COVID-19 and your 2019 tax year filings

Canada Revenue Agency (CRA) has officially extended this year’s filing deadline for personal income tax to June 1, 2020.
Taxpayer will have until September 1, 2020 to pay their 2019 tax owing.

For more CRA information and updates, please go to https://www.canada.ca/en/revenue-agency.html

For tax measures to help support Canadians during the COVID-19 pandemic, please go to https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html

In this unprecedented times, please stay safe and well by:
– practising social distancing by keeping at least 2 meters apart from each other;
– correctly washing your hands with soap and water for at least 20 seconds;
– don’t touch your face, nose and eyes;
– supporting your loved ones, friends and community by staying connected virtually;
– self isolate if you don’t feel well. Contact your health care provider by phone. Do not just show up at your doctor’s office, clinic or local hospital.

Lastly, a shout out and kudos to all the front line workers (including health, paramedics, police, fire fighters, supply chain workers, politicians of all stripes at all levels of government) who are working hard to keep us safe, fed and healthy.

Please take care of yourselves and do what you can in your community. We’re all in this together.

2019 tax season is here!

FAQs on taxes …

Q: How much tax do I have to pay?
A: It depends on your income for the year. Total taxes owing is based on the income brackets you fall under. Here’s a simple chart for you to self check on your marginal tax rates for Canadians who are BC residents:

 2019FederalBC
Income brackets – federalTax RatesTax Rates
≤ $47,63015.0% 
$47,631 – $95,25920.5% 
$95,260 – $147,66726.0% 
$147,668 – $210,37129.0% 
≥ $210,37233.0% 
Income brackets – BC  
≤ $40,707 5.1%
$40,708 – $81,416 7.7%
$81,417 – $93,476 10.5%
$93,477 – $113,506 12.3%
$113,507 – $153,900 14.7%
≥ $153,901 16.8%

Q: When is the deadline for filing my 2019 personal tax return?
A: April 30th, 2020.
June 15th, 2020 if you or your spouse is self employed.

Q: When is the deadline for RRSP contributions to qualify for 2019 claim?
A: March 2nd, 2020.

Q: What are some common deductions I should consider?
A: Gather your 2019 information and proof (ie: receipts) on –
– charitable donations made,
– medical and dental expenses paid,
– childcare expenses paid,
– tuition paid,
– employment expenses paid,
– political contributions,
– investment related expenses such as interest and carrying charges paid,
There are too many other possible claims to list here. To start jotting your memory, review your 2018 tax return to check for items claimed in the past and see if they’re still valid for 2019.
Also review Canada Revenue Agency’s 2019 income tax guide for ‘what’s new’ this year –
https://www.canada.ca/content/dam/cra-arc/formspubs/pub/5000-g/5000-g-c-19e.pdf

Beware of CRA phone scams

It can be financially devastating when one falls for one of these scams. Especially seniors today, who still are the most vulnerable to be taken by scammers. Trusting Canadians have lost hundreds of thousands of dollars, often to overseas scammers, believing that they are being threatened by Canada Revenue Agency (CRA) for outstanding tax bills.

First and foremost, know that CRA will never leave threatening phone messages. They will also never demand immediate payment by Western Union, e-transfer, prepaid credit card, bitcoin or any form of gift cards from popular retailers (ie: Amazon, Apple, etc).

If in doubt with the legitamacy of the call, check by calling CRA directly. Their official phone numbers are listed on their website. Their current toll free number is 1-800-959-8281. Here is the link to CRA’s website https://www.canada.ca/en/revenue-agency/corporate/contact-information/telephone-numbers.html#h1.

And don’t worry, they will never threaten you with police intervention or jail time over the phone.

CPPIB good news update

The Canada Pension Plan Investment Board (CPPIB) manages $392 billion as of 2019/Mar/31 for Canadians. Its mandate is to optimize return on investment for the Canada Pension Plan (CPP), for many generations and with a low risk profile.
It released its latest annual report. The results are impressive.

  • the plan produced a solid 8.9% return this past financial year;
  • the plan’s net assets increased by almost $36 billion;
  • the plan produced an average of 9.2% return for the last 10 years.

