Category Archives for "Personal Finances"

The Personal Tax Filing Deadline is April 30th – Some Last Minute Reminders

By Randall Orser | Personal Finances , Personal Income Tax

The deadline for filing your personal taxes April 30th is almost here.  Here are some things to remember before you start the filing process.

1.  Most Canadian residents need to file an income tax return for the previous year to pay the correct amount of income tax owed, pay back overpayment of benefits or to claim benefits.

2.  If you file late and owe money the CRA will charge you interest and penalties on the unpaid amount.  So even if you know that you will have to pay, help yourself by at least filing on time.

3.  Before you tackle your income-tax return be sure that you have all the following information on hand.

  • Information from the CRA including your notice of assessment from the previous year.
  • All your tax information slips such as T4’s from employers, as well as your investment information slips and RRSP contribution receipts from your bank.
  • Information on other income such as self-employment income.
  • Receipts for tax deductions such as medical expenses and donations.

4.  Decide how you are going to file your taxes either a paper copy or online using NETFILE, and make sure that you have the correct tax package for your province. The advantage of using NETFILE is that you get immediate confirmation that your return has been received and if you are owed a refund you will get it much faster, sometimes within two weeks of filing.

5.  If your taxes are complicated for example if you run a small business it is often better to use a tax professional to prepare and file your return, however to save yourself some money you should still spend time sorting your receipts and getting everything ready for your accountant.

6.  There are a few different ways to pay any income tax due; by mailing a cheque to the CRA, using online or telephone banking, using the CRA’s My Payment Service or making a payment at your bank.  If you have to pay your taxes by installments you can set up a payment arrangement with the CRA.

7.  Set up a direct deposit with the CRA so that your tax refund and any benefit payments are deposited directly to your bank account.

Need Help With Your Return? Where to Get Answers to Your Income Tax Questions

By Randall Orser | Investments , Personal Finances , Personal Income Tax

The April 30th deadline is rapidly approaching.  If you are in a panic about your tax return and need answers to some questions, here are some places you can go for help.

1.  If your tax return is complicated it is always best to get a tax professional such as Number Crunchers® to complete it for you. We know all the ins and outs of tax returns and we can answer your questions and make sense of the chaos.

2. If you still want to go it alone, get a Canadian Income Tax Package.  This used to be mailed out but can now be downloaded and printed from the CRA Website.  The package includes line by line instructions to help you to fill out your return.

3. Head to the CRA website at http://www.cra-arc.gc.ca/formspubs/tpcs/menu-eng.html to find forms and publications by topic.

4. The CRA has an automated Tax Information Phone Service (TIPS) for personal and general tax information.  To find out more go to http://www.cra-arc.gc.ca/esrvc-srvce/tps/menu-eng.html.  Before calling you need to make sure that you have the following information on hand: your social insurance number, your month and year of birth and the total income that you recorded on line 150 of your 2017 return.

5. Tax information for individuals, businesses, charities and trusts can be found at http://www.cra-arc.gc.ca/ndvdls-fmls/menu-eng.html

6. Phone Inquiries – you can reach a CRA representative by calling 1-800-959-8281 but expect to wait a while to talk to someone, they are extremely busy at this time of year.  They do have extended evening and weekend hours up to April 30th, (9am to 9pm local time during the week and 9am to 5pm Saturdays local time) and they do suggest calling Thursday or Friday when the phones are usually less busy.

7. For help with CRA online services you can go to their E-Service Help Desk at http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/menu-eng.html.

8. If you need help with a very basic return that does not include bankruptcy, deceased individuals, capital gains or losses, employment expenses or business or rental income and expenses there are Volunteer Income Tax Preparation Clinics offered by the CRA.  These are only to help people who meet their basic eligibility requirements such as maximum income levels.  For more information about locations go to http://www.cra-arc.gc.ca/tx/ndvdls/vlntr/menu-eng.html

How Far Back can a CRA Reassessment go?

By Randall Orser | Personal Finances , Personal Income Tax

After you file your taxes you will receive a Notice of Assessment which details the amount of tax that you owe or the refund you will receive.  Sometimes you will be asked to do a preassessment review in a situation where the CRA will ask you for additional information or documentation. The CRA can reassess your taxes after they have sent out your Notice of Assessment.  This usually happens later in the same year.  You should respond to the CRA by the deadline (usually 30 days from the date of the letter) with the information requested. 

