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Tax Alerts

Two quarterly newsletters have beed—one dealing with personal issues, and one dealing with corporate issues.


Sometime around the middle of August, millions of Canadians will receive unexpected mail from the Canada Revenue Agency (CRA), and that mail will contain unfamiliar and unwelcome news. Specifically, the enclosed form will advise the recipient that, in the view of the CRA, he or she should make instalment payments of income tax on September 15 and December 15th of this year – and will helpfully identify the amounts which should be paid on each date.


The traditional idea of retirement – working full-time until age 65 and then leaving the workforce completely to live on government-sponsored and private sources of retirement income – has undergone a lot of changes over the past couple of decades, and Canada’s government-sponsored retirement income system has evolved in response. Generally, the changes to the Canada Pension Plan (CPP) and Old Age Security (OAS) programs have increased the flexibility of those programs and, in particular, have given individuals a greater range of choices with respect to, especially, the timing of their receipt of CPP and OAS.


While Canadians typically think of taxes only in the spring when the annual return must be filed, taxes are a year-round business for the Canada Revenue Agency (CRA). The CRA is busy processing and issuing Notices of Assessment for individual tax returns during the February to June filing season. To date, in 2017, the CRA has received and processed just under 28 million individual income tax returns. That volume of returns and the CRA’s self-imposed processing turnaround goals (two to six weeks, depending on the filing method) mean that the CRA cannot possibly do an in-depth review of each return filed prior to issuing the Notice of Assessment.


The Bank of Canada’s recent decision to raise interest rates generated a lot of media attention, for the most part because while the increase itself was only one quarter of a percentage point, it was the first move made by the Bank of Canada to increase rates in the past seven years. Much of the media coverage of the rate change centered around the effect that change might or might not have on the current real estate market. One of the issues under discussion was whether this or future increases in interest rates (and therefore mortgage rates) would act as a barrier to those seeking to get into the housing market. And a phrase that was prominent in that discussion — the mortgage financing “stress test” — is likely one that is unfamiliar to most Canadians, even those who are affected by it.


Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.


Many Canadians are called upon to act as a caregiver for a family member who either cannot live independently or who requires varying degrees of assistance in order to be able to continue to live on their own. Sometimes that family member is a disabled adult child, while in other cases it’s an aging parent who needs help.


For several years, the Canada Revenue Agency (CRA) has been encouraging taxpayers to manage their taxes and benefits online, through the CRA website, and has been largely successful in that effort. More recently, the Agency has taken the next step, by creating mobile apps which taxpayers can use to obtain most of the same information, and carry out many of the same tasks, as can already be done online.


For most Canadian taxpayers, income tax is an “out-of-sight, out-of-mind” subject, with most taxpayers giving serious thought to their tax situation only when it’s time to file the annual tax return. And, too often, that approach leads to an unexpected (or higher than expected) tax amount owing when the return is filed – and seemingly no way to fix that problem.


The Canada Pension Plan (CPP), together with the Old Age Security (OAS) program, forms the cornerstone of Canada’s retirement income system. There are other retirement savings options available to Canadians, but the CPP is unique in that it is Canada’s only compulsory retirement savings program.


Costs incurred for child care expenses are among the most frequent deductions claimed by Canadian taxpayers on their annual tax returns. And, for many Canadian families, especially those with more than one child, or those who live in large urban centres, the cost of child care can consume a significant percentage of their annual budget.


It’s not news that the Canadian tax system is complex and that most Canadians, especially those who only encounter it once a year at tax-filing time, would rather not have to deal with that complexity. Consequently, over the next couple of months, it’s likely that more than 16 million Canadian taxpayers will seek out the services of professional tax return preparers and tax discounters, in order to get their 2016 returns completed and EFILED on time.


The time is fast approaching when the annual chore of gathering together the various pieces of information needed to complete one’s annual tax return, and getting that return completed and filed can’t be delayed any longer. For those wishing to put that chore off as long as possible, there is one (very small) bit of good news. Individual Canadians (other than the self-employed and their spouses) are required to file the annual return by April 30 of the following year, and to pay any tax amount owed by the same deadline. This year, since April 30 falls on a Sunday, the Canada Revenue Agency (CRA) has extended that filing and payment deadline to the following day, Monday May 1, 2017. Self-employed taxpayers have until Thursday June 15, 2017 to file their returns for 2016, but they too must pay any outstanding tax amounts owed for that year by Monday May 1, 2017.


Although individual Canadians file the same T1 Income Tax Return form each year, the rules governing the information to be provided on that return form and the tax consequences flowing from that information is in a constant state of change. And, it’s a safe bet that very few taxpayers read the annual Income Tax Guide carefully to find out what’s changed on this year’s return.


For retired Canadians (and almost certainly for those who are no longer paying a mortgage) the annual income tax bill can represent the single largest expenditure in their budgets. The Canadian tax system provides a number of tax deductions and credits available only to those over the age of 65 (like the age credit) or only to those receiving the kinds of income usually received by retirees (like the pension income credit) to help minimize that tax burden. One of the most valuable of those strategies —  pension income splitting — isn’t particularly familiar to many taxpayers who could benefit from it, especially those who do not receive professional tax planning or tax return preparation advice.


As everyone knows, the Canadian tax system is a complex one, and that complexity is reflected on the annual tax return filed by individual Canadian taxpayers. The T1 Individual Income Tax Return itself is only four pages long, but the information on those four pages is supported by 13 supplementary federal schedules, dealing with everything from the calculation of capital gains to determining required Canada Pension Plan contributions by self-employed taxpayers.


