Category Archives for "Personal Income Tax"

What To Do If You Forgot to File Taxes?

By Randall Orser | Personal Income Tax

Savings And Finance Concept TNEvery year in Canada we must file a personal income tax return by April 30th (June 15th for those who are self-employed). As with anything in our busy, hectic lives, we do forget; however, what if it’s your tax filing that you forgot? That can have serious consequences depending on what you owe, and for what benefit programs you are qualified.

The first thing is Don’t Panic! Okay you will, but calm down. If you’ve realized you haven’t filed your taxes, and it’s not too late in the year, you’ll be okay. Yes, if you owe money, you’ll have a penalty and interest, however, catch it soon enough and it won’t be that much. Of course, if you are getting a refund, then you won’t be charged any penalty. And, getting benefit payments will definitely be delayed, as you haven’t filed, though you will get a catch-up payment.

Canada Revenue Agency (CRA) has now allowed the electronic filing of tax returns until January of the following year, so for the 2013 filing year you can electronically file until January 16th. Eventually, I believe, we’ll be able to file electronically for any tax year any time.

Many people end up not filing for fear that they will owe, or owe way more than they can pay at the moment. It’s much better to file and owe than not file and owe, as CRA tends to get a bit anxious when they realize you owe, but haven’t filed and paid yet. Of course, these same people think they’re going to owe tons of money, and, in the end, don’t owe near as much as they thought, or, hilariously, get a refund. I love the expression on peoples’ faces when I tell them they owe $X, and they were thinking $XXX.

What are the penalties for filing late? If you owe tax for 2013 and do not file your return for 2013 on time, CRA will charge you a late-filing penalty. The penalty is 5% of your 2013 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

For example, you owe $3,200 and don’t file until November 15th 2014. In this case you owe $583.91 in penalties plus 5% interest compounded daily (approximately $194). That’s a total balance owing of $3,977.91. Your penalties/interest are 24.3% of the original balance owing.

If you failed to report an amount on your return for 2013, and you also failed to report an amount on your return for 2010, 2011, or 2012, you may have to pay a federal and provincial/territorial repeated failure to report income penalty. The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your return for 2013. Your late-filing penalty for 2013 may be 10% of your 2013 balance owing, plus 2% of your 2013 balance owing for each full month your return is late, to a maximum of 20 months. That can get quite steep depending on how much you owe.

Using our example above of owing $3,200, and this is another year of filing late your penalty would be $764.09 for a total of $3,964.09, and interest would be $203 for a total of $4,167.09 (30.2% of the original amount owing.

From our examples above it is much better to pay upon filing (or pay by installments when you believe you have a big balance owing). If you know you’re going to owe, but don’t have the funds at filing, file anyway and work out some kind of payment arrangement with CRA.

Do you have multiple years to file? Can’t find your slips? If your slips are normally filed with CRA (such as T4s, T5s, etc.) then you can request copies and use those to file your returns. You will have to paper file for 2012 and prior. If you believe you will owe for these prior years, you may also want to look into the Voluntary Disclosures Program.

With the Voluntary Disclosures Program, you may file a disclosure to correct inaccurate or incomplete information, or to provide information you may have omitted in your previous dealings with the CRA. More specifically, this includes information you have previously reported that was not complete, information you have reported incorrectly, or information you did not provide previously to the CRA.

Canada has a high compliance rate (94.5%) of people who file their taxes on time. If you find you’re not one of those, you may need to look into why you’re always late filing. Are you using a tax preparer now? Maybe you should. I hound my clients to get me their stuff, and most appreciate that. Of course, once you’re caught up always ensure you file on time after that so you avoid higher penalties.

Why are my support payments taxable?

By Randall Orser | Personal Income Tax

Your Money Check Payment in Mailbox TNThere are two kinds of support payments: child and spousal. Child support payments are those payments that you and your spouse have agreed on, or are court ordered, to help cover the cost of raising the children by the one spouse. Spousal support payments are those payments that you and your spouse agreed on, or are court ordered, that cover that spouse’s own maintenance (living expenses). Generally, the agreement or order must stipulate whether the payment is a child or spousal support payment.

Your payment is considered a support payment if the following five conditions are met.

