Newsletters

Tax Alerts

Since the beginning of the pandemic in March 2020, the federal government has provided a wide range of pandemic benefit programs for individuals. In the main, those programs have acted to replace income lost where employment income was no longer available as businesses closed during lockdowns, or individuals were unable to work because of illness or because they were at home with young children when schools closed to in-person learning.


Canada’s retirement income system has three major components – private savings through registered retirement savings plans or registered pension plans, and two public retirement income plans – the Canada Pension Plan and the Old Age Security program. The last of those – the Old Age Security program – is the only aspect of Canada’s retirement income system which does not require a direct contribution from recipients of program benefits. Rather, the OAS program is funded through general tax revenues, and eligibility to receive OAS is based solely on Canadian residency. Anyone who is 65 years of age or older and has lived in Canada for at least 40 years after the age of 18 is eligible to receive the maximum benefit. For the second quarter of 2022 (April to June 2022), that maximum monthly benefit is $648.67.


The difficulties faced by younger Canadians in buying a first home almost anywhere in Canada, owing to both the spiraling cost of real estate and, more recently, increases in interest rates, is a major concern for those individuals and their families. Not surprisingly, then, the issue of housing affordability was a major focus of the recent federal budget, and the following measures to address that problem were announced.


For the majority of Canadians, the due date for filing of an individual tax return for the 2021 tax year was Monday May 2, 2022. (Self-employed Canadians and their spouses have until Wednesday June 15, 2022 to get that return filed.) When things go entirely as planned and hoped, the taxpayer will have prepared a return that is complete and correct, and filed it on time, and the Canada Revenue Agency will issue a Notice of Assessment indicating that the return is “assessed as filed”, meaning that the CRA agrees with the information filed and tax result obtained by the taxpayer. While that’s the outcome everyone is hoping for, it’s a result which can be derailed in any number of ways.


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


It is a sad fact that, every year, thousands of Canadians become the victims of scams in which fraud artists claim to be representatives of the federal government. Equally sadly, in most cases the money lost is never recovered.


Most taxpayers sit down to do their annual tax return, or wait to hear from their tax return preparer, with some degree of trepidation. In most cases taxpayers don’t know, until their return is completed, what the “bottom line” will be, and it’s usually a case of hoping for the best and fearing the worst.


Our tax system is complex and, understandably, its myriad rules and exceptions are a mystery to most Canadian taxpayers – and most are happy to leave it that way. There is however, one rule in the Canadian tax system which doesn’t really have any exceptions and of which most Canadian taxpayers are all too well aware. That is the rule that says individual income tax amounts owed for any tax year must be paid – in full – on or before April 30 of the following calendar year. This year, that means April 30, 2022 – although, since April 30, 2022 falls on a Saturday, the Canada Revenue Agency is providing an administrative concession by allowing taxpayers until Monday May 2 to pay their taxes without incurring any interest charges.


Most Canadians don’t turn their attention to their taxes until sometime around the end of March or the beginning of April, in time to complete the return for 2021 ahead of the May 2, 2022 filing deadline.


Each year, the Canada Revenue Agency (CRA) publishes a statistical summary of the tax filing patterns of Canadians during the previous filing season. Those statistics for last year show that the vast majority of Canadian individual income tax returns — just over 90%, or just over 28 million returns — were filed online, using one or the other of the CRA’s web-based filing methods. About 2.8 million returns — or just over 9% — were paper-filed.


The Canadian tax system provides individual taxpayers with a tax credit for out-of-pocket medical and para-medical expenses incurred during the year. Given that such expenses must be incurred at some time by virtually every Canadian, that credit is among the most frequently claimed on the annual return. Unfortunately, however, the rules governing such claims are detailed, somewhat complex, and frequently confusing.


While the requirement that Canadians file an income tax return each year never changes, the actual content of that return is never the same year to year. While many of the changes — like inflation-related increases to income tax brackets and credit amounts — happen automatically and don’t require any particular awareness or action on the part of the taxpayer, this is not the case with all tax changes. In some cases, taxpayers who aren’t aware of the changes can miss out on newly available or expanded tax deductions or credits, even if they are using tax preparation software to prepare their return. While the Canada Revenue Agency (CRA) will usually catch arithmetic errors made on a return, the Agency does not (and cannot) ensure that a taxpayer has made all of the claims which are available to him or her. And perhaps the only thing worse than having to pay a tax bill is paying one that is higher than it needs to be because available deductions or credits were missed.


The list of financial assistance programs that have been provided by the federal government to support individual Canadians through two years of the pandemic is lengthy, detailed, and sometimes confusing. Unfortunately for the Canadian taxpayer, however, every one of those programs has one thing in common — benefits received are taxable income which must be reported on the return for the year in which they were received, and on which tax must be paid.


