Registering your Business for an GST/HST Number

Happy Fall Y’all! The SheDo Squad hopes your 2021 year has been a prosperous one and for our business clients – we hope your businesses are thriving while entering the first few weeks of the fourth quarter of 2021. Quarter four is a time for many of our clients with new businesses to reach out and enquire about their Goods and Services Tax/Harmonized Sales Tax (GST/HST) obligations and if they haven’t already done so, asking… ”When should I be registering for a GST/HST number with the Canada Revenue Agency (CRA) and when should I be charging GST/HST on sales?”

IF you are a small business owner who has been pondering similar questions regarding GST/HST, I hope to provide you with some answers below…

    Who needs to register for a GST/HST number?

The CRA expects that once sales meet and exceed $30,000 from worldwide taxable supplies in a given period, then the business is no longer a small supplier and it is mandatory to register for a GST/HST number.

This includes sole proprietors, partnerships and/or corporations with gross worldwide taxable supplies over $30,000, before any expense deductions.

    When exactly does your business need to register for a GST/HST number?

Once you meet and exceed the $30,000 threshold, you must register and begin charging GST/HST on sales. The CRA expects that you register within 30 days after you have exceeded $30,000 of sales within a single calendar quarter OR over four consecutive calendar quarters. Once this occurs, you will now be collecting GST/HST on sales from the date of GST/HST registration going forward.

If you are just starting your business, but offer high-value services or products, and expect to exceed $30,000 quickly, you can voluntarily register in advance. It is also a good idea to voluntarily register if you will be incurring many costly expenses to start your business. This is because you can claim the GST/HST paid and get them back as Input Tax Credits (ITC’s) through the GST/HST return.

    How do I register for a GST/HST number?

Being registered for GST/HST as a business means you need to acquire a CRA GST/HST Number and need to determine a reporting frequency. A business will be provided this number once registering over the phone or online.

The CRA GST/HST business line is 1-800-959-5525; or, more conveniently, you can register online through the CRA My Business Account using this link:

Register for a GST/HST Number with CRA

    How do I file a GST/HST return?

Once registered you will be required to complete a GST/HST Return (form GST34) based on your reporting frequency. GST/HST reporting is monthly, quarterly, or annually, and is determined by your gross annual sales. A chart is enclosed below to help you determine your frequency. Most sole proprietors and corporations filing their first GST/HST return will be annual filers, but they may file on a quarterly or monthly basis if they choose to do so. If wanting to be a quarterly or monthly reporter (and is not mandatory), this can be requested at time of registration.

Assigned and Optional Reporting Periods


Annual Sales: $1,500,000 or less
ASSIGNED Reporting Period: Annual
OPTIONAL Reporting Period: Quarterly/Monthly

Annual Sales: More than $1,500,000 up to $6,000,000
ASSIGNED Reporting Period: Quarterly
OPTIONAL Reporting Period: Monthly

Annual Sales: More than $6,000,000
ASSIGNED Reporting Period: Monthly
OPTIONAL Reporting Period: NIL

For most business owners, their GST/HST return will be filed online through their CRA My Business Account or through the Represent a Client portal with their authorized representatives. You are also still able to file your GST/HST returns through the mail with the GST34-2 personalized GST/HST Return.

    What is included on your GST/HST Return?

For most businesses, the most common entries on each GST/HST return for any given period include: worldwide sales and other revenue (line 101), sales tax collected or became collectable (total on line 105 with adjustments) and GST/HST paid or became payable on qualifying expenses (total on line 108 with adjustments) which is know as Input Tax Credits (ITC’s).

If you have sales both inside and outside of Canada, all worldwide sales are to be reported on your GST/HST return, regardless if some of your sales are applicable to GST/HST or not. It is important to review your GST/HST requirements on sales and determine which sales may be taxable, exempt or zero-rated. It is also important to review GST/HST requirements between each province and territory and tax requirements of sales out of country.

    How do I pay my GST/HST balance owing?

You can remit your GST/HST payment electronically through your business financial institution online, telephone banking service, in person at a bank with a remittance voucher OR by cheque through the mail. You can also remit electronically using the CRA’s My Payment option, which I have linked here for you:

CRA My Payment

If you find any of this information overwhelming or still have questions regarding registering for GST/HST, the ladies here at SheDo Tax would be more than happy to set up a time to chat. If you have not been tracking your sales this year but expect that you may be nearing the $30,000 threshold, it is important to have your books in order, and we can also help with that. Feel free to reach out to us at info@shedotax.ca or call 289-758-9501.