For most Canadians – certainly most Canadians who earn their income through employment – the payment of income tax throughout the year is an automatic and largely invisible process, requiring no particular action on the part of the employee. Federal and provincial income taxes, along with Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums, are deducted from each employee’s income and the amount deposited to an employee’s bank account is the net amount remaining after such taxes, contributions, and premiums are deducted and remitted on the employee’s behalf to the Canada Revenue Agency (CRA). While no one likes having to pay taxes, having those taxes paid “off the top” in such an automatic way is, relatively speaking, painless.


There’s little likelihood that the average Canadian taxpayer can fail to notice that it is, once again, registered retirement savings plan (RRSP) season, given the number of television, radio, and online RRSP-related advertisements and reminders which invariably appear at this time of year. This year taxpayers must, in order to deduct an RRSP contribution on their income tax return for 2016, make that contribution on or before Wednesday, March 1, 2017. The maximum allowable current year contribution which can be made by any individual taxpayer for 2016 is 18% of that taxpayer’s earned income for the 2015 year, to a statutory maximum of $25,370.


The Employment Insurance premium rate for 2017 is 1.63%.


The Canada Pension Plan (CPP) contribution rate for 2017 is unchanged at 4.95% of pensionable earnings for the year.


Dollar amounts on which individual non-refundable federal tax credits for 2017 are based, and the actual tax credit claimable, will be as follows:


The indexing factor for federal tax credits and brackets for 2017 is 1.4%.  The following federal tax rates and brackets will be in effect for individuals for the 2017 tax year.


Each new tax year brings with it a new list of tax payment and filing deadlines, as well as some changes with respect to tax planning strategies. Some of the more significant dates and changes for individual taxpayers for 2017 are listed below.


Planning for – or even thinking about – 2017 taxes before the New Year has even been rung in may seem more than a little premature. However, most Canadians will start paying their taxes for 2017 with the first paycheque they receive in January, and it is worth taking a bit of time to make sure that things start off – and stay – on the right foot.


During the month of December, it is customary for employers to provide something “extra” for their employees, by way of a holiday gift, a year-end bonus or an employer-sponsored social event. And it’s certainly the case that employers who provide such extras don’t intend to create a tax liability for their employees. Unfortunately, it is the case that a failure to properly structure such gifts or other extras can result in unintended and unwelcome tax consequences to those employees.


Most Canadians are aware that the deadline for contributing to one’s registered retirement savings plan (RRSP) is 60 days after the calendar year end – in order to be claimed on the return for 2016, such contributions must be made before March 2, 2017. Many also know that contributions to a tax-free savings account (TFSA) can be made at any time during the year. Consequently, when Canadians start thinking about year-end tax planning or saving strategies, RRSPs and TFSAs aren’t often top of mind. The fact is, however, that there are some situations in which planning strategies involving TFSAs and RRSPs must be put in place by the end of the calendar year. In other situations, acting before the end of the calendar year, while not required, will produce a better tax result. Some of those situations are outlined below.


While tax planning is best approached as an ongoing, year-round activity, the fact is that for most Canadians the subject of taxes becomes top of mind only a few times a year. Typically, that happens when the annual tax return is due, when the annual RRSP contribution deadline is looming, and for some, at the end of the calendar year.

There is, in fact, good reason to spend some time considering one’s tax situation as the end of the calendar year approaches. With the notable exception of (in most cases) contributing to one’s RRSP, any steps taken in order to reduce one’s income tax bill for 2016 must be finalized by December 31st of this year.


Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.


The budgetary cycle of the federal government follows a regular schedule. The Budget for the upcoming fiscal year (which runs from April 1 to March 31) is brought down by the Minister of Finance in late winter or early spring. About six months later, or half way through the fiscal year, the revenue, expenditure, and deficit/surplus numbers announced and projected in the budget (for both the current and future fiscal years) are updated by the Minister in the Fall Fiscal and Economic Update. On occasion, the federal government will use the Fiscal and Economic Update to announce new taxation and expenditure measures.


Changes in technology and the Canadian workplace over the past quarter century have made the option of working from one’s home, at least on an occasional or part-time basis, almost the norm among Canadian employees. For most, the opportunity to take a break from sitting in traffic gridlock or rushing to catch the commuter train is a valued employment perk.


Once daily weather reports begin to include wind chill factors or frost warnings, the thoughts of many Canadian turn to the idea of spending part of the Canadian winter somewhere much warmer – most often, in one of the southern U.S. states. And, while the anemic state of the Canadian dollar has required Canadians to downsize some of those plans, it is still the case that thousands of Canadian “snowbirds” fly south every winter.


During the financial crisis that took place in 2008 and 2009, the Canadian mortgage and real estate market didn’t experience the kind of meltdown which occurred south of the border. That result was attributable, in many respects, to the fact that Canadian lending practices, and the rules governing those practices, were much more conservative and stringent than the corresponding rules in place in the United States.


Canada Pension Plan (CPP) retirement benefits are available to virtually any Canadian who has participated in the work force and made contributions to the CPP and for most retirees, that monthly CPP benefit represents a substantial percentage of their income. Consequently, knowing what to expect in the way of CPP retirement benefits is crucial to an individual’s retirement income planning.


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, in a few months, as the holiday season approaches, charities will launch their year-end marketing campaigns.


It has become something of a dreary chorus over the past decade, as financial advisers, central bankers and even Ministers of Finance remind, warn, and even scold Canadians about the risks associated with their ever-increasing levels of household debt.

That chorus was renewed this month, as statistics issued for the second quarter (April to June) of 2016 showed that the amount of household debt held by Canadians, expressed as a percentage of disposable income, had set yet another record. At the end of that quarter, as reported by Statistics Canada, Canadians households held $1.68 in credit market debt for every dollar of disposable income.