Facts on CPP. Did you know that –

  • it was designed to provide just 25% of an average income (not 100%)?
  • CPP contributions are kept entirely separate from government general accounts, and at arms length from possible federal government’s meddling and political interference?
  • the plan’s chief actuary is responsible to review and make projections to ensure there will be no shortfall, for at least over the next 75 years?

If you’ve ever contributed to the Canada Pension Plan, you can view your estimated monthly CPP benefits on retirement. You need to obtain an account with MyService Canada and request a record of your personal CPP contributions over your working live.
MyService Canadahere’s the link

The bottom line on our collective CPP government pension – we need not worry our CPP will run of money any time soon!

CPPIBhere’s its link

Beware of CRA scams!

Canada Revenue Agency (CRA) has posted some warnings on scams whereby thousands of unsuspecting Canadians have fallen prey to and lost millions of dollars to scammers.

Check out the government’s website for more information and how to protect yourself – click here. Here are some important points mentioned by CRA on its website –

1) By phone, CRA will never

  • ask for information about your passport, health card, or driver’s license
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • use aggressive language or threaten you with arrest or sending the police
  • leave voicemails that are threatening or give personal or financial information

2) By email, CRA will never

  • give or ask for personal or financial information by email and ask you to click on a link
  • email you a link asking you to fill in an online form with personal or financial details
  • send you an email with a link to your refund
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • threaten you with arrest or a prison sentence

3) By mail, CRA will never

  • set up a meeting with you in a public place to take a payment
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • threaten you with arrest or a prison sentence

4) CRA never uses text messages or instant messaging such as Facebook Messenger or WhatsApp to communicate with taxpayers under any circumstance. If a taxpayer receives text or instant messages claiming to be from the CRA, they are scams!

5) Other useful information on scammers posing as CRA employees. Check out this CRA’s website link – click here.

TFSA accumulated savings, RRSP and tax tips – 2019 update

Here’s another update of my previous posts on TFSA (Tax Free Savings Account) accumulation.
Since 2009, one can contribute to a TFSA and any investment income earned is tax free.

I’ve dropped the assumed annual return from 4%  to a conservative 3% due to recent decline and uncertainty in the markets.  Even with this reduced drop over the plan’s life-to-date, and assuming the maximum is contributed each year at the beginning of each year, one can still expect to have over $75,000 by the end of 2019! The magic of compounding and accumulation.

Here’s the link – 2019Jan-TFSA savings accumulation

Chartered Professional Accountants of BC (CPABC) is committed to providing resources to assist individuals and businesses prepare their income tax returns, invest in RRSPs, and plan their finances.   As a service to the public, here’s the link to its latest RRSP and other useful tax tips.

Short and sweet for the year-end

It’s really amazing that another year-end is upon us.    Living just keeps happening and time flies.

Before you know it, we might be at a stage where we’ll need a little financial cushion to help us along.   Hopefully over the years, you’ve been socking away a little savings regularly and that it has grown nicely and steadily for you.

Here again is a reminder to help you along in maximizing your savings and minimizing your taxes along the way.

  • Tax free savings account (TFSA) – building a tax free nest egg  without worrying about future tax liability on the income.
  • Registered Retirement Savings Plan (RRSP) – building a tax deferred retirement nest egg, saving you taxes today and hopefully to pay tax in the future when you income is taxed at a lower rate.
  • Regular withdrawal to invest – getting into the habit of forced savings by withdrawing a set amount each payday.   Investing those savings into tax efficient investments will help maximize your savings.  The compounding effect of regular savings can also have a pleasant surprise over time.
  • Spend less.   Think twice before buying will often result in a bigger nest egg.  Remember, this is often from after tax money so your saving has even more bang for the buck.

It’s often said that having family and friends is the most important things to have during the holidays.   This is so true, and you don’t need to spend a huge sum to have a memorable and wonderful time.

Merry Christmas and Happy New Year!

 

SPP contributions is now $6,000 annually!

 

Good news for RRSP contributors.

SPP (Saskatchewan Pension Plan), a defined contribution plan and is available to all Canadians, has increased its annual maximum limit to $6,000 from $2,500, subject to one’s available RRSP room.

Members can take advantage of the increased limit starting with the 2017 tax year.

Its performance for the past year on its Balanced Fund is a respectable 9.7%.