Take care, and stay safe,

Rachel

“What are the COVID-19 pandemic benefits that are currently still available to me?”

We are well into the 3rd (and hopefully) final wave of the pandemic. Over the past 14 months, millions of Canadians have been struggling and navigating through their “new normal”. Whether you have been transitioning into working from home, having reduced hours with your career, unfortunately lost your job or business all together or even having to take a leave to assist with online learning for your children – many of us have incurred drastic life adjustments as a result of the big C word… COVID-19!

While individuals continue to get reduced pay, or no work all together, one question the ladies at SheDo Tax consistently receive is, “What are the COVID-19 pandemic benefits that are currently still available to me?”

Since March 2020, there have been different versions of pandemic benefits. Below, I want to give you an update on what is CURRENTLY available and open for applications today.

In October 2020, the federal government replaced CERB with CRB.

Canada Recovery Benefit (CRB) provides income support to employed and self-employed Canadians who are directly affected by the COVID-19 pandemic who are ineligible for EI benefits.

Canadians who are eligible will receive $1000 for a two-week period – with 10% tax withheld at source ($100 per two-week period) – resulting in a $900 deposit. Each application is for a two-week period.

To become eligible for CRB, Canadians must have stopped working and are ineligible to receive EI OR have had reduced employment income by at least 50 percent due to the COVID-19 pandemic. These conditions must be met for the ENTIRE two-week period for which Canadians are applying to receive the CRB benefit payment.

In addition, he or she did not quit their job or have not reduced their hours voluntarily on or after September 27, 2020 and did not turn down reasonable work during the two week period for which the applicant is applying.

The next benefit currently available is the Canada Recovery Caregiving Benefit (CRCB)

The CRCB provides income support to employed and self-employed Canadians who are unable to work because they are caregivers to their children who are under the age of 12 years old or a family member who requires supervised care.

CRCB is a week-to-week application. Canadians who are eligible for CRCB will receive $500 for a one-week period. Similarly, to CRB 10% of tax with withheld at source, resulting in a $450 weekly deposit.

To become eligible for the CRCB, Canadians must be employed or self-employed on the day BEFORE their first application period. They must be unable to work for at least 50% of their scheduled work week because he or she is caring for a family member under the age of 12 years old or a family member who requires supervised care due to one of the following reasons (1) daycare, day program or care facility is closed due to COVID-19; (2) regular care services are unavailable due to COVID-19; and, (3) the dependent person is (a) sick with COVID-19; (b) considered to be a high risk of being infected with COVID-19; or, (c) self-isolating due to COVID-19.

In addition, he or she must be the ONLY individual, in the applicant’s household, applying to receive the CRCB for that week and must not be receiving paid leave from an employer for the same period.

What differs between CRB and CRCB is the first eligibility requirement; CRB you must have had your employment income reduced up to 50% due to COVID-19. This could be your workplace has shut down, you have had your hours cut, you must quarantine for work related instances. Whereas the CRCB is your inability to attend your scheduled employment hours, have your employment income cut by 50% due to one of the eligibilities listed above relating to caregiving.

Lastly, the Canadian government created the Canada Recovery Sickness Benefit (CRSB) for people who do not have paid sick leave and get COVID-19 or must isolate or miss work because of COVID-19.

After contracting Covid-19 or being required to isolate, you must wait to apply until after you have missed work for one week. Your application must be received within 60 days of missing work.

To become eligible for CRSB, Canadians must have a job or are self-employed on the day before they would get a CRSB payment. They must also have lost at least 50% of their time at work for the weeks that they are applying for because:

• He/she have COVID-19 or might have COVID-19,
• a medical professional has told them that you are more vulnerable to COVID-19 than the average person, or
• their employer, medical professional, or public health authority told you to isolate because of COVID-19.

It is EXTREMELY IMPORTANT to note that for all COVID Related Benefit Programs you also:
• Must be presently in Canada.
• Must be at least 15 years old.
• Must have a social insurance number.
• Did not apply for or will receive any of the following benefits during the period which the applicant is receiving:
o Any other Covid-19 benefit related income
o Short-term disability benefit
o Employment Insurance (EI) benefits
o Québec Paternal insurance Plan (QPIP) benefits
• earned at least $5000 in 2019, 2020 or in the 12 months prior to submitting the CRB application from employment income, self-employment income or parental benefits.

Aside from this article on pandemic benefits for individuals as shown above (CRB vs. CRCB vs. CRSB), there are other pandemic programs still active to support businesses. In addition, there may be also the eligibility of retroactively applying for some of these pandemic benefits.