At the Canada Revenue Agency (CRA), taxes are a year-round business. During the spring and early summer, the CRA is busy processing the millions of individual tax returns filed by Canadians for the previous tax year. The volume of returns filed and the Agency’s self-imposed processing turnaround goals mean that the CRA cannot possibly do an in-depth review of each return filed. Once the season of processing and assessing tax returns is for the most part complete, however, the CRA moves to the next phase of its activities – specifically, the start of its annual post-assessment tax return review process.


Having access to mobile communication is useful and practical for any number of reasons and Canadians who don’t have a cell or smart phone are likely now the exception rather than the rule. It’s also the case, however, that cell phone rates payable by Canadians are among the highest in the world, and so having an employer provide that cell phone (and pay the associated costs) is consequently a valued employment benefit. That said, Canadians who enjoy such an employment benefit should be aware that, while they may not have to pay a monthly cell phone bill, there still can be a cost in the form of a taxable benefit which must be reported on the annual return. 


When it comes to questions around personal finance, two issues tend to dominate current discussions. The first is whether and to what extent Canadians are financially prepared for retirement, and the second is the seemingly inexorable increase in the value of residential real estate. For many retired Canadians, those two issues are very much interlinked.


While our health care system is not without its problems, Canadians are fortunate to benefit from a publicly funded system in which individuals are not required to pay personally for the cost of necessary medical care. Generally speaking, acute care provided in a hospital setting is covered by that system, as is more routine care provided by physicians in their offices.

Canadians who, as the result of illness or accident, require care in our medical system are nonetheless often surprised to find that there is a long and ever-increasing list of expenses which are not covered by government-sponsored health care, or for which the individual is required to make at least a partial payment. In some cases, individuals will have private health care coverage to help offset those costs but for most, such costs must be paid on an out-of-pocket basis. For those who must bear such costs personally, some recovery of costs incurred is possible by claiming a medical expense tax credit on the annual return. The federal medical expense tax credit is equal to 15% of the cost of qualifying medical expenses claimed, and each of the provinces and territories also provide for a medical expense tax credit, at varying rates.


Each spring, Canadians are required to fulfill two tax obligations. The first is the requirement to file an individual income tax return providing details of income earned, deductions and credits claimed, and the amount of income tax payable for the previous calendar year. The second such obligation is to pay any amount of income tax owed for that year which is still outstanding. And although the Canadian tax system is for the most part a voluntary self-reporting and self-assessing one, most Canadians do comply with those two obligations in a timely way.


Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.


Home renovations are big business right now in Canada, as many homeowners opt to make changes and/or additions to their current residences rather than try to find a new home in the current real estate market. And, while the cost of renovating one’s home is usually considered a personal expense which doesn’t qualify for any tax credit or deduction, starting this year there is an exception to that rule.


The fact that the cost of residential real estate in Canada’s largest cities has reached unaffordable levels for most Canadians, especially young families, isn’t really news any more. What’s relatively new, however, is that significant price increases are now being seen in cities which are within daily driving range of those major cities, presumably as individuals and families move further and further out in search of affordable housing. The trade-off for moving further from work in order to be able to purchase an affordable home is, of course, the daily commute. And, while gas prices aren’t currently at the levels seen a year or two ago, commuting is never inexpensive, leading many to wonder whether our tax system provides any relief for unavoidable commuting costs incurred.


By the time this summer reached the halfway mark, most Canadian taxpayers had filed a tax return for 2015, received a Notice of Assessment with respect to that return, and considered that their income tax obligations for this year were complete. For a significant number of those taxpayers, however, the filing of that return will trigger the issuance of a 2016 Tax Instalment Reminder from the Canada Revenue Agency (CRA), and that reminder will show up in their mailboxes sometime during the month of August. On that form, the CRA will suggest to the recipient that he or she should make instalment payments of income tax on September 15 and December 15, 2016, and will identify the amount which should be paid on each date.


As the summer starts to wind down, both students returning this fall to their post-secondary institutions and those just starting post-secondary education must focus on the details of the upcoming school year: finding a place to live, choosing courses, and — perhaps most important — arranging payment of tuition and other education-related bills.


For most of the year, taxpayers live quite happily without any contact with the Canada Revenue Agency (CRA). During and just following tax filing season, however, such contact is routine – tax returns must be filed, Notices of Assessment are received from the CRA and, on occasion, the CRA will contact a taxpayer seeking clarification of income amounts reported or documentation of  deductions or credits claimed on the annual return. Consequently, it wouldn’t necessarily strike taxpayers as unusual to be contacted by the CRA with a message that a tax amount is owed or, more happily, that the taxpayer is owed a refund by the Agency. Consequently, it’s the perfect time for scam artists posing as representatives of the CRA to seize the opportunity to defraud taxpayers.


By the end of June all individual taxpayers have filed their 2015 income tax returns and most will have received a Notice of Assessment outlining the Canada Revenue Agency’s (CRA’s) conclusions with respect to that taxpayer’s income and tax position for the year. In most cases, the Notice of Assessment won’t vary a great deal from the information provided by the taxpayer in his or her return. Where it does, and the change is to the taxpayer’s detriment, taxable income assessed is greater than the amount reported by the taxpayer, or a deduction or credit is denied, then the taxpayer has to decide whether to dispute the CRA’s assessment.


By now, most Canadians are familiar with the use and the benefits of a tax-free savings account (TFSA), which have proven to be a very popular savings vehicle since they were introduced in 2009. What’s proven to be harder to do is keeping track of one’s annual TFSA contribution limit. The annual TFSA contribution limit contribution allowed by law has been something of a moving target, subject to change after change by successive governments. As well, withdrawals made from a TFSA are added to one’s annual contribution limit, but not until the following taxation year – a fact that has escaped many TFSA holders and sometimes even their financial advisers. And finally, the Canada Revenue Agency (CRA) used to provide information on a taxpayer’s current year TFSA contribution limit on the annual Notice of Assessment, but that’s no longer the case, meaning that the taxpayer has to make an extra effort to obtain that information.