A CRA reassessment or audit can be very worrying for most taxpayers and a common question is “How far back can the CRA reassess me?”  There are limits as to how far back the CRA can go to reassess someone’s taxes returns and the usual time limit is three years from the date your return was filed.  However, they can extend the reassessment period if they believe that you may have carelessly or willfully misrepresented your tax situation, or if they suspect fraud. In order to reassess the CRA must prove that fraud, neglect or willful fault occurred. This does not mean that you made a simple mistake on your return but that you made a serious misrepresentation such as in reporting your income.  

It is important that you keep all your tax information and documents for six years in case they are requested by the CRA.  Should you be subject to a reassessment or audit it would be difficult to prove your case without supporting receipts.  The CRA must have proof of your financial and tax situation and if you are unable to provide the documentation then you could end up dealing with a lengthy audit.  

If you are being audited there is nothing that you can do to stop it, and the worst thing that you can do is to ignore communications from the CRA.  The best thing you can do is to get organized with your paperwork and receipts and to be as cooperative as possible.  Also, it is advisable to get professional help as soon as you get your audit letter so that you can prepare a better case. 

An audit can be a “desk audit” which is common if you have business income and declared losses, or, if you have real estate transactions reported on your return.  In a “field audit”, the taxman will show up at your home or place of work. 

For more information on CRA Tax Audits visit: 

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4188.html

Who are the Canadians Most Likely to be Audited by the CRA?

By Randall Orser | Personal Finances , Personal Income Tax

Every taxpayer’s nightmare is to get a notice from the CRA that you are going to be audited.  Around 30,000 such letters were sent out in 2018 (according to tax lawyer David Rotfleisch) so we are right to be afraid!  

So, who are the people most likely to be audited?

  • Those who are self-employed.  Tax returns for self-employed people are usually more complicated as there is no paperwork like a T4 for the CRA to confirm the income that you have declared.
  • You work in construction, retail or the restaurant industry.  These industries have been singled out by the CRA as they are often heavily cash based and there are high rates of tax evasion.
  • You keep reporting rental and/or business losses. The CRA will wonder if you are really losing all this money or if you are stashing it away in a tax haven.
  • You report drastic swings in income especially if you are self-employed.
  • Your income does not match your postal code. If you are making less than your neighbours, the CRA might begin to wonder how you can afford to live where you do.
  • You have offshore assets.  Owning assets offshore can lead to unwanted scrutiny.
  • You receive wire transfers from abroad of $10,000 or more.  Since 2015 all financial institutions must report to the CRA all international funds transfers of $10,000 or more. 

It is important to really understand the letter that you get from the CRA if it wants to review your taxes.  A tax review notice is not an audit letter.  

Tax reviews are quite common, and it means that the taxman wants to check the records and receipts that you used to report income and to claim expenses.  Reassessments can be done randomly or because the numbers received from other sources does not match with your numbers.  Usually you show them the paperwork and the matter will be over.  However, if you do not respond to the CRA or they do not like your responses to their questions then your review may turn into a full-on audit.

From an article by Erica Alini on www.globalnews.ca

 

Can you Amend Your Tax Return After Filing?

By Randall Orser | Personal Finances , Personal Income Tax

There are many things in life that you cannot change, but luckily your tax return is not one of them.   If you have made an error, it is quite easy for you to correct it, but the most important thing is to not file another tax return for the same year.

You should wait for your Notice of Assessment before requesting any changes to be made and you can only request changes as far back as 10 years.   

There are two ways to request amendments to your return: it can either be online or by mail, and both have their own rules and limitations.

Online:

This is usually the easier option all you have to do is to log into your CRA My Account and click “change my return”, however you cannot make changes to any of the following:

  • A bankruptcy return
  • A tax return where there are 9 reassessments for a particular tax year
  • A tax return that has not been assessed
  • A tax return prior to the year of bankruptcy
  • Carry back amounts such as capital or non-capital losses
  • An elected split pension amount
  • A return of an international or non-resident person (including residents of Canada, newcomers to Canada and individuals who left Canada during the year).
  • A return where you have income from a business which is permanently established outside your province or territory of residence

The processing time for an online request is usually two weeks unless it is sent in spring or early summer, or if it needs further review, or the CRA has to contact you for more information or documentation.