  1. The payment must be made under the terms of a court order or written agreement.
  2. If the recipient is the payer’s current or former spouse or common-law partner, the payer must be living separate and apart from the recipient at the time the payment was made because of a breakdown in the relationship. Otherwise, the payer must be the legal parent of a child of the recipient.
  3. The payment is made for the maintenance of the recipient, child of the recipient, or both, and the recipient has discretion as to the use of the amount.
  4. The allowance must be payable on a periodic basis. The timing of the payments must be set out in the court order or written agreement.
  5. The payments must be made directly to the recipient.

For tax purposes, child support payments are not taxable income to the recipient. However, they must be laid out in the court order or agreement as child support payments. If your order or agreement predates May 1 1997, then the recipient would have to include the payments as income, and the payer gets a deduction.

Spousal support payments are taxable income to the recipient, and a deduction for the payer. As with anything tax wise, there are exceptions. Child support has priority. If your court order or written agreement specifies child support payments and support payments for the recipient, priority is given to the child support.

This means that all payments made are first considered to have been made toward child support. Any amount paid over and above the child support amount is considered to be support payments for the recipient. All child support payable to a recipient must be fully paid before any amounts paid as support for the recipient can be claimed as a deduction. Any arrears in the amount of child support is carried forward and added to the next year’s support payable. The priority of child support does not apply when the child support and spouse or common-law partner support are payable under different court orders or written agreements and the recipients are different people.

Payments made after the death of the recipient are not deductible by the payer. Whether the payments are made to the estate or the children, these payments would not meet the conditions of a support payment. Payments made by the estate of a payer to the recipient are neither deductible nor taxable. The amounts do not meet the conditions of a support payment because an estate cannot have a spouse or common-law partner.

If you have to claim support payments you received, then it’s because they are for spousal support. Check your agreement or court order to ensure you are doing this correctly, and keep track of your child support payments as you may not have to claim the support payments if the child support is not paid in full.

What are child and family benefits?

By Randall Orser | Personal Income Tax

Piggy Bank Family Shows Planning And Protection TNThe Government of Canada has through our taxation system derived benefits for those taxpayers with spouses and children. These benefits are: Canada Child Tax Benefit (CCTB), Universal Child Care Benefit (UCCB), GST/HST Credit, Working Income Tax Benefit (WITB), Children’s Special Allowances (CSAs) [these are payments given to a government agency that protects and cares for children and we won’t cover that here], and various Provincial and Territorial programs.

Information you provide on your income tax and benefit return is used to calculate your child and family benefits payments. Make sure you file your income tax and benefit return on time every year, even if you have not received income in the year. If you have a spouse or common-law partner, they also have to file an income tax and benefit return each year.

Canada child tax benefit (CCTB)

The Canada child tax benefit is a tax-free monthly payment made to eligible families to help them with the cost of raising children under age 18. The CCTB may include the National Child Benefit Supplement and the Child Disability Benefit.

The national child benefit is a joint initiative of the federal, provincial, and territorial governments that will:

  • Help prevent and reduce the depth of child poverty;
  • Promote attachment to the workforce by ensuring that families will always be better off as a result of working; and
  • Reduce overlap and duplication of government programs and services.

In July 1998, the Government of Canada enhanced the Canada child tax benefit (CCTB) by introducing the national child benefit supplement (NCBS). This supplement is the federal government’s contribution to the national child benefit initiative.

The Child Disability Benefit (CDB) is a tax-free benefit for families who care for a child under age 18 who is eligible for the disability amount. A child is eligible for the disability amount when a qualified practitioner certifies, on Form T2201, Disability Tax Credit Certificate, that the child has a severe and prolonged impairment in physical or mental functions, and the CRA approves the form.

Universal Child Care Benefit (UCCB)

The UCCB is designed to help Canadian families, as they try to balance work and family life, by supporting their child care choices through direct financial support. The UCCB is for children under the age of 6 years and is paid in installments of $100 per month per child.

To receive the UCCB, all the following conditions must be met.

a)     You must live with the child, and the child must be under the age of 6

b)    You must be the person who is primarily responsible for the care and upbringing of the child

This means you are responsible for such things as supervising the child’s daily activities and needs, making sure the child’s medical needs are met, and arranging for child care when necessary. If there is a female parent who lives with the child, CRA usually considers her to be this person. However, it could be the father, a grandparent, or a guardian.

c)     You must be a resident of Canada

d)    You or your spouse or common-law partner must be:

o   Canadian Citizen

o   Permanent resident

o   Protected person

o   Temporary Resident

Generally, you should apply for the UCCB as soon as possible after:

  • Your child is born;
  • A child starts to live with you; or
  • You become a resident of Canada.

