What’s New For 2018: CRA

The Filing deadline for your 2017 Personal Tax Return (T1) is April 30th, 2018.

While most Canadian income tax and benefit returns for 2017 are due on April 30, 2018, if you or your spouse or common-law partner is self-employed, you have until June 15, 2018.

You can file online as early as February 26, 2018.

Filing early ensures your benefit and credit payments are not delayed or stopped.

If you have a spouse or common-law partner, they should also file a return early.

The benefit and credit payments include (Link to CRA website included):

This year, the Canada Revenue Agency is making it easier for paper tax filers to do their taxes by mailing them their forms and guides directly.

Want your tax refund faster?

You can register for  the CRA’s direct deposit, and receive your income tax refunds and benefits quickly and securely, however, if you provide the CRA with your bank information AND fall into tax troubles, the CRA can, and will, use that bank account to freeze or seize the money in it to pay off the debt.

Additionally, there are some new changes which can impact your tax return, some of which include;

Medical Expense Tax Credit for Reproductive Expenses

The medical expense tax credit provides relief for individuals who have paid significant medical expenses for themselves or certain dependants.  This credit is non-refundable credit and is intended to reduce taxes owing.

Effective for 2017, amounts paid for reproductive technologies for the purpose of conceiving a child can be claimed as a medical expense tax credit, even if the individual does not have a medical condition preventing them from conceiving a child. Previously, the medical expense tax credit was available if the use of the reproductive technologies directly related to a medical infertility condition.

A request can be made to the Canada Revenue Agency to claim reproductive technologies expenses unclaimed in the last 10 calendar years.

Certification of Disability Tax Credit Certificate

The Disability Tax Credit program provides relief for individuals who have a severe and prolonged impairment in physical and mental functions by providing a non-refundable tax credit that can reduce taxes owing.

As of March 2017, nurse practitioners and medical doctors are allowed to certify Form T2201, Disability Tax Credit Certificate.

Federal Public Transit Credit

After June 30, 2017, amounts paid for eligible transit passes no longer qualify for a non-refundable tax credit, however, you can claim a non-refundable tax credit in your 2017 income tax and benefit return for eligible transit passes paid from January 1, 2017 to June 30, 2017.

As a result of the changes made to the Federal Public Transit Credit, the Ontario government introduced a new refundable tax credit effective July 1, 2017, and to be eligible to claim this credit, you must meet the following criteria:

  • Be 65 years of age at the beginning of the year;
  • Reside in Ontario at the end of the year; and
  • Paid for eligible transit service from July 1, 2017 to December 31, 2017 (receipts should be retained).

The maximum refundable credit that can be claimed for 2017 is $225. For subsequent years, the maximum refundable credit is $450. Visit the Canada.ca site here, for additional information.

Tuition, Education and Textbook Credit

Effective January 1, 2017, the Federal, education and textbook credits were eliminated, however, any unused credits from previous years can be carried-forward.

As a result of the 2016 Ontario Budget, changes were made to the Ontario tuition and education non-refundable tax credits. Credit is available for eligible tuition fees paid for studies before September 5, 2017. In addition, credit for the education amount is available for months of study before September 2017. Unused credits from previous years can be carried forward.

FILE

Of most importance is that you must file that tax return on time to the CRA.  If you have a habit of being late, the CRA will increase the amount of the Late Filing Penalty (LFP) year-over-year, and they multiply that percentage against the amount of taxes owing.  There is not limit to the amount of penalties which can be charged, and the most I have seen is 93%.  That is a LOT, and it’s in addition to the taxes owing!

If you need assistance with anything discussed above, or if you require more details, or have CRA debts, you can reach us at info@intaxicating.ca for your coast-to-coast CRA Collections expertise.

Visit our website, http://www.intaxicating.ca.

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Key Deductions and Tax Credits for Persons Older Than 65-Years of Age

With the 2014 Tax Filing season rapidly approaching, I think it is important to keep track of key deductions and credits that Canadians older than 65-years-old should be thinking about when they file their Canadian tax returns this year and all years going forward.

The Canada Revenue Agency set up their own webpage dedicated just to this very topic: http://www.cra-arc.gc.ca/seniors/ which I recommend bookmarking, but I have summarized their points below for ease of access.

Common credits which may be claimed by seniors

  • Age amount
  • Pension income amount
  • Disability amount (for themselves)
  • Amounts transferred from a spouse or common-law partner
  • Medical expenses

Age amount

You can claim this amount if you were 65 years of age or older on December 31, 2013, and your net income (line 236 of your return) is less than $80,256. If your net income was:

It is important to remember to enter your date of birth in the “Information about you” area on page 1 of your tax return.

Remember to claim the corresponding provincial or territorial non-refundable tax credit to which you are entitled, on line 5808 of your provincial or territorial Form 428.