Sometime during the month of February, millions of Canadians will receive mail from the Canada Revenue Agency (CRA). That mail, a “Tax Instalment Reminder”, will set out the amount of instalment payments of income tax to be paid by the recipient taxpayer by March 15 and June 15 of this year.


Income tax is a big-ticket item for most retired Canadians. Especially for those who are no longer paying a mortgage, the annual tax bill may be the single biggest expenditure they are required to make each year. Fortunately, 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), in order to help minimize that tax burden. And, in most cases, the availability of those credits is flagged, either on the income tax form which must be completed each spring or on the accompanying income tax guide.


If there is one invariable “rule” of financial and retirement planning of which most Canadians are aware, it is the unquestioned wisdom of making regular contributions to one’s registered retirement savings plan (RRSP). And it is true that for several decades the RRSP was only tax-sheltered savings and investment vehicle available to most individual Canadians.


As the pandemic continued past 2020 and through 2021, it is likely that employees who were able to work from home spent at least part of the 2021 tax year doing just that. And, as was the case in 2020, those workers may be entitled to claim a deduction on their 2021 tax return for home office expenses incurred.


The Employment Insurance premium rate for 2022 is unchanged at 1.58%.


The Quebec Pension Plan contribution rate for 2022 is set at 6.15% of pensionable earnings for the year.


The Canada Pension Plan contribution rate for 2022 is set at 5.7% of pensionable earnings for the year.


Dollar amounts on which individual non-refundable federal tax credits for 2022 are based, and the actual tax credit claimable, will be as follows:


The indexing factor for federal tax credits and brackets for 2022 is 2.4%. The following federal tax rates and brackets will be in effect for individuals for the 2022 tax year.


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


Canadians have a well-deserved reputation for supporting charitable causes, through donations of both money and goods. Our tax system supports that generosity by providing a tax credit for qualifying donations made.


The Canadian tax system is a “self-assessing system” which relies heavily on the voluntary co-operation of taxpayers. Canadians are expected (in fact, in most cases, required), to complete and file a tax return each spring, reporting income from all sources, calculating the amount of tax owed and remitting that amount to the federal government by a specified deadline. Although the rate of compliance among Canadian taxpayers is very high — just over 30 million individual income tax returns for the 2019 tax year were filed with the Canada Revenue Agency (CRA) between February and October of 2020 — there are, inevitably, those who do not either file or pay on time.


One of the more unexpected effects of the current pandemic has been the impact on the Canadian real estate market. In each of July, August, and September 2020 the number of home sales, especially in major cities, has set a year-over-year record and, in many of the same places, the vacancy rate for rental accommodation has gone up.


Since the pandemic began early in 2020, and especially after many non-essential businesses were required to close temporarily as a public health measure, the federal government has brought forward a broad range of financial relief programs for both individuals and businesses.


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


The year 2020 has been one of significant personal and economic dislocation for Canadians. The ongoing pandemic and the resulting impact to everyone’s way of life has led many to reassess their current circumstances and, often, to make changes. For older Canadians, one of those changes is likely to be consideration of whether it makes sense to accelerate retirement plans. Like the rest of the workforce, many older Canadians have lost jobs or faced reduced hours — and, therefore, reduced income — as a result of the pandemic. Older Canadians have reason to feel particularly vulnerable to the risk of falling seriously ill during the pandemic, and many of those who are nearing retirement are likely considering, as the pandemic continues with no certain end in sight, whether it makes sense to return to full-time work (if and when that work becomes available again) and continue to incur such risks.


Each year, the due date for payment of all income tax amounts owed for the previous year falls on April 30. In 2020, however, that payment deadline has been something of a moving target. Earlier this year, the federal government, in recognition of the financial disruption and hardship caused by the pandemic, extended the payment deadline by four months, to September 1, 2020. In mid-September that date was extended again, such that all individual income taxes owed for 2019 were due and payable by Wednesday September 30. There has been no further extension.


Notwithstanding the ongoing pandemic, the real estate market in most of Canada continues to thrive and home prices continue to rise. Some of that may be attributable to the fact that, while prices are rising, the cost of financing a home purchase is near historic lows.


Most Canadians know that the deadline for making contributions to one’s registered retirement savings plan (RRSP) comes 60 days after the end of the calendar year, around the end of February. There are, however, some circumstances in which an RRSP contribution must be (or should be) made by December 31, in order to achieve the desired tax result.


When the Canada Pension Plan was introduced in 1965, it was a relatively simple retirement savings model. Working Canadians started making contributions to the CPP when they turned 18 years of age and continued making those contributions throughout their working life. Those who had contributed could start receiving the CPP retirement benefit at any time between the ages of 60 and 65. Once an individual was receiving retirement benefits, he or she was not required (or allowed) to make further contributions to the CPP, even if that individual continued to work. The CPP retirement benefit for which that individual was eligible therefore could not increase (except for inflationary increases) after that point.