By Mail:

You will have to complete a T1-ADJ T1 Adjustment Request. You can download a copy of it from the CRA website.  Alternatively, you can submit a signed letter with the following details:

  • The years of the returns to be changed
  • Your social insurance number
  • Your full address
  • A telephone number where you can be reached during the day

The processing time for a mailed in request is usually eight weeks unless the same conditions apply as with an online request. 

Once your review is complete you will receive either a Notice of Reassessment from the CRA or a letter explaining why the changes that you asked for were not applied. 

So, you don’t need to worry if you have made a mistake on your tax return, it is relatively easy to make any changes.

 

 

Why you Should Always File Your Income tax Return on Time

By Randall Orser | Personal Finances , Personal Income Tax

Every tax season, we see a number of new clients who have several years of returns to file. Often, they have not filed their returns because they think they owe money but if this is the case avoiding your taxes will do you more harm than good.

The CRA views overdue items in two distinct ways – a) compliance and b) collections. The first option requires you to file your return on time. The second results in two different charges – late filing penalties and interest.  If you are late filing and owe money you could be liable for both.

  • 5% of the balance owing as late filing penalty

  • 1% of the balance owing as additional penalty for every full month you’re late (up to a maximum of 12 months)
  • Interest charged on the above penalty
  • Additional compound daily interest on the balance owing based on prescribed rates by the CRA.

If you avoid filing your taxes on time it could actually make the charges increase rather than minimize them. For example, if you file 12 months late, you’ll be charged 17% on the balance owing, plus interest on penalties dating back to the original deadline. 

If this is your second offence and you have been late filing in either 2013, 2014, 2015 or 2016, the current penalty may go up to 10% of your 2018 balance owing, as well as an additional 2% for every month you’re late up to 20 months maximum.  Payments that you do make will be applied to the previous years that you owe first.  If you have a balance owing for 2018, your payment has to be received by the Canada Revenue Agency on or before the tax deadline in Canada on April 30, 2019. 

If you do miss the April 30 Tax Deadline but don’t owe any taxes, you won’t have any late filing penalty or interest to pay, but that still means that the CRA will hold your refund until you actually file.

So even though you may dread owing the CRA money, do not avoid filing on time so that you can save yourself from having to pay more.

Do you Know the Difference Between Tax Havens and Tax Shelters?

By Randall Orser | Investments , Personal Finances , Personal Income Tax

Though both tax havens and tax shelters are used by wealthy people to reduce their income tax payments there is a big difference between the two.

Tax Haven is a locale anywhere in the world that has lax tax laws.  This country will often charge very low or very reduced tax rates.  Many multinational corporations take advantage of the benefits of tax havens creating subsidiaries to shield their incomes from taxation. Tax havens can also provide offshore banking services to non-resident companies and individuals.  Foreigners can easily form an international business corporation or offshore corporation which will often be given tax exemption for a set period of time.  

Because of the strict privacy laws enforced by most tax havens owners of these “shell” companies often remain unknown.  Although tax havens are technically legal the CRA frowns upon them and the public has a poor view of companies carrying out offshore banking activity.  Switzerland is the most well-known tax haven, but others include the British Virgin Islands and Luxembourg.

Tax Shelters are commonly used by all taxpayers as a method of legally reducing their tax burden through the use of specific investment types or strategies.  These are often temporary and require a future income tax payment, but they are useful for those wanting to reduce their tax payments during the years when their earnings are highest.  The two most popular tax shelters in Canada are Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSPs). 

The TFSA was started by the government in 2009 and it allows anyone over 18 to earn investment income tax free up to a set maximum per year.  In 2009 you could contribute up to $5000 which increased to $5,500 per year in 2013 with and $10,000 for one year in 2015.   This allowance is cumulative so that if you had not contributed by 2017 you could invest up to $52,000 and in 2019 your total investment allowance Including an increase to $6000 per year will be $63,500. You can withdraw from your account anytime during the year, but you cannot replace it until the following year unless you have sufficient contribution room for it to be considered an additional contribution.

