 2019. OAS payments are indexed quarterly ...
The Canada Revenue Agency (CRA) has announced the interest rates which will apply to amounts owed to and by the Agency for 2019, as well as the rates that will apply for the purpose of calculating emp...
The Canada Revenue Agency (CRA) has updated and re-issued its publication on the conduct of tax audits. The updated publication (RC4188E)) outlines the process by which the CRA chooses a file for aud...
The Canada Revenue Agency (CRA) formerly provided taxpayers with a listing of prescribed interest rates for leasing, with such listing including the applicable rate for the upcoming month, as well as ...
The most recent release of Statistics Canada’s Consumer Price Index shows that the rate of inflation for the month of August stood at 1.9%, as measured on a year-over-year basis. The inflation ...
Finance Canada has released the Annual Financial Report of the Government of Canada for 2018-19, which provides an overview of the federal government’s financial results for the 2018-19 fiscal y...
Each September thousands of international students move to (or return to) Canada to attend Canadian secondary or post-secondary educational institutions. Depending on their residency status, those st...
The most recent release of Statistics Canada’s Labour Force Survey shows that employment increased by 81,000 positions during the month of August 2019. Notwithstanding that increase, the unemplo...
In its regularly scheduled interest rate announcement made on September 4, the Bank of Canada indicated that, in its view, no change was needed to current rates. Accordingly, the Bank Rate remains at ...
Individual taxpayers who make quarterly instalment payments of tax must make the third such instalment payment for the year on or before September 15. As that date falls on a Sunday this year, payment...
The Bank of Canada has released a listing of the eight dates on which it will make regularly scheduled interest rate announcements during 2020. That listing is as follows: Wednesday, January 22 We...
The Canada Revenue Agency has issued a Tax Tip warning owners of self-directed RRSPs about a current tax scheme which they may encounter. Promoters of such schemes falsely promise owners of self-dire...
The Canada Revenue Agency has updated and re-issued its Information Circular outlining the rules and requirements which apply to taxpayers who keep business and tax books and records in electronic for...
The most recent release of Statistics Canada’s Consumer Price Index shows that the rate of inflation recorded for the month of July was unchanged from the previous month. For both June and July,...
The Canada Revenue Agency (CRA) formerly provided taxpayers with a listing of prescribed interest rates for leasing, which includes the applicable rate for the upcoming month, as well as the rates in ...
The most recent release of Statistics Canada’s Labour Force Survey shows a slight increase in the unemployment rate for the month of July, as measured on a year-over-year basis. For that month, ...
The Canada Revenue Agency (CRA) has issued a Tax Tip reminding taxpayers of the procedures which it utilizes to protect their personal information, particularly with respect to contacts between taxpay...
Individuals who are required to pay income tax by instalments must make their third quarterly instalment for 2019 on or before September 15, 2019. As that date is a Sunday, such payments are considere...
The federal government provides tax relief to livestock producers who are experiencing severe weather or climate conditions during the year. Such relief is provided through the livestock tax deferral ...
The Bank of Canada has released the listing of dates on which it will make scheduled interest rate announcements during calendar year 2020. There will be 8 such scheduled interest rate announcements ...
Prospective mortgage borrowers in Canada are subject to a “stress test” as part of the assessment of their credit-worthiness. Under that test, such borrowers are required to qualify for a ...
The most recent release of Statistics Canada’s Consumer Price Index shows that the overall rate of inflation during the month of June 2019 stood at 2%. The comparable rate for May was 2.4%. The...
The Canada Revenue Agency (CRA) formerly provided taxpayers with a listing of prescribed interest rates for leasing, with such listing including the applicable rate for the upcoming month, as well as ...
The most recent release of Statistics Canada’s Labour Force Survey shows that, although the unemployment rate for the month of June rose by 0.1%, employment increased by 132,000 positions during...
In its regularly scheduled interest rate announcement made on July 10, the Bank of Canada indicated that, in its view, no change was needed to current rates. Accordingly, the bank rate remains at 2%. ...
The Canada Revenue Agency (CRA) has announced the interest rates which will apply to amounts owed to and by the Agency for the first three quarters of 2019, as well as the rates that will apply for th...
July 1, 2019 is the start of the 2019-20 benefit year for many provincial and federal child and tax benefits, including the federal GST/HST credit and the Canada Child Benefit. As of that date, the p...
The federal government has announced the Old Age Security (OAS) and related amounts which will be paid during the third quarter (July 1 to September 30) of 2019. OAS payments are indexed quarterly to ...
The Canada Revenue Agency (CRA) has announced the prescribed interest rate for leasing rules which will be in effect during the month of July 2019. The prescribed rate for July is 2.75%. A chart sho...
The most recent release of Statistics Canada’s Consumer Price Index shows that the rate of inflation for the month of May 2019, as measured on a year-over-year basis, stood at 2.4%. Inflation d...
Under the Canadian tax system, employee stock options receive preferential tax treatment. In this year’s Budget the federal government indicated that, in its view, the existing rules on stock op...
In this year’s federal Budget, a new program was announced to benefit first-time home buyers. Under that program, the First-Time Home Buyer’s Incentive, the Canada Mortgage and Housing Cor...
Effective as of July 2019, the amount of Canada Child Benefit (CCB) payable to eligible Canadian families will be increased to account for inflation. Starting with the July payment (which will be mad...
The most recent release of Statistics Canada’s Labour Force Survey shows a small decline in the overall unemployment rate recorded for the month of May. The unemployment rate for that month stoo...
The Canada Revenue Agency (CRA) has announced the prescribed interest rates for leasing rules which will be in effect during the month of June 2019. The prescribed rate for that month will be increas...
Individual taxpayers who pay income tax by instalments must make their second instalment payment for 2019 on or before June 17, 2019. Such taxpayers will have received an instalment notice setting ou...
Self-employed taxpayers (and their spouses) have until Monday June 17, 2019 to file their income tax returns for the 2018 tax year. Returns filed after that date will be subject to late-filing penalti...
In its regularly scheduled interest rate announcement made on May 29, the Bank of Canada indicated that, in its view, no change was needed to current interest rates. Consequently, the Bank Rate remain...
The federal government and many of the provinces provide benefit programs for which both entitlement and benefit amount are based, at least in part, on the income of the recipient taxpayer. Those bene...
The most recent release of Statistics Canada’s Consumer Price Index shows that the rate of inflation for the month of April stood at 2%, as measured on a year-over-year basis. Seven of the eigh...
The Canada Revenue Agency (CRA) has issued a Tax Tip confirming that the filing deadline for individual income tax returns filed for the 2018 tax year by self-employed individuals and their spouses is...
The most recent release of Statistics Canada’s Labour Force Survey shows growth in employment during the month of April for nearly all demographic groups. The overall unemployment rate for the m...
The Canada Revenue Agency (CRA) has issued a warning about a current tax scheme involving Health Spending Accounts (HSAs) which are being marketed to small businesses. HSAs are self-insured health pla...
The federal government has announced that, effective with the July 2019 payment, Canada Child Benefit rates will increase.As of July, the maximum benefit for a child under the age of 6 will increase t...
The Canada Revenue Agency (CRA) has announced the prescribed interest rates for leasing rules which will be in effect during the month of May 2019. The prescribed rate for that month will be reduced ...
The Canada Revenue Agency (CRA) has issued a press release reminding taxpayers who have been affected by this spring’s floods of the availability of relief with respect to their obligation to fi...
The most recent release of Statistics Canada’s Consumer Price Index shows a significant increase in the rate of inflation recorded for the month of March 2019. During that month, the CPI rose 1....
The Bank of Canada, in its regularly scheduled interest rate announcement made on April 24, determined that no change was needed to current rates. The Bank Rate therefore remains at 2%. The press rel...
The federal government has announced the Old Age Security payment rates which will be in effect for the second quarter (April 1 to June 30) of 2019. OAS payment rates are indexed quarterly to inflati...
All payments of individual income tax owed for the 2018 taxation year must be received by the Canada Revenue Agency (CRA) on or before Tuesday April 30, 2019. There are a number of means by which pay...
The Canada Revenue Agency (CRA) has issued an updated guide to be used by taxpayers who are claiming medical expenses on their income tax returns for 2018. Individual taxpayers are entitled to claim ...
The most recent release of Statistics Canada’s Labour Force Survey indicates that there was no change in the overall unemployment rate for the month of March. That rate remained at 5.8%. Employ...
The Canada Revenue Agency has announced the prescribed interest rates for leasing rules which will be in effect during the month April 2019. The prescribed rate for the upcoming month is 3.1%. A cha...
The Canada Revenue Agency has announced the interest rates which will apply to amounts owed to and by the Agency for the first half of 2019, as well as the rates that will apply for the purpose of cal...
The Canada Revenue Agency (CRA) has posted a number of Tax Tips for seniors and students on its website. Those Tax Tips list and explain particular credits, deductions, or benefits which are most like...
The most recent release of Statistics Canada’s Consumer Price Survey indicates that the rate of inflation for the month of February, as measured on a year-over-year basis, stood at 1.5%. The com...
Budget 2019 is proposing that the excise duty framework for cannabis products be amended to more effectively apply the excise duty on new classes of cannabis products, as well as to cannabis oils, whi...
Budget 2019 proposes to expand health-related tax relief under the Goods and Services Tax/Harmonized Sales Tax (GST/HST) system to better meet the health care needs of Canadians by: providing GST/H...
Budget 2019 announces the Government’s intent to limit the use of the current employee stock option tax regime and move toward aligning the tax treatment with the United States for employees of ...
Budget 2019 proposes that the Canada Revenue Agency (CRA) will be allowed to send requirements for information electronically to a bank or credit union only if the bank or credit union notifies the CR...
Budget 2019 proposes that the joint and several liability for tax owing on income from carrying on a business in a TFSA be extended to the TFSA holder. The joint and several liability of a trustee of ...
Budget 2019 proposes to introduce a new rule that would deny a mutual fund trust a deduction in respect of the portion of an allocation made to a unitholder on a redemption of a unit of the mutual fun...
Budget 2019 proposes to prohibit Individual Pension Plans (IPPs) from providing retirement benefits in respect of past years of employment that were pensionable service under a defined benefit plan of...
To bring the Specified Multi-Employer Plan (SMEP) rules in line with the pension tax provisions that apply to other defined benefit RPPs, Budget 2019 proposes to amend the tax rules to prohibit contri...
Amounts paid for cannabis products may be eligible for the medical expense tax credit where such products are purchased for a patient for medical purposes in accordance with the Access to Cannabis for...
A recent court decision related to the interpretation of “national importance” has created uncertainty about the availability of these tax incentives. Budget 2019 proposes to introduce leg...
Budget 2019 proposes to amend the Income Tax Act to clarify that financial assistance payments received by care providers under a kinship care program are neither taxable nor included in income for th...
Budget 2019 proposes to amend the Income Tax Act to clarify that an individual may be considered to be the parent of a child in their care for the purpose of the Canada Workers Benefit, regardless of ...
To ensure that the Registered Disability Savings Plan (RDSP) continues to respond to the needs of Canadians with disabilities, Budget 2019 proposes two changes that will better protect the long-term s...
Budget 2019 proposes to amend the tax rules to permit PRPPs and defined contribution RPPs to provide a variable payment life annuity (VPLA) to members directly from the plan. A VPLA will provide payme...
Budget 2019 proposes to amend the tax rules to permit an advanced life deferred annuity (ALDA) to be a qualifying annuity purchase, or a qualified investment, under certain registered plans. An ALDA w...
To improve the consistency of the tax treatment of owners of multi-unit residential properties in comparison to owners of single-unit residential properties, Budget 2019 proposes to allow a taxpayer t...
Budget 2019 proposes to increase the Home Buyers’ Plan (HBP) withdrawal limit to $35,000. This would be available for withdrawals made after March 19, 2019. Budget 2019 also proposes to extend a...
Budget 2019 proposes this new, non-taxable credit that would help Canadians pay for training fees. Every year, eligible workers between the ages of 25 and 64 would accumulate a credit balance of $250 ...
Budget 2019 proposes to: extend the foreign affiliate dumping rules in the Income Tax Act to prevent a corporation resident in Canada that is controlled by a non-resident individual or trust from r...
In Budget 2019, the Government proposes further amendments to the Income Tax Act to make the beneficial ownership information maintained by federally incorporated corporations more readily available t...
Budget 2019 proposes an amendment that introduces an additional qualification for the commercial transaction exception in the definition “derivative forward agreement” as the exception app...
Budget 2019 proposes to add The Memorandum of Understanding between the Government of Canada and the Respective Governments of the Flemish, French and German-speaking Communities of the Kingdom of Bel...
Budget 2019 proposes to repeal the use of taxable income as a factor in determining a CCPC’s annual expenditure limit for the purpose of the enhanced SR&ED tax credit. As a result, small CCP...
Budget 2019 proposes to eliminate the requirement that sales be to a farming or fishing cooperative corporation in order to be excluded from specified corporate income. As such, this exclusion will ap...
Budget 2019 proposes that these vehicles be eligible for a full tax write-off in the year they are put in use. Qualifying vehicles will include electric battery, plug-in hybrid (with a battery capacit...
Budget 2019 proposes to introduce three new tax measures to support Canadian journalism: allowing journalism organizations to register as qualified donees; a refundable labour tax credit for quali...
The most recent release of Statistics Canada’s Labour Force survey shows that, while the rate of unemployment for the month of February was unchanged, employment grew by 56,000 positions. The un...
In its regularly scheduled interest rate announcement made on March 6, the Bank of Canada indicated that, in its view, no change was needed to current rates. Accordingly, the Bank Rate remains at 2% ...
The most recent release of Statistics Canada’s Consumer Price Index (CPI) shows a drop in the rate of inflation for the month of January. That rate, as measured on a year-over-year basis, was 1....
The first instalment payment of individual income taxes for the 2019 tax year is due on or before Friday March 15, 2019. Individuals who have previously paid tax by instalments will have received an i...
The Canada Revenue Agency (CRA) has announced that its Individual Income Tax Enquiries line (1-800-959-8281) is now available for extended hours. Until April 30, 2019, telephone agents will be availa...
The Minister of Finance has announced that the 2019-20 federal Budget will be brought down on Tuesday, March 19, 2019. Once the Budget is released, at around 4 p.m., the Budget Papers will be posted ...
The 2018 T1 Individual Income Tax Return and Guide package is now available on the Canada Revenue Agency (CRA) website at https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packag...
The Canada Revenue Agency (CRA) has announced that its NETFILE service for the filing of individual income tax returns is available as of Monday, February 18, 2019. The current NETFILE service (which...
