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Tax Newsletters & Articles

Budget tax changes affecting caregivers (April 2017)

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

Whatever the circumstances, caregiving is a demanding and often stressful role. And, while such caregiving imposes demands on caregivers in a number of areas, one of those demands is almost always financial. Sometimes that takes the form of financial support, or disability-related costs incurred for the dependent relative, while in other cases a caregiver’s income is reduced because of the need to re-allocate time from paid employment to unpaid caregiving.

The Canadian tax system recognizes the financial costs which are borne by caregivers and has, for many years, provided those caregivers with the opportunity to claim tax credits which seek to mitigate those financial costs. Unfortunately that system of credits has grown over a number of years into an often confusing patchwork system. Particularly for the taxpayer who encounters that system only once a year, at tax filing time, it can be difficult to understand which credits are available in which circumstances, and how the credits interact.

For this reason, the federal government has announced, as part of the 2017 federal Budget, that the current system of multiple caregiver credits is being eliminated, effective as of the 2017 tax year, with those multiple credits replaced by a single consolidated Canada Caregiver Credit.

The basic rule for the new credit is that it will be claimable by individual Canadians who provide care for infirm dependants who are parents/grandparents, brothers/sisters, aunts/uncles, nieces/nephews, or adult children of the taxpayer making the claim, or that taxpayer’s spouse or common law partner. The credit amount claimable for infirm dependants who fall into any of those categories is $6,883 per year.

A smaller credit amount will be claimable by individual Canadians who provide care for:

  • an infirm dependant spouse or common law partner for whom the caregiver has claimed the spousal/common-law partner amount;
  • an infirm dependant for whom the caregiver has claimed the eligible dependent credit; and
  • an infirm child who is under the age of 18 at the end of the tax year.

The Canada Caregiver Credit amount for individuals who fall into any of these categories is $2,150 per year.

As is the case under current rules, the credit will be reduced dollar-for-dollar where the dependant’s net income exceeds a prescribed amount. For 2017, that prescribed income amount is $16,163, which represents a significant increase in some cases from the prescribed income limit set under current rules.

In all cases, regardless of the family relationship, the new Canada Caregiver Credit can be claimed only in respect of an individual who is infirm. Under pre-budget rules, adult children who provided in-home care for parents or grandparents who were over the age of 65 could claim a caregiver credit with respect to those relatives. Beginning with the 2017 tax year, however, no credit will be claimable in respect of non-infirm senior relatives who are dependent upon their adult children or grandchildren.

While it is necessary, in order to claim the new credit, that the dependant be infirm, there is no requirement that the infirm individual actually reside with the person making the Canada Caregiver Credit claim. As long as the infirm individual is dependent on the caregiver (and assuming that the other relationship and income criteria outlined above are met) that caregiver can claim the Canada Caregiver Credit.

While only one Canada Caregiver Credit can be claimed in respect of a single infirm dependant, that credit can be shared among multiple caregivers who support the same dependant. So, for instance, a married couple on whom an infirm parent is dependent could divide the credit between them, in whatever proportion they wish.

It should be emphasized that the changes announced in the Budget will have no effect on tax returns for the 2016 taxation year which are now being filed. The Budget measures affecting caregiver tax credits took effect as of January 1, 2017 and will be reflected for the first time on the 2017 tax return which will be filed a year from now.

That said, those taxpayers who are affected (for better or for worse) by the changes may want to take a look at how their tax situation for 2017 has changed as a result. For instance, an individual who provided in-home care to a non-infirm parent or grandparent and who claimed a caregiver tax credit in respect of that parent or grandparent should realize that no such claim will be available for the 2017 tax year. And, for each such claim not made, the individual’s federal tax payable for 2017 will increase by about $700.