GST/HST Credit

The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low or modest incomes offset all or part of the GST or HST that they pay.

You are eligible for this credit if, you are a resident of Canada for income tax purposes in the month prior to and at the beginning of the month in which the GST/HST credit is issued and at least one of the following applies:

  • You are 19 years of age or older before the month in which we make a quarterly payment;
  • You have (or previously had) a spouse or common-law partner; or
  • You are (or previously were) a parent and live (or previously lived) with your child.

If you will turn 19 before April 1, 2015, you can apply for this credit on your 2013 tax return.

To receive the GST/HST credit, you have to apply for it, even if you received it last year. To apply, you have to file an income tax and benefit return for 2013, even if you have not received income in the year. On page 1 of your return, check the “Yes” box in the GST/HST credit application area and enter your marital status in the Identification area.

Working Income Tax Benefit (WITB)

The working income tax benefit (WITB) is a refundable tax credit intended to provide tax relief for eligible working low-income individuals and families who are already in the workforce and to encourage other Canadians to enter the workforce. This also includes income earned from being self-employed.

You can claim the WITB on line 453 of your 2014 income tax and benefit return. However, eligible individuals and families may be able to apply for the 2015 advance payments. You can apply for the advanced payments when you file your income tax return.

To qualify, your working income must be over $3,000 for the year, you must be a resident of Canada throughout the year, and over 19 years of age as of December 31st for the year you apply. If you are under 19 years of age, you may still be eligible for the WITB, if you have a spouse or common-law partner or an eligible dependent on December 31st.

You are not eligible for the WITB if:

  • You do not have an eligible dependent and are enrolled as a full-time student at a designated educational institution for more than 13 weeks in the year;
  • You are confined to a prison or similar institution for a period of 90 days or more in the year; or
  • You do not have to pay tax in Canada because you are an officer or servant of another country, such as a diplomat, or a family member or employee of such person.

If you are eligible for the WITB and the disability amount, you may also be eligible to claim an annual disability supplement. To be eligible for the disability supplement, your working income must be over $1,150 and we must have an approved Form T2201, Disability Tax Credit Certificate on file with CRA.

As you can see the federal government have various credits that can help low-income families with relieve from various financial pressures they incur day-to-day. Always ask your tax preparer whether or not you qualify for these credits, and why you don’t. The CRA will inform you once you’ve filed your taxes whether or not you qualify, too. Below we are talking about the various (and there are many of them) programs to help low-income families.

Provincial and Territorial programs

Alberta family employment 
tax credit (AFETC)

The AFETC is a non-taxable amount paid to families with working income that have children under 18 years of age.

BC family bonus (BCFB)

This program provides non-taxable amounts paid monthly to help low- and modest-income families with the cost of raising children under 18 years of age. The amount is combined with the CCTB into a single monthly payment.

BC low-income climate action tax credit (BCLICATC)

This credit is a non-taxable amount paid to help low‑income individuals and families with the carbon taxes they pay.

New Brunswick child tax benefit (NBCTB)

The NBCTB is a non-taxable amount paid monthly to qualifying families with children under 18 years of age. The New Brunswick working income supplement (NBWIS) is an additional benefit paid to qualifying families with earned income who have children under 18 years of age. Benefits are combined with the CCTB into a single monthly payment.

Newfoundland and Labrador child benefit (and mother baby nutrition supplement)

This benefit is a non-taxable amount paid monthly to help low-income families with the cost of raising children under 18 years of age. The mother baby nutrition supplement (MBNS) is an additional benefit paid to qualifying families who have children under one year of age. Benefits are combined with the CCTB into a single monthly payment.

Newfoundland and Labrador harmonized sales tax credit (NLHSTC)

This credit is a non‑taxable amount paid to help low-income individuals and families who may be affected by the HST. Under this program, individuals or families with adjusted family net incomes of $15,000 or less receive an annual amount of $40 per adult and $60 for each child under 19.

Newfoundland and Labrador seniors’ benefit (NLSB)

This program provides a non‑taxable annual amount of $1,036 for a single senior (65 years of age or older at any time during 2014) or a married or common-law couple with at least one senior whose adjusted family net income is $28,654 or less. Seniors will get part of this payment if their adjusted family net income is between $28,654 and $37,522.

Northwest Territories child benefit (NWTCB)

This benefit is a non-taxable amount paid monthly to qualifying families with children under 18 years of age.