The Canada Revenue Agency (CRA) has issued a Tax Tip for post-secondary students and graduates who will be filing an income tax return for the 2018 tax year. That Tax Tip, which can be found on the C...
During the month of January, the number of people employed in Canada rose by 67,000, with that figure attributable for most part to increased employment of those aged 15 to 24 and those working in the...
The Canada Revenue Agency (CRA) has announced the prescribed interest rate for leasing rules which will be in effect during the month of March 2019. That prescribed rate for the month of March will b...
The Canada Revenue Agency (CRA) has posted a Tax Tip which lists the tax deductions and credits which are most relevant to seniors, and which can be claimed by eligible seniors when preparing and fili...
The Canada Revenue Agency (CRA) has announced that its NETFILE service for the filing of individual income tax returns for the 2018 tax year will be available online on Monday February 18, 2019. The N...
Effective as of February 11, 2019, the Canada Revenue Agency (CRA) will be merging its online mail and account alerts services. Notification of the change is being sent to users of those services, and...
Finance Canada has issued a reminder that the current consultation process with respect to the upcoming 2019-20 federal Budget will end on Tuesday, January 29, 2019. Interested stakeholders can make ...
The most recent release of Statistics Canada’s Consumer Price Index shows that the rate of inflation, as measured on a year-over-year basis, stood at 2% during the month of December 2018. The eq...
Finance Canada has announced the automobile deduction limits and expense benefit rates which will apply to businesses and their employees during the 2019 taxation year. Most of the limits which appli...
In its regularly scheduled interest rate announcement made on January 9, 2019, the Bank of Canada indicated that no change would be made to current interest rates. The Bank Rate therefore remains at 2...
The Canada Revenue Agency (CRA) has announced the prescribed interest rates for leasing rules which will be in effect during the months of January and February 2019.The prescribed rate for January is ...
The Canada Revenue Agency (CRA) has announced the interest rates which will apply to amounts owed to and by the Agency for the first quarter of 2019, as well as the rates that will apply for the purpo...
Over the next seven years, significant changes will be made to the Canada Pension Plan. Those changes will result, overall, in an increase of about 50% in the maximum retirement benefit. The first su...
The most recent release of Statistics Canada’s Consumer Price Index shows that the rate of inflation for the month of November, as measured on a year-over-year basis, stood at 1.7%. The comparab...
Taxpayers who have not yet filed their individual income tax returns for 2017 (or the three prior years) can file those returns on NETFILE until Friday, January 25, 2019. Until that date, the Canada R...
The Canada Revenue Agency (CRA) has announced the prescribed interest rate for leasing rules which will be in effect during the month of January 2019. The prescribed rate for that month will be 3.39%...
Where taxpayers fail to meet their tax filing or payment obligations, penalties and interest are usually levied for that failure. However, the Minister of National Revenue has the authority to forgive...
The most recent release of Statistics Canada’s Labour Force Survey shows that the unemployment rate for the month of November was the lowest recorded since 1976. The unemployment rate for the m...
In its regularly scheduled interest rate announcement made on December 5, the Bank of Canada indicated that, in its view, no change to current interest rates was needed. Accordingly, the Bank Rate rem...
The federal government will provide the following personal tax credit amounts for 2019: Basic personal amount ……………………………&...
The most recent release of Statistics Canada’s Consumer Price Index shows a slight increase in the rate of inflation rate for the month of October. That rate rose 2.4%, following a 2.2% increase...
Finance Canada has announced details of the consultation process leading up the release of the 2019-20 Federal Budget next spring. The budget consultation process will include both in-person and digi...
In the 2018-19 Fall Economic Statement, the Minister of Finance announced that three new tax initiatives would be introduced to support both traditional and digital news organizations. Those changes ...
In the Fall Economic Statement issued on November 21, the Minister of Finance announced new tax measures that would: allow businesses to immediately write off the cost of machinery and equipment us...
Some of the non-monetary benefits which employers provide to their employees must be included in the employee’s income and taxed as such. Each year, employers must include the amount of any such...
The Canada Revenue Agency (CRA) provides a mobile web app for small business owners and sole proprietors which enables them to manage their business tax accounts on any browser-enabled mobile device. ...
The most recent release of Statistics Canada’s Labour Force Survey shows a small decline in unemployment during the month of September. That rate stood at 5.8%, down 0.1% from the rate posted fo...
The Canada Revenue Agency has announced the contribution rates and amounts for the Canada Pension Plan which will apply during the 2019 calendar year, and that announcement can be found at https://www...
The Canada Revenue Agency (CRA) has announced the prescribed interest rate for leasing rules which will be in effect during the month of November. The prescribed rate for that month will be 3.43%. A...
The Canada Revenue Agency (CRA) (as well as other federal government departments and agencies) has issued information indicating how government payments will be handled during the current postal disru...
The most recent release of Statistics Canada’s Consumer Price Index shows that the inflation rate for the month of September stood at 2.2%, as measured on a year-over-year basis. The comparable ...
In its regularly scheduled interest rate announcement made on October 24, the Bank of Canada once again increased the bank rate, which now stands at 2%.In the press release announcing the increase, wh...
The federal government has announced the maximum Old Age Security (OAS) benefit amount which will be paid to eligible recipients in the last quarter — October, November, and December — of ...
In some circumstances, taxpayers are entitled to request a reduction in the amount of tax being deducted at source from their income. An employee can request that the amount of income tax being deduct...
A number of changes have been made over the past few years to the Canada Pension Plan (CPP), with those changes generally providing greater flexibility to CPP contributors. Some of those changes parti...
The most recent release of Statistics Canada’s Labour Force Survey shows a small decrease in the overall unemployment rate for the month of September. That rate decreased from the 6% rate record...
The Canada Revenue Agency (CRA) has announced the prescribed interest rate for leasing rules which will be in effect during the month of October. The prescribed rate for that month will be 3.33%. A ...
The Canada Revenue Agency (CRA) has announced the interest rates which will apply to amounts owed to and by the Agency for the fourth quarter of 2018, as well as the rates that will apply for the purp...
While the deadline for filing of individual income tax returns for the 2017 tax year (for both employees and the self-employed) has passed, the Canada Revenue Agency’s (CRA’s) NETFILE serv...
The most recent release of Statistics Canada’s Consumer Price Index shows that the rate of inflation for the month of August 2018 stood at 2.8%, as measured on a year-over-year basis. The compar...
Canada’s tax system is one based on residency, and individuals who are considered to be residents of Canada are subject to federal and provincial tax. The federal government has issued a fact s...
The Minister of Finance has announced that the employment insurance premium rate payable by employees and the self-employed for the 2019 tax year will be reduced. The premium rate for that year will ...
The federal government has updated and re-issued its guide to child benefits paid by the federal and several provincial governments. The updated guide (T4114), which is available on the Canada Revenu...
The most recent release of Statistics Canada’s Labour Force Survey shows a small increase in the unemployment rate posted for the month of August. That rate rose by 0.2%, from 5.8% to 6%. Most ...
The Canada Revenue Agency (CRA) can provide interest and penalty relief to taxpayers who are unable to meet their tax filing or payment obligations due to circumstances beyond their control, including...
In its scheduled interest rate announcement made on September 5, the Bank indicated that no change would be made to current interest rates. Accordingly, the Bank Rate remains at 1.75%. The Bank ackno...
Each year the Canada Revenue Agency (CRA) sends a letter and questionnaire to approximately 350,000 taxpayers, seeking to determine whether such taxpayers are receiving the correct tax credits and ben...
The due date for the third instalment payment of 2018 income taxes by individuals falls on September 15, 2018. As that date is a Saturday, instalment payments will be considered to be made on time if ...
The federal government has announced that changes will be made to the administrative rules governing the extent to which charities can engage in non-partisan political activities. The intended amendm...
The most recent release of Statistics Canada’s Consumer Price Survey shows a significant increase in inflation for the month of July. That rate, as measured on a year-over-year basis, stood at 3...
The most recent release of Statistics Canada’s Labour Force Survey indicates that the overall rate of unemployment was down slightly for the month of July. That rate stood at 5.8%, down by 0.2% ...
The Minister of Finance has announced that two major payment card networks have agreed to lower costs charged to small and medium-sized businesses. Both VISA and Mastercard have agreed to reduce dome...
The Canada Revenue Agency (CRA) prepares and posts on its website a number of podcasts and webinars covering tax and tax-related issues of particular interest to small businesses. There are currently...
The Bank of Canada has issued a listing of the dates on which it will make announcements during the 2019 calendar year with respect to current interest rates. There are eight such interest rate annou...
The Canada Mortgage and Housing Corporation (CMHC) has announced that, effective as of October 1, 2018, changes will be made to the process by which self-employed taxpayers are assessed for mortgage f...
The Canada Revenue Agency (CRA) has updated and re-issued its Form RC366, which allows businesses to have amounts owed to them deposited directly to a bank account. The updated form can be used to ei...
The Canada Revenue Agency (CRA) has updated and re-issued its publication RC4092(E) on Registered Education Savings Plans. The updated publication incorporates changes, originally announced as part o...
The most recent release of Statistics Canada’s Consumer Price Index shows that the overall rate of inflation for the month of June, as measured on a year-over-year basis, stood at 2.5%. That cha...
The Canada Revenue Agency (CRA) has announced the prescribed interest rates for leasing rules which will apply during the months of July and August 2018. Those prescribed rates will be 3.28% for July...
The Canada Revenue Agency has updated and re-issued its publication outlining the tax treatment of funds held in a RRIF on the death of the RRIF annuitant. The updated publication (RC4178(E)) also re...
While employment rose by 32,000 during the month of June, the unemployment rate was also up, by 0.2%, a result attributed by Statistics Canada an increase in the number of individuals seeking to enter...
In its regularly scheduled interest rate announcement made on July 11, the Bank of Canada indicated that it was increasing its benchmark interest rate by one-quarter of a percentage point. Accordingly...
Each year, the Canada Revenue Agency reviews approximately 3 million returns which have already been filed and assessed. Generally, such reviews are carried out to confirm income amounts reported, and...
Old Age Security (“OAS”) benefits received by Canadians are indexed to changes in the overall Consumer Price Index, and are adjusted each quarter to reflect increases in that Index.The fed...
The most recent release of Statistics Canada’s Consumer Price Index indicates the rate of inflation for the month of May stood at 2.2%. The same rate was recorded for the month of April, and bot...
The Canada Revenue Agency (CRA) has re-issued the payroll deductions online calculator to be used by employers in calculating employee source deductions as of July 1, 2018. The updated version of tha...
The Canada Revenue Agency (CRA) has announced the prescribed interest rate for leasing rules which will be in effect during the month of July. The prescribed rate for that month will be 3.28%. A cha...
The Canada Revenue Agency (CRA) has announced the interest rates which will apply to amounts owed to and by the Agency for the third quarter of 2018, as well as the rates that will apply for the purpo...
The Canada Revenue Agency has updated and re-issued its standard form for filing an objection to a Notice of Assessment or Reassessment. The 2018 T-400A E, Notice of Objection, can be found on the CRA...
The most recent release of Statistics Canada’s Labour Force Survey shows little change in unemployment during the month of May. For the fourth consecutive month, that rate stood at 5.8%. There ...
The filing deadline for individual income tax returns for the 2017 year for self-employed individuals and their spouses is midnight Friday June 15, 2018. Returns can be filed using the Canada Revenue...
For Canadians who make quarterly instalment payments of personal income tax, the next due date for such payment is Friday June 15, 2018. The Canada Revenue Agency has posted a notice on its website i...
The Canada Revenue Agency (CRA) has issued a reminder to taxpayers who have been affected by this spring’s floods of the availability of administrative tax relief. Under the federal government&...
In its regularly scheduled interest rate announcement made on May 30, the Bank of Canada indicated that, in its view, no change was needed to current interest rates. Accordingly, the Bank Rate remains...
The Canada Revenue Agency (CRA) has issued updated payroll deduction formulas for use by employers for payroll periods beginning after July 1, 2018. The updated formulas reflect changes in provincial ...
The most recent release of Statistics Canada’s Consumer Price Index shows that the overall rate of inflation for the month of April stood at 2.2%, as measured on a year-over-year basis. The rate...
The Canada Revenue Agency (CRA) will be making changes to its distribution method for GST/HST reporting and remittance forms for small businesses, with those changes generally directed toward reducing...
The most recent release of Statistics Canada’s Labour Force Survey indicates that there was no change during the month of April to either employment figures or the overall unemployment rate. Th...
The Canada Revenue Agency prepares and posts podcasts on a number of different tax topics, both individual and corporate. Those podcasts are available for download from the CRA website. The current s...
The Canada Revenue Agency has announced the prescribed interest rates for leasing rules which will be in effect during the months of May and June 2018. Those prescribed rates will be 3.22% during the...
Taxpayers who have filed their return for the 2017 tax year and are expecting to receive a refund can track the status of that refund payment through a toll-free telephone line. That line, the CRA&rsq...
The Canada Revenue Agency (CRA) has issued a warning to taxpayers of the need to be particularly vigilant with respect to fraudulent text, telephone, and e-mail communications, which increase during t...
The most recent release of Statistics Canada’s Consumer Price Index indicates that the rate of inflation stood at 2.3% during the month of March 2018, as measured on a year-over-year basis. The ...
The Canada Revenue Agency (CRA) has issued a reminder that all individual income tax balances owed for the 2017 tax year must be paid on or before Monday April 30, 2018. April 30 is also the deadline...
The most recent release of Statistics Canada’s Labour Force Survey shows that the rate of unemployment for the month of March 2018 stood at 5.8%. The same rate was recorded for February 2018. E...
In its regularly scheduled interest rate announcement made on April 18, the Bank of Canada indicated that no change was required to current interest rates. Accordingly, the Bank Rate will remain at 1....
It is not uncommon for taxpayers to discover an error or omission in an already-filed return, and the usual means by which such error can be corrected is the filing of a T1-Adjustment form. While a co...
The Canada Revenue Agency (CRA) has issued a reminder to taxpayers who receive income from the “sharing economy” that such income is taxable and must be reported on the annual tax return. ...
The Bank of Canada’s regularly scheduled interest rate announcement dates for the remainder of calendar year 2018 are as follows: April 18, 2018; May 30, 2018; July 11, 2018; S...
Proceeds received from the sale of one’s principal residence are, in most circumstances, not taxable, as such sales are eligible for the principal residence exemption. However, as of the 2016 ta...
The most recent release of Statistics Canada’s Consumer Price Index shows a sharp increase in inflation for the month of February. That rate stood at 2.2%, while the rate for January 2018 was 1....