Another unique option over other RRSP plans is its method of contributions.   Aside from normal fund transfers and deposits, it also allows for regular credit card (Visa or Mastercard) contributions.

Click on this link for more information – https://www.saskpension.com/

Note::  RRSP contribution deadline is March 1, 2018 for the 2017 tax year.

Once again, it’s year-end tax planning time …

Before we start to celebrate another festive season, let’s review some essential planning items and act now to make sure we save on 2017 tax dollars.

  • Make sure you’ve paid these bills before the year-end for this year’s tax benefits/credits –
    medical and dental expenses;
    child care expenses;
    spousal support payment;
    political donations;
    charitable donations;
    tuition fees (there are new rules in 2017 extending eligibility for occupational skills courses);
    interest and vestment counsel fees;
    monthly transit pass costs for January to June, 2017 (this credit is no longer available after June 30, 2017).
  • Harvesting tax losses.   Consider selling unwanted investment losers in your non registered portfolios to use as offsets to your capital gains.   Any unused losses for the current tax year can also be carried back three years and forward indefinitely.  The last stock trading date for settlement of securities this year is December 27, 2017, for both Canadian and US exchange securities.
  • Good to hold off buying any mutual funds until the new year.   This will avoid any possible surprising and unanticipated income distribution even if you owned the funds for a month or less.
  • For self employed taxpayers, consider
    – making your intended capital item purchases (such as an automobile) before the business’ year-end to maximize your capital cost allowance.  You are entitled to claim half of the maximum business deductions for the year even though you actually only owned the item(s) for as few as one day!
    – consider paying adult family members a reasonable amount on work they’ve performed for the business for income splitting purpose. It is especially important if you have an incorporated business as the government is looking to changing the tax rules in 2018;
    – if you have discretion over the timing and amount of receipt of non-eligible dividend income, consider receiving them this year rather than later.  Tax rates are increasing.   Although other consideration like tax deferral benefits must also be taken into account.
  • This is the time to see if it makes sense to contribute to your RRSP or spousal RRSP for the current year.   You probably know how much income you’ve earned for the year, and whether a contribution will benefit you in tax savings.
  • Adjust your 4th quarter tax instalment to compensate for possible 2017 over or under payment.
  • It’s always wise to contribute to your TFSA if there’s excess cash for savings and investments.   Doing so in your TFSA will help you avoid taxation on any investment income generated from those contributions.

Upcoming deadlines –
2017 personal tax filing – April 30, 2018
2017 personal tax filing with selfemployment reporting – June 15, 2018
RRSP contribution deadline for 2017 – March 01, 2018

 

 

Short term rentals – mortgage helper traps and tips

Air bnb and other online short-term rentals are popping up everywhere.   Renting out your home or part of your home from time to time is a great way to bring in extra income.

But before you do, consider the following potential traps:

  1. Does your home’s municipal zoning allows you to sell short term rentals?  Does it require you to apply for a licence?
  2. Have you taken out extra property and liability coverage for this type of rental with your home insurance?   If not, you will likely null and void your policy with these rentals and ultimately defeat the purpose of having home insurance.
  3. If you live in a condo complex, have you checked with your strata?
  4. Consider the tax liability of rental income generated.  Short term rentals are considered business ventures, as such must be reported on your annual income tax return.  Have you planned for this tax expense?
  5. Consider potential tax implication with Canada Revenue Agency’s ‘change in use’ rule on your principal residence exemptions.   The rules have changed and you may incur additional capital gains tax now, or when you sell your home in the future.

Tips to counter these potential traps:

A. To avoid running afoul of government licensing requirements, fully understand zoning laws and abide by their requirements.

B. Speak with your insurance broker/agent about the potential change BEFORE you start your rentals.   It is not difficult for insurance companies to check if you’re violating the policy rules.  Your online ads are date stamped identifying when you’ve actually started making your home available for rentals.

C. To avoid penalties and levies from your strata, abide by its rules.

D. Speak with a tax accountant or lawyer BEFORE you start your rentals.   Understand fully the tax implications of your rental business and decide if this is still a venture worth your while to embark on.

Rental rules are complex and not as simple as just sharing your home in exchange for money.   A mortgage helper is nice but make sure you go in fully prepared and with your eyes wide open.