Conversely, taxpayers who have not been able to claim a caregiver tax credit because the income of an infirm adult family member who was dependent on them was too high should reexamine their eligibility under the new rules. The dependant income threshold for full eligibility for the (former) infirm dependent credit was $6,902. The dependant income threshold for full eligibility for the new Canada Caregiver Credit is (for 2017) $16,163. Consequently, in many cases, claims for a caregiver tax credit may become available for the first time. In addition, it will be possible for dependants to receive higher income amounts (for instance, by making higher withdrawals from an RRSP or RRIF), without eroding their caregiver’s ability to claim the new Canada Caregiver Credit.

More information on the changes creating the new Canada Caregiver Credit can be found in the 2017-18 federal Budget papers, available on the Finance Canada website at www.budget.gc.ca/2017/docs/tm-mf/si-rs-en.html#_Toc476839165.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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Using the CRA’s mobile apps (April 2017)

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

For individuals, there are currently two such apps – MyCRA and MyBenefits CRA. The former gives users access to a range of information about their own tax affairs, as well as more general information about the CRA’s services, as follows:

  • personal tax information, including the following:
    • view return status and notices of assessment,
    • view benefit and credit payment amounts and dates,
    • view TFSA and RRSP contribution limits,
    • sign up for email notification of correspondence,
    • update address and phone numbers,
    • add or update direct deposit information,
    • request a proof of income statement (option C print),
    • view or update marital status, and
    • view or adjust the list of children in the individual’s care;
  • making a payment to the CRA (opens in new browser window);
  • a list of certified EFILE tax professionals (opens in new browser window);
  • a list of CRA-certified software (opens in new browser window);
  • a list of community volunteer income tax clinics (opens in new browser window);
  • a charitable donation tax credit calculator (opens in new browser window); and
  • a list of registered charities (opens in new browser window).

As the name implies, MyBenefits CRA allows users to obtain both general and taxpayer-specific information about federal and provincial refundable tax credits which they are receiving or may be eligible to receive. Those credits include the harmonized sales tax (HST) credit and the Child Tax Benefit (CTB), and the specific services provided are as follows:

  • non-personalized benefit dates;
  • benefits calculator;
  • the following secure services
    • view next benefit/credit payments,
    • view last benefit/credit payments,
    • view or update marital status,
    • view or adjust the list of children in the individual’s care, and
    • check application status (if applicable) for Canada child benefits.

Because both mobile apps allow access to confidential taxpayer information, it is necessary to register in advance in order to use them. The process involved is essentially the same as is required in order to use the CRA’s online services through its website. And, while the process for doing so can seem a bit detailed and lengthy, once registration is effected, signing in to use the apps is relatively simple thereafter. The initial process of registration is as follows.

The starting place is the CRA’s registration page for online services at www.cra-arc.gc.ca/esrvc-srvce/tx/psssrvcs/pss_fq/cnd-eng.html#hlp1b. Once there, click on the link to MyCRA mobile app or MyBenefits CRA mobile app, where the following instructions will appear.

Step 1 – Provide personal information

  • Enter your social insurance number.
  • Enter your date of birth.
  • Enter your current postal code.
  • Enter an amount you entered on one of your income tax and benefit returns. (Please note: You should have a copy of your returns handy. The line amount requested will vary. It could be from the current tax year or the previous one. To register, a return for one of these two years must have been filed and assessed.)
  • Create a CRA user ID and password.
  • Create a series of security questions and answers.

After the taxpayer completes Step 1 of the registration process, he or she will have access to some information in MyCRA. A CRA security code will then be sent by regular mail and should arrive within 5-10 days. That CRA security code has an expiry date, which will be indicated in the letter. The taxpayer can then return to MyCRA mobile app, select "Log in", and enter his or her CRA user ID and password. When prompted, the user should enter his or her ID and the CRA security code. Once that is done, the user will have access to all of the available services in MyCRA.

The wide availability of information and services online has meant that most Canadians have a large and ever-increasing number of user ids and passwords to remember. The CRA has made using its online services (and mobile apps) somewhat easier in this regard, as it is possible to register for and access those services and apps by using an ID and password already set up with a Canadian financial institution. More information on the how the “sign-in partner” process works is available at www.cra-arc.gc.ca/esrvc-srvce/tx/psssrvcs/snp_fq/menu-eng.html.