The Canada Revenue Agency (CRA) has announced the interest rates which will apply to amounts owed to and by the CRA for the second quarter of 2018, as well as the rates that will apply for the purpose...
While taxpayers fall victim to tax scams year-round, such scams are more prevalent during and just following tax filing season. During that time, taxpayers expect to hear from the tax authoritie...
In December 2017, the Canada Revenue Agency (CRA) announced that substantive changes would be made to the Agency’s Voluntary Disclosure Program (VDP). That program enables taxpayers who are in d...
The Canada Revenue Agency has issued its Guide RC4018, Electronic Filers Manual for 2017 Income Tax and Benefit Returns. That guide is for use by certified e-filers in filing individual income tax ret...
The most recent release of Statistics Canada’s Labour Force Survey shows a small decline in the overall unemployment rate for the month of February 2018. That rate declined from 5.9% in the mont...
The most recent release of Statistics Canada’s Consumer Price Index indicates that the rate of inflation for the month of January 2018 stood at 1.7%. The rate for the previous month was 1.9%. I...
In its regularly scheduled interest rate announcement made on March 7, the Bank of Canada indicated that no change would be made to current interest rates. Accordingly, the bank rate remains at 1.5%. ...
Budget 2018: No personal tax credits have been repealed, and there are no new personal tax rate changes....
Budget 2018: Foreign-born Status Indians may now be eligible for child benefits, retroactive to 2005....
Budget 2018: Eligibility of specially trained service animals will be expanded for the purposes of the medical expense tax credit....
Budget 2018: Taxpayers will no longer need to apply when filing their return in order to receive the Canada Workers Benefit....
Budget 2018: The Working Income Tax Benefit amounts are enhanced as of 2019, and the credit is renamed the Canada Workers Benefit...
Budget 2018: The non-resident surplus stripping rules are tightened to address the use of partnerships and trusts....
Budget 2018: Where a CRA compliance order or information requirement is contested, a new rule will “stop the clock” to prevent the tax year from being statute barred....
Budget 2018: A corporation will have two RDTOH accounts going forward: eligible and non-eligible RDTOH....
Budget 2018: A corporation with $100,000 of investment income will have its small business limit reduced to $250,000....
Budget 2018: A corporation’s small business limit will be reduced where the corporation earns investment income exceeding $50,000....
The Canada Revenue Agency (CRA) provides a 1-800 telephone service to provide tax information to Canadian taxpayers. Such information can be general in nature, or can involve the specific tax affairs ...
The Canada Revenue Agency’s NETFILE service for filing of individual income tax returns will be available starting Monday February 26, 2018. Taxpayers do not need to obtain an access code to fi...
The most recent release of Statistics Canada’s Labor Force Survey shows a slight increase in the overall unemployment rate for the month of January. That rate rose by 0.1%, from 5.8% to 5.9%. T...
The Federal Minister of Finance has announced that the 2018-19 federal Budget will be brought down on Tuesday, February 27, 2018. The Budget will be released at around 4 p.m. and the full Budget Pape...
This year, the Canada Revenue Agency (CRA) will be providing taxpayers with hard copies of the 2017 Income Tax and Benefit package through a variety of means, and at various dates. Individuals who pa...
The Canada Revenue Agency (CRA) has announced the date on which NETFILE service for the filing of individual income tax returns for the 2017 tax year will be available. NETFILE service will be availa...
While the majority of Canadians now file their individual income tax returns electronically, there is still a significant minority of tax filers who file using a printed return. The Canada Revenue Ag...
The Canada Revenue Agency (CRA) has posted a notice on its website that an “update” has been made to individual 2017 tax forms. Those forms are to be used by individual Canadians to file t...
For a number of years, taxpayers whose tax situation was relatively straightforward were able to file their return by telephone. That service, which was called TELEFILE, was withdrawn a few years ago....
The Canada Revenue Agency (CRA) has announced the interest rates which will apply to amounts owed to and by the Agency for the first quarter of 2018, as well as the rates that will apply for the purpo...
As widely expected, the Bank of Canada indicated, in its regularly scheduled interest rate announcement made on January 17, that an increase in the bank rate was required. The Bank’s announceme...
Finance Canada has announced that the consultation process leading to the release of the 2018-19 federal Budget will conclude on Friday January 26, 2018. Canadians can provide input by submitting the...
The Canada Revenue Agency has released the T1 Individual Income Tax Return and Benefit form to be used by individual Canadian taxpayers in filing their return for the 2017 tax year. The T1 form is ava...
The most recent release of Statistics Canada’s Labour Force Survey indicates that the unemployment rate for the month of December 2017 stood at 5.7%. The last period for which that rate was reco...
As previously announced, the federal small business tax rate is reduced to 10.0%, effective as of January 1, 2018. There is no change in the federal small business limit, which remains at $500,000. T...
Finance Canada has announced the limits and thresholds which will apply for purposes of determining automobile benefits and deductions during 2018. Most such deduction limits and thresholds are uncha...
Planned changes to the federal income tax rules governing the taxation of small incorporated Canadian businesses are to take effect for 2018. One of those changes will include greater restrictions on ...
The Canada Revenue Agency (CRA) provides an administrative program under which taxpayers who have failed to file returns or pay taxes on a timely basis can bring their tax affairs into compliance, usu...
Taxpayers who are turning age 71 during the year and who have available contribution room are entitled to make a final RRSP contribution for that year. Such contributions must be made by the end of t...
Taxpayers who have not yet filed their return for the 2016 tax year will have until January 19, 2018 to file that return using NETFILE. Until that date, returns for the 2013, 2014, 2015, and 2016 tax ...
In its regularly scheduled interest rate announcement made on December 6, the Bank of Canada indicated that, in its view, no change is required to current rates. Accordingly, the bank rate remains at ...
The most recent release of Statistic’s Canada’s Labour Force Survey shows a slight decline in the overall unemployment for the month of November. That rate declined by 0.4%, to 5.9%. The N...
The Canada Revenue Agency has issued the 2018 version of its publication T4127(E), Payroll Deductions Formulas. The guide is intended for use by payroll software providers and by employers which manag...
The Canada Revenue Agency has issued the federal TD1 Form and Worksheet which will be used by taxpayers and their employers to determine required federal income tax source deductions for the upcoming ...
The most recent release of Statistics Canada’s Consumer Price Index (CPI) shows an inflation rate of 1.4% for the month of October, as measured on a year-over-year basis. The equivalent rate for...
Finance Canada has begun the consultation process leading to the release of the 2018-19 federal Budget. As part of that budget consultation process, the Minister of Finance is holding in-person publi...
Effective as of January 8, 2018, administrators and representatives of qualifying Canadian trusts will be able to file trust income tax and information returns online, through the Canada Revenue Agenc...
The federal government has announced the premium rates and maximum insurable earnings amount which will be in place for the 2018 calendar year. The premium rate for the year for employees has been se...
The Canada Revenue Agency (CRA) has announced the contribution rates and amounts for both employers and employees which will apply for 2018. Maximum pensionable earnings for the year will be $55,900 ...
The Ontario Minister of Finance has announced that the 2019 Fall Economic Statement will be brought down on Wednesday November 6, 2019. That economic statement will update the revenue, expenditure, a...
The province of Ontario charges and pays interest on underpayments and overpayments of tax at rates prescribed by statute and set at the beginning of each calendar quarter. The rates levied and paid f...
The Ontario government has released the Public Accounts which summarize the province’s financial position at the end of the 2018-19 fiscal year, which ended March 31, 2019. The related press re...
The province of Ontario levies an Estate Administration Tax (formerly known as probate fees) on the total value of the estate of a deceased person. In this year’s budget, the provincial governme...
The Ontario government has released the province’s financial results for the first quarter (April 1 – June 30) of the 2019-2020 fiscal year. Those results indicate that the deficit projec...
The province of Ontario levies a land transfer tax (LTT) on each purchase and sale of property in the province. The province also provides first-time homebuyers in Ontario with a refund of LTT which w...
The province of Ontario provides residents with a number of refundable tax credits, with eligibility for those credits based on age, income, and type and place of residence. The current benefit year f...
The province of Ontario charges and pays interest on underpayments and overpayments of tax at rates prescribed by statute and set at the beginning of each calendar quarter. The rates levied and paid f...
Ontario imposes a 15% non-resident speculation tax (NRST) on purchases of residential property located in the Greater Golden Horseshoe Region (GGH) by individuals who are not citizens or permanent res...
In its 2019-20 Budget, the Ontario government announced a new non-refundable tax credit for lower-income working residents of the province. That credit, the Low-income Individuals and Families Tax (LI...
The province of Ontario levies an Estate Administration Tax (EAT), which is more commonly known as probate fees. In the 2019-20 Budget, the province announced that changes would be made to the EAT, as...
The 2019-20 Ontario Budget released on April 11, 2019 indicates that the province will not achieve a balanced budget until the 2023-24 fiscal year. The Budget papers show that the province expects th...
The 2019-20 provincial Budget brought down on April 11 included the announcement of a new refundable child care tax credit, claimable for the 2019 and subsequent taxation years. The new credit will b...
The province of Ontario charges and pays interest on underpayments and overpayments of tax at rates prescribed by statute and set at the beginning of each calendar quarter. The rates levied and paid f...
The Ontario government has announced that the province’s Budget for the upcoming (2019-20) fiscal year will be brought down on Thursday April 11, 2019. Once the Budget is released, the Budget p...
The provincial government has issued its fiscal update for the Third Quarter of the 2018-19 year, and that update shows a $1 billion reduction in the province’s deficit. That deficit is now proj...
The Ontario government has announced that it will be carrying out a consultation process with respect to the laws which govern real estate professionals in Ontario. The process will address a broad ra...
The provincial government has announced that it will be holding a consultation process with respect to changes to the provincial automobile insurance program. Both consumers and businesses can provid...
The province of Ontario charges and pays interest on underpayments and overpayments of tax at rates prescribed by statute and set at the beginning of each calendar quarter. The rates levied and paid f...
The Canada Revenue Agency has issued a supplement to the payroll deduction tables to be used for residents of Ontario during the 2019 tax year. The supplement, which can be found on the CRA website a...
The Ontario Minister of Finance has announced the start of the consultation process leading to the release of the province’s 2019-20 Budget next spring. There are several options for Ontario re...
In the recent Economic Outlook and Fiscal Review, the Ontario Minister of Finance announced that the annual payroll threshold for the province’s Employer Health (payroll) Tax (EHT) would be incr...
The province of Ontario will provide the following personal tax credit amounts for 2019: Basic personal amount ……………………………...
The Ontario government has reversed the minimum wage increase which had been scheduled to take effect on January 1, 2019. On that date, the minimum wage was scheduled to increase from $14 to $15 per h...
In the 2018 Economic Outlook and Fiscal Review issued on November 15, the provincial government announced that, beginning with the 2019 tax year, low-income individuals and families will be eligible f...
The province provides a program under which low-income seniors and low-income persons with disabilities can obtain a partial deferral of property tax and education tax. The tax deferral applies to the...
The province of Ontario charges and pays interest on underpayments and overpayments of tax at rates prescribed by statute and set at the beginning of each calendar quarter. The rates levied and paid f...
The government of Ontario has announced that planned fee increases with respect to licensing fees for drivers in the province, which were to have taken effect on September 1, 2018, have been cancelled...
The Ontario government provides an online service – ONT-TAXS, through which Ontario businesses can file and amend returns, make tax payments, and track the status of such returns and payments. ...
The new benefit year for the Ontario Trillium Benefit (OTB) began in July 2018 and will run until June 2019. The OTB is a refundable tax credit which is claimed on the annual tax return and paid to ta...
As announced in this year’s provincial Budget, Ontario has altered its personal tax rate structure. The changes announced include the elimination of the provincial surtax and the replacement of ...
The Ontario government has announced that the existing cap-and-trade carbon tax system will be eliminated, effective as from July 3, and that provincial government programs which were funded under tha...
The province of Ontario charges and pays interest on underpayments and overpayments of tax at rates prescribed by statute and set at the beginning of each calendar quarter. The rates levied and paid f...
The Canada Revenue Agency (CRA) has re-issued the payroll deductions online calculator to be used by Ontario employers in calculating employee source deductions starting July 1, 2018. The updated ver...
The province provides eligible Ontario residents with a number of refundable tax credits and benefits. Those benefits are paid on a monthly basis, and eligibility for most benefits is based, in part, ...
The Ontario Research and Development Tax Credit (ORDTC) is a 3.5% non-refundable tax credit earned on eligible R&D expenditures. As announced in this year’s provincial Budget, elig...
The Ontario government recently enacted legislation to implement announcements made in this year’s provincial budget. Those announcements include two changes affecting seniors in the province, a...
The provincial government has announced changes that will provide Ontario residents with increased access to personal information held by credit reporting agencies. Under the new rules, certain credi...
The province of Ontario provides a number of tax credits to individual residents of the province, and those benefits are paid on monthly basis. The next benefit year will start in July 2018 and run un...
In this year’s Budget, the provincial government announced that the non-refundable tax credit provided to taxpayers who make qualifying donations to charity would be increased. The credit is a ...
The province of Ontario charges and pays interest on underpayments and overpayments of tax at rates prescribed by statute and set at the beginning of each calendar quarter. The rates levied and paid f...
The Ontario Budget for the 2018-19 fiscal year, which was brought down on March 28, included the announcement of changes to the province’s personal income tax rate structure, with such changes h...
Previously announced changes to Ontario’s employment standards laws will take effect on April 1, 2018. The upcoming changes will, for the most part, affect temporary, part-time, and seasonal em...
The provincial government has announced that Ontario’s 2018-19 Budget will be brought down by the Minister of Finance on Wednesday, March 28 at around 4 p.m. Once the Budget is announced, the B...
The province of Ontario will provide the following personal tax credit amounts for 2018: Basic personal amount ……………………………...
The provincial government has announced that, effective as of March 1, 2018, unsolicited door-to-door sales of the following appliances will no longer be permitted: air cleaners, air conditioner...
The release of Ontario’s Third Quarter Finances report indicates that the province remains on track to balance the budget for the 2017-18 fiscal year, although the amount of the projected surplu...
The provincial government has announced that, effective for leases signed on or after April 30, 2018, residential landlords in Ontario will be required to use a new standard-form, plain-language lease...
For the 2018 tax year, the province of Ontario will levy personal income tax based on the following tax rates and brackets. 05% on taxable income between $10,354 and $42,960; 15% on taxable in...
The province of Ontario provides a number of refundable tax credits to individual residents of the province. Several of those credits are combined and paid as a single monthly benefit — the Onta...
