News
TIPS Line
CRA has an enhanced version of the TIPS website titled “My Account” which can be set up at http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/myccnt/menu-eng.html This site allows you to determine your RRSP deduction limit, as well as view your installment balance, current year’s tax assessment, change your address, telephone number, Home Buyers Plan information and much more. Before you can access the services under “My Account” for the first time, you have to register for a Government of Canada epass. As part of the registration process, you will be required to provide some personal information, create an epass User ID and Password, and select and answer three questions. After you have completed this part of the process, your CRA Activation Code will be mailed to you in approximately five business days (15 days if outside Canada and the U.S.). To complete your registration, return to the CRA “My Account” Web site and enter your CRA Activation Code to access your personal tax and benefit information. To access the CRA’s “My Account” at any time in the future, you simply need to return to the CRA’s “My Account” Web site and log in using your epass User ID and Password.
Tax-Free Savings Account (TFSA)
Canadian residents are now able to set up one or more Tax-Free Savings Accounts. TFSA’s are registered savings accounts similar to registered retirement accounts, but unlike RRF’s, contributions to a TFSA will not be deductible. The advantage of TFSA’s is income and gains (and conversely, losses) in respect to investments held within a TFSA are not included in income when any amounts are withdrawn. Every year, $5,000 of TFSA contribution room will be issued and any unused contribution room will be carried forward to future years, with no limit on the number of years that unused contribution room can be carried forward. When withdrawals are made, that amount will be added to the following year’s contribution room.
For example, if an individual only contributed $3,000 in 2009, an amount of $2,000 would be carried forward to 2010 and the contribution room for 2010 would then be $5,000 plus $2,000, or $7,000. If in 2010, $1,000 is withdrawn, but no contributions are made, the contribution room for 2011 would be $5,000, plus $7,000, plus the $1,000 withdrawn, or $13,000.
For certain individuals, the use of a TFSA can provide advantages beyond just the tax savings on investment income. Examples are:
Seniors – the use of TFSA allows for continued investment earnings while not impacting an individual’s taxable income level.
Low income taxpayers – if low income earners are not able to utilize an RRSP deduction, they could earn tax-free income in a TFSA, depending on their situation concerning the GST credit and Child Tax Benefit.
Persons with no earned income – since RRSP’s are not available to these individuals, they could deposit excess funds to a TFSA. If they should start earning income, they could withdraw the TFSA funds tax free and re-contribute them into an RRSP account.
There is no benefit to having dividend-bearing securities or investments providing capital gains in the TFSA as any tax advantage would be lost. Interest bearing accounts, however, are perfect candidates for TFSA’s, since the interest will not be taxed in a TFSA.
Interest on money borrowed to put into a TFSA is not tax-deductible. It is also important to check the fees charged by the financial institution before opening a TFSA.
Excess contributions will be subject to a tax of one percent per month.
Seniors
An individual whose 2010 net income exceeds $66,335 will have their Old Age Security payment clawed back.
Persons eligible for the $2,000 pension income credit will be able to transfer up to 50% of pension income to a resident spouse/common-law partner in 2009 and subsequent years. This will require a joint election which must be made each year. Both persons must agree to the allocation.
Medical Expenses - Cosmetic Procedures
In the 2010 Federal Budget, any expenses incurred for purely cosmetic procedures performed for enhancing one’s appearance have been deemed ineligible for the medical expense tax credits. These include liposuction, hair replacement procedures, botulinum toxin injections, and teeth whitening. If cosmetic procedures are required for medical or reconstructive purposes, such as corrective laser eye surgery and dental crowns, they will continue to qualify for the tax credit.
Federal Political Contributions
If amounts of $400 or greater are donated to a federal political party by a married or common-law couple, the couple should split the donation between them, making half of the donation in each of their names, in order to obtain the maximum tax credit available. The tax credit available on the first $400 is 75% of the contributed amount, while the credit on amounts greater than $400 is 50% or less.
In order for the contributions to be claimed by each individual, there must be two separate donation receipts, each made out to the appropriate taxpayer. Unlike contributions to Alberta political parties, where both names on the receipt allow the taxpayers to split the donation, the federal policy does not allow the split.
EI Benefits for the Self-Employed
Self-employed people will now have access to the following four special EI benefits: maternity benefits, parental benefits, sickness benefits and compassionate care benefits. They will need to enter into an agreement with Service Canada by registering online with Service Canada, using the “My Service Canada” Account. Unfortunately, they will have to wait twelve months after registering before they will qualify to make a claim for the EI special benefits.