Whether it’s done using a CRA ID and password or using the sign-in partner option, once registration is completed, that registration is effective for both mobile apps – MyCRA and MyBenefits, as well as for the CRA’s online service MyAccount. The services provided are, however, different.

My Benefits CRA provides taxpayers with quick access to personalized benefit and credit information in a format specifically designed for mobile devices. MyCRA allows mobile users to view their recent tax information, and update contact information, direct deposit, and more. My Account, the online service, provides taxpayers with a more extensive list of options, and that list can be found at www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/myccnt/bt-eng.html.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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Last-minute tax filing strategies (April 2017)

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

While it is true that nearly all tax planning and tax saving strategies need to be implemented before the end of the calendar year in order to be effective for that year (the RRSP contribution deadline of 60 days after year-end being the only major exception), it’s not the case that nothing can be done at tax filing time to minimize the tax bill payable.

The available strategies are better characterized as tax filing rather than tax planning techniques. While it’s not possible, after the RRSP contribution deadline has passed, to create any expenditure-based deductions or credits for 2016, the taxpayer can realize some tax savings through the strategic use of deductions and credits for expenditures already made, either in 2016 or in previous years. And, many of those expenditures are ones which are incurred by millions of Canadian taxpayers every year.

Medical expense tax credit

While many medical expenses incurred by Canadians (like doctor’s visits and hospital care) are covered by public health care plans, there is a very long list of such expenses (like prescription drugs and dental care) which must be incurred on a regular basis and which must be paid out-of-pocket. Some individuals, of course, have such costs covered by an employer-sponsored benefits plan, but they are a diminishing group – for many Canadians, there is no private or public coverage for such costs.

Taxpayers who must pay out of pocket without reimbursement for medical costs do, however, have the option of claiming a federal credit equal to 15% of qualifying medical expenses. Each of the provinces and territories also offers a medical expense tax credit, with the percentage amount varying by jurisdiction.

In all cases, the credit for medical expenses can be claimed only on such expenses which exceed 3% of the taxpayer’s net income, or $2,237 (for 2016), whichever is less. It is possible, however, for all medical expenses of both spouses and all children who were born in 1999 or later, to be combined and claimed by either spouse. So, while the medical expenses incurred by a single family member might not be enough to allow him or her to make a claim, aggregating those expenses may well mean that total expenses are enough to get over the 3% of net income/$2,237 threshold.

Similarly, it’s also possible to claim, on the 2016 return, expenses which were incurred prior to 2016. Taxpayers are entitled to claim all qualifying expenses incurred in any 12-month period which ends during the taxation year for which the return is being filed. So, if the taxpayer and his or her family incurred medical expenses during 2015 which did not exceed the 3% of net income threshold, they can combine such expenses with qualifying expenses incurred in 2016 in making their claim on the 2016 return. The only restrictions on doing so are that all such expenses must have been incurred within a single 12-month period ending in 2016 and, of course, any expense claimed can only be claimed once.

In determining who will make the medical tax credit claim for a family, there are two points to remember. Since total medical expenses claimable are those which exceed 3% of net income or $2,237, whichever is less, the greatest benefit will be obtained if the spouse with the lower net income makes the claim for total family medical expenses. However, the medical expense credit is a non-refundable one, meaning that it can reduce tax payable, but cannot create or increase a refund. Therefore, it’s necessary that the spouse making the claim have tax payable for the year of at least as much as the credit to be obtained, in order to make full use of that credit.

There are a huge number and variety of medical expenses which can be incurred. Some of those will qualify for the medical expense tax credit whenever a qualifying expenditure is made, while in other cases, it is necessary to have a doctor’s prescription certifying that the particular product, service, or equipment are necessary. A listing of medical expenses eligible for the credit, and any requirements (such as a doctor’s prescription) which must be obtained, can be found on the Canada Revenue Agency website at www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330-331/menu-eng.html#mdcl_xpns.