Nova Scotia child benefit (NSCB)

This benefit is a non-taxable amount paid monthly to help low- and modest-income families with the cost of raising children under 18 years of age. These amounts are combined with the CCTB into a single monthly payment.

Nova Scotia affordable living tax credit (NSALTC)

This credit is a non‑taxable amount paid to make life more affordable for Nova Scotian households with low and modest incomes. The credit offsets the increase in the HST and provides additional income for these households.

Nunavut child benefit (NUCB)

This benefit is a non-taxable amount paid monthly to qualifying families with children under 18 years of age.

Ontario trillium benefit (OTB)

The Ontario trillium benefit (OTB) is the combined payment of the Ontario energy and property tax credit, the Northern Ontario energy credit, and the Ontario sales tax credit.

Ontario energy and property tax credit (OEPTC)

The Ontario energy and property tax credit (OEPTC) is designed to help low- to moderate-income Ontario residents with the sales tax on energy and with property taxes.

Northern Ontario energy credit (NOEC) 

The Northern Ontario energy credit (NOEC) is designed to help low- to moderate-income Northern Ontario residents with the higher energy costs they face living in the north.

Prince Edward Island sales tax credit

This credit is a non‑taxable amount paid to help offset the increase in the sales tax for households with low and modest incomes.

Saskatchewan lowincome tax credit (SLITC)

This credit is a non‑taxable amount paid to help Saskatchewan residents with low and modest incomes.

Yukon child benefit (YCB)

This benefit is a non-taxable amount paid monthly to help low‑ and modest‑income families with the cost of raising children under 18 years of age. These amounts are combined with the CCTB into a single monthly payment

What does the tax rate really mean?

By Randall Orser | Personal Income Tax

Pig Energy bar TNIn Canada we work on a marginal income tax system, or marginal tax rate, so the more you make the more you pay, however, you’re taxed in brackets. By that, you only pay the higher rate on the income earned in that bracket. You have a Federal rate and a Provincial rate. The Provincial rate varies widely from Province to Province, with Alberta having a flat rate of 10%, and Quebec having the highest rates (up to 25.75%).

The current Federal income tax rates are:

  • 15% on the first $43,953 of taxable income, +
  • 22% on the next $43,954 of taxable income (on the portion of taxable income over $43,953 up to $87,907), +
  • 26% on the next $48,363 of taxable income (on the portion of taxable income over $87,907 up to $136,270), +
  • 29% of taxable income over $136,270.

For example, John, who lives in British Columbia, makes $175,000 per year. Here’s how his marginal tax is figured out:

Federal

15% level        $ 6,592.95

22% level           9,669.88

26% level        12,574.38

29% level        11,231.70

Total Tax        $40,068.91

Provincial (BC)

5.06% level   $ 1,902.86      on first $37,606 of taxable income

7.70% level    2,895.74      on the next $37,607

10.50% level    1,169.81      on the next $11,141

12.29% level    2,274.14      on the next $18,504

14.70% level    6,635.87      on the next $45,142

16.80% level    4,200.00      on the amount over $150,000

Total               $19,078.42

Total Tax        $59,147.33

In the example above, the marginal tax rate is 45.8%, which is the addition of the top tax brackets of the Federal and Provincial rates in which your income falls, in this case 29% Federal and 16.8% Provincial. The average tax is 34% ($59,147.33 divided by $175,000 of total income). Average tax is the percentage of tax paid based on your total gross income and reflects the total tax you are paying. It is the total amount of tax you will pay through all the brackets divided by total income and will mathematically always be lower than the marginal tax rate.

Of course, the above just reflects the tax you’d pay if you didn’t have deductions, such as RRSPs, childcare expenses, etc., or your non-refundable tax credits, such as the basic personal exemption, spousal amount, employment credit, etc.

In this article we’re just talking about income taxes, however, there are many taxes that we as Canadians pay. Some of these taxes are: Carbon taxes, property taxes, sales taxes, fuel taxes, liquor and tobacco taxes, medical premiums, and more. Oh, and don’t forget about Canada Pension Plan & Employment Insurance (yes those are taxes). It would probably boggle the mind to figure out exactly how much we do pay.

If you looked at all the taxes that the average Canadian pays, it would probably end up being between 40% or 50% of your income going to some form of government. I don’t necessarily agree with that, however, until we figure out what government should really be doing for us, and not wanting government to do it all for us, we’re stuck with this high rate of taxes.