Whether you are seeking information on pandemic benefits as an individual or a business, the SheDo Tax ladies are always here to help and answer your questions.

Here’s hoping this is the last HURRAH of the pandemic and the new normal returns back to the old normal soon.
We hope everyone is staying happy and healthy!
Cheers to All! – Rachel Whitlock and The SheDo Squad

Ready. Set. Prepare. 2020 Tax Filing Season is Here!

As 2021 begins – and we enter into likely one of the busiest tax seasons we have encountered – with various new government income streams to declare and many new income tax deductions that are still being rolled out… Our main priority is to ensure all of our clients are prepared, organized and ready!

Below, we have put together a few lists – both for individuals and businesses – to help you prepare for an effortless tax filing season:

For Businesses – We recommend to get all your 2020 slips filed to CRA to avoid any penalties by end of February 2021, here are a list of examples:

  • T4 slip preparation for your employees
  • T5 slip preparation for any dividends received for your corporation
  • T4A slip preparation for management fees/fees for services
  • T5018 slip preparation for any subcontractors you hired throughout the year

For Businesses – Work at getting your bookkeeping and filing requirements up to date.  Ensure you are filing on time to avoid any penalties/interest.  Here is a list of things to work on now:

  • Accounts Receivable Review – Determination of any invoices to be written as bad debt in 2020
  • Getting up to date with Monthly/Quarterly/Year End HST preparation and filing
  • Getting up to date with any necessary WSIB filing requirements
  • Assistance with any overdue payroll requirements
  • Make year end adjusting entries now if you are able
  • Remember T2 Corporate Tax Return Filing deadline (6 months to file after year end, 3 months to pay after year end)
  • Remember T1 Income Tax Return Filing deadline (if you or your spouse have sole proprietor/partnership income to declare – due date to file is June 15, 2021 but payment is due April 30, 2021)
  • For Individuals – End of February will be here before you know it.  Here are some things to prepare for
  • Do some number crunching with your 2020 income.  Determine your RRSP contributions that you may want/need to make in the first 60 days of 2021 to apply to the 2020 tax return
  • Gather and organize all receipts for deductions:  medical expenses, child care expenses, donations, rent receipts..to name a few
  • Remember T1 Personal Income Tax Filing deadline (deadline to file and payment due by April 30 2021)

As always, all of us here at SheDo Tax are more than able to assist with any of the above items and more.

We ask that when you do file with us this year to disclose ALL government Co-Vid related programs that you participated in throughout the 2020 taxation year (both business and individual programs) so that we can ensure all income is reported correctly.

We understand it is going to be a difficult filing season for most…rest assure…SheDo Tax has your back for the 2020 filing season!

Preparing for the 2020 Tax Season with COVID-19 Payments Received

2020 has been a difficult year for many Canadians with COVID-19 affecting most of us in one-way shape or form.  With the year winding down, it is time to start thinking about the next tax filing season.   As new information has become available from the Canada Revenue Agency (CRA) in recent weeks, we are hoping this blog post will help outline some of the steps that must be taken by individuals and business owners from income received through the 2020 programs that were put in place due to the pandemic.

As most of us are aware, the federal government quickly implemented income replacement programs to help those businesses and individuals who were affected by COVID-19.  As to be expected, this upcoming tax season is gearing up to be even more complicated than usual for Canadians who took advantage of these programs. Although tax season is still a few months away, the ladies at SheDo Tax are recommending that taxpayers ensure they were eligible for each COVID benefit they applied for and gather as much income source information as they can to determine if money needs to be set aside for potential tax balances due.

The programs that became available through Canada’s COVID-19 Economic Response Plan have been helpful to many, but what taxpayers need to remember is that most of the subsidies and benefits ARE taxable.

What does this mean?  It means that monies received from these programs that were marked “taxable” will have tax implications. For individual’s who received income from CERB, CRB, CESB etc., you will be expected to report the full amount you received and it will be added together with any other sources of income that were earned during the tax year.

One important thing to note is unlike your employment income where income tax is deducted at source (calculated by the income you made from that source only) and will be reported on your T4 slip at the end of the year, any income received through the economic response plan did not withhold any income tax at source.

For 2020, the basic personal exemption amount is set at $13,229.  This is the amount of income you can make before income tax applies to your income.  For those Canadians who claimed all 7 periods of CERB, they will have exceeded the basic personal amount.  Likely, most individuals will have other sources of income to declare.  However, you should see if you only received CERB alone in 2020, and have no other deductions to declare, you may owe income tax since no tax was deducted at source.  This is a simple example to show how easily a tax balance can occur in the 2020 tax year if no income tax was set aside.