The government of Ontario has announced the launch of its pre-budget consultation process leading to the release of the province’s 2018-19 Budget. That budget consultation process has several c...
The Canada Revenue Agency has released the 2017 T1 Individual Income Tax Return and Benefit form to be used by individuals who were residents of Ontario at the end of that year. The T1 form package (w...
The province of Ontario charges and pays interest on underpayments and overpayments of tax at rates prescribed by statute and set at the beginning of each calendar quarter. The rates levied and paid f...
The Canada Revenue Agency (CRA) has issued the payroll deduction tables which Ontario employers will use to determine employee source deductions for federal and provincial income tax, Canada Pension P...
The Canada Revenue Agency has issued the Ontario TD1 form and worksheet which will be used by taxpayers resident in the province, and their employers, to determine required provincial income tax sourc...
The Ontario government has enacted a number of changes to the province’s employment standards laws, and those changes include the following: the Ontario minimum wage will increase to $14 per ...
The province of Ontario provided employers who hired and trained eligible apprentices in designated construction, industrial and motive power, and certain service trades with a refundable tax credit, ...
In the 2017 Economic and Fiscal Review issued on November 14, Ontario’s Minister of Finance announced that the provincial small business tax rate would be reduced, effective as of January 1, 201...
Planning for – or even thinking about – 2020 taxes when it’s not even December 2019 may seem more than a little premature. However, most Canadians will start paying their taxes for 2020 with the first paycheque they receive in January, and it’s worth taking a bit of time to make sure that things start off – and stay – on the right foot.
Planning for – or even thinking about – 2020 taxes when it’s not even December 2019 may seem more than a little premature. However, most Canadians will start paying their taxes for 2020 with the first paycheque they receive in January, and it’s worth taking a bit of time to make sure that things start off – and stay – on the right foot.
For most Canadians, (certainly for the vast majority who earn their income from employment), income tax, along with other statutory deductions like Canada Pension Plan contributions and Employment Insurance premiums, are paid periodically throughout the year by means of deductions taken from each paycheque received, with those deductions then remitted to the Canada Revenue Agency (CRA) on the taxpayer’s behalf by his or her employer.
Of course, each taxpayer’s situation is unique and so the employer has to have some guidance as to how much to deduct and remit on behalf of each employee. That guidance is provided by the employee/taxpayer in the form of TD1 forms which are completed and signed by each employee, sometimes at the start of each year, but certainly at the time employment commences. Each employee must, in fact, complete two TD1 forms – one for federal tax purposes and the other for provincial tax imposed by the province in which the taxpayer lives. Federal and provincial TD1 forms for 2020 (which have not yet been released by the CRA but, once published, will be available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms.html) list the most common statutory credits claimed by taxpayers, including the basic personal credit, the spousal credit amount, and the age amount. Adding amounts claimed on each form gives the Total Claim Amounts (one federal, one provincial) which the employer then uses to determine, based on tables issued by the CRA, the amount of income tax which should be deducted (or withheld) from each of the employee’s paycheques and remitted on his or her behalf to the federal government.
While the TD1 completed by the employee at the time his or her employment commenced will have accurately reflected the credits claimable by the employee at that time, everyone’s life circumstances change. Where a baby is born, or a son or daughter starts post-secondary education, a taxpayer turns 65 years of age, or an elderly parent comes to live with his or her children, the affected taxpayer will be become eligible to claim tax credits not previously available. And, since the employer can only calculate source deductions based on information provided to it by the employee, those new credit claims won’t be reflected in the amounts deducted at source from the employee’s paycheque.
Consequently, it’s a good idea for all employees to review the TD1 form prior to the start of each taxation year and to make any changes needed to ensure that a claim is made for any and all credit amounts currently available to him or her. Doing so will ensure that the correct amount of tax is deducted at source throughout the year.
It’s often the case that a taxpayer will have available deductions which cannot be recorded on the TD1, like RRSP contributions, deductible support payments, or child care expenses. While such claims make things a little more complicated, it’s still possible to have source deductions adjusted to accurately reflect those claims, and the employee’s resulting reduced tax liability for 2020. The way to do so is to file Form T1213, Request to Reduce Tax Deductions at Source (available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1213.html), with the Agency. Once that form is filed with the CRA, they will, after verifying that the claims made are accurate, provide the employer with a Letter of Authority authorizing that employer to reduce the amount of tax being withheld at source.
Of course, as with all things bureaucratic, having one’s source deductions reduced by filing a T1213 takes time. Consequently, the sooner a T1213 for 2020 is filed with the CRA, the sooner source deductions can be adjusted, effective for all subsequent paycheques. Providing an employer with an updated TD1 for 2020 at the same time will ensure that source deductions made during 2020 will accurately reflect all of the employee’s current circumstances, and consequently his or her actual tax liability for the year.
It is also possible for some taxpayers to adjust the amount of remaining tax they will pay during 2019. While the majority of Canadians pay their taxes through source deductions, there are still millions of taxpayers who pay income taxes by quarterly instalments, with the amount of those instalments representing an estimate of the taxpayer’s total liability for the year.
The final quarterly instalment for this year will be due on Monday December 16, 2019. By that time, almost everyone will have a reasonably good idea of what his or her income and deductions will be for 2019 and so will be in a position to estimate what the final tax bill for the year will be, taking into account any tax planning strategies already put in place, as well as any RRSP contributions which will be made on or before February 29, 2020. While the tax return forms to be used for the 2019 year haven’t yet been released by the CRA, it’s possible to arrive at an estimate by using the 2018 form. Increases in tax credit amounts and tax brackets from 2018 to 2019 will mean that using the 2018 form will likely result in a slight over-estimate of tax liability for 2019.
Once an estimate of one’s tax bill for 2019 has been calculated, that figure should be compared to the total of tax instalments already made during this calendar year (that figure can be obtained by calling the CRA’s Individual Income Tax Enquiries line at 1-800-959-8281). Depending on the result, it may then be possible to reduce the amount of the tax instalment to be paid on December 15 – and thereby free up some funds for the inevitable holiday spending!
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
The start of fall marks a lot of things, among them a number of runs, walks and other similar events held to raise money for a broad range of Canadian charities. And, within the next month, as the holiday season approaches, charities will launch their year-end marketing campaigns.
The start of fall marks a lot of things, among them a number of runs, walks and other similar events held to raise money for a broad range of Canadian charities. And, within the next month, as the holiday season approaches, charities will launch their year-end marketing campaigns.
Canadians have a well-deserved reputation for supporting charitable causes, through donations of both money and goods. Our tax system supports that generosity by providing a tax credit for qualifying donations made. Federally, taxpayers can claim a credit of 15% of the first $200 in donations plus 29% of donations over the $200 threshold.
In all cases, in order to claim a credit for a donation in a particular tax year, that donation must be made by the end of that calendar year – without exception.
There is, however, another reason to ensure donations are made by December 31. The credit provided by the federal government is a two-level credit, in which the percentage credit claimable increases with the amount of donation made. For federal tax purposes, the first $200 in donations is eligible for a non-refundable tax credit equal to 15% of the donation. The credit for donations made during the year which exceed the $200 threshold is, however, calculated as 29% of the excess. Where the taxpayer making the donation has taxable income (for 2019) over $210,371, charitable donations above the $200 threshold can receive a federal tax credit of 33%.
As a result of the two-level credit structure, the best tax result is obtained when donations made during a single calendar year are maximized. For instance, a qualifying charitable donation of $400 made in December 2019 will received a federal credit of $88 ($200 × 15% + $200 × 29%). If the same amount is donated, but the donation is split equally between December 2019 and January 2020, the total credit claimable is only $60 ($200 × 15% + $200 × 15%), and the 2020 donation can’t be claimed until the 2020 return is filed in April 2021. And, of course, the larger the donation in any one calendar year, the greater the proportion of that donation which will receive credit at the 29% level rather than the 15% level.
It’s also possible to carry forward, for up to 5 years, donations which were made in a particular tax year. So, if donations made in 2019 don’t reach the $200 level, it’s usually worth holding off on claiming the donation and carrying forward to the next year in which total donations, including carryforwards, are over that threshold. Of course, this also means that donations made but not claimed in any of the 2014, 2015, 2016, 2017, or 2018 tax years can be carried forward and added to the total donations made in 2019, and the aggregate then claimed on the 2019 tax return.
When claiming charitable donations, it’s possible to combine donations made by oneself and one’s spouse and claim them on a single return. Generally, and especially in provinces and territories which impose a high-income surtax – currently, Ontario and Prince Edward Island – it makes sense for the higher income spouse to make the claim for the total of charitable donations made by both spouses. Doing so will reduce the tax payable by that spouse and thereby minimize (or avoid) liability for the provincial high-income surtax.
Since the charitable donations tax credit is a two-level credit, in which the credit percentage increases once donations made in a year exceed $200, it always makes sense to aggregate donations in a single year, so as to maximize the amount of credit claimable.
Any charity seeking or receiving a donation should be able to provide a registered charitable number, and a searchable current listing of registered charities can be found on the Canada Revenue Agency website at https://apps.cra-arc.gc.ca/ebci/hacc/srch/pub/dsplyBscSrch?request_locale=en. Information on the charitable donations tax credit is available on the same website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/349/menu-eng.html.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
Most Canadians expend a considerable amount of time and effort in order to put money aside for retirement. Especially in an era in which the majority of workers can’t look forward to receiving an employer-sponsored pension plan, Canadians are well aware that the bulk of their income during retirement will have to come from government sources and from their own savings efforts.
Most Canadians expend a considerable amount of time and effort in order to put money aside for retirement. Especially in an era in which the majority of workers can’t look forward to receiving an employer-sponsored pension plan, Canadians are well aware that the bulk of their income during retirement will have to come from government sources and from their own savings efforts.
One of the difficulties in saving for retirement is the near impossibility of knowing how to set a savings goal which meets the twin goals of sufficiency and attainability. As well, while many savers focus on identifying the “magic number” which will ensure a comfortable retirement, the fact is that the total amount saved is only one component of retirement financial planning. The reality is that most Canadians will receive income in retirement from at least three sources – private savings accumulated in a registered retirement savings plan (RRSP) or tax-free savings accounts (TFSAs), a Canada Pension Plan retirement pension, and Old Age Security benefits. The real question for most Canadians is how to determine the amount of annual income which all those sources of income will generate during their retirement years, and that is not a simple calculation.
Money can be withdrawn from an RRSP or TFSA at any age, a CPP retirement pension can start any time from age 60 to age 70, and Old Age Security benefits can be received as early as age 65 or as late as age 70. For both CPP and OAS, benefits will rise with each month that receipt of such benefits is deferred. Many Canadians continue to work, on a full or part-time basis, while receiving CPP and OAS benefits. As well, income from the different types of retirement income may be subject to different tax treatment, meaning that the after-tax amount received on $100 of income may vary widely, depending on the nature and source of that income.
The number of factors to consider and, especially, the complexity which results from the interaction of those factors could reasonably lead the average Canadian to conclude that it’s just not possible to make an accurate determination of the best way to structure their income in retirement, in order to ensure a reasonable income throughout their retirement years. But, help is at hand – and it’s free! That help is in the form of a Retirement Income Calculator which is available on the Government of Canada website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/retirement-income-calculator.html.
Using that calculator, individual Canadian taxpayers can enter their personal data, including their date of birth, gender, and planned age of retirement, without the need to provide any personal identifying information. The user is then asked to provide information on income amounts which will be received from various sources, including any employer pension and Canada Pension Plan amounts and the age at which the user plans to begin receiving such income. Information is requested on the user’s period of residency in Canada, in order to determine whether he or she will be eligible to receive Old Age Security benefits and the amount of OAS benefits which will be provided at different ages. The calculator also allows the user to input the total amount of savings accumulated to date. Finally, information is requested on any other sources of income which will be available (e.g., income arising from part-time employment during retirement).
Using that data, the calculator estimates the amount of income which will be available to the individual from each source during each year of his or her retirement and generates a bar graph and a table showing those income amounts.
The real benefit of the calculator, however, lies in the user’s ability to vary the inputs – to create “what-if” scenarios in order to determine the effect any changes made will have on retirement income at various ages. Users can change the age at which they choose to receive government-sponsored retirement benefits like CPP and OAS, or can specify a different rate of return (pre or post retirement) earned on retirement savings. They can also change the period of time (i.e., life expectancy) over which retirement income will be spread. That way, the user can obtain answers to frequently asked questions like the following:
How much more will I receive if I delay receipt of Canada Pension Plan or Old Age Security benefits, or both, for one, two, or more years?
What if I work an additional year or two after age 65 before starting RRSP withdrawals?
What if I earn income from part-time employment during retirement?
What if I choose to begin receiving CPP and OAS as soon as I am eligible, but defer making RRSP withdrawals?
What if I live longer than the average life expectancy?
For each of these what-if fact scenarios, the calculator will determine the effect that particular change will have on the amount of income receivable from each different retirement income source, and will provide a summary of income for each year of retirement from all such sources under each fact scenario created by the user.
There are, of course, some factors which can’t be incorporated into any calculator because they cannot be predicted or planned for. No one can predict how long their retirement will last (although the calculator does project retirement income based on average life expectancy for individuals of the age and gender of the user). Similarly, it’s never possible to know what investment returns will be earned on retirement savings during retirement, or what the rate of inflation will be. The calculator’s ability to estimate future income data based on a number of different fact patterns does, however, allow users to create retirement income projections under both best-case and worst-case retirement income scenarios – and to plan for both.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
To win elections, politicians need votes. And to run the election campaigns needed to garner those votes, those politicians need an organization, volunteers, and money — a lot of money. To wage the most recent federal election, the major political parties raised and spent millions of dollars, and their task of raising that money was undoubtedly made somewhat easier by the fact that Canadian taxpayers who donated money to political parties or candidate can obtain some tax relief from doing so.
To win elections, politicians need votes. And to run the election campaigns needed to garner those votes, those politicians need an organization, volunteers, and money — a lot of money. To wage the most recent federal election, the major political parties raised and spent millions of dollars, and their task of raising that money was undoubtedly made somewhat easier by the fact that Canadian taxpayers who donated money to political parties or candidate can obtain some tax relief from doing so.
Individuals who donated to the political party or candidate of their choice may or may not be happy with the outcome of the election, but no matter which registered party or candidate they donated to, it will be possible for them to claim a federal tax credit for those donations when they file their returns for 2019 next spring.
The credit provided under the Income Tax Act is available with respect to funds contributed to either a registered political party or to candidates running in a federal election. Contributions can be made at any time, not just during an election campaign, as long as the donation is received by an official candidate or a registered federal political party or association.