RRSPs - You can contribute to your RRSP each year up to a limit based upon your income and deduct it from your taxable income.  You will only pay income tax on your investment and the interest it earns when you make withdrawals from your RRSP.  If you have a properly structured investment portfolio you will be able to take advantage of the low tax rate on capital gains and dividend income outside of your RRSP while it shelters your higher taxed investment income.

RRIFs - A Registered Retirement Income Fund is a tax-deferred retirement plan for your RRSP. RRIFs are used by those who do not plan to withdraw their RRSP as a lump sum when they retire but take smaller withdrawals.  RRIFs offer more flexibility and tax savings than lump sum withdrawals, but you must withdraw a minimum each year and report it for tax purposes.  You may withdraw more if you wish at any time.  The CRA will set your minimum withdrawal for each year according to a schedule which will start at 5.28% at age 71 in 2019.

For more information about TSFA’s, RRSP’s or RRIF’s consult your investment advisor or the CRA website 

 

Best Business Opportunities for Retirees

By Randall Orser | Personal Finances , Personal Income Tax , Small Business

Are you getting ready to retire but don’t see yourself filling your days with tv reruns, golf or playing cards?  Already retired but you could use some extra income? These are good reasons to start your own business when you retire.  Here some businesses to consider that can offer you part-time work and can be operated from home.

  1.  Chauffeur – If you are still fit and have an outgoing personality then working as a chauffeur helping other seniors with transportation to medical appointments, shopping and more can be a good option.  You will need to check Provincial licensing requirements, upgrade your driver’s license and maybe do CPR training and have a criminal record check done.
  2. Travel Tour Guide – If you love to travel, being a tour guide and getting paid to travel can be a dream job for you.  All your travel expenses will be paid for and in addition to wages you will also get tips. Contact the International Tour Management Institute for more information.
  3. Hauling – If you have a truck or a van hauling can be a good business for you.  There is always a demand for people to take away garden waste, trash and discarded household items.
  4. Painting and Interior Decorating – If you have a good eye for colour and are creative, why not share your skills?
  5. Translation Services – Good at languages? then being a translator could be ideal for you. You will need excellent writing skills, and knowledge of a particular industry can allow you to specialize.
  6. Arts and Crafts – If you are skilled at making pots, painting or creating wooden items you can sell your creations at local craft fairs or create an on-line store to sell your products.
  7. Tutoring – If you have teaching skills then becoming a tutor could be ideal for you. In addition to in-home tutoring, on-line tutoring is now becoming very popular.  One area particularly in demand is teaching second languages, or teaching English as a second language at home or even as a teacher in another country.
  8. Pet Services – There is always a demand for reliable people for dog walking and pet sitting.  Many people prefer to keep their pets at home rather than put them in a kennel and are willing to pay for a pet sitter who will also keep an eye on their home while they are away.
  9. Security services – Trained security personnel are always in high demand especially those who are retired police officers or members of the armed forces. 

These ideas are not likely to make you lots of money but they are inexpensive to start and will keep you active and give you purpose in your retirement.

From an article by Susan Ward

How Long does it Take to Get Your Tax Refund?

By Randall Orser | Personal Finances , Personal Income Tax

The time it takes to get your tax refund depends on how and when you filed your income tax return.  

According to the CRA when you file your tax return on or before your filing due date, they will issue you with a Notice of Assessment and any refund that they owe you as follows: 

  • Within two weeks of receiving your return if you file it electronically
  • Within eight weeks of receiving your paper return
  • Within sixteen weeks of receiving your non-resident paper filed return

Tax returns that are filed electronically are processed faster than paper returns, often within as few as eight business days. The CRA also says that if you use direct deposit into your bank account then you could get your refund faster.  However, it is realistic to expect your tax refund after the end of February because even if you filed in January the CRA does not begin processing income tax returns until mid-February.

How to Check the Status of your Tax Refund or Return 

There are several ways to check on your personal tax return.

  • You can use My Account for individual returns including partnerships and sole proprietorships.  You will be able to see the status of your return, set up direct debit information, make payments, get information on your RRSP and TFSA as well as submit documents and update your contact information.
  • From mobile devices you can use the MyCRA app for individual tax returns that allows you to view the status of your return and your notice of assessment, your TSFA/RRSP contribution limits, manage direct deposits and update your contact information.
  • You can call the CRA Telerefund line at 1-800-959-1956 or the Tax Information Phone Service (TIPS) line at 1-800-267-6999.  To be able to access your tax information you need to be able to provide the following to identify yourself.
    • Social insurance number
    • Full Name
    • Date of Birth
    • Details from your account or a previous assessed return

The earliest you can expect information to be available via Telerefund or TIPS is mid-March if you filed before mid-February.  Otherwise you need to wait four weeks after filing between mid- February and mid-April and at least six weeks after mid-April.