GST/HST Credit for Individuals

By Randall Orser | Personal Income Tax

piggy bank

The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low or modest incomes offset all or part of the GST orHST that they pay. Many of the Provinces also participate in this credit and add to it or supplement it in other ways.You are eligible for this credit if, youare a resident of Canada for income tax purposes in the month prior to and at the beginning of the month in which the GST/HST credit is issued and at least one of the following applies:

  • You are 19 years of age or older before the month in which we make a quarterly payment;

oIf you will turn 19 before April 1, 2014, you can apply for this credit on your 2012 tax return.

  • You have (or previously had) a spouse or common-law partner; or
  • You are (or previously were) a parent and live (or previously lived) with your child.

To receive the GST/HST credit, you have to apply for it, even if you received it last year. To apply, you have to file an income tax and benefit return for 2012, even if you have not received income in the year. On page 1 of your return, check the “Yes” box in the GST/HST credit application area and enter your marital status in the Identification area. If you are using a tax preparer, they will automatically tick this box (at least they should).

If you have a spouse or common-law partner, be sure to complete the information concerning your spouse or common-law partner in the Identification area on page 1 of your return. Include his or her net income, even if it is zero. Only one of you can apply for the credit. No matter which one of you applies, the credit will be the same.

What if I didn’t apply for the GST/HST credit when I filed my 2012 income tax return? Is it too late to apply now?

No. You can simply complete and send Form T1-ADJ, T1 Adjustment Request, or write a letter, to your tax centre stating you would like to apply for the GST/HST credit. Please include your social insurance number and, if applicable, your spouse’s or common-law partner’s social insurance number and net income, even if it is zero. You can also call the Individual income tax enquiries line to ask for an adjustment to your income tax return. You will receive a Notice of Reassessment in about eight weeks. Soon after, you will receive separately a GST/HST credit notice of determination and payment (if applicable).

How do I get the credit after a separation?

You should advise Canada Revenue Agency (CRA) in writing of your separation. Either use Form RC65, Marital Status Change, or send a letter to your tax centre giving CRA your new status and the date of the change. Also tell CRA that you are now applying for the GST/HST credit. After they receive this information, and, if you qualify you can start getting the credit for yourself.

Note: You are separated if you have been living apart from your spouse or common-law partner for 90 consecutive days or more because of a breakdown in your relationship, and you have not reconciled. Do not advise CRA of your separation until you have been separated for more than 90 consecutive days.

CRA calculates your GST credit for the benefit period of July 2014 to June 2015 based on:

  • The number of children for whom you have registered for the Canada child tax benefit or the GST/HST credit; and
  • Your family net income for 2013.

If you are single, your family net income is the amount from line 236 of your income tax return, or the amount that it would be if you filed a return. If you have a spouse or common-law partner, their net income is added with your net income to get your family net income.

Please note the Universal Child Care Benefit (reported on line 117 of your tax return) and registered disability savings plan (reported on line 125 of your tax return) are not included as part of your family net income for the calculation of your GST credit. However, if you are required to repay any part of the Universal Child Care Benefit (reported on line 213 of your tax return) and registered disability savings plan (reported on line 232 of your tax return), CRA will include these amounts as part of your family net income.

What happens if a GST/HST credit recipient dies?

An individual is not entitled to the GST/HST credit after he or she dies. However, CRA may send out a payment after the date of death because they are not aware of the situation. If this happens, please return the payment to the tax centre that serves your area, and give CRA the date of death so they can update their records. CRA will go after the estate for any funds paid out that should not have been, and they can be relentless.

If you owe CRA money for other taxes, they will take your GST/HST credit and apply it to any balance owing. As well, they will take your GST/HST credit for any balances owing from other organizations with which they have a shared agreement. That means they share information with that agency as well as collect payments for it.

Whenever you file your taxes, ensure that you check the box for the GST/HST credit, even if you think you may not qualify. It’s another way for the government to help out those who are lower income or have children under 18.

They’re back! Emails from Canada Revenue Agency.

By Randall Orser | Personal Income Tax

Taxes On Calculator Shows Income Tax ReturnWell, they never actually seem to leave really. It seems once tax time rolls around people start getting an email from Canada Revenue Agency (CRA). Since CRA never uses email, these are always fraudulent. Question any email you get from CRA, and report it to them, so they can stop these scammers. Of course, be diligent throughout the year too.