Between mid-February and mid-August of this year, the Canada Revenue Agency (CRA) received and processed just over 29 million individual income tax returns filed for the 2019 tax year. The sheer volume of returns and the processing turnaround timelines mean that the CRA does not (and cannot possibly) do a manual review of the information provided in a return prior to issuing the Notice of Assessment. Rather, all returns are scanned by the Agency’s computer system and a Notice of Assessment is then issued.


When the state of emergency was declared in March of this year, the federal government extended the usual deadlines for both the filing of individual tax returns and payment of taxes owed, for both 2019 and 2020. Sometimes those deadlines (like the deadline for filing of individual income tax returns for 2019) were put off until June, but most such deadlines were deferred until September 30. A summary of the federal individual income tax deadlines which will fall this year on September 30 is set out below.


Of all the many financial relief programs introduced by the federal government to address the economic impact of the pandemic, probably none has had a bigger impact than the Canada Emergency Relief Benefit (CERB). As of August 16, nearly 9 million Canadians had applied for and received payments under the CERB program, and the program had paid out just over $70 billion.


Most Canadians who participate in the paid work force do so as employees. Consequently, they receive a regular paycheque from their employer and they pay income taxes by means of amounts deducted from that paycheque and remitted to the federal government on their behalf.


It’s an acknowledged reality that times of crisis bring out both the best and the worst in people. While most Canadians would never consider using the current pandemic as a means of defrauding others, this is not, unfortunately, true of everyone.

This is a time when Canadians are particularly vulnerable to scammers and fraud artists, for a number of reasons. First, of course, is the financial dislocation which has resulted from the pandemic — many Canadians have lost income and may be in real financial difficulty, making them especially vulnerable to fraudulent communications indicating that there is money available to them. Second, the federal government has instituted a great number of programs to provide financial assistance to those hit hard by the pandemic. The sheer number of those programs, however, and the fact that they have had to be revised frequently to take account of changing conditions has resulted in an inevitable degree of confusion about just what is available, who is eligible for the different benefits, and how to claim them. That confusion makes it easier for fraud artists to convince their victims of the validity of what they are “offering”. It also makes taxpayers vulnerable to phone calls or voice mails in which they are, in effect, accused of receiving benefits to which they were not entitled and demanding that they send funds in repayment.


When states of emergency were being declared across the country in March of this year, thousands of businesses were forced to close their doors and, as a result, were faced with the necessity of laying off some or all of their employees.

The question of when, or even whether, those employees could and would be recalled to work was essentially unknown at that time. To address that reality the federal government established the Canada Emergency Wage Subsidy (CEWS) program. As the name implies, the program involved the payment of a subsidy to the employer, who would use those funds to keep employees on the payroll pending the re-opening of the business and the return to work.


For post-secondary students the upcoming academic year is going to be unlike anything they have previously experienced. Post-secondary institutions across the country are now determining whether, and to what extent, students should return to in-class learning or whether, at least for the fall semester of the 2020-21 academic year, programs should be delivered entirely through online or remote learning. While some institutions have already indicated that they will be only providing online learning, and a smaller group intends to continue entirely with the traditional in-class model, most universities and colleges have taken a “wait and see” approach, choosing to employ a “hybrid” model which combines in-class learning with online courses.


When the Canada Pension Plan was put in place on January 1,1966, it was a relatively simple retirement savings model. Working Canadians started making contributions to the CPP when they turned 18 years of age and continued making those contributions throughout their working life. Those who had contributed could start receiving CPP on retirement, usually at the age of 65. Once an individual was receiving retirement benefits, he or she was not required (or allowed) to make further contributions to the CPP. The CPP retirement benefit for which that individual was eligible therefore could not increase (except for inflationary increases) after that point.


Just over a decade ago, it was possible to buy a home in Canada with no down payment — financing 100% of the purchase price — and extending the repayment period for that borrowing over a 40-year period.


While Canadians had an extended time this year to file their income tax returns for the 2019 tax year, the extended filing deadlines (June 1 for the majority of Canadians, and June 15 for self-employed individuals and their spouses) have passed and returns should be filed.


While the standard (and accurate) advice is that tax and financial planning are best approached as activities to be carried on throughout the year, it’s also the case that a mid-year tax and financial checkup makes good sense, and that’s especially the case this year.


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


Although the filing deadline for individual income tax returns for the 2019 tax year has been extended to June 1, 2020, millions of Canadians have nonetheless already filed those returns. Specifically, by May 19, 2020, the Canada Revenue Agency (CRA) had processed just over 20 million individual income tax returns filed for the 2019 tax year. Just over 13 million of those returns resulted in a refund to the taxpayer, while just over 3 million resulted in a tax balance owed by the taxpayer.