While the parties which currently hold seats in the House of Commons are, of course, the most well-known, there were in fact 21 political parties registered and in good standing with Elections Canada for purposes of the 2019 federal election. They are as follows, in alphabetical order:
- Animal Protection Party of Canada
- Bloc Québécois
- Canada's Fourth Front
- Canadian Nationalist Party
- Christian Heritage Party of Canada
- Communist Party of Canada
- Conservative Party of Canada
- Green Party of Canada
- Liberal Party of Canada
- Libertarian Party of Canada
- Marijuana Party
- Marxist-Leninist Party of Canada
- National Citizens Alliance of Canada
- New Democratic Party
- Parti pour l'Indépendance du Québec
- Parti Rhinocéros Party
- People’s Party of Canada
- Progressive Canadian Party
- Stop Climate Change
- The United Party of Canada
- Veterans Coalition Party of Canada
Donations to any one of these registered parties, within prescribed limits, would qualify for the federal political contribution tax credit.
Official candidates can, of course, be running either as candidates for one of the registered parties or as independents. Elections Canada provides a list of confirmed candidates who ran in this year’s federal election, and that list can be found at https://www.elections.ca/content2.aspx?section=can&document=index&lang=e.
The federal political tax credit is calculated as a percentage of donations given. However, the credit percentage decreases as contributions amounts increase, and no credit at all is given for donations in excess of $1,275. The credit percentages allowed at different contribution levels are as follows:
Contribution amount |
Allowable tax credit |
$0.01 to $400.00 |
75% of the contribution |
$400.01 to $750.00 |
$300 + 50% of the contribution over $400 |
$750.01 and over
|
$475 + 33⅓% of the contribution over $750 |
The maximum credit claimable in any taxation year by a single taxpayer is $650. Once the math is worked out, it becomes clear that the maximum credit obtainable is reached once contribution levels reach $1,275.
Contribution amount Allowable tax credit
$400 × 75% = $300
$350 × 50% = $175
$525 × 33.3% = $175
$1,275 $650
Where donations exceed $1,275 in any one taxation year, no tax credit can be claimed on the “excess” donation. As well, there is no provision which allows the taxpayer to carry over any “excess” contributions to a subsequent taxation year, meaning that no credit will ever be obtainable with respect to those “excess” contributions.
Many Canadians who are committed to a particular political party or candidate volunteer their time during a nomination or election campaign – canvassing for the candidate, putting up election signs or telephoning voters to encourage them to vote for the candidate. However, in such cases, the work must be its own reward, as no income tax receipts can be issued for most such non-monetary contributions and consequently no credit can be claimed for the value of any non-monetary contribution (including volunteer hours) donated.
Where a qualifying contribution is made, an official receipt must be issued in order for the tax credit to be claimed. During an election campaign, the official agent of a candidate issues that receipt, and it must be issued between the time the candidate is officially nominated and election day. Outside an election period, any receipts are issued by the registered agent of a political party or association. A receipt must be issued, in paper or electronic format, for every contribution over $20.
The actual credit for qualifying donations made is claimed on the tax return for the year in which the contribution was made. The amount of the credit is calculated (according to the formula outlined above) on the Federal Worksheet and the amount of the actual credit entered on line 410 of Schedule 1 of the federal tax return. By the time the 2019 return is filed, of course, the election will long since have been concluded, the newly elected government will be in place in Ottawa, and the taxpayer will be in a position to assess whether it was, in fact, money well spent.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
Tax-free savings accounts (TFSAs) have been around for a full decade now, having been introduced in 2009, and for most Canadians, a TFSA (along with a registered retirement savings plan (RRSP)) is now a regular part of their financial and tax planning.
Tax-free savings accounts (TFSAs) have been around for a full decade now, having been introduced in 2009, and for most Canadians, a TFSA (along with a registered retirement savings plan (RRSP)) is now a regular part of their financial and tax planning.
TFSAs are, in many ways, the inverse of RRSPs. While TFSAs do not provide the tax deduction that an RRSP contribution creates, the strength of TFSAs lies in their great flexibility and the ability they give to Canadians to save, for short-term or long-term purposes, on a tax-free basis. Every Canadian aged 18 years of age and older can contribute a specified annual amount to a TFSA ($6,000 for 2019). Funds contributed to the TFSA are not deductible from income for tax purposes, but investment income earned by those funds is not taxed, either as it accrues or on withdrawal. Where a taxpayer does not contribute to a TFSA in a particular tax year, the contribution not made can be carried forward and that contribution made in any subsequent year. As well, TFSA holders can withdraw funds from their plan at any time, free of tax, and funds withdrawn can be re-contributed, but not until the following year. Therefore, each taxpayer’s contribution limit for a particular year is that year’s statutory annual amount, plus any allowable contributions not made in previous years and carried forward, plus amounts withdrawn in any previous year but not yet re-contributed.
The amount of the allowable TFSA contribution limit for a year has been something of a moving target since 2009: what follows is a listing of the maximum allowable annual contribution limits for each year since TFSAs were introduced.
- The annual TFSA dollar limit for the years 2009, 2010, 2011, and 2012 was $5,000.
- The annual TFSA dollar limit for the years 2013 and 2014 was $5,500.
- The annual TFSA dollar limit for the year 2015 was $10,000.
- The annual TFSA dollar limit for the year 2016, 2017, and 2018 was $5,500.
- The annual TFSA dollar limit for the year 2019 is $6,000.
It’s readily apparent that, especially where there are carryforward amounts and/or the taxpayer has made withdrawals from a TFSA, that calculating one’s current year contribution room can be complex. At one time the Canada Revenue Agency (CRA) notified taxpayers of their current year TFSA contribution limit on the annual Notice of Assessment, but that is no longer the case. Now, the easiest way to find out one’s current year contribution limit is by calling the CRA’s Individual Income Tax Enquiries Line at 1-800-959-8281 or its automated Tax Information Phone Service (TIPS) line at 1-800-267-6999. Taxpayers who have registered for the Agency’s My Account online service can use that service to find the same information. It’s also possible to obtain from the CRA a TFSA Room Statement and a TFSA Transaction Summary, with the latter showing the contributions and withdrawals which have been made.
It is important to stay within one’s overall contribution limit because exceeding that limit — even for one day — will result in the imposition of a penalty tax. Therefore, once the taxpayer knows figures out his or her total contribution limit for 2019, it’s time to make sure that current contribution plans for the year will not put the taxpayer in an overcontribution position. Some taxpayers contribute on a regular, often monthly basis, while others are in the habit of depositing regular or irregular or periodic income receipts, like a tax refund or tax benefit amount or a bonus from their employer, into their TFSA. Either way, after finding out one’s current year contribution limit, it’s necessary to calculate how much has already been contributed in 2019. The difference between those two figures represents the balance which can be contributed before the end of the year without getting into an overcontribution position and incurring penalties. And, it’s important to remember that if withdrawals have been or will be made during 2019, those amounts cannot be re-contributed until after the end of this year.
If it’s necessary to adjust regular contributions in order not to go “offside” by the end of the year, the best time to do it is obviously before getting into that overcontribution position. As soon as a taxpayer is in an overcontribution position, however, a penalty tax of 1% per month of the excess is imposed, even if the excess funds are withdrawn before the end of the month — in other words, as explained in the Canada Revenue Agency guide to TFSAs “[I]f, at any time in a month, you have an excess TFSA amount, you are liable to a tax of 1% on your highest excess TFSA amount in that month.”
Especially where TFSA contributions are set up to occur regularly, by automatic deposit or bank transfer, it’s easy to assume that everything has been taken care of and nothing further needs to be done with respect to such arrangements. However, an “out of sight and out of mind” approach rarely makes for good financial and tax planning, and checking on the status of one’s TFSA on a periodic (at least quarterly) basis can help to ensure that everything is as it should be, and that unnecessary penalties are avoided.
One final consideration — one of the strengths of a TFSA as a savings vehicle is the ability to re-contribute funds which have been withdrawn. However, as outlined above, such re-contributions cannot be made until after the end of the calendar year in which the withdrawal was made. For that reason, taxpayers who may be contemplating a TFSA withdrawal early in 2020, perhaps in order to make an RRSP contribution, or to pay for a winter vacation, should make that withdrawal before the end of 2019. That way, should funds become available (perhaps through the tax refund generated by the RRSP contribution) it will be possible to make the re-contribution in 2020. If the withdrawal is not made until 2020, re-contribution will not be possible (without incurring a penalty) until 2021.
TFSAs are valuable savings and planning vehicles for Canadians — perhaps the most flexible such vehicle available. It’s easy, however, to get tripped up on the rules governing TFSAs, especially the rules around withdrawals and re-contributions. To help keep taxpayers from running afoul of those rules, the Canada Revenue Agency provides a lengthy and detailed publication on TFSAs, and that publication is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4466/tax-free-savings-account-tfsa-guide-individuals.html.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
In most cases, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences — a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be being able to claim a tax credit or deduction for the fees paid.
In most cases, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences — a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be being able to claim a tax credit or deduction for the fees paid.
Unfortunately, while there are some circumstances in which such a deduction can be claimed, those circumstances don’t usually include the routine reasons — purchasing a home, getting a divorce, establishing custody rights or seeking legal advice about making a will or managing a family estate — for which most Canadians incur legal fees. Generally, personal (as distinct from business-related) legal fees become deductible for most Canadian taxpayers only where they are incurred to recover amounts which they believe are owed to them, and where those amounts involve employment or employment-related income or, in some cases, family support obligations.
The first situation in which legal fees paid may be deductible is that of an employee seeking to collect (or to establish a right to collect) salary or wages. In all Canadian provinces and territories, employment standards laws provide that an employee who is about to lose his or her job (for reasons not involving fault on the part of the employee) is entitled to receive a specified amount of notice, or salary or wages equivalent to such notice. In many cases, however, the employee can establish a right to a period of notice (or payment in lieu) greater than the statutory minimum. The amount of notice or payment in lieu of notice which is payable can then become a matter of negotiation between the employer and its former employee, and such negotiations usually involve legal representation and consequently, legal fees. In that situation, legal fees incurred by the employee to establish a right to amounts allegedly owed by the employer are deductible by that former employee. If a court action is necessary and the Court requires the employer to reimburse its former employee for some or all of the legal fees incurred, the amount of that reimbursement must be subtracted from any deduction claimed. In other words, the former employee can claim a deduction only for legal fees which he or she was personally required to pay in order to collect wages or salary owed and for which he or she was not reimbursed.
In some situations, an employee or former employee seeks legal help in order to collect or to establish a right to collect a retiring allowance or pension benefits. In such situations, the legal fees incurred can be deducted, up to the total amount of the retiring allowance or pension income actually received for that year. Where part of the retiring allowance or pension benefits received in a particular year is contributed to an RRSP or registered pension plan, the amount contributed must be subtracted from the total amount received when calculating the maximum allowable deduction for legal fees. However, where all legal fees incurred can’t be claimed in the current year, they can be carried forward and claimed on the return for any of the seven subsequent tax years.
The rules covering the deduction of legal fees incurred where an employee claims amounts from an employer or former employer are relatively straightforward. The same, unfortunately, cannot be said for the rules governing the deductibility of legal fees paid in connection with family support obligations. Those rules have evolved over the past number of years in a somewhat piecemeal fashion. The current rules are as follows.
Legal fees incurred by either party in the course of negotiating a separation agreement or obtaining a divorce are not deductible. Such fees paid to establish child custody or visitation rights are similarly not deductible by either parent.
Where, however, one former spouse has the right to receive support payments from the other, there are circumstances in which legal fees paid in connection with that right are deductible. Specifically, legal fees paid for the following purposes will be deductible by the person receiving those support payments:
- collecting late support payments;
- establishing the amount of support payments from a current or former spouse or common-law partner;
- establishing the amount of support payments from the legal parent of that person’s child (who is not a current or former spouse or common-law partner). However, in these circumstances the deduction is allowed only where the support is payable under a court order, not simply under the terms of an agreement between the parties;
- seeking an increase in support payments; or
- seeking an order making child support amounts received non-taxable.
On the payment side of the support payment/receipt equation, the situation is not nearly so favourable, as a deduction for legal fees incurred will not generally not be allowed to a person paying support. More specifically, as stated in the CRA guide, a person paying support cannot claim legal fees incurred in order to “establish, negotiate or contest the amount of support payments”.
Finally, where the Canada Revenue Agency reviews or challenges income amounts, deductions or credits reported or claimed by a taxpayer for a tax year, any fees (which in this case includes accounting fees) paid for advice or assistance in dealing with the CRA’s review, assessment or reassessment, or in objecting to that assessment or reassessment, can be deducted by the taxpayer. A deduction can similarly be claimed where the taxpayer incurs such fees in relation to a dispute involving employment insurance, the Canada Pension Plan or the Quebec Pension Plan.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
As the baby boom generation ages, members of that generation must switch their focus from the accumulation of retirement savings to creating a structure which will ensure a steady flow of income throughout that retirement. Those individuals face a particular deadline when their 71st birthday arrives, as they must, by December 31st of that year, collapse their RRSP and convert it into a source of retirement income.
As the baby boom generation ages, members of that generation must switch their focus from the accumulation of retirement savings to creating a structure which will ensure a steady flow of income throughout that retirement. Those individuals face a particular deadline when their 71st birthday arrives, as they must, by December 31st of that year, collapse their RRSP and convert it into a source of retirement income.
The decision to be made is an important one which, once made, can’t be undone. In addition, such decision involves a number of factors which are either unknown, or beyond the control of the individual, or both. And, to add to the pressure, the choice made will affect the individual’s finances for the remainder of his or her life
While the actual decision is a complex one, the options available to a taxpayer who must convert an RRSP are actually quite few in number — three, to be precise. They are as follows:
- collapse the RRSP and include all of the proceeds in income for that year;
- collapse the RRSP and transfer all proceeds to a registered retirement income fund (RRIF); and/or
- collapse the RRSP and purchase an annuity with the proceeds.
It’s not hard to see that the first option doesn’t have much to recommend it. Collapsing an RRSP without transferring the balance to a RRIF or purchasing an annuity means that every dollar in the RRSP will be treated as taxable income for that year. In many cases, that will mean losing nearly half of the RRSP proceeds to income tax. And, while any amount left can then be invested, tax will be payable on all investment income earned.
As a practical matter, then, the choices come down to two: a RRIF or an annuity. And, as is the case with most tax and financial planning decisions, the best choice will be driven by one’s personal financial and family circumstances, risk tolerance, cost of living, and the availability of other sources of income to meet that cost of living.