The Canada Revenue Agency (CRA) warns all taxpayers to beware of telephone calls or emails that claim to be from the CRA but are not. These are phishing and other fraudulent scams that could result in identity and financial theft.

You should be especially aware of phishing scams asking for your information such as credit card, bank account, and passport numbers. The CRA would never ask for this type of information. Some of these scams ask for this personal information directly, and others refer the taxpayer to a Web site resembling the CRA’s, where the person is asked to verify their identity by entering personal information. Taxpayers should not click on links included in these emails. Email scams may also contain embedded malicious software that can harm your computer and put your personal information at risk.

Examples of recent email scams include notifications to taxpayers that they are entitled to a refund of a specific amount, or informing taxpayers that their tax assessment has been verified and they are eligible to receive a tax refund. These emails often have CRA logos or Internet links that appear official. Some contain obvious grammar or spelling mistakes.

To better equip taxpayers to identify possible scams, the following guidelines should be used. The CRA:

  • NEVER requests information from a taxpayer about a passport, health card, or driver’s license.
  • NEVER divulges taxpayer information to another person unless the taxpayer provides formal authorization. Such as a T1013 or RC59.
  • NEVER leaves any personal information on an answering machine or asks taxpayers to leave a message with their personal information on an answering machine.

When in doubt, ask yourself the following:

  • Am I expecting additional money from the CRA?
  • Does this sound too good to be true?
  • Is the requester asking for information I would not include with my tax return?
  • Is the requester asking for information I know the CRA already has on file for me?
  • How did the requester get my email address or telephone number?
  • Am I confident I know who is asking for the information?
  • Is there a reason that the CRA may be calling? Do I have a tax balance outstanding?

For information on scams, to report deceptive telemarketing, and if personal or financial information has been unwittingly provided, go to the Royal Canadian Mounted Police Web page at: www.rcmp-grc.gc.ca/scams-fraudes/phishing-eng.htm

Heartbleed Bug

Though this doesn’t have anything to do with email scams, I thought it prudent to warn you that there was some social insurance numbers compromised, approximately 900. CRA is contacting all those that are affected via registered mail, not telephone or email. If your SIN was compromised you will get this registered letter, or probably have already gotten one. To fine out more information go to http://www.cra-arc.gc.ca/gncy/sttmnt2-eng.html.

Why Is My Tax Notice Of Assessment Different Than What Was Filed?

By Randall Orser | Personal Income Tax

Tax In Piggy Shows Taxation Payment DueEvery year after you file your personal income taxes, Canada Revenue Agency (CRA) sends you a Notice of Assessment (NOA). On this NOA, CRA will state any information that relates to changes made during their processing of your return, what any carry forwards for non-capital and net capital losses will be, information on your current TFSA, and what is your next year RRSP contribution limit.

Occasionally, you find that something has been changed by CRA due to information they received that you perhaps didn’t get, such as an additional slip, or carry forwards you may have forgotten about. It could also have been a mistake during the preparation of your return.

The most common mistake we find is the missing slip. You had more than one job in the tax year, or non-registered investments that send out a slip you don’t get or that slip comes after you’ve done your taxes. If you do have non-registered investments, allow enough time for those slips to come before you file your taxes. T3 Statement of Trust Income Allocations and Designations slips are the last slips you’ll usually receive. I find it best to wait until Mid-March or later to do your taxes, if you get any kind of slip for non-registered investments. Those slips usually come on a T3, T5, 5008.

Another slip that is commonly forgot about is the T4RSP, which is a slip you receive when you take money out of your RRSP during the year. It is amazing how many people forget they did this, do their taxes, and then get a NOA very different from what they thought it would be. This can be a major difference depending on how much you withdrew, and what was your income for that year.

For those of you that still paper file, yes there are still people using paper, addition errors are the biggest mistake. Double, and triple, check your addition and subtraction. Make sure that you have the correct figures before you send in your return. A good idea is to do it in pencil (never file your return in pencil) first then do it over in pen. If you’ve paid based on what you’ve filed, and you file too close to the deadline, you may be charged penalties and interest if the balance owing goes above what you already paid, and CRA processes your return after April 30th.

Your instalment payments are another item that can make your NOA different from what you filed. Sometime in February you get a statement of instalments paid that apply to the prior tax year. It’s best to make sure you get this statement before filing, and call CRA if you don’t have it by March. Always ensure exactly what you paid for instalments for the prior tax year before filing your taxes.