On the bright side, benefits such as the increased one -time payout for HST, increased one -time CCB payout are not taxable, and you will not be required to report that income, nor will you receive a tax slip.

All business owners who received subsidy and relief monies through business COVID related programs will also be required to add these amounts to business income when filing their 2020 income tax returns.

Three of the available programs for businesses that we would like to focus primarily on include: Canada Emergency Wage Subsidy (CEWS), Canada Emergency Business Account (CEBA) and the Temporary Wage Subsidy (TWS).

The Canada Wage Subsidy program (CEWS) provided employers an option to help prevent lay off but rather encourage rehiring. If an employer is eligible in any of the 12 qualifying periods, they can receive up to 75% of remuneration paid to employers as a subsidy reimbursement. The amount of CEWS an employer receives in each period, will be considered as government assistance, and will need to be included in the employer’s income for the taxation year.

Similarly, the Temporary Wage Subsidy (TWS) was a three-month subsidy that allowed eligible employers to reduce their payroll source deductions by 10% when remitting to the CRA. The amount that was deducted is to be marked as taxable income.   It is important to note that any employer that participated in this program, a PD27 form must be filled out and uploaded or mailed to CRA.  Although currently there is no stated due date, it is highly advised to submit by the end of the calendar year.

The Canada Emergency Business Account (CEBA) is a $40,000 interest free loan for employers. The program was meant to help employers pay for non-deferred expenses. If the maximum was applied for and used, then $10,000 of this loan may be forgivable.  To elaborate, if the loan is repaid by December 31, 2022 then only $30,000 is due to be paid back.  There are no terms during this two-year period and no interest applied. If the loan is not paid by this time, it will convert into a 3-year installment payment at 5% interest due by Dec 31, 2025.  The eligibility and criteria of this program has changed multiple times since the beginning of the loan’s launch.  One thing is certain that for the 2020 tax filing, the forgivable portion of the loan of $10,000 (maximum) IS to be reported as income for the business in the current year.  If any of the forgivable portion is repaid in a future year, this can be a deduction for the year it is repaid.

We understand the 2020 tax filing season is going to be confusing and likely frustrating.  Hopefully, you can put your mind at ease as SheDo Tax is here to help along the way! As more information becomes available to us, we will do our best to keep our clients updated and in the know with new tax implications.

As always, if you have any questions or need some guidance and advice please email info@shedotax.ca or give us a call at 289-758-9501.

 

CERB has Ended… NOW WHAT?

After providing millions of Canadians with financial relief since the beginning of this pandemic, the Canadian Emergency Response Benefit (CERB) payments have come to an end.

As a second wave of the pandemic is upon us, Canadians still collecting CERB and remain without employment will be forced to transition to a recently updated Employment Insurance (EI) program or apply for three additional temporary pandemic benefits.

Those who have collected CERB through Service Canada and are eligible for EI will be automatically transferred to this new EI program. Those who have been applying for CERB through the Canada Revenue Agency (CRA) My Account, will have to apply for EI which will now all be administered by Service Canada.

One of the biggest differences between CERB and the new EI is that claimants will be required to self-report on their employment status and apply every two weeks to continue to receive benefits. This EI will be available to regular claimants as well as special claimants.

What makes this new transitioned EI different?

Claimants applying for regular benefits will apply to individuals who involuntarily lost their jobs and are actively looking for work while claimants applying for special benefits are for those who have been unable to work due to the special life circumstances such as sickness, maternity/parental leave and compassion leave.

In both cases, Canadians with 120 insurable hours – which works out to roughly 3.5 weeks of work in the last 52 weeks can apply for and receive the taxable EI benefit at a rate of $500/ week, for up to 26 weeks. This is in comparison to the 420 to 700 hours usually required. To meet the minimum hours to qualify for transitioned EI, claimants will receive 300-hour credits for regular benefits (to add to the 120 hours to meet eligibility) and 480 hours for special benefits. These insurable hours are available to EI claims made within the next year.

For those who do not qualify for EI, 3 new temporary benefits may apply to you. The CRA guesstimates this situation will apply to roughly 1 million Canadians.