There has been much discussion in recent years about whether Canadians are adequately prepared for retirement and, more specifically, whether Canadians are saving enough to ensure a retirement free of undue financial stress. While the financial health of current and soon-to-be-retirees (essentially, the baby boomers) is a concern, the focus is more on the question of whether our current system is such that younger Canadians can expect to have some degree of financial security in retirement. The workplace has altered dramatically in the past quarter century and many of the retirement income options which were relied upon by previous generations – especially an employer-sponsored defined benefit pension plan – are all but unknown to private sector workers under the age of 30 or even 40.


The forest fires affecting Northern Alberta and the Canada’s Revenue Agency’s (CRA’s) offer of administrative tax relief to those affected by the fires and the resulting evacuations has highlighted a federal government program of which few taxpayers are aware – the CRA’s Taxpayer Relief Program. In a nutshell, that program offers relief from interest charges, penalties, and collection actions for those who are unable, due to circumstances outside their control, from fulfilling their tax filing and/or payment obligations.


By the beginning of June, most taxpayers have filed their annual return for the previous year and have most likely received a Notice of Assessment in respect of that return, containing the good or bad news about their tax situation for the year. At this point, most Canadians are probably happy to put taxes out of sight and out of mind until next year’s filing season rolls around. For a number of reasons, however, that’s not the best strategy.


As the end of the school year draws closer, and with it the start of two months of summer holidays, families who don’t have a stay-at-home parent (and likely some who do) must start thinking about how to keep the kids supervised and busy throughout the summer months. There is no shortage of options — at this time of year, advertisements for summer activities and summer camps abound — but nearly all the available options have one thing in common, and that’s a price tag. Some choices, like day camps provided by the local recreation authority can be relatively inexpensive, while the cost of others, like summer-long residential camps or elite level sports or arts camps, can run to the thousands of dollars.


By May 23, 2016, the Canada Revenue Agency (CRA) had processed just under 26 million individual income tax returns filed for the 2015 tax year. About half of those returns (56%) resulted in a refund to the taxpayer. About 18% of returns filed and processed required payment of a tax balance by the taxpayer. Slightly over 20% were what are called “nil” returns – returns where no tax is owing and no refund claimed, but the taxpayer is filing in order to provide income information which will be used to determine his or her eligibility for tax credit payments (like the Canada Child Tax Benefit or the HST credit ).


Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.


Canada’s tax system is a self-assessing and self-reporting one, in which taxpayers are expected (and required) to provide the tax authorities with an annual summary of their income and any deductions and tax credits claimable, along with payment of any tax amount owed. Although no one really likes doing their taxes, or paying those taxes, the vast majority of Canadians nonetheless do file their returns on time, and pay up. For a significant minority, however, completing and filing the return is something that just doesn’t get done. Sometimes the cause is just procrastination, while in other cases, a taxpayer is worried that there will be a large balance owing and he or she avoids completing and filing the return for that reason.


Springtime and early summer is moving season in Canada. The real estate market is traditionally at its strongest in the spring, and spring house sales are followed by real estate closings and moves in the following late spring and early summer months. All of this means that a great number of Canadians will be buying or selling houses this spring and summer and, inevitably, moving. Moving is a stressful and often expensive undertaking, even when the move is a desired one — buying a coveted (and increasingly difficult to obtain) first home, perhaps, or taking a step up the property ladder to a second, larger home. There is not much that can diminish the stress of moving, but the financial hit can be offset somewhat by a tax deduction which may be claimed for many of those moving-related costs.


By now, most Canadian taxpayers (excepting the self-employed and their spouses, who have until June 15) will have filed their 2015 income tax returns. Once the Canada Revenue Agency (CRA) has processed those millions of returns, over the next few weeks and months, taxpayers across Canada will begin to receive Notices of Assessment for 2015. In most cases, the Notice of Assessment issued will simply confirm the information which the taxpayer provided on the return, perhaps with some minor arithmetical corrections. However, not infrequently, the Notice of Assessment will indicate that the CRA has disallowed or changed the amount of certain deductions or credits, or has included in income amounts not declared by the taxpayer on his or her return. When that happens, it’s time for the taxpayer to decide whether to dispute the CRA’s assessment of their tax situation.


In recent years, there has been a great deal of public discussion about the availability (and the viability) of federal income support programs for retirees. It’s not news that Canada’s population is aging, and the demands placed on government-sponsored retirement income programs will of course increase as greater numbers of Canadians reach the age at which they will be entitled to receive monthly benefit payments from those programs.


By the time most Canadians sit down to organize their various tax slips and receipts and undertake to complete their tax return for 2015, the most significant opportunities to minimize the tax bill for the year are no longer available. Most such tax planning or saving strategies, in order to be effective for 2015, must have been implemented by the end of the calendar year. The major exception to that is, of course, the making of registered retirement savings plan (RRSP) contributions, but even that had to be done on or before February 29, 2016 in order to be deducted on the return for 2015.


Over the next academic and calendar year, post-secondary students will find that a number of changes are taking place with respect to the rules governing the financing side of post-secondary education. Some of those changes will be welcome, and others will not.


For even the most determined of procrastinators, the deadline for filing an individual income tax return for the 2015 tax year is imminent. That deadline will come on Monday May 2, 2016 for most Canadians, and on Wednesday June 15, 2016 for the self-employed and their spouses.