When you do get your NOA check it, and compare it to what was filed. If you used a tax preparer, send it to them, so they can see what happened after your return was filed. It’s important to check your NOA so next year you know for what to look when you go to prepare your next year’s taxes.

As an employer, do I get any credits for having apprentices?

By Randall Orser | Personal Income Tax

Dollar bills falling in of a piggy bank in a magical landscape TNThe federal and provincial governments have been encouraging people to join the trades in the last few years, and through the apprenticeship programs they have given employers who hire apprentices credits. This has allowed employers to bring on apprentices and have help with paying their wages. This is another great way to help small businesses that are the main employers in most provinces in Canada.

Apprenticeship Job Creation Tax Credit (AJCTC)

The AJCTC is a non-refundable tax credit equal to 10% of the eligible salaries and wages payable to eligible apprentices in respect of employment after May 1, 2006. The maximum credit an employer can claim is $2,000 per year for each eligible apprentice. If your business hires an “eligible apprentice”, you qualify to claim the credit.

An “eligible apprentice” is someone who is working in a prescribed trade in the first two years of their apprenticeship contract. This contract must be registered with a federal, provincial or territorial government under an apprenticeship program designed to certify or license individuals in the trade. A prescribed trade includes the trades currently listed as Red Seal Trades. The Red Seal Program is recognized as the interprovincial standard of excellence in the skilled trades.

If you are an employer, you will be able to claim the credit on your Individual Income Tax Return, on line 412 – Investment tax credit, by filing Form T2038(IND), Investment Tax Credit (Individuals). In addition, any unused credit may be carried back 3 years and carried forward 20 years. When two or more related employers employ the same apprentice, special rules apply to ensure that the $2,000 limit is allocated to only one employer.

Hiring Credit for Small Business (HCSB)

While this credit applies to all employees you hire, I thought I’d mention it as its one people forget about. The HCSB stimulates new employment and supports small businesses, while providing relief from the employer’s share of employment insurance (EI) premiums by crediting up to $1,000 on their payroll account. As of August 2, 2013, over $209 million has been credited to over 549,000 eligible employers.

Basically you get the difference between your EI premiums from one year to the next, up to a maximum of $1,000. For example, in 2012 you paid $1,329 in EI Premiums and in 2013 you paid $1,799 you would get a credit of $470 in 2014, which you can use to reduce your current payroll remittance.

Provincial Credits

Each province or territory also has it’s own credits for employers of apprentices. You should check with Canada Revenue Agency and your provincial apprenticeship authority to see what’s available.

In British Columbia there is the British Columbia Training Tax Credit (Employers), which you file with form T1014. Complete this form to calculate your British Columbia training tax credit for employers. If you are completing the tax return for a corporation, use Schedule 428, British Columbia Training Tax Credit, of the T2 return.

You can claim this credit if you were a resident of British Columbia at the end of the year and you met the following conditions:

• You carried on a business in British Columbia at any time in the year; and

• You employed a person who was registered in an eligible program administered through the British Columbia Industry Training Authority (ITA) at any time in the year.

There are three elements to the training tax credit:

• Basic tax credit for an eligible recognized program (non-Red Seal) (read Part 2 of the worksheet);

• Completion tax credit for an eligible training program (Red Seal and non-Red Seal) (read Part 3 of the worksheet); and

• Enhanced tax credit for First Nations individuals and persons with disabilities (read Part 4 of the worksheet).

If you are an employer who will be hiring apprentices, you’ll be glad to know there are credits available to you for hiring and training your workforce. Government has come to realize that it needs to incentivize employers to bring on and train new employees. Let’s face it, it can be very expensive to hire and train a workforce, and it’s nice to see your efforts are being recognized.

What tax credits are available for apprentices?

By Randall Orser | Personal Income Tax

Breaking the Bank TNYou, or a loved one, have decided to embark on a career in the trades, which is great. Fortunately, there are tax breaks for those who go into the trades as apprentices. Of course, you have to prove your apprentice and be registered with the federal or provincial government, and it leads to a certification or designation in that trade.

Tools Expense

You may be able to deduct the cost of eligible tools you bought in the tax year to earn employment income as a tradesperson and as an eligible apprentice mechanic. This cost includes any GST, and provincial sales tax (PST), or HST you paid. You may also be able to get a rebate of the GST/HST you paid.