          The Canada Recovery Benefit (CRB) began September 27th. This is designed for workers who are self employed and are not “employees” and find themselves in need of support and ineligible for EI. It will provide $500 a week for up to 26 weeks. Similarly, to CERB, it is taxable, and you must have been unable to work.  One requirement is that business hours must have been reduced by 50% due to Covid-19 and pandemic restrictions. You will also be required to have earned at least $5000 from employment/self employment in 2019 or 2020. Those who apply for CRB will be actively seeking employment and accepting work where it is reasonable to do so.  This benefit must be applied for every two weeks.

It is important to note the CRA has stated that there will be a claw back from The Canada Recovery Benefit. Upon filing next years tax return, any with a net income over $38,000 in the year they claimed the CRB benefit, the claw back will be 50 cents on the dollar over $38,000 – this excludes income from the benefit itself. For example:  If you make $40,000 in employment income outside of the CRB you will be required to pay back $2,000 as a claw back, due after filing next years income tax.

          The Canada Recovery Sickness Benefit (CRSB) is a new taxable initiative providing $500 a week for up to 14 days for employees, or the self employed, who must self isolate due to Covid-19. Its qualifications are $5,000 of earned employment income in 2019 or 2020. Workers who miss a minimum of 60% of their scheduled work week due to self isolating are eligible. No medical certificate will be required, but workers will not be able to claim the CRSB and other paid sick leave for the same benefit period. Eligible workers will be required to apply separately for each one week period up to two weeks.

         The Canada Recovery Caregiver Benefit (CRCB) will also be effective September 27th, 2020 for one year and will pay a $500/ week taxable benefit for up to 26 weeks per household. This benefit is for Canadian residents who are employed, or self employed the day preceding their application. They must have earned $5000 in employment or self employment income in 2019 or 2020, and have been unable to work at least 60% of their normally scheduled work week because of either – caring for a child 12 and under due to covid related school closures, the child cannot attend school due to being high risk at the advice of a medical professional, or their caregiver who usually provides care cannot do so due to the pandemic. Similarly, caring for a disabled family member or dependant because their day programs are unavailable or closed, they are at high-risk of contracting covid at the advice of a medical professional, or the caregiver who normally provides care is no longer due to the pandemic.

In addition, to claim the CRCB you must not be in receipt of any paid leave during the period you are applying for, and are not receiving CRB, EI, CSRB, short term disability benefits or workers compensation payments in the same week. Individuals must apply after each week they are seeking income support for.

For small businesses, the CEBA – Canada Emergency Business Account, which is a $40,000 interest free business loan, has been extended until Oct 31, 2020

It is important to note that the eligibility of these programs is subject to change as a second wave is upon us.

If you have any questions regarding the information above or possible eligibility, please feel free to reach out to us here info@shedotax.ca, or 289-758-9501.

To close, many Canadians who have collected all periods of CERB payments and are now relying on these new taxable benefits, have transitioned to EI, or have returned to work full time must be aware that they have likely exceeded the basic personal income amount of $13,229 for the 2020 income tax year. It is our recommendation here at SheDo Tax that you consider paying into involuntary T1 installments or have money set aside for tax season, when income tax will inevitably be owing. If you have not yet filed your taxes for the 2019 income tax year, we are also more than happy to help!

Have a wonderful day friends and be safe!

Rachel

 

 

 

 

 

 

 

CoVid 19 – Employment Insurance (EI) vs. Canadian Emergency Response Benefit (CERB)

So many questions circling around…

“Do I apply for EI?”
“Do I need my employer to issue me a ROE”
“When will funds be available to me”
“Covid19 is directly related to my work shortage, do I qualify?”
“How do I apply?”
“Help!!!”

As Income Tax preparers, and bookkeepers, we are frequently asked the same questions daily related to unemployment and layoff. This is all in relation to the closure of non-essential business and reduction of hours. Over the past 3 weeks, the government began announcing new measures to help Canadians through these tough economic times.

As most of you are aware last week Justin Trudeau announced a new Canadian Emergency Response Benefit (CERB). This benefit replaced the two previous measures announced.

The Canadian Emergency Response Benefit (CERB) is a taxable benefit that would provide $2,000 a month for up to four months. This benefit is for Canadians who have had their employment income drastically reduced as a result of the Corona Virus. This benefit is a much simpler and accessible combination or the previous announced emergency benefits. It also currently REPLACES EI for those who have and have yet to apply.

The EI system was not designed to process such shear volumes of applicants, a majority received following March 15th, 2020. Given this situation, all Canadians who have ceased working for the reasons listed below, whether they are EI eligible OR NOT, would be able to receive the Emergency Response Benefit in a timely manner.

The CERB would cover Canadians who have lost their jobs, are sick, quarantined, or taking care of someone who is sick with COVID-19. This also applies to working parents who must stay home without pay to care for their children who are sick or who are at home due to care facility closures.