For several decades, Canadian families have received financial assistance from the federal government to help offset the cost of raising children, through a range of benefits and allowance programs. Those programs have taken a variety of forms, from direct payments to parents to credits provided on the annual tax return. Some amounts provided under some such programs were taxable, while others were not. The one constant throughout those decades is that such programs are in a continual state of change and revision, resulting in a sometimes confusing patchwork of entitlements.


There’s no denying that the Canadian tax system is complex, even for individuals with relatively straightforward tax and financial circumstances. As well, significant costs can follow if a taxpayer gets it wrong when filing the annual tax return. Sometimes those costs are measured in the amount of time needed to straighten out the consequences of mistakes made on the annual return; in a worst case scenario, they can involve financial costs in the form of interest charges or even penalties levied for a failure to remit taxes payable on time or in the right amount. Whatever the reason, fewer and fewer individuals are willing to brave the annual trip through the 488 lines of the federal tax return (plus seemingly innumerable related federal schedules and provincial tax forms), and that means that the percentage of Canadians who have their return prepared by someone who has, presumably, more expertise, has continued to rise.


Any taxpayer told of a strategy that offered the possibility of saving hundreds or thousands of dollars in tax and increasing his or her eligibility for government benefits while requiring no advance planning, no expenditure of funds, and almost no expenditure of time could be forgiven for thinking that what was proposed was an illegal tax scam. In fact, that description applies to pension income splitting which is a government-sanctioned strategy to allow married taxpayers over the age of 65 (or, in some cases, age 60) to minimize their combined tax bill by dividing their private pension income in a way which creates the best possible tax result.


For several years, the Canada Revenue Agency (CRA) has been seeking to convince Canadian taxpayers of the benefits of filing their annual tax return online, and it seems that their efforts have been successful. Last year, over 80% of Canadian taxpayers filed their returns by electronic means. The change has been a rapid one, as nearly 40% of tax filers filed a paper return in 2011, with that number dropping to less than 20% in 2015.


While filing a tax return is an annual event for just about every Canadian, the return that is filed, and sometimes the process of filing it, changes each year. Differences in the return itself arise from changes made in our tax laws, which occur on a regular basis. Changes to the filing process generally come about because of changes in the Canada Revenue Agency’s (CRA) administrative procedures, which themselves are usually the result of improvements in technology. The process of filing returns for 2015 includes both types of changes.


Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.


The early months of the new calendar year can feel like a never-ending series of bills and other financial obligations. Credit card bills from holiday spending, or perhaps a mid-winter vacation, are due or coming due. The RRSP deadline of February 29, 2016 is approaching, and the May 2, 2016 deadline for payment of any final balance of 2015 income taxes owed is not far behind.


Millions of Canadians receive Old Age Security (OAS) benefits, meaning that millions of Canadians may be subject to the OAS “recovery tax” or, as it is more commonly referred to, the clawback. Unfortunately, very few Canadians are familiar with that tax or how it works, and even fewer incorporate the possibility of having to pay the tax into their retirement income planning. There are, however, strategies which allow taxpayers to minimize or avoid the OAS clawback in retirement.


Canadian taxpayers don’t need a calendar to know that the registered retirement savings plan (RRSP) contribution deadline is approaching — the glut of television, radio and internet ads which fill the airwaves and screens this time of year are reminder enough. And, while RRSP planning and retirement planning generally are best approached as an ongoing, year-round activity, it is true that an imminent deadline tends to focus the minds of taxpayers on such issues


As the time for the traditionally strong spring housing market approaches, the current state of Canadian real estate is on the minds of a lot of Canadians these days. It’s also a concern for Finance Canada, which has made a change to Canadian mortgage financing rules which will take effect on February 15, 2016, in time for that spring housing market.


Planning for 2016 taxes when the year has barely started and the filing deadline for 2015 returns is still months away may seem more than a little premature. Nonetheless, taking some time to review one’s tax situation—and perhaps putting a few strategies in place—at the beginning of the year can help avoid a cash flow crisis or other financial shock when the RRSP contribution deadline looms or it is tax filing (and tax payment) time in the spring of 2017. And, while many tax planning and tax saving strategies can be implemented throughout the tax year, getting an early start on such planning usually leads to the best results.


The Employment Insurance premium rate for 2016 is 1.88%.

Yearly maximum insurable earnings are set at $50,800, making the maximum employee premium $955.04.

As in previous years, employer premiums are 1.4 times the employee contribution. The maximum employer premium for 2016 is therefore $1337.06.


The Canada Pension Plan contribution rate for 2016 is unchanged at 4.95% of pensionable earnings for the year.


Dollar amounts on which individual non-refundable federal tax credits for 2016 are based, and the actual tax credit claimable, are contained herein.


The indexing factor for federal tax credits and brackets for 2016 is 1.3%. Contained herein are the federal tax rates and brackets will be in effect for individuals for the 2016 tax year.


Each new tax year brings with it a listing of tax payment and filing deadlines, as well as some changes with respect to tax planning strategies.


The Canadian income tax system, as it applies to individuals, operates on a calendar year basis. While there are a few exceptions (RRSP contributions and pension income splitting being the important ones), the general rule is that, in order to be effective for a particular taxation year, tax planning strategies must be implemented before the end of that year.


Old Age Security (or OAS) is one the two main components of Canada’s government-sponsored retirement income system—the other being the Canada Pension Plan (CPP). There are also federal and provincial supplements which are available to lower-income seniors. While many retired Canadians receive both OAS and CPP benefits every month, the two plans are quite different. The only determinants of the amount of Canada Pension Plan benefits receivable are one’s contribution amount and the age at which one elects to begin receiving benefits; other sources of available income or one’s overall income level are not considered. Eligibility for OAS, on the other hand, is based on Canadian residency. Essentially, a person aged 65 and older who has lived in Canada for at least forty years after the age of 18 is eligible for full OAS benefits. Where the length of Canadian residency after age 18 is less than forty years, a partial pension is earned at the rate of 1/40th of the full monthly pension for each full year lived in Canada. OAS benefits are fully indexed to inflation.