Eco-ENERGY-Retrofit Program
The federal government is providing a grant to help homeowners saving money on home energy retrofits. This grant provides up to $5,000 for expenditures aimed at reducing energy consumption and helping keep a cleaner environment. Launched on April 1, 2007, this grant was increased by 25% on March 30, 2009 and is only available to March 31, 2011 (subject to available funding). In order to qualify, homeowners must first get a pre-retrofit energy evaluation done by a certified evaluator. From the date of the pre-retrofit evaluation, they have 18 months to complete their renovations and have a post-retrofit evaluation done by the evaluator. The post-retrofit evaluation must be completed by March 31, 2011 in order to qualify for the grant.
Examples of what qualifies for this grant are found at http://www.oee.nrcan.gc.ca/residential/personal/retrofit-homes/retrofit-qualify-grant.cfm . Depending on the alterations or renovations recommended by the evaluator, homeowners may also be able to qualify for the Home Renovation Tax Credit. You may also go to http://ecoaction.gc.ca/news-nouvelles/20090330-1-eng.cfm for more information
CPP Issues
Maximum Canada Pension Plan pensionable earnings for 2009: $47,200
Exemption: $3,500
Maximum contributory earnings:
$43,700 × 4.95% = $2,163.15 × 2 (self-employed individuals) = $4,326.30 ($4,237.20 in 2009)
If you are considering accessing your CPP retirement pension, here are some of the points you should be aware of:
- CPP retirement pension on income earned during the years you have been together can be split up to 50% with your spouse (or common-law partner) once your application has been approved. If only one person has contributed to CPP, the pension can be split into equal payments and the pension is then taxed in the hands of the recipients. Advantages of splitting include shifting income to a lower tax bracket spouse and reducing or eliminating the “claw back” of Old Age Security;
- It is possible to take your CPP early if you are age 60-64 and have retired or have reduced earnings. Although there is a decrease in the monthly amount of up to 30%, in many cases it makes financial sense to start taking CPP as early as age 60. The break even age for the CPP early withdraw decision is around 78, however many experts prefer to take the benefits “now”. Please contact us or visit http://www.hrsdc.gc.ca/eng/isp/pub/factsheets/retire.shtml for more information.
- Due to the number of drop off years that you are granted for the calculation of the monthly benefit, it is possible to have zero or minimal contributions to the CPP program for a year without an impact to your monthly pension. Given the large cost of CPP to self-employed individuals (shown above), the opportunity for significant savings exists in the right situation. For an estimate on the amount of your CPP pension and earnings history, please contact Canada Pension at 1-800-277-9914. From this information, we can assist you in making your CPP decision going forward until retirement.
New Mileage Logbooks
On June 28, 2010, the federal government announced that businesses could use a simplified logbook for motor vehicle expense once they have established a base year (maintain a full logbook for one complete year). The simplified logbook covers a three month period and can be used to extrapolate the business use for the entire year (as long as the usage is within 10% of the prior year). You can visit
http://www.cra-arc.gc.ca/nwsrm/rlss/2010/m06/nr100628-eng.html for further details.
Summer 2010 newsletter
2009 Christmas Newsletter
2009_GHA_Christmas_Newsletter.doc
Highlights of the 2009 Federal Budget
Highlights_of_the_2009_Federal_Budget.doc
2008 Christmas Newsletter
60 Day Cut-Off
In order to determine taxable income and corporate taxes payable, which are due 90 days after your fiscal year end, we require all corporate clients to provide their complete records and financial data, including QuickBooks, Simply or any other electronic data, on or before the 60th day following their respective fiscal year-ends.
This policy will ensure our office has 30 days to determine taxable income and corporate taxes payable for all clients to meet this deadline. We will not be able to guarantee the accuracy of the taxable income and corporate taxes payable if complete information is not received within 60 days.
We wish to remind our clients that Canada Revenue Agency and Alberta Finance will assess interest and penalties to corporations with outstanding tax balances 180 days and 90 days, respectively, subsequent to their year-end deadline.
Furthermore, in order to complete and file corporate tax returns within the required time period, being 180 days subsequent to their respective year-end, clients are now required to provide their complete records and financial data, including QuickBooks, Simply or any other electronic data, on or before the 120th day following their respective fiscal year-end. This will ensure sufficient time for our office to complete preparation of the year-end file and corporate tax returns.