An eligible tool is a tool (including associated equipment such as a toolbox) that:

  • You bought to use in your job as a tradesperson and was not used for any purpose before you bought it;
  • Your employer certified as being necessary for you to provide as a condition of, and for use in, your job as a tradesperson; and
  • Is not an electronic communication device (like a cell phone) or electronic data processing equipment (unless the device or equipment can be used only for the purpose of measuring, locating, or calculating).

Your employer has to complete and sign Form T2200, Declaration of Conditions of Employment. Have your employer complete question 11 of Part B of the form to certify that the tools being claimed were bought and provided by you as a condition of your employment as a tradesperson. Attach to Form T2200 a list of the tools you are claiming, as well as the related receipts. You do not have to include Form T2200, your receipts, or your list of tools with your return, but you should keep them in case we ask to see them.

Even though you may have already claimed the tradesperson’s deduction for tools, you may also be able to deduct a part of the cost of eligible tools you bought in 2013 to earn employment income as an eligible apprentice mechanic. You are an eligible apprentice mechanic if you:

  • Are registered in a program established under the laws of Canada or of a province or territory that leads to a designation under those laws as a mechanic licensed to repair self-propelled motorized vehicles (such as automobiles, aircraft, boats, or snowmobiles); and
  • Are employed as an apprentice mechanic.

As an eligible apprentice mechanic, you must first calculate the tradesperson’s tools deduction, if any, that you qualify for. You may qualify for that deduction if you bought eligible tools for your job in 2013.

Tax Credits

The provinces and territories also have their own tax credits for apprentices. British Columbia is one such province. In BC you can file a T1014 British Columbia Training Tax Credit (Individuals). You can claim this credit if you were a resident of British Columbia on December 31, 2013, and you completed an eligible program administered through the British Columbia Industry Training Authority or you passed a challenge exam and received a Certificate of Qualification from the British Columbia Industry Training Authority, in the tax year. Eligible programs and completion requirements are defined by Regulation.

Check with your province, your industry training authority, and Canada Revenue Agency, to see what tax credits are available to you.

Employment Insurance for business owners, is it worth it?

By Randall Orser | Personal Income Tax

Young stylish businessmanThe government in its infinite wisdom (or maybe because it’s so broke) decided to allow self-employed persons to apply for the employment insurance benefit. The benefits you would get are limited to maternity, parental, sickness, compassionate care, and care of critically ill children.

Sorry, but you can’t lay yourself off and collect benefits. Oh, and you have to wait 12 months before you can ever claim any benefits. So, if you’re pregnant now, you’re too late.

What are the Eligibility requirements?

You can enter into an agreement, or register, with the Canada Employment Insurance Commission through Service Canada if you:

  • Operate your own business, or if you work for a corporation but cannot access EI benefits because you control more than 40% of the corporation’s voting shares;
  • Either a Canadian citizen or a permanent resident of Canada.

You will qualify for EI special benefits if:

  • You have reduced the amount of time devoted to your business by more than 40% because:
    • Your child was born;
    • You are caring for your newborn or adopted child or children;
    • You are ill, injured, or in quarantine;
    • You need to provide care or support to a gravely ill family member; or
    • You need to provide care or support to your critically ill or injured child
  • You have earned a minimum amount of self-employed earnings during the calendar year preceding the year you submit a claim. This amount may change from year to year. If you want to apply for benefits in 2014, for example, you would need to earn at least $6,515 in 2013; and
  • For EI sickness claims – you have provided a medical certificate as proof that you are unable to work because of illness, injury, or quarantine; or
    • For compassionate care benefit claims – you have provided medical proof showing that a gravely ill family member who is at risk of dying within 26 weeks needs your care or support;
    • For EI maternity or parental benefit claims – you have provided the expected date of birth of the child and the actual birth date once it has occurred, or the official placement date in the case of adoption; or
    • For parents of critically ill children claims – you have provided a medical certificate completed by a specialist medical doctor stating that your care or your critically ill or injured child requires support.

As you can see it’s quite a bit of work to actually get the benefits and you have to have income to get any kind of benefit. So, if you’re business isn’t making a profit, you’ll be hard pressed to ever collect any employment benefits.

Is it worth doing Employment Insurance (EI)?

I don’t believe in the end it’s worth the hassle to do employment insurance. There are much better ways to deal with a crisis, such as critical illness insurance, disability insurance and other avenues. With the EI program, you’re just contributing into the pool, and it goes out for everyone in that pool to use. You may never use, or if you do there’s a limit to how long and how much you get paid. In the end, you need to setup a savings/insurance program for those times when you’re going to be off work.