The annuity route has the great advantages of simplicity and reliability. In exchange for a lump sum amount paid by the taxpayer, the annuity issuer agrees to pay the taxpayer a specific sum of money on a periodic basis (usually once a month) for the remainder of the annuitant’s life. Annuities can also provide a guarantee period, in which the annuity payments continue for a specified time period (5 years, 10 years, etc.), even if the taxpayer dies during that time. The amount of monthly income which can be received depends, of course, on the amount paid in, but also on the gender and, especially, the age of the taxpayer. Currently, the annuity rate for each $100,000 paid to the annuity issuer by a taxpayer who is 71 years of age is about $586 per month for a male taxpayer and about $533 per month for a female taxpayer (the actual rate is set by the company which issues the annuity and will vary somewhat from company to company). Those rates do not include any guarantee period.
For taxpayers whose primary objective is to obtain a guaranteed life-long income stream without the responsibility of making any investment decisions or the need to take any investment risk, an annuity can be an attractive option. There are, however, some potential downsides to be considered. First, an annuity can never be reversed. Once the taxpayer has signed the annuity contract and transferred the funds, he or she is locked into that annuity arrangement for the remainder of his or her life, regardless of any change in circumstances that might mean an annuity is no longer suitable. Second, unless the annuity contract includes a guarantee period, there is no way of knowing how many payments the taxpayer will receive. If he or she dies within a short period of time after the annuity is put in place, there is generally no refund of amounts invested — once the initial transfer is made at the time the annuity is purchased, all funds transferred belong to the annuity company. Third, most annuity payment schedules do not keep up with inflation — while it is possible to obtain an annuity in which payments are indexed, having that feature will mean a substantially lower monthly payout amount. Finally, where the amount paid to obtain the annuity represents most or all of the taxpayer’s assets, entering into the annuity arrangement means that the taxpayer will not be leaving an estate for his or her heirs.
The second option open to taxpayers is to collapse the RRSP and transfer the entire balance to a RRIF. A RRIF operates in much the same way as an RRSP, with two major differences. First, it is not possible to contribute funds to a RRIF. Second, the taxpayer is required to withdraw an amount from his or her RRIF (and to pay tax on that amount) each year. That minimum withdrawal amount is a percentage of the outstanding balance, with that percentage figure determined by the taxpayer’s age at the beginning of the year. While the taxpayer can always withdraw more in a year or make lump sum withdrawals (and pay tax on those withdrawals), he or she cannot withdraw less than the minimum required withdrawal for his or her age group.
Where a taxpayer holds savings in a RRIF, he or she can invest those funds in the same investment vehicles as were used while the funds were held in an RRSP and those funds can continue to grow on a tax-sheltered basis, in the same way as funds in an RRSP. While the ability to continue holding investments that can grow on a tax-sheltered basis provides the taxpayer with a lot of flexibility, and the potential for growth in value, those benefits have a price in the form of investment risk. As is the case with all investments, the investments held within a RRIF can increase in value — or decrease — and the taxpayer carries the entire investment risk. When things go the way every investor wants them to, investment income is earned while the taxpayer’s underlying capital is maintained but, of course, that result is never guaranteed.
On the death of a RRIF annuitant, any funds remaining in the RRIF can pass to the annuitant’s spouse on a tax-free basis. Where there is no spouse, the remaining funds in the RRIF will be income to the RRIF annuitant in the year of death, and any balance after tax is paid will become part of his or her estate, available for distribution to beneficiaries.
While the above discussion of RRIFs versus annuities focuses on the benefits and downsides of each, it is not necessary (and in most cases not advisable) to limit the options to an either/or choice. It is possible to achieve, to a degree, the seemingly irreconcilable goals of lifetime income security and the potential for capital (and estate) growth. Combining the two alternatives — annuity and RRIF — either now or in the future can go a long way toward satisfying both objectives.
For everyone, in retirement or not, all spending is a combination of non-discretionary and discretionary items. The first category is made up mostly of expenditures for income tax, housing (whether rent or the cost of maintaining a house), food, insurance costs, and (especially for older Canadians) the cost of out-of-pocket medical expenses. The second category, discretionary expenses, includes entertainment, travel, and the cost of any hobbies or interests pursued. A strategy which utilizes a portion of RRSP savings to create a secure lifelong income stream to pay non-discretionary costs can remove the worry of outliving one’s money, while the balance of savings can be invested through a RRIF, for growth and to provide the income for non-discretionary spending.
Such a secure income stream can, of course, be created by purchasing an annuity. As well, although most taxpayers don’t necessarily think of them in that way, the Canada Pension Plan and Old Age Security have many of the attributes of an annuity, with the added benefit that both are indexed to inflation. By age 71, all taxpayers who are eligible for CPP and OAS will have begun receiving those monthly benefits. Consequently, in making the RRIF/annuity decision at that age, taxpayers should include in their calculations the extent to which CPP and OAS benefits will pay for their non-discretionary living costs.
As of September 2019, the maximum OAS benefit for most Canadians (specifically, those who have lived in Canada for 40 years after the age of 18) is about $614 per month. The amount of CPP benefits receivable by the taxpayer will vary, depending on his or her work history, but the maximum current benefit which can be received at age 65 is about $1,155. (Where receipt of either benefit is deferred past the age of 65, those amounts go up.) As a result, a single taxpayer who receives the maximum CPP and OAS benefits at age 65 will have just over $21,000 in annual income (or about $1,770 per month). And, for a married couple, of course, the combined total annual income received from CPP and OAS is just over $42,000 annually, or $3,500 per month. While $21,000 a year isn’t enough to provide a comfortable retirement, for those who go into retirement in good financial shape — meaning, generally, without any debt — it can go a long way toward meeting non-discretionary living costs. In other words, most Canadians who are facing the annuity versus RRIF decision already have a source of income which is effectively guaranteed for their lifetime and which is indexed to inflation. Taxpayers who are considering the purchase of an annuity to create the income stream required to cover non-discretionary expenses should first determine how much of those expenses can already be met by the combination of their (and their spouse’s) CPP and OAS benefits. The amount of any annuity purchase can then be set to cover off any shortfall.
While the options available to a taxpayer at age 71 with respect to the structuring of future retirement income are relatively straightforward, the number of factors to be considered in assessing those factors and making that decision are not. All of that makes for a situation in which consulting with an independent financial advisor on the right mix of choices and investments isn’t just a good idea, it’s a necessary one.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
When parents separate and divorce, it is frequently the case that they are able to agree on an arrangement to share custody of their children. Such a shared-custody arrangement is often to the benefit of all concerned, especially the children of the marriage.
When parents separate and divorce, it is frequently the case that they are able to agree on an arrangement to share custody of their children. Such a shared-custody arrangement is often to the benefit of all concerned, especially the children of the marriage.
While a shared-custody arrangement usually makes the most sense from a human perspective, it can cause legal, financial, and tax complications. In particular, parents who share custody of their children must usually share, or divide, the tax deductions and benefits which can be received in respect of those children.
One of those benefits is the Canada Child Benefit (CCB) which is, in general terms, a non-taxable monthly benefit paid to parents of children who are under the age of 18.
The tax rules allow parents who share custody to also share CCB amounts. In such situations, payments made are equivalent to each eligible individual receiving one-half of the annual entitlement that they would receive if they were the only eligible parent (i.e., if the child lived with them all of the time), paid in monthly installments over the year. That has been the case since 2011, with the Canada Revenue Agency (CRA) determining who qualifies, based on an interpretation of shared parenting as meaning that a child generally lives with the parent between 40% and 60% of the time. However, recent Court decisions have altered and narrowed that policy, finding that a shared parenting arrangement requires that a child reside with a parent between 45% and 55% of the time.
In the CRA’s view, the narrower interpretation put forward into those Court decisions could result in a number of parents who share parenting time not being able to share in the benefits to which they are entitled. Consequently, new rules have been published to clarify the payment of CCB to shared-custody parents.
Those new rules provide that a shared-custody parent would be defined as one of two parents who:
- are not at that time cohabitating spouses or common-law partners of each other;
- reside with the child either at least 40% of the time in a month or on an equal or approximately equal basis; and
- primarily fulfill the responsibility for the care and upbringing of the child when residing with the child.
The proposed changes will provide more flexibility when it comes to shared-custody parents and the receipt of tax benefits for their children and will allow the CRA to continue with its existing administrative practices with respect to such parents. While the legislation to make the announced changes has not, owing to the election call, been passed by Parliament, officials of the Department of Finance have indicated that the CRA will nonetheless be administering the CCB based on those proposed rules, which are retroactive to June 2011.
More information on the new rules can be found on the Finance Canada website at https://www.fin.gc.ca/n19/data/19-095_01-eng.asp.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
Canadians are fortunate to benefit from a publicly funded health care system, in which most costs of care ranging from routine visits to a family doctor to intensive care in a hospital setting are paid for by government-sponsored health insurance.
Canadians are fortunate to benefit from a publicly funded health care system, in which most costs of care ranging from routine visits to a family doctor to intensive care in a hospital setting are paid for by government-sponsored health insurance.
While there is no doubt that most medical costs are not the financial responsibility of the individual, it is nonetheless a fact that a significant (and growing) number of medical and para-medical costs must be paid for on an out-of-pocket basis by the person incurring those costs. And those costs can, in some instances, run to thousands of dollars per year.
The costs which first come to mind are, of course, those which must be incurred for prescription medicine. While some Canadians have full or partial coverage for such costs through an employer-sponsored benefits plan, the majority of Canadians (especially those working on a part-time or contract basis) don’t. Similarly, visits to a dentist must be paid for by those who don’t have private medical insurance on an out-of-pocket basis. The same goes for services provided by any number of medical and, especially, para-medical practitioners, including physiotherapists, psychologists, and registered massage therapists.
It’s a virtual certainty that nearly all Canadians will incur one or more of those uninsured costs over the course of a year. The good news for those individuals and families is that in many instances a federal and provincial tax credit can be claimed to help offset those costs. The bad news is that the rules on determining just what expenses qualify for the credit and how and when to claim it can be complex.
First, the basics. The technical rule is that, for 2019, taxpayers can claim a tax credit for qualifying medical expenses which exceed 3% of their net income for the year or $2,352, whichever is less. That’s a confusing calculation to many Canadians, and it’s perhaps easier to think of it in these terms:
- For 2019, taxpayers who have income of $78,400 or less can claim all qualifying medical expenses which exceed 3% of their income for the year. As an example, someone who has $50,000 in income for 2019 can claim qualifying medical expenses over $1,500 ($50,000 × 3% = $1,500).
- For 2019, taxpayers who have income over $78,400 can claim their qualifying medical expenses which are greater than $2,352.
There is also some degree of flexibility in the timing of a claim made for the medical expense tax credit. Specifically, a claim made on the return for 2019 can include any qualifying medical expense incurred in any 12-month period which ends in 2019. Consequently, taxpayers can, in order to maximize the expenses claimed for the year (and so exceed the statutory thresholds outlined above) can pick any 12-month period ending during 2019.
For example, an individual might have incurred significant medical expenses in the last half of 2018 and the first half of 2019. That taxpayer would likely benefit from choosing the period July 1, 2018 to June 30, 2019, and claiming all medical expenses incurred during that period on his or her return for 2019.
There is, unfortunately, no formula or rule-of-thumb which allows a taxpayer to easily or quickly pick the time period which will provide the greatest credit amount, since that determination depends on when qualifying medical expenses were incurred. To determine the optimal period for a medical expenses tax credit claim, it’s really a matter of trial and error, or doing the computation for different time periods and choosing the one that gives the best result.
In aggregating those medical expenses, it’s also possible for families to include all qualifying expenses incurred by both spouses and by any children who were born in 2002 or later. The claim for the credit (using the total family medical expenses) can then be made by either spouse. Since the amount of the allowable expense claim increases as income decreases, it makes sense for the claim for total family medical expenses to be made by the lower-income spouse on his or her return for the year, as long as that spouse’s tax payable for the year is greater than the amount of the credit to be claimed.
Of course, the first determination which must be made when calculating a medical expense tax credit claim for the year is which expenses do or do not qualify for the credit. The number and kind of expenses which can be incurred for medical care are almost limitless in their scope and variety, and the list of qualifying and non-qualifying expenses for purposes of the credit reflects that reality.
The Canada Revenue Agency (CRA) helpfully provides a chart of the types of expenses which can qualify for the medical expense tax credit, and that chart includes other requirements which must be met in order for a particular expense to qualify. It’s well worth reviewing that chart (which is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-330-331-eligible-medical-expenses-you-claim-on-your-tax-return.html#mdcl_xpns) as the requirements imposed in order to qualify can be very specific and are not necessarily intuitive. For instance, to claim the cost of a walker as a medical expense, it is necessary to have a doctor’s prescription for that equipment. However, the cost of a wheelchair can be claimed with no requirement for a prescription. Finally, although the chart listing eligible medical expenses is 14 pages long, the CRA notes that such listing is “not exhaustive”. A full listing can be found in CRA Income Tax Folio S1-F1-C1, Medical Expense Tax Credit, which is available at https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-1-health-medical/income-tax-folio-s1-f1-c1-medical-expense-tax-credit.html.
The exercise of determining eligible medical expenses for all family members, calculating the optimal time period for making a medical expense tax credit claim, and determining the actual credit claimable can be a time-consuming process. However, given that such expenses are usually unavoidable, the dollar figure costs are often significant, and the effort has to be made only once a year, it is an annual effort worth making.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
The Canadian tax system is a “self-assessing system” which relies heavily on the voluntary co-operation of taxpayers. Canadians are expected (in fact, in most cases, required), to complete and file a tax return each spring, reporting income from all sources, calculating the amount of tax owed, and remitting that amount to the federal government by a specified deadline.
The Canadian tax system is a “self-assessing system” which relies heavily on the voluntary co-operation of taxpayers. Canadians are expected (in fact, in most cases, required), to complete and file a tax return each spring, reporting income from all sources, calculating the amount of tax owed, and remitting that amount to the federal government by a specified deadline.
While it’s doubtful that many Canadians approach the task with any degree of enthusiasm, the fact is that millions of Canadians do sit down each spring to complete their annual tax return for the previous calendar year (or more often, they pay someone else to do it for them). Although the rate of compliance among Canadian taxpayers is very high — for the last filing season, just under 30 million individual income tax returns were filed with the Canada Revenue Agency (CRA) — there are, inevitably, those who do not file or pay on time.
There are a lot of reasons why individual Canadians don’t file their returns or pay their taxes on a timely basis, and almost all of them are based on a lack of understanding of how our tax system works, or on incorrect information about that system.