Your Return/Refund May be Delayed:

  • If your contact information has changed and you do not update the CRA.  If they need to verify information, it will take longer to process your return.
  • If there are errors on your return. Misreporting income or expenses can delay your return and put you at risk of an audit.
  • You have large changes in your deduction claims year over year
  • Your tax history, if you have previously been reassessed or penalized
  • Your return has been randomly selected for review 

You May not get the Refund you are Expecting if the CRA keeps some of it: 

  • To cover a balance owing from previous years.
  • You have a garnishment order under the Family Orders and Agreements Enforcement Assistance Act
  • You owe other federal, provincial or territorial government debts such as student loans, employment insurance and social assistance benefit overpayments, immigration loans and training allowance repayments.
  • You have an outstanding GST/HST payments from a sole proprietorship or partnership
  • Your refund is $2 or less.

5 Early Steps to Get Ready for Tax Time

By Randall Orser | Happy New Year , Personal Finances , Personal Income Tax , Small Business

HAPPY NEW YEAR

While you are nursing that hangover or catching up on sleep might not be the best time to remind you that the last year is over and that you need to start thinking about filing your taxes! but here it is!

You are probably not too excited about filing your taxes but look at this as a great opportunity to review your finances and getting organized early will save you the pain and hassle of doing everything at the last minute.  

Here are some simple steps to help you to reduce your stress and get yourself on track for filing your taxes by the end of April or even a little earlier!

  1. Make an Account List:  Start by making a list of all your financial accounts. If you have a small business, you need to create both a personal and a business account list.  Include bank accounts, credit cards, investments, retirement, and every other financial account you have. Unused but still open accounts should be included on your list.  If these accounts are old and inactive now is a good time to close them. Make sure all of your accounts are accounted for in your bookkeeping software, so you don’t miss any transactions. If you forget to write off an eligible business expense, that is money you are giving money to the CRA that should be in your pocket!
  2. Get your Bookkeeping up to date:  If you have been ignoring your bookkeeping for a while, it’s time to get caught up! You’ll need copies of your annual income statement, which is the core document used to prepare your business taxes.  You might also need your balance sheet and depending on the registration of the business you run, you may also need to list assets and liabilities on your taxes, which comes from the balance sheet. Remember that errors in your bookkeeping can lead to errors on your taxes. You don’t want to pay too much and lose out on profits you should keep. Similarly, you don’t want to underreport and find yourself on thewrong side of an audit, fines, and penalties. Making sure your books are done, and done accurately, is key to tax season success.  If bookkeeping is not your thing, it might be a good idea to enlist the help of a professional bookkeeper who will keep your records in order for you so that everything is ready for tax time.
  3. Put Together a Tax Form Checklist:  Make a list of all the sources that you expect to get tax forms from.  These can be from bank accounts, investments, educational institutions and the government. You can put your checklist in an Excel spreadsheet or Google Sheets for easier access using your phone. Whichever method you use, make sure you have all the forms you need before you file your taxes, or you will have to file an update to your return if something is missed and this can be a big hassle.
  4. Create a Tax Form Folder (digital and physical):  When the forms arrive, it is easy to set them aside to open later then misplace them.  Train yourself to open everything right away and file it in a folder either physically or digitally.  You can use Dropbox to store digital copies and add in scanned paper copies so that you have everything together.
  5. Choose your Filing Method:  Decide whether you want to do your taxes yourself online, or you want to hire a bookkeeper or accountant to do them for you. Think about how knowledgeable or comfortable you are about doing your taxes.  If the answer if not very, you should use a professional to avoid making mistakes or missing deductions.

Taxes don't Have to be Terrible! 

You may dread tax season, but taxes don’t have to be a horrible part of your finances and your business. You do them every year, so find ways to make the process easier and faster.  Preparation well in advance can be the key to a successful filing and just think how satisfying it is when it is all done for another year! 

From an article by Eric Rosenberg