Tip: You may be able to transfer all or part of your age amount to your spouse or common-law partner or to claim all or part of his or her age amount. See line 326 – Amounts transferred from your spouse or common-law partner, for more information.

Pension income amount

You may be able to claim up to $2,000 if you reported eligible pension, superannuation, or annuity payments on line 115, line 116, and/or line 129 of your return.

Eligible pension income does not include the following income amounts:

  • any foreign source pension income that is tax-free in Canada because of a tax treaty that entitles you to claim a deduction at line 256;
  • income from a United States individual retirement account (IRA); or
  • amounts from a RRIF included on line 115 and transferred to an RRSP, another RRIF or an annuity.

Canada Pension Plan (CPP) income does not count as eligible income here.

Pension income splitting

If you qualify to claim the pension income amount, discussed above, then you are often able to report up to one-half of that pension income on your spouse or common law partner’s tax return, which will save you tax as a couple if your spouse is in a lower tax bracket.

Amounts transferred from your spouse or common-law partner

If your spouse or common-law partner does not need to claim some or all of certain non-refundable tax credits to reduce his or her federal tax to zero, you may be able to transfer those unused amounts to your return.

Split CPP income

If you and your spouse are at least 60 years of age, and one or both of you receive CPP benefits, each spouse may be able to apply to split their benefits with the other (i.e., report half on each other’s tax returns), which can save tax if one of you is in a lower tax bracket.

CPP contributions

If you are 60 to 70 years of age and employed or self-employed, you have to make CPP or Quebec Pension Plan (QPP) contributions, even if you’re receiving CPP or QPP benefits.

You can claim a tax credit for these contributions. However, if you’re at least 65 but under 70 years of age, you can elect to stop making contributions (use Form CPT30, the applicable part of Schedule 8 to your tax return, or Form RC381, whichever applies), but don’t just stop making the contributions without that election!

Medical expenses (for self, spouse or common-law partner, and your dependent children born in 1996 or later)

On line 330 of your personal tax return you can claim the total eligible medical expenses you or your spouse or common-law partner paid for:

  • yourself;
  • your spouse or common-law partner; and
  • your or your spouse’s or common-law partner’s children born in 1996 or later.

Medical expenses for other dependents must be claimed on line 331.

Tip:

You may be eligible to claim a variety of medical expenses, perhaps even previously unclaimed amounts, as long as the expenses were incurred in any 12-month period that ended in 2013. The list of eligible expenses has continued to expand slowly over the past few years.

It is wise tax-strategy to claim medical expenses on the lower-income spouse’s return to maximize your tax relief.

Disability amount (for self)

You can claim the disability amount of $7,697 on line 316 once you are eligible for the disability tax credit (DTC).

Tip:

If you were eligible for the DTC for previous years but did not claim the DTC when you filed your return, you can request adjustments for up to 10 years under the CRA’s Taxpayer Relief Provisions. To claim the disability amount for prior years, you will need to file Form T1-ADJ, T1 Adjustment Request, for each year you need to amend.

If you or anyone else paid for attendant care, or for care in an establishment, special rules may apply. For more information, see Attendant care or care in an establishment.

If you have a severe and prolonged physical or mental impairment, you may be eligible to claim $7,697 if a qualified practitioner certifies, on Form T2201 – Disability Tax Credit Certificate, that you meet certain conditions.

Public transit amount

You can claim the cost of monthly (or longer duration) public transit passes for travel on public transit within Canada for 2014. The cost of electronic payment cards can also be claimed when conditions are met.

Work force credits

If you’re still working, even part time, you may be eligible to claim the Canada employment amount (maximum $1,117) and the Working income tax benefit (see Schedule 6 of your return).

Registered plans

You’re entitled to make contributions to a registered retirement savings plan (RRSP) until the end of the year in which you turn 71-years-old.  Don’t forget to claim a deduction if you have made a contribution for 2014.

And if you’re eligible for the disability tax credit it is possible to make contributions to a registered disability savings plan (RDSP) to shelter income on those contributions from tax.

OAS clawbacks

Some seniors must pay back all or a portion of their Old Age Security (OAS) benefits if their income exceeds $70,954 (for 2013). If you’re in this boat, examine the types of income you’re earning to see if you can change the type of income earned to reduce the impact of these clawbacks going forward.

The Canada Revenue Agency (CRA) also administers the Ontario Trillium Benefit (OTB) which is the combined payment of the Ontario energy and property tax credit, the Northern Ontario energy credit, and the Ontario sales tax credit. The annual OTB entitlement is usually divided by 12 and the payments issued monthly. Your 2015 OTB payments, which are based on your 2014 income tax and benefit return, will be issued on the 10th of each month, starting on in July 2015.

Exceptions:

Starting with your 2014 income tax and benefit return, you can elect to receive your 2015 OTB in one payment at the end of the benefit year. If your annual 2015 OTB entitlement is over $360 and you make this election, you will get it in one payment in June 2016 instead of receiving monthly payments from July 2015 to June 2016.