It seems not entirely in the spirit of the upcoming holidays to be talking about potential tax liability arising from holiday gifts. And it should be noted that, in the vast majority of cases, there are no tax consequences to such gifts. Where, however, gifts are provided by an employer to employees, unintended (and unwelcome) employee tax liability can be the result.


Generally speaking, and absent extraordinary circumstances, the federal government issues two major economic and fiscal documents each year. The first is the federal Budget, which is usually delivered in the late winter or early spring, and outlines the government’s plans and projections with respect to federal government revenues and expenditures for the upcoming (April 1 to March 31) fiscal year, along with any new tax measures which the government intends to implement. About halfway through the fiscal year, usually during month of October, the federal government releases its Economic and Fiscal Update. As the name implies, this release updates the information announced in the federal Budget, especially with respect to revenue and expense projections, the overall state of the Canadian economy, and whether a change is required to the surplus or deficit projection provided in the Budget for the current fiscal year.


Two quarterly newsletters have been added—one about personal issues, and one about corporate issues.


The Canadian tax system is a complex one, and while there are some deductions and credits—like RRSP contributions or charitable donations—which are familiar to just about every taxpayer, others are not so well known. One of those is the deduction which can be claimed by any taxpayer who must pay union dues or professional fees or professional liability insurance premiums.


Thousands of Canadians, usually retirees, spend some or all of the Canadian winter as far south of the border as possible, often in Florida or Arizona. While the declining value of the Canadian dollar has made such sojourns much more expensive, meaning that some vacation plans may have to be scaled back, many Canadians will be planning at least a short stay in a warmer place this winter.


One of the many changes resulting from developments in Canada’s economy over the past quarter century has been the need for, more or less, continuous learning. At one time, it was possible to set a career goal, acquire the necessary training or skills for that work and make a lifelong career in that field. It’s abundantly clear that that is no longer the reality for most Canadian workers, whatever their field of work.


Most Canadians are aware that the deadline for contributing to one’s registered retirement savings plan (RRSP) is 60 days after the calendar year end. Many also know that contributions to a tax-free savings account (TFSA) can be made at any time during the year. Consequently, when Canadians start thinking about year-end tax planning or saving strategies, RRSPs and TFSAs aren’t often top-of-mind. The fact is, however, that there are some situations in which planning strategies involving TFSAs and RRSPs have to be put in place by the end of the calendar year; some of those are outlined below.


As is reported in the news at least once a month, there doesn’t seem to be an end or a limit to the inexorable rise in Canadian house prices. While the cost of housing in Vancouver and Toronto outstrips prices everywhere else, even smaller metropolitan areas are posting record increases.


By the time the summer is over and everyone’s back to school and work, most taxpayers have completed and forgotten about their tax obligations for the year. Returns have been filed and Notices of Assessment have been received. Income tax refunds have been spent or saved, and any amount still owing for taxes has generally been paid. For the Canada Revenue Agency (CRA), however, taxes are a year-round business, and fall marks the move from one phase of its activities to another—specifically, to the start of its annual post-assessment tax return review process.


For several years the Canada Revenue Agency (CRA) has encouraged taxpayers to begin receiving payments from the Agency by means of direct deposit to their bank accounts, rather than by receiving cheques sent through the mail. By the spring of 2016, that second option will no longer be available.


Time and again, Canadians have shown that where there is a humanitarian crisis anywhere in the world, whether caused by a natural disaster or arising for reasons of politics or economics, they are prepared to extend a helping hand. In many such past instances, the federal government has indicated that it will augment the generosity of Canadians by matching donations which are made.


For most Canadians, having to pay for legal services is an infrequent occurrence, and most of us would like to keep it that way. In most instances, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences—a divorce, a death, or a job loss. About the only thing that mitigates the pain of paying legal fees (aside, 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.


The current election campaign has once again focused the attention of Canadians, especially the baby boomers, on changes announced in 2012 to Canada’s retirement income system. One of the results of those changes is that Canadians aged 65 and over can, as of July 1, 2013, choose to defer receipt of their Old Age Security (OAS) benefits. What’s more difficult is deciding, on an individual basis, whether it makes sense to defer receipt of those benefits and, if so, for how long.


A number of circumstances and developments have come together to make working from home an attractive prospect for both employers and employees. Soaring house prices in major Canadian cities have driven those who work in those cities further and further afield in the search for affordable housing. Consequently, there are increasing numbers of Canadians who must travel into a major urban centre for work each day, putting already crowded highways and city streets into near-gridlock much of the time. And the summer of 2015 has been more difficult than most for commuters. In addition to the usual delays caused by the summer construction schedule, special events held in major cities have closed or narrowed the usual commuter routes. Any commuter spending hours a day just trying to get to and from work might well wonder whether it’s worth it.


By this time of the year, most Canadian taxpayers have filed their returns for 2014 and received a Notice of Assessment with respect to those returns. Many will have received a refund, while others have received the unwelcome news that money is owed to the Canada Revenue Agency (CRA) and have paid up, however unwillingly.


Two quarterly newsletters have been added—one about personal issues, and one about corporate issues.


This month, millions of Canadians will receive unexpected mail from the Canada Revenue Agency (CRA). That mail will contain an unfamiliar form—a 2015 Instalment Reminder. On that form, the CRA suggests to the recipient that he or she should make instalment payments of income tax on September 15 and December 15 2015, and will identify the amount which should be paid on each date.


Earlier this year, it was announced that the annual contribution limit to tax-free savings accounts (TFSAs) would be nearly doubled, increasing from $5,500 to $10,000, and that that increase would be effective for the 2015 and subsequent tax years.