Some taxpayers don’t file because they believe that there’s no requirement to do so if they don’t owe anything and aren’t expecting a refund. While that can be true, it is also necessary to file in order to receive a number of income-tested tax credits and benefits, including the harmonized sales tax (HST) credit, the Canada Child Benefit, and a range of provincial tax credits. Those who don’t file cannot have their eligibility for such credits determined and, therefore, no credits can be paid to them. Others don’t file because they have a balance owing but don’t have the funds to pay that balance on filing. That, too, is the wrong approach, as anyone who owes taxes but doesn’t file a return by the filing deadline gets hit with an immediate penalty of at least 5% of the outstanding amount owed. In such circumstances, the right approach is to file on time and to contact the CRA in order to come to an agreement on a payment arrangement over time. Finally, there is a persistent (and completely false) tax myth that has been circulating for decades, that the federal government does not have the legal right to collect taxes, and every year some taxpayers fall victim to someone peddling that myth.
There are also a number of Canadians who file returns in which income amounts are underreported and/or deductions or credits to which that taxpayer is not entitled are claimed. While the overall percentage of taxpayers who don’t file or pay on time, or who file returns which are not accurate isn’t high, there are a lot of such returns when measured by absolute numbers. And, although each such instance of non-compliance represents lost revenue to the Canadian government, the resources needed to track down each and every instance of non-compliance simply aren’t available, especially since in many cases the amount recovered may be less than the costs which must be incurred to recover that amount.
With all of that in mind, several years ago the CRA instituted a program intended to encourage non-compliant taxpayers to come forward and put their tax affairs in order. The incentive to do so arose from the fact that, in most cases, while such taxpayers would have to pay outstanding tax amounts owed, plus interest, they would not be subject to penalties which would normally be imposed and would, in addition, avoid the risk of criminal prosecution.
That program, the Voluntary Disclosure Program (VDP), generally fulfilled its objectives but was criticized as being a means by which those who engage in deliberate tax avoidance could escape the consequences of their actions. As a result, changes were made to the VDP in March of 2018, with the effect of narrowing the eligibility criteria for the program and imposing additional conditions on participants.
The changes made in 2018 did not alter the basic requirements for participation in the VDP, which are still as follows. To qualify for relief, an application made with respect to non-compliance with income tax filing and payment obligations must:
- be voluntary (meaning that it is done before the taxpayer becomes aware of any compliance or enforcement action by the CRA);
- be complete;
- involve the application or potential application of a penalty;
- include information that is at least one year past due; and
- include payment of the estimated tax owing.
Under the current VDP structure, there are two separate programs for income tax disclosures — the Limited Program and the General Program — and the kind and extent of relief available depends on the track to which a particular application is assigned.
While the CRA will make a determination of whether an application should proceed under the Limited or the General Program on a case-by-case basis, there are guidelines in place. The CRA’s intention is to restrict the Limited Program to instances in which applications disclose non-compliance which appears to include intentional (as distinct from inadvertent) conduct on the part of the taxpayer. In making its determination of the appropriate track for a disclosure, the factors which the CRA will consider include the following:
- the dollar amounts involved;
- the number of years of non-compliance; and
- the sophistication of the taxpayer; and
- whether efforts were made to avoid detection through the use of offshore vehicles or other means.
Those whose applications are accepted under the Limited Program will not be subject to criminal prosecution and will be exempt from the more stringent penalties which usually apply in cases of gross negligence on the part of the taxpayer. Interest on outstanding tax balances will be payable, however, and other penalties will be levied.
Taxpayers whose conduct does not consign them to the Limited Program will instead be considered under the General Program. Under that Program, no penalties will be charged and no criminal prosecutions will take place. As well, the CRA will provide partial interest relief, specifically for the years preceding the three most recent years of non-compliance — that is, for the years preceding the three most recent years of returns required to be filed. For example, a taxpayer who makes an application to the VDP and who has failed to file returns for the 2010 through 2017 taxation years may be provided with interest relief with respect to taxes owed for the 2010-2014 taxation years. Such relief is generally equal to 50% of interest owed (i.e., the taxpayer will be required to pay only half of the interest charges which would otherwise be levied for those years). No interest relief will, however, be provided on tax amounts owed for the three most recent (2015-2017) taxation years. Since interest charges levied by the CRA are, by law, greater than current commercial rates and interest charged is compounded daily, having interest amounts forgiven, even in part, can make a significant difference to the overall tax bill faced by the taxpayer.
In order to benefit from the VDP, taxpayers must first make an application to the program. That application must include payment of the estimated taxes owing, as a condition of participation in the VDP. Where a taxpayer is financially unable to make that tax payment, he or she can request that the CRA consider a payment arrangement.
The decision to apply to the VDP and to “come clean” about all previous tax transgressions is one which many taxpayers may well view with trepidation. Those who are unsure about whether they want to move forward with a VDP application can take advantage of the CRA’s “pre-disclosure discussion service”. As the name implies, that service allows taxpayers to participate in preliminary discussions, on an anonymous basis”, to gain some knowledge about the VDP program, the process involved and the potential relief available.
Taxpayers who decide to move forward with an application to the VDP can complete and file Form RC199, Voluntary Disclosures Program Application, which is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/rc199.html. While use of this form is not mandatory — a letter will suffice — there’s really no downside to using the prescribed form, and doing so will ensure that all of the needed information is provided to the tax authorities. Once the application is received, the CRA will check to make certain that the applicant is eligible to apply and that all of the required information, documentation, and payment has been sent. The CRA will then let the taxpayer know of his or her acceptance into the VDP and the effective date of that acceptance. The next step is for the CRA to evaluate the application to ensure that the five criteria for participation in the VDP (as listed above) are satisfied and to determine the program (Limited or General) to which the application should be assigned, and the taxation year(s) for which relief is being considered. The taxpayer will be provided with that information in writing. The CRA’s advice is that taxpayers should contact them (for individual taxpayers, by calling the Individual Income Tax Enquiries line at 1-800-959-8281) if they have not heard from the CRA within four or five weeks of submitting an application.
If the decision made is that the application is not eligible for the VDP, that the necessary information, documentation, or payment was not received, that the five conditions of a valid application are not met, or that the circumstances are such that relief is not typically considered the taxpayer will also be advised in writing, with reasons, of the CRA’s decision to deny the application.
Where the decision made by the CRA is one with which the taxpayer does not agree, he or she is entitled to ask for a second review of the application. If that decision is also unfavourable, it is possible for a taxpayer to ask a court to review the decision and direct the CRA to re-consider the VDP application. However, taxpayers should be aware that the circumstances in which courts can do so are very limited and such applications to court are more often than not unsuccessful. In any case, a taxpayer who is considering a court application with respect to a decision made under the VDP should obtain legal advice before doing so.
Finally, taxpayers should recognize that the VDP Program can’t be used as a kind of “get out of jail free card” with respect to repeated failures to meet their tax filing and payment obligations. The CRA website makes it clear that the Agency expects taxpayers who have benefitted from the VDP to thereafter meet their tax obligations and a second review will be provided for the same taxpayer only in unusual situations where the circumstances are beyond the taxpayer’s control.
Detailed information on the VDP program can be found on the CRA website at https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/voluntary-disclosures-program-overview.html.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
By now, news of yet another data breach resulting in unauthorized access to personal information — especially financial information — has become so frequent as to seem almost commonplace. Notwithstanding, the recent data breach affecting Capital One was, in many ways, a singular event.
By now, news of yet another data breach resulting in unauthorized access to personal information — especially financial information — has become so frequent as to seem almost commonplace. Notwithstanding, the recent data breach affecting Capital One was, in many ways, a singular event.
The magnitude of the Capital One data breach was unprecedented in many respects. The number of Canadians affected by the breach, the volume of information obtained and, particularly, the nature of the information lost were all on a scale not previously seen, in Canada or elsewhere.
According to information provided by Capital One, approximately 6 million Canadians (or one in every six Canadians) have had the privacy of their personal information compromised. Part of the reason that such a huge number of individuals has been affected is the time frame involved. The breach affected, not just those who held credit products issued by Capital One, but those who applied for such products (whether or not they were ever obtained) for a fifteen-year period, from 2005 through early 2019. The personal information obtained through the breach included personal information Capital One routinely collects at the time it receives credit card applications, including names, addresses, postal codes, phone numbers, email addresses, dates of birth, income, credit scores, credit limits, balances, payment history and contact information.
While a privacy breach involving any of the above information is problematic for those affected, the most significant aspect of the Capital Once breach is that the Social Insurance Numbers (SIN) of 1 million Canadians were obtained by an unauthorized person or persons as a result of the privacy breach. A SIN is the “gold standard” of personal identification for Canadians — it is used to file tax returns, obtain government benefits, and open bank accounts. Having someone’s SIN makes it easier to obtain other identifying information and that information, in the aggregate, facilitates identity theft.
Anyone who has been the victim of a personal information data breach can take steps to mitigate the possible impact of that breach. Affected credit cards can be cancelled and re-issued and bank account numbers changed. Individuals can change passwords and e-mail addresses. While all of that is time consuming, aggravating and inconvenient, it can be done.
The situation is different when it comes to SINs. SINs are issued by the federal government and the government’s policy is to NOT provide an individual with a new SIN where the original number is compromised in a data breach. (A new SIN can be requested only in circumstances in which an individual can prove that his or her SIN was used fraudulently.) The stated reasons for that policy, as outlined on the Service Canada website, are as follows:
A new Social Insurance Number does not protect you from fraud and identity theft
A new SIN is not a fresh start or protection from fraud or identity theft.
If someone else uses your old SIN and the business does not check the person’s identity, you may have to prove you were not involved in the fraud or pay the impostor’s debts.
A new Social Insurance Number is a complex affair
The Government can only share your new SIN with the federal departments and agencies that use your SIN.
This means that it would be up to you to provide your new SIN to all the financial institutions, creditors, pension providers, recent and current employers, and any other organizations with which you shared your old SIN.
Not doing so or failing to do so properly risks not receiving benefits or leaves the door open to subsequent fraud or identity theft.
You double your monitoring efforts with two Social Insurance Numbers instead of one
A new SIN does not erase your old SIN. You would therefore need to monitor your accounts and credit reports for both SINs on a regular and ongoing basis. This would put added burden on you. Numerous SINs multiply the risk of fraud.
Consequently, individuals whose SINs have been obtained by unauthorized persons through the Capital One hack will need to be vigilant, now and for some time into the future, to guard against unauthorized use of that number. Such individuals may rightfully expect Capital One to take responsibility for and cover the cost of such monitoring efforts, and the company has indicated that it will take the following actions.
The company began directly notifying Canadians affected by the cyber incident by email on August 7, 2019, and that process will continue by e-mail or regular mail, over several weeks. The difficulty, of course, is that e-mail addresses were one of the kinds of information obtained as part of the data breach. Consequently, anyone who receives an e-mail from Capital One will need to take steps to ensure that such e-mail is not part of a further phishing attempt. Any suspicious e-mails received should be forwarded, without opening (and especially without clicking on any links) to abuse@capitalone.com In order to help those affected spot fraudulent emails or messages, Capital One has posted a number of tips on its website at https://www.capitalone.ca/help/fraud-protection/.
Capital One has also announced that it will not be contacting anyone affected by the data breach by telephone or text. Consequently, any phone call or text which purports to be from Capital One is fraudulent and should be ignored. Where personal information has mistakenly been provided in response to such a call or text, the following steps should be taken:
- call Capital One to report that account information may have been compromised;
- sign in to Capital One online banking and change passwords; and
- check accounts for suspicious activity.
Finally, the company has indicated that it will provide and pay for two years of credit monitoring and identity theft insurance from TransUnion to everyone impacted. Details of the data breach and the company’s response are outlined on the Capital One website at https://www.capitalone.ca/facts2019/.
One of the reasons that so many SINs were compromised in the Capital One data breach is that Canadians have become accustomed to being routinely asked for their SIN in situations in which that request shouldn’t be made. And, in too many cases, Canadians routinely provide those SINs without fully considering the potential risks.
The number of instances in which individuals are required to provide their SINs is actually quite limited, and such information can generally be requested only by an employer, by agencies of the federal government, or by private institutions (like banks or credit unions) which are required to provide taxpayer-specific information to the federal government, especially the tax authorities, and then only in specific circumstances.
Notwithstanding, SINs are requested in any number of situations in which they don’t have to be provided, including the following:
- proving your identity (except for specific government programs);
- completing a job application before you get the job;
- completing an application to rent a property;
- negotiating a lease with a landlord;
- completing a credit card application;
- cashing a cheque;
- completing some banking transactions (mortgage, line of credit, loan);
- completing a medical questionnaire;
- renting a car;
- subscribing to long distance or cellular telephone services;
- writing a will;
- applying to a university or college; and
- making funeral arrangements.
Somewhat surprisingly, it’s not actually against Canadian law for an individual or company to ask for a SIN in circumstances in which they aren’t entitled to it. Consequently, the onus falls on the individual to refuse to provide his or her SIN in such circumstances. That’s not always as easy as it sounds — for instance, SINs are routinely requested in residential tenancy applications and, in a tight rental market, individuals may be reluctant to refuse where doing so could mean losing out on hard-to-find rental accommodation. Individuals will therefore need to determine, in each instance, whether the risks inherent in providing one’s SIN number are justified in the circumstances. And no matter what those circumstances are, the best advice is always this: if you don’t have to disclose identifying and/or personal financial information, then don’t!
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
The start of the calendar year also marks the beginning of the tax year for individuals and consequently most tax changes are scheduled to take effect as of January 1 of each year. However, the federal and provincial budgets are brought down in the late winter and spring, and those budgets can include announcements of tax changes which will take effect later in the year (often, but not exclusively, on July 1, being halfway through the tax year). As well, where a change in tax rates, credits, or income brackets announced in the budgets is made effective as from the beginning of the tax and calendar year, individuals will first notice that change when their payroll withholdings are adjusted starting in July.
The start of the calendar year also marks the beginning of the tax year for individuals and consequently most tax changes are scheduled to take effect as of January 1 of each year. However, the federal and provincial budgets are brought down in the late winter and spring, and those budgets can include announcements of tax changes which will take effect later in the year (often, but not exclusively, on July 1, being halfway through the tax year). As well, where a change in tax rates, credits, or income brackets announced in the budgets is made effective as from the beginning of the tax and calendar year, individuals will first notice that change when their payroll withholdings are adjusted starting in July.
What follows is a listing of significant federal and provincial tax changes which are currently scheduled to come into effect during the remainder of the 2018 tax year.
Federal
Indexation of Child Tax Benefits
In its 2016 Budget, the federal government replaced the existing Canada Child Tax Benefit with the Canada Child Benefit program. The new program provides lower and middle income Canadian families with a non-taxable monthly benefit, with the amount of that benefit dependent on family size and income.