Although we’re not even halfway through the calendar, 2020 has already been a year of significant financial upheaval and stress for millions of Canadians. The number of employed Canadians fell by one million during the month of March 2020 — and then by another two million during the month of April.


Since mid-March, the federal and provincial governments have announced the creation of numerous programs to help both individuals and Canadian businesses with the financial fallout of the current pandemic. Of those programs, none has had a more direct impact on the lives of Canadians than the Canada Emergency Response Benefit, or CERB. As of mid-May, more than 8 million Canadians have applied for the benefit, and more than $40 billion has been paid out under the CERB program.


Working from home isn’t really a new phenomenon — employees have been doing so for more than 25 years, ever since changes in technology made such remote work arrangements feasible. Over the past two months or so, however, millions of Canadian employees have had to adapt to working from home for the first time. And it seems that an increasing number of companies are deciding that such arrangements can and should be maintained for the longer term, even after they are no longer required for reasons of public health.


The Old Age Security program is the only aspect of Canada’s retirement income system which does not require a direct contribution from recipients of program benefits. Rather, the OAS program is funded through general tax revenues, and eligibility to receive OAS is based solely on Canadian residency. Anyone who is 65 years of age or older and has lived in Canada for at least 40 years after the age of 18 is eligible to receive the maximum benefit. For the second quarter of 2020 (April to June 2020), that maximum monthly benefit is $613.53.


By the time most Canadians sit down to organize their various tax slips and receipts and undertake to complete their tax return for 2019, 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 2019, must have been implemented by the end of that 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 March 2, 2020 in order to be deducted on the return for 2019.


The past few months have been an almost perfect storm of bad financial news for Canadian retirees. The historic stock market downturn which occurred in mid-March resulted in a significant loss of value for many retirement savings portfolios, whether those savings were held in registered retirement savings plans (RRSPs) or registered retirement income funds (RRIFs). That downturn was accompanied by three consecutive interest rate cuts by the Bank of Canada, meaning that rates of return on such safe investment vehicles as guaranteed investment certificates, which were already low, became negligible.


There have been so many announcements over the past couple of months with respect to temporary changes to individual and business tax obligations that keeping up with all of the new rules and altered deadlines isn’t easy. The good news is that, in all cases, individual taxpayers (both employees and the self-employed) are being provided with extended time to pay any income tax amounts for both 2019 and 2020. And, in most cases, taxpayers also have more time to file returns for the 2019 tax year.


Wage subsidy program for employers

The federal government will be providing eligible employers who have experienced a significant decline in revenues with a wage subsidy. For purposes of the subsidy, eligible employers include individuals, taxable corporations, and partnerships consisting of eligible employers, as well as non‑profit organizations and registered charities.


The current pandemic has changed the lives of Canadians in innumerable ways, and the tax system has not been exempt from those changes. In fact, since we are currently in what would in normal circumstances be the peak of the filing, payment and return processing season, the usual tax-related obligations which apply to both individuals and businesses have been altered or extended in a number of ways to accommodate current realities.


Income tax is a big-ticket item for most retired Canadians. Especially for those who are no longer paying a mortgage, the annual tax bill may be the single biggest expenditure they are required to make each year. Fortunately, 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), in order to help minimize that tax burden. And, in most cases, the availability of those credits is flagged, either on the income tax form which must be completed each spring or on the accompanying income tax guide.


If there is one invariable “rule” of financial and retirement planning of which most Canadians are aware, it is the unquestioned wisdom of making regular contributions to a registered retirement savings plan (RRSP). And it is true that for several decades the RRSP was only tax-sheltered savings and investment vehicle available to most individual Canadians.


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 8 pages (as of 2019) of the federal tax return (plus a 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.


The Employment Insurance premium rate for 2020 is decreased to 1.58%.


The Canada Pension Plan contribution rate for 2020 is increased to 5.25% of pensionable earnings for the year.


Dollar amounts on which individual non-refundable federal tax credits for 2020 are based, and the actual tax credit claimable, will be as follows:


The indexing factor for federal tax credits and brackets for 2019 is 1.9%. The following federal tax rates and brackets will be in effect for individuals for the 2020 tax year:


Alberta

The general corporate income tax rate will decrease from 11% to 10%, effective January 1, 2020.

The provincial education and tuition tax credits are eliminated as of the 2020 taxation year.

Indexation of personal income tax credits and income brackets is eliminated as of January 1, 2020.

The provincial Scientific Research and Experimental Development (SR&ED) tax credit is eliminated as of January 1, 2020.


Your Business. Your Way.