The CERB also applies to wage earners, contract workers and the self-employed who would otherwise be ineligible for Employment Insurance (EI).

Additionally, workers who are still employed, but are not receiving income, because of disruptions to their work situation due to the pandemic qualify. It is a broad spectrum of applicants who are available for this benefit.

To qualify, applicants must have had $5,000 in employment income, self-employment income, or maternity or parental leave benefits for 2019 or in the 12-month period preceding the day they make the application.

You’ll be able to apply through the CRA MyAccount secure portal, your secure My Service Canada Account or over the phone.

If you’ve already applied for EI and your application hasn’t been processed yet, you’ll automatically be applied for the CERB instead.

Canadians could begin to receive your benefit in as little as 10 days after application.

To note: If you are already receiving EI benefits regular or sickness benefits will continue to receive their benefits and should NOT apply for the emergency response benefit. If your EI benefits end before Oct 3rd, 2020 you can then apply for CERB once your benefits cease, IF they are unable to return to work due to COVID-19.

For more funding sources available from the federal and provincial governments during Covid-19, take a look at our blog later this week.

For more Frequently Asked Questions – https://www.unifor.org/en/faq-new-canada-emergency-response-benefit-cerb

RRSP’s – the ins and outs and what you need to know!

The last month to make RRSP contributions to be claimed for 2019 tax filing is upon us. Time to check those couch cushions, and winter coat pockets and scrounge up some savings, to make that all-important contribution!

What are RRSP’S?

Registered Retirement Savings Plan, a plan created by the federal government to allow you to save and invest your hard-earned dollars into a tax deferred savings account. The term “tax deferred” refers to any money put into the plan that can accumulate tax free until the money is withdrawn.

When can I contribute for the current year?

March 2, 2020 is the contribution deadline for the 2019 tax filing season.

The RRSP contribution period goes from March 2nd of the current year to March 1st of the following year (first 60 days). These dates are important to remember, especially the first 60 days of the following year. These latter contributions can ONLY be declared in the previous years tax return.

Let’s use Peter as an example:

Peter contributes $2,000 to his RRSP on Feb 23rd, 2020. Because the contribution was made in the first 60 days of the year, Peter must declare these on his 2019 tax return. He can choose not to use the contributions and carry them forward to the following year, but he must claim them in the 2019 year.

Can I contribute as much as I want into the plan?

Not exactly. You are limited to the lesser of 18% of your earned income for the year, or the maximum, which is predetermined every year. This year the max sits at $26,500 of contribution room. This amount is what is called your RRSP limit and can be found on your Notice of Assessment from the CRA, or your My Account. All unused room from previous years, accumulates to future years.

The government stipulates *earned income* as not all sources of income are included; including but not limited to interest income, dividends and capital gains.

What makes RRSPs enticing to the average taxpayer is, that not only does your money grow without any interference from the tax man, but you get a tax deduction each year you contribute. Any and all amounts, including the first 60 days of the current year get deducted from your total income, which helps determine your NET income. That’s an almost instant return on investment even before your money has had time to work for you.

Let’s use Peter again as an example:

Peter made $46,000 during the year. He had $3,000 of disposable income and decided to contribute his money to his RRSP. At $46,000 earned income Peter falls into the 15% federal income tax bracket. The $3,000 acts as a deduction from income, bringing his net to $46,000. Peter just maximized his RRSP deduction, by bringing him down a federal income tax bracket!
Let’s take a look at a simple calculation.
Without RRSP $46,000 x 15% =$6900 tax payable.
With RRSP Contribution $46,000 – $3,000 = $43,000 x 15% $6450 tax payable.

The tax savings alone are huge for Peter, and he was pleased with his decision to contribute. Most places of employment take enough tax off your salary or hourly wages to match your year income according to your tax bracket. So, in theory Peter receives a $450 refund from the CRA for his contribution, this does not take into account any and all other forms of income deductions, as well as the provincial tax calculation.

Now another thing to consider is lowering your net income can potentially increase your government credits, like GST/HST and the Canada Child Benefit. These are all calculated based on net income!

As tax preparers, we recommend RRSP contributions as they can provide a huge return on investment to the taxpayer.

The benefits of an RRSP do have an expiry date. Unfortunately, at age 71 is when the CRA requires you to start withdrawing from your RRSP at set percentages. This money being withdrawn is now a RRIF. The whole point of RRSP contributions, aside from ensuring you can live comfortably upon retirement, but it defers the taxes paid on this money, when you likely have lower earned income and be taxed in the lowest tax bracket.