When the CCB program was introduced, one of the terms of that program was that benefits payable would be indexed, starting in July 2020. However, in the fall of 2017, the federal government announced that such indexation would be accelerated, such that all CCB benefits will be indexed to changes in the Consumer Price Index, starting in July 2018.
Indexation of benefits will take place automatically starting in July, and there is no requirement or need for CCB recipients to take any action.
British Columbia
Interactive Digital Media Tax Credit extended
The B.C. Interactive Digital Media tax credit, which was scheduled to expire at the end of August, 2018, has been extended for a period of five years and so it will be available until August 31, 2023.
Manitoba
Carbon tax introduced effective September 1
Manitoba’s carbon tax will impose a $25 tax per tonne of greenhouse gas emissions beginning on September 1, 2018 and will apply to gas, liquid, and solid fuel products intended for combustion in the province.
Corporate tax credit programs extended
The Manitoba Book Publishing Tax Credit and the Cultural Industries Printing Tax Credit were both scheduled to expire on December 31, 2018. Both have been extended for one year, to December 31, 2019.
Ontario
Changes to personal income tax rates and brackets
Previously, Ontario was one of only two Canadian provinces to levy a personal income tax surtax. However, it was announced in this year’s Budget that the surtax would be eliminated, and that tax brackets and rates would be adjusted to compensate for that change.
Although the change in the rate structure is effective as of the beginning of 2018, changes to income tax source deductions which reflect that change will be implemented starting in July.
Prince Edward Island
Change to basic personal amount
In this year’s Budget, the province announced that the basic personal tax credit amount, which is claimable by all PEI residents, would be increased in two steps. The first stage of that change will see the amount for 2018 increase from $8,160 to $8,660.
Although the change is effective as of the beginning of the calendar year, it will first be reflected in payroll deductions made for provincial income tax starting in July 2018.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
For several generations, reaching one’s 65th birthday marked the transition from working life to full retirement, and, usually, receipt of a monthly employee pension, along with government-sponsored retirement benefits. That is no longer the reality. The age at which Canadians retire can now span a decade or more, and retirement is more likely to be a gradual transition than a single event.
For several generations, reaching one’s 65th birthday marked the transition from working life to full retirement, and, usually, receipt of a monthly employee pension, along with government-sponsored retirement benefits. That is no longer the reality. The age at which Canadians retire can now span a decade or more, and retirement is more likely to be a gradual transition than a single event.
Today, Canadians can choose to begin receiving benefits from government-sponsored retirement benefit programs between the ages of 60 and 70. Canada Pension Plan retirement benefits can begin as early as age 60, and taxpayers can start collecting Old Age Security benefits at age 65. Receipt of income from either of those government- sponsored retirement income plans can also be deferred until the age of 70, but no later.
As well, the employer-sponsored pension plan is no longer available as a source of guaranteed retirement income for the majority of retirees. Instead, such retirees have (hopefully) saved for retirement through a registered retirement savings plan (RRSP). Holders of such plans are required to collapse their RRSP by the end of the year in which they turn 71 years of age. And, the decision made on what to do with the funds within that RRSP will affect the individual’s income for the remainder of his or her life.
While the actual decision is a complex one, the options available to a taxpayer who must collapse an RRSP are actually quite few in number — three, to be precise. They are as follows:
- collapse the RRSP and include all of the proceeds in income for that year;
- collapse the RRSP and transfer all proceeds to a registered retirement income fund (RRIF); and/or
- collapse the RRSP and purchase an annuity with the proceeds.
It’s not hard to see that the first option doesn’t have much to recommend it. Collapsing an RRSP without transferring the balance to a RRIF or purchasing an annuity means that every dollar in the RRSP will be treated as taxable income for that year. In most cases, that will mean losing nearly half of the RRSP proceeds to income tax. And, while any amount left can then be invested, tax will be payable on all investment income earned.
As a practical matter, then, the choices come down to two: a RRIF or an annuity. And, as is the case with most tax and financial planning decisions, the best choice will be driven by one’s personal financial and family circumstances, risk tolerance, cost of living, and the availability of other sources of income to meet that cost of living.
The annuity route has the great advantages of simplicity and reliability. In exchange for a lump sum amount paid by the taxpayer, the annuity issuer agrees to pay the taxpayer a specific sum of money, usually once a month, for the remainder of the annuitant’s life. Annuities can also provide a guarantee period, in which the annuity payments continue for a specified time period (5 years, 10 years), even if the taxpayer dies during that time. The amount of monthly income which can be received depends, of course, on the amount paid in, but also on the gender and, especially, the age of the taxpayer. Currently, annuity rates for each $100,000 paid to the annuity issuer by a taxpayer who is 70 years of age range from $579 to $643 per month for a male taxpayer and from $515 to $572 for a female taxpayer (the actual rate is set by the company which issues the annuity). Those rates do not include any guarantee period.
For taxpayers whose primary objective is to obtain a guaranteed life-long income stream without the responsibility of making any investment decisions or the need to take any investment risk, an annuity can be an attractive option. There are however, some potential downsides to be considered. First, an annuity can never be reversed. Once the taxpayer has signed the annuity contract and transferred the funds, he or she is locked into that annuity arrangement for the remainder of his or her life, regardless of any change in circumstances that might mean an annuity is no longer suitable. Second, unless the annuity contract includes a guarantee period, there is no way of knowing how many payments the taxpayer will receive. If he or she dies within a short period of time after the annuity is put in place, there is no refund of amounts invested — once the initial transfer is made at the time the annuity is purchased, all funds transferred belong to the annuity company. Third, most annuity payment schedules do not keep up with inflation — while it is possible to obtain an annuity in which payments are indexed, having that feature will mean a substantially lower monthly payout amount. Finally, where the amount paid to obtain the annuity represents most or all of the taxpayer’s assets, entering into the annuity arrangement means that the taxpayer will not be leaving an estate for his or heirs.
The second option open to taxpayers is to collapse the RRSP and transfer the entire balance to a registered retirement income fund, or RRIF. A RRIF operates in much the same way as an RRSP, with two major differences. First, it’s not possible to contribute funds to a RRIF. Second, the taxpayer is required to withdraw an amount from his or her RRIF (and to pay tax on that amount) each year. That minimum withdrawal amount is a percentage of the outstanding balance, with that percentage figure determined by the taxpayer’s age at the beginning of the year. While the taxpayer can always withdraw more in a year, or make lump sum withdrawals (and pay tax on those withdrawals), he or she cannot withdraw less than the minimum required withdrawal for his or her age group.
Where a taxpayer holds savings in a RRIF, he or she can invest those funds in the same investment vehicles as were used while the funds were held in an RRSP and those funds can continue to grow on a tax-sheltered basis, in the same way as funds in an RRSP. While the ability to continue holding investments that can grow on a tax-sheltered basis provides the taxpayer with a lot of flexibility, and the potential for growth in value, those benefits have a price in the form of investment risk. As is the case with all investments, the investments held within a RRIF can increase in value — or decrease — and the taxpayer carries the entire investment risk. When things go the way every investor wants them to, investment income is earned while the taxpayer’s underlying capital is maintained but, of course, that result is never guaranteed.
On the death of a RRIF annuitant, any funds remaining in the RRIF can pass to the annuitant’s spouse on a tax-free basis. Where there is no spouse, the remaining funds in the RRIF will be income to the RRIF annuitant in the year of death, and any balance after tax is paid will become part of his or her estate, available for distribution to beneficiaries.
While the above discussion of RRIFs versus annuities focuses on the benefits and downsides of each, it is not necessary (and in most cases not advisable) to limit the options to an either/or choice. It is possible to achieve, to a degree, the seemingly irreconcilable goals of lifetime income security and the potential for capital (and estate) growth. Combining the two alternatives — annuity and RRIF — either now or in the future, can go a long way toward satisfying both objectives.
For everyone, in retirement or not, all spending is a combination of non-discretionary and discretionary items. The first category is made up mostly of expenditures for income tax, housing (whether rent or the cost of maintaining a house), food, insurance costs, and (especially for older Canadians) the cost of out-of-pocket medical expenses. The second category of discretionary expenses includes entertainment, travel, and the cost of any hobbies or interests pursued. A strategy which utilizes a portion of RRSP savings to create a secure lifelong income stream to cover non-discretionary costs can remove the worry of outliving one’s money, while the balance of savings can be invested through a RRIF, for growth and to provide the income for non-discretionary spending.
Such a secure income stream can, of course, be created by purchasing an annuity. As well, although most taxpayers don’t necessarily think of them in that way, the Canada Pension Plan and Old Age Security have many of the attributes of an annuity, with the added benefit that both are indexed to inflation. By age 71, all taxpayers who are eligible for CPP and OAS will have begun receiving those monthly benefits. Consequently, in making the RRIF/annuity decision at that age, taxpayers should include in their calculations the extent to which CPP and OAS benefits will pay for their non-discretionary living costs.
As of June 2018, the maximum OAS benefit for most Canadians (specifically, those who have lived in Canada for 40 years after the age of 18) is about $590 per month. The amount of CPP benefits receivable by the taxpayer will vary, depending on his or her work history, but the maximum current benefit which can be received at age 65 is about $1,050. (Where receipt of either benefit is deferred past the age of 65, those amounts go up.) As a result, a single taxpayer who receives the maximum CPP and OAS benefits at age 65 will have just under $20,000 in annual income (just over $1,600 per month). And, for a married couple, of course, the combined total annual income received from CPP and OAS can approach $40,000 annually, or $3,200 per month. While $20,000 a year isn’t enough to provide a comfortable retirement, for those who go into retirement in good financial shape — meaning, generally, without any debt — it can go a long way toward meeting non-discretionary living costs. In other words, most Canadians who are facing the annuity versus RRIF decision already have a source of income which is effectively guaranteed for their lifetime and which is indexed to inflation. Taxpayers who are considering the purchase of an annuity to create the income stream required to cover non-discretionary expenses should first determine how much of those expenses can already be met by the combination of their (and their spouse’s) CPP and OAS benefits. The amount of any annuity purchase can then be set to cover off any shortfall.
While the options available to a taxpayer at age 71 with respect to the structuring of future retirement income are relatively straightforward, the number of factors to be considered in assessing those factors and making that decision are not. All of that makes for a situation in which consulting with an independent financial adviser on the right mix of choices and investments isn’t just a good idea, it’s a necessary one.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
It’s something of an article of faith among Canadians that, as temperatures rise in the spring, gas prices rise along with them. Whether that’s the case every year or not, this year statistics certainly support that conclusion. In mid-May, Statistics Canada released its monthly Consumer Price Index, which showed that gasoline prices were up by 14.2%. As of the third week of May, the per-litre cost of gas across the country ranged from 125.2 cents per litre (in Manitoba) to 148.5 cents per litre (in British Columbia). On May 23, the average price across Canada was 135.2 cents per litre, an increase of more than 25 cents per litre from last year’s average on that date.
It’s something of an article of faith among Canadians that, as temperatures rise in the spring, gas prices rise along with them. Whether that’s the case every year or not, this year statistics certainly support that conclusion. In mid-May, Statistics Canada released its monthly Consumer Price Index, which showed that gasoline prices were up by 14.2%. As of the third week of May, the per-litre cost of gas across the country ranged from 125.2 cents per litre (in Manitoba) to 148.5 cents per litre (in British Columbia). On May 23, the average price across Canada was 135.2 cents per litre, an increase of more than 25 cents per litre from last year’s average on that date.
While in some cases Canadians can reduce the impact of gas price increases by reducing the amount of driving they do, the practical reality is that, for most of us, driving a car every day can’t be avoided, and gasoline is consequently a non-discretionary expense. That’s especially true for those who must drive to work each day and, increasingly, that drive is becoming a longer and longer one, as individuals and families move further and further from their workplace location in search of affordable housing. Finally, for many Canadians a car is their only transportation option, when they live in places that are not served by public transit, or the available transit isn’t a practical daily option.
Unfortunately, for most taxpayers, there’s no relief provided by our tax system to help alleviate the cost of driving as the cost of driving to work and back home, as well as the cost of driving that isn’t work-related, is considered a personal expense for which no deduction or credit can be claimed, no matter how great the cost. That said, there are some (fairly narrow) circumstances in which employees can claim a deduction for the cost of work-related travel.
Those circumstances exist where an employee is required, as part of his or her terms of employment, to use a personal vehicle for work-related travel. For instance, an employee might, as part of his or her job, be required to see clients at their own premises for the purpose of meetings or other work-related activities and be expected to use his or her own vehicle to get to such meetings. If the employer is prepared to certify on a Form T2200 that the employee was ordinarily required to work away from his employer’s place of business or in different places, that he or she is required to pay his or her own motor vehicle expenses and that no tax-free allowance was provided by the employer for such expenses, the employee can deduct actual expenses incurred for such work-related travel. Those deductible expenses include the following:
- fuel (gasoline, propane, oil);
- maintenance and repairs;
- insurance;
- license and registration fees;
- interest paid on a loan to purchase the vehicle;
- eligible leasing costs for the vehicle; and
- depreciation, in the form of capital cost allowance.
In almost all instances, a taxpayer will use the same vehicle for both personal and work-related driving. Where that’s the case, only the portion of expenses incurred for work-related driving can be deducted and the employee must keep a record of both the total kilometres driven and the kilometres driven for work-related purposes. And, of course, receipts must be kept to document all expenses incurred and claimed.
While no limits (other than the general limit of reasonableness) are placed on the amount of costs which can be deducted in the first four categories listed above, there are limits and restrictions with respect to allowable deductions for interest, eligible leasing costs, and depreciation claims. The rules governing those claims and the tax treatment of employee automobile allowances and available deductions for employment-related automobile use generally are outlined on the Canada Revenue Agency website at www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/229/slry/mtrvhcl-eng.html.
In larger urban centres, and in the nearby cities and suburbs which are served by inter-city transit, many commuters utilize that transit as a way of avoiding both the stress of a drive to work in rush hour traffic and the associated costs. And, for a time, such commuters were able to claim a tax credit to help mitigate the cost of using such transit. Unfortunately, the federal public transit tax credit was eliminated in 2017, such that it could be claimed only for costs incurred for transit use before July 1, 2017. It was not possible to carry the credit over and claim it in a subsequent taxation year, so the last claim anyone could make for the public transit tax credit was on the 2017 annual tax return.
No amount of tax relief is going to make driving, especially for a lengthy daily commute, an inexpensive proposition. But, that said, seeking out and claiming every possible deduction and credit available under our tax rules can at least help to minimize the pain.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.