This summer, millions of Canadians have been affected by a series of disasters ranging from forest fires to droughts and other kinds of severe weather, and many of those Canadians have been temporarily displaced from their homes and businesses as a result.


In October 2014, the federal government announced a number of changes to tax and benefit programs affecting families with young children. One such change altered the Universal Child Care Benefit (UCCB) program, effective January 1, 2015, to increase the amount of that taxable benefit for families having children under the age of 6 and to create a new benefit for those with children aged 6 to 17. The first payment of the new or increased benefit was made in July, in the form of a lump sum payment representing the accrued benefits for the first half of 2015. Since then, this being an election year, there have been claims and counter-claims about the amount of the net benefit to Canadian families of the changes to the UCCB, and about the kind of tax planning families receiving that benefit need to undertake. The existing and new tax rules which determine the overall net benefit of the changes for Canadian families are as follows. 


While for elementary and secondary school students, the summer is just beginning, post-secondary students are already halfway through their summer break between school years. And, as summer starts winding down, these post-secondary students will start thinking about choosing courses and finding a place to live during the coming academic year. Their parents’ attention will more likely be focused on the cost of that year, and the upcoming deadlines for payment of first semester tuition and housing costs.


Canadians will go to the polls for the next federal election on October 19, 2015, and the campaign by all parties to win votes in that election is already on. And, while no two election campaigns are alike, either in the way they are run or the ultimate outcome, they all have one thing in common—money. It costs a great deal of money to run a national election campaign, and each party and candidate seeking election or re-election in October has been and will be seeking contributions from individual Canadians to help them finance their campaigns. The task of raising that money is made somewhat easier by the fact that Canadian taxpayers who donate money to political parties or candidates can claim a federal tax credit for those donations.


Conventional wisdom with respect to the cycle of income, debt, and savings over an individual’s lifetime is based on certain assumptions. Generally, it is assumed that Canadians in their 20s and 30s will see their financial affairs weighted far more heavily on the debt side of the equation, as they pay off student loans, buy a home (and take on a mortgage), and meet the financial demands of raising children while building a career. As those individuals move into their 40s and 50s, it’s assumed that the financial demands of raising that family will eventually decline and the mortgage will be paid off. As well, the two decades between 40 and 60 have traditionally been the peaking earning years and, as other financial obligations are reduced, some of those higher earnings can be redirected to saving for retirement. Ultimately, the cycle ends with retirement around the age of 60 or 65, with a paid-for home, no debt, and adequate savings for retirement.


Fraud isn’t and never has been a seasonal business—every day of the year, attempts are made to cheat individuals out of their hard-earned income or savings. There are, however, times of the year when some types of scams are more prevalent and tax scams flourish during tax filing season.


As the end of the school year draws closer, and with it the start of two months of summer holidays, families who don’t have a stay-at-home parent (and likely some who do) must start thinking about how to keep the kids supervised and busy throughout the summer months. There is no shortage of options—at this time of year, advertisements for summer activities and summer camps abound—but nearly all the available options have one thing in common, and that’s a price tag. Some choices, like day camps provided by the local recreation authority can be relatively inexpensive, while the cost of others, like summer-long residential camps or elite-level sports or arts camps, can run into the thousands of dollars.


Keeping up with reporting, remitting, and payment obligations for income taxes, goods and services, or harmonized sales tax and employee source deductions is a constant headache for many small business owners, who would rather be spending their time working to grow their businesses. Staying on top of such obligations is particularly challenging for new small business owners, to whom all such calculations, forms, and remittance deadlines represent new and unfamiliar territory.


By the second week of May 2015, the Canada Revenue Agency (CRA) had processed about 22 million individual income tax returns filed for the 2014 tax year. Just under two-thirds of those returns (about 64%) resulted in a refund to the taxpayer. About 14% of returns filed and processed required payment of a tax balance by the taxpayer. Just under 20% were what are called “nil” returns – returns where no tax is owing and no refund claimed and the taxpayer is filing in order to provide income information which will be used to determine his or her eligibility for tax credit payments (like the Canada Child Tax Benefit or the HST credit).


Most older Canadians would prefer to stay in their own homes for as long as possible—so-called “aging in place”. Staying in one’s own home throughout retirement has a number of strong points—a familiar environment in a familiar community and, most often, more privacy, independence, and autonomy. There are financial advantages, as well, to aging in place. Care provided in an assisted-living setting (whether a retirement home, a long-term care facility, or a nursing home) is expensive. And, while home ownership means expenses as well, for most retirees the biggest home-related cost—mortgage payments—are no longer a concern.


Two quarterly newsletters have been added—one about personal issues, and one about corporate issues.


Spring is the traditional season for real estate sales and purchases, and the spring of 2015 is proving to be no exception. In fact, the residential real estate market is particularly active this year. According to statistics compiled by the Canadian Real Estate Association (CREA), “actual (not seasonally adjusted) activity in March stood 9.5% above levels reported in March 2014 and slightly above the 10-year average for the month.”


According to figures posted on the Canada Revenue Agency (CRA) website, the Agency had, by April 19, 2015, received almost 16 million 2014 individual income tax returns, and had processed slightly more than 14 million of those returns. Those returns already processed represent about half of the total number of returns to be filed for the year: last year, the total number of T1 individual income tax returns filed was just over 28 million.


There was much speculation—and more than a few hints dropped—that this year’s federal budget would include an increase in the amount which individual Canadians can contribute to a Tax-Free Savings Account (TFSA). That increase was announced as anticipated and, effective with the 2015 tax year, eligible individuals can now contribute up to $10,000 per year to a TFSA. The former limit was $5,500.