One last thing to note, if you do have RRSP saved up and are a first-time home buyer you can withdraw up to $35,000 for the down payment on your home and have that withdraw be tax free. Repayment is over a 15-year time span, and first payment is required in the second year after the withdrawal. If the money is not contributed back in each tax filing year, it will simply be added as other income. Typically, any money withdrawn from your RRSP is subject to income tax for any other reason outside the Home Buyers Plan and the Lifelong Learning plan, which similarly is the opportunity to withdraw up to $10,000 in a calendar year, ($20,000 lifetime) for education opportunities, with a similar repayment plan.

Now is the time to determine if you should make that last RRSP contribution for the year.

Have questions or want some advice for this upcoming tax filing season, we at SheDo Tax are more than happy to help!

So you received a review letter from the CRA… Now what?

The CRA is requesting more information about your income tax return after you’ve already cleaned out and packed up your tax folders.

Breathe.

A tax review is different from a tax audit. A review is a simpler look at the tax return information, where an audit is a more formal and detailed analysis of the taxpayers return.
The CRA regularly conducts review programs as an important part of the self-assessment tax system. To determine if they’ve assessed your return correctly, they may request more supporting documents and information that applies to the situation your being reviewed for.

They may select your income tax for review for multiple reasons:

A.  Could be a conflict of information between third-party sources (slips issued by your employer, financial institution, your history of credits claimed and deducted)

B.   Could be unusual claims or significant changes from your filing history; or…

C.  Sometimes, its as simple as a random selection.

Also keep in mind that there are a few different types of reviews:

  1. Pre-assessment Review Program (The CRA conducts a review before processing your return and issuing a Notice of Assessment. The peak period for this program is between February and July.)
  2. Processing Review Program (The CRA reviews your return after issuing a Notice of Assessment usually between August and December.)
  3. Matching Program (This can take place before or after the Notice of Assessment is issued, where information from your tax return is compared to a third-party source -your employer or a financial institution.)
  4. Special Assessments Program (This also takes place after the Notice of Assessment is issued. It is a more in-depth review, resulting from trends in non-compliance that have come to the attention of the CRA.)

If you get selected for review, not to worry…We are here to help!  It’s time to co-operate!

Avoid unwanted fees. Do not ignore the CRA’s request to provide additional information on your tax return. The CRA can adjust as they see fit based on the information available. Respond to their request within the specified time frame (usually 30 days) of receiving your notice and avoid the unnecessary hassle. To respond, you must include your reference number (located at the top right corner of their letter to you) and provide all of the information requested.

Do not fret! As concerning as it may seem to receive a letter from the CRA requesting additional information, it’s quite common. As long as you keep your legitimate receipts, slips and letters organized, you won’t need to scramble. This process is as fast and simple as you make it.

If your claim was changed after being reviewed by one of the CRA’s programs and you have additional information or documents related to the claim, the CRA will accept all new submissions and review your claim again for a possible adjustment. Send any additional information or documents to the address indicated on the letter you received or online using your “My Account”.

If you have any other questions regarding a letter you may have received, the SheDo Squad is happy to help.  Reach out and will respond in a timely manner.

Looking forward to hearing from you!

Shannon Smith, 1/3 of our Epic SheDo Squad

Fallin’ Behind on your Taxes?

Every year it is estimated that 3 Million Canadians do not file their taxes on time.  As Income Tax Preparers, this is a staggering number.

 

The Canada Revenue Agency (CRA) encourages filing on or before the deadline of April 30th for T1 individuals, and June 15th for small business owners.  T2 Corporate tax are due 6 months after the end of their fiscal year. So, what if you missed the deadline? What if months or years have gone by since you last filed your taxes?……. Whether you are filing personal tax, small business or corporation, filing late is better than not filing at all.

Admittedly, there aren’t too many people I know, that enjoy filing their taxes.  Tempting as it may be, procrastinating will only make it worse. Often the burden of calculating expenses, collecting receipts, having lost slips, or paying a debt owing to the government is more than enough reason to delay filing.

If your tax balance is zero or you’re getting a refund, you can breathe a sigh of relief, you won’t incur penalties for late filing. It is important to note that filing late can delay your government benefits; for example, if you qualify for the Canada Child Benefit or HST credit and don’t file on time, you may not receive your payment on time.

If you have a balance owing, the penalties for filing late can be quite steep, and often a burden. The current late filing penalty is 5% of your balance owing, plus an additional 1% for each month your return is late, up to 12 months. If filing late is your only option, it is a good idea to file as soon as you can to avoid racking up that extra 1% penalty per month.