If your 2014 OTB annual entitlement is $360 or less, it will be issued in one lump-sum payment in the first payment month (usually July).

 

These items often changes and some situations may be applicable to you, while other’s may not.  Please speak to your accountant or tax professional to be sure they apply.  If you claim a credit you are not entitled to, the CRA will disallow the credit and charge you interest from the date the returns were due.

 

#inTAXicating

IRS and healthcare?!?

The already busy (read: crabby) IRS and it’s agents already try to catch tax cheats and under the proposed health care legislation, they would get another assignment: checking to see whether Americans have health insurance. The legislation would require most Americans to have health insurance and to prove it on their federal tax returns.  Those who don’t would pay a penalty to the IRS.

Good thing that IRS agents get to carry guns, unlike their Canadian counterparts…

That’s one of several key duties the IRS would assume under the bills that have been approved by the House of Representatives and Senate and will be merged by negotiators from both chambers.

The IRS also would distribute as much as $140 billion a year in new government subsidies to help small employers and as many as 19 million lower-income people buy coverage.

In addition, the IRS would collect hundreds of billions of dollars in new fees on employers, drug companies and device makers, according to the non-partisan Congressional Budget Office.

Some critics of the health bill question whether the IRS, which has struggled in recent years with budget problems, staffing shortages and outdated computer systems, will be up to the job of enforcing the mandate and efficiently handling the subsidies.

The CBO estimated the IRS would need $5 billion to $10 billion in the first decade to cover the costs of its expanded role. The IRS’ annual budget is currently $11.5 billion.

Neither the House nor Senate bill includes funding for the IRS, but money could be added by House and Senate negotiators.

The IRS already has trouble meeting its primary duty: collecting taxes. By the IRS’s own estimates, it failed to collect about $290 billion in taxes in 2005, the latest year for which data are available.

In one of the biggest examples of using the tax code to achieve a social goal, Congress shifted much of its effort to help the poor in the 1990s from direct spending to the Earned Income Tax Credit, an IRS-run program that pays rebates to low-income working people to offset taxes.

In 2005, more than 22 million people claimed the credit, resulting in more than $40 billion in payments, a Treasury Department inspector general found last year. The audit found $11.4 billion in improper payments in 2005 — about 28 cents of every dollar paid out.

Under the health care legislation, the IRS would determine who qualifies for the insurance subsidies.  Those subsidies would apply to people with incomes up to four times the federal poverty level, which is $43,320 for an individual and $88,200 for a family of four.  The government would pay insurance companies to help individuals buy policies on the new exchanges.  The exchanges, a central feature in both bills, would be a sort of marketplace where small businesses and individuals who don’t get employer-sponsored coverage could shop for health plans.

To meet the mandate, Americans would have to provide proof of insurance coverage with their annual tax returns. The mandate would begin in 2013 under the House bill; 2014 in the Senate bill.

The penalty in the Senate bill for not having coverage would start in 2014 at $95 or 0.5% of an individual’s income, whichever is greater. It would rise to $750 or 2% of annual income in 2016, up to the cost of the cheapest health plans. The House bill penalty would be up to 2.5% of an individual’s income up to the cost of the average health plan.

In 2007, Massachusetts became the first state to enact a health insurance mandate and lowered the percentage of uninsured residents from 7% to 4%.  State residents there were required to report their health insurance status on a special form they attach to state income tax returns. Insurers provide statements to policyholders confirming coverage and report that data to the state Department of Revenue.

The state tax agency did not get extra staff or money for enforcement and has not had serious difficulties gathering the information, spokesman Robert Bliss said.  In 2008, more than 96% of tax filers provided proof of coverage. Only 1.3% of filers, or about 45,000 residents, were assessed a no-coverage penalty of up to $1,068.  The “vast majority” of Massachusetts residents who pay the penalty are self-reported, Bliss said.

Bliss said the fact that the department had 18 months to get ready for the state’s insurance mandate was “enormously important” in making sure it was ready to handle the assignment. That bodes well for the IRS, which would have three to four years to get ready under the bills.

Under the current versions of the health care bills, the IRS would oversee:

  • Subsidies for low-income people purchasing health insurance through newly created state exchanges.
  • Small-business tax credits to provide insurance to employees,
  • Enforcement of mandate that all U.S. citizens and legal residents have insurance.
  • Penalties on employers for not providing affordable coverage if any of their employees get subsidies under the new insurance exchanges.
  • A tax on insurers that provide high-cost “Cadillac” insurance benefits.
  • Penalties for improper distributions from Health Savings Accounts, which would increase under the legislation.
  • Contributions to Flexible Savings Accounts, which would be limited.
  • New requirements for non-profit hospitals to prove their charitable missions, such as doing a “community needs assessment” once every three years.
  • Taxes on pharmaceutical companies, medical device companies and health insurance providers.