Most Canadians, especially those nearing retirement, have saved money through a registered retirement savings plan (RRSP). For all those individuals, no matter what the size of their RRSP or what other sources of retirement income they have, the same rule applies. By the end of the year in which they turn 71, an RRSP holder must collapse that RRSP. There are, essentially, three options available to the individual at that point. First, he or she can simply collapse the plan and have all funds in that plan treated (and taxed) as income for that year. Unless the amount within the RRSP is very small, that’s obviously not a tax-efficient plan, and not a recommended one. Second, the individual can collapse the RRSP and use the funds to purchase an annuity, which will provide a (taxable) income stream for the term of the annuity. That term can be for a fixed number of years, or for the rest of the individual’s life, or some combination of the two. The advantage of an annuity is that it does provide income security for the individual. However, annuity payout rates are based on the interest rates in effect at the time the annuity is purchased, and the current low interest rate environment means that annuity rates are not currently, by historic standards, particularly generous.


An old but still valid axiom of tax planning is that the best year-end tax planning starts on January 1st. The concept of year-end tax planning as a year-round activity may indeed be the ideal, but it’s certainly not the reality for most Canadian taxpayers. Some may be alerted to the need to think about current-year taxes by the approach of the calendar year end, while others have their memories jogged by an imminent RRSP contribution deadline. For many (if not most) Canadians, however, taxes aren’t thought of until it’s time to complete the annual tax return. But, even for those taxpayers, options to reduce the annual tax bill are still available, through careful completion of that return.


Two reports released recently by Statistics Canada and by Canadian credit reporting agency TransUnion indicate that Canadians continue to rack up household and personal debt, but also that they might, perhaps, be getting better at managing that debt load.


Like the rest of the world, the Canada Revenue Agency (CRA) has moved in recent years to dealing with its client group—the Canadian taxpayer—online, through the Agency’s website. To do so, the CRA has steadily expanded its roster of online services, while at the same time reducing or eliminating the in-person, telephone, or paper service options it once provided.


For even the most determined of procrastinators, the deadline for filing an individual income tax return for the 2014 tax year is imminent. That deadline will come on Thursday, April 30 for most Canadians, and on Monday, June 15 for the self-employed and their spouses.


Canadians whose adult memories reach back a quarter century to the early 1990s will likely remember a series of television ads picturing middle-aged individuals or couples enjoying life in an idyllic setting, the result of having retired at the age of 55. The concept of that a financially comfortable retirement could be achieved before the traditional retirement age of 65 was a relatively novel one, and for working Canadians of that generation, the term “Freedom 55” came to represent an ideal.


As our tax system has become more and more complex, the number of individuals willing to brave the annual trip through 485 lines of the tax return and a 68-page tax guide on their own is declining. Consequently, the percentage of Canadians who have their return prepared by someone else with, presumably, more expertise has continued to increase.


Spring is, of course, income tax return filing season in Canada, and over the next four months millions of Canadians will file a return for the 2014 tax year. The filing deadline for this year is Thursday, April 30 for most taxpayers, and Monday June 15 for self-employed taxpayers and their spouses.


Every annual tax filing season brings with it a number of changes to the annual return. In some years those changes are broad-based, affecting large numbers of taxpayers, while in others the changes are more targeted, and of interest to only specific groups within the overall population.


Two quarterly newsletters have been added—one about personal issues, and one about corporate issues.


Canadian taxpayers don’t need a calendar to know that the registered retirement savings plan (RRSP) contribution deadline is approaching—the glut of television, radio, and internet ads which fill the airwaves and computer screens this time of year are reminder enough. And, while RRSP planning and retirement planning generally are best approached as an ongoing, year-round activity, it is true that an imminent deadline tends to focus the minds of taxpayers on such issues.


The announcement of a change in our tax laws to permit income splitting within families in order to reduce the overall family tax burden has received a lot of attention in the media of late. What’s not as well known is the fact that older Canadian taxpayers have in fact been able for several years to benefit from a similar income splitting strategy. Generally speaking, the opportunity to split pension income is available to couples who are 65 and over, and are receiving income from either RRSP/RRIF savings or from an employer-sponsored pension plan.


The early months of the new calendar year can feel like a never-ending series of bills and other financial obligations. Credit card bills from holiday spending, or perhaps a mid-winter vacation, are due or coming due. The RRSP deadline of March 2, 2015 is approaching, and the April 30, 2015 deadline for payment of 2014 taxes owed is not far behind.


As everyone knows—even those who aren’t parents—raising children is expensive. Even though basic needs like education and health care are publicly funded, there is still a never-ending list of discretionary and non-discretionary costs to be paid.


Planning for 2015 taxes even before the New Year is rung in may seem more than a little premature. Nonetheless, taking some time to review one’s tax situation—and perhaps putting a few strategies in place—at the beginning of the year can help avoid a cash flow crisis or other financial shock when the RRSP contribution deadline looms or it is tax filing (and tax payment) time in the spring of 2016. And, while many tax-planning and tax-saving strategies can be implemented throughout the tax year, getting an early start on such planning usually leads to the best results.


The Employment Insurance premium rate for 2015 is 1.88%.


The Canada Pension Plan contribution rate for 2015 is unchanged at 4.95% of pensionable earnings for the year.


Dollar amounts on which individual non-refundable federal tax credits for 2015 are based, and the actual tax credit claimable, will be as follows:


The indexing factor for federal tax credits and brackets for 2015 is 1.7%. Consequently, the following federal tax rates and brackets will be in effect for individuals for the 2015 tax year.


Each new tax year brings with it a listing of tax payment and filing deadlines, as well as some changes with respect to tax-planning strategies. Some of the more significant dates and changes for individual taxpayers for 2015 are listed herein.