There are larger penalties for chronic late filers, a status with the CRA you never want to hold.

On the bright side, there is some reprieve for those who owe a balance to the CRA. If full payment for outstanding debt puts you in financial hardship, you do have a few options. Firstly, you can choose a monthly payment plan set forth and agreed upon between yourself and the CRA. You also have the option in paying in a few installments. The government will accept any attempt at payment. DO NOT think this debt will go away, and that you can delay paying….  I will explain why in another blog post.

Paying what you can does not mean you will no longer accrue interest, but you will only pay interest on the outstanding debt.  Furthermore, there is an interest relief program available to Canadians if you do end up owing money to the CRA. This situation does not apply to everyone, and it is not a guarantee, but if you must file your return late because of circumstances beyond your control, you can apply to have late penalties waived. Check out :  RC4288 Request for Taxpayer Relief with CRA for further details.

In Summary, if you have been delaying filing your taxes, for whatever reason, we here at the SheDo Tax Company would be happy to help you get your taxes on file, up to date and without judgement.  We understand that life gets in the way, other priorities sometimes trump getting your taxes in on time.  You can put your trust in us, and believe us when we say, you are not the only one who has Fallin’ Behind.

 

We are always here to help you!

Rachel Whitlock

 

 

Claiming Donations – TIPS IN 6

Whether you’re volunteering at your church, participating in a local walkathon, or donating to a charitable organization, we Canadians live in a society full of generosity. Along with the colossal feeling of knowing you’ve made a difference; your donation can also yield a tax break. Donating to a charitable organization is helps lower your taxes payable!

 

  1. First things first– This tax credit helps to lower your taxes payable… however, this is a non-refundable tax credit. As such, it can only be used to reduce tax owed; if you don’t owe any tax, you don’t get a refund from this credit. Generally, your tax savings will be equal to the amount of the charitable tax credit calculated.

 

  1. Balance Owing – If you know you’re going to owe money to the government, why not donate some of that money to a qualified charity, rather than the government? This will not only lower your taxes payable, but you’ll be supporting a charity in need.

 

  1. Qualified Charities – It’s important to know if you’ve donated to a qualified charity.  As an example, unfortunately GoFundMe donations are considered a “personal gift” and not a donation. (This doesn’t mean you can’t donate to these campaigns, it’s just not tax deductible).  It is extremely important to ensure the charitable organization you are contributing to is a registered charity and has an eligible charitable registration number.

 

  1. Tax Credit Rates – You can’t always claim the full value of gifts given to charities. Instead, you are limited to claiming gifts up to 75 percent of your net income in most cases. If you donate $200 or more, you qualify for a higher rate. This means that you are eligible for a tax credit worth15 percent on the first $200 donated, plus a tax credit worth 29 percent on any amount above $200. For example, if you donate $200, you receive a tax credit worth $30 (15 percent of $200). However, if you donate $500, you receive the same $30 tax credit, plus a tax credit worth $87 on the amount above $200.

 

  1. Timeline– You can claim donations made on or before Dec 31 in the same tax year. You can also claim any donation amounts not claimed by you or your spouse or common-lay partner in the past five years. This being said, you can also carry forward donation receipts for up to five years and claim them all at once in a single tax year. If you are claiming several credits this year, such as tuition and education credits, check to see if your donation would be better claimed in a future year. Remember, donation credits are non-refundable which means that if you are already in a position where you don’t owe any tax, you won’t benefit from claiming the credit.

 

  1. Super Credit – The super credit started in the 2013 tax year and is listed as only temporary for the 2013 to 2017 tax years. This credit results in an additional 25 percent to the federal rates. For the first $200, you receive the old 15 percent plus another 25 percent worth of credit. For amounts over $200, the amount would be the 29 percent plus another 25 percent federal credit. The maximum contribution that qualifies for the super credit is $1,000. Any amount over that $1,000 does not receive the additional credit.  This credit is only considered to first-time donors.   To be considered a first-time donor, you, or a spouse or your common-law partner, must not have claimed the charitable donations tax credit in the past five years.
  • The super credit is only beneficial to individuals who are behind in taxes and if you have carry forward amounts owing. If you are one of these individuals it is most beneficial to apply all donations on your 2017 return!

 

And that’s my tips in 6!

If you have any questions in regards to the Donation non-refundable tax credit, reach out to us today!  Happy to Help!

Shannon Smith and the SheDo Tax Crew