Charitable donation tax credit

Canadians who make donations to registered charities are entitled to claim a non-refundable charitable donations tax credit for those donations, for both federal and provincial/territorial tax purposes. The amount of the provincial/territorial credit will vary by jurisdiction: the federal credit is calculated as 15% of donations up to $200 and 29% of donations over that amount.

Taxpayers are entitled to make a claim on the annual tax return for charitable donations made in the current (2016) year, or in any of the previous five years. While it may seem counter-intuitive not to claim a contribution made during the year, in some cases a better tax result may be obtained by waiting.

For taxpayers whose total charitable donations made during 2016 are more than $200, the full claim should be made on the 2016 return – there is no benefit to such taxpayers in delaying the claim. Where, however, total charitable donations made during the year do not exceed that $200 threshold, it may be better to wait. For example a taxpayer who contributes $150 to a charity in a year and claims that amount on the return will receive a 15% federal credit. Where the same taxpayer makes a similar $150 donation in the next year and claims the entire $300 in donations on that year’s return, he or she will receive a credit of 15% on the first $200 and 29% on the balance of $100 in donations.

Pension income splitting

Each of the tax filing strategies outlined above require that the taxpayer make some kind of expenditure in order to claim the related credit. That’s not the case for pension income splitting, which can provide eligible taxpayers with significant tax benefits.

Pension income splitting effectively allows spouses to split private pension income (generally, income from an employer-sponsored pension plan, from a registered retirement savings plan or a registered retirement income fund) between them for tax purposes. So, a taxpayer who receives $40,000 a year in qualifying pension income can report $20,000 of that income on his or her return, with the remaining $20,000 reported by his or her spouse. There’s no need for any actual transfer of funds – the “transfer” is simply a notional one done for tax reporting purposes only.

The mechanics of pension income splitting are relatively simple. Taxpayers who wish to split eligible pension income received by either of them must each file Form T1032E(12), Joint Election to Split Pension Income, with their annual tax return. That form, which is unfortunately not included in the general tax return package issued by the CRA, can be found on the CRA website at www.cra-arc.gc.ca/E/pbg/tf/t1032/README.html. There is relatively little information in the General Income Tax Guide on pension income splitting; much more extensive and detailed information on qualifying income, mechanics, benefits, and tax results of the strategy can be found on the CRA website at www.cra-arc.gc.ca/pensionsplitting/.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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Upcoming changes to the Canada Pension Plan (April 2017)

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

Canadians can, of course, contribute to registered retirement savings plans (RRSPs) and individuals who were residents of Canada for at least 20 years of their adult lives will be able to receive OAS benefits after age 65. And, an ever-decreasing minority of Canadians can look forward to receiving payments from an employer-sponsored registered pension plan (RPP). However, despite the availability of these options, the hard fact is that many Canadians now in the work force will not have enough income from all sources, public and private, to ensure a financially comfortable retirement – or even, in some cases, to provide a reasonable standard of living. While most Canadians will receive Old Age Security payments, even the maximum benefit receivable (currently less than $7,000 per year) isn’t enough to live on. Most Canadians will not be receiving benefits from an RPP. And, while changes have been made in recent years to encourage taxpayers to accumulate private retirement savings through an RRSP, the fact is that many working Canadians do not make RRSP contributions each year and those who do usually contribute much less than the allowable maximum.

The Department of Finance estimates that one-third of Canadian families who are nearing retirement and do not have workplace pension plans are at risk of having their current after-tax family income drop by more than 40% following retirement. Faced with that reality, the federal and provincial governments have moved to make changes which would increase the amount of retirement income received by Canadians. Those changes will come about through enhancements to the CPP, which will mean higher CPP retirement benefits for the next generation of Canadian workers.

The benefit of increasing Canadians’ retirement income through changes to the CPP is that, unlike contributions made to an RRSP, saving for retirement through the CPP isn’t voluntary. Working Canadians are required by law to make contributions, with the contribution amount set by the CPP, deducted from the employee’s gross pay and remitted to the federal government on their behalf. And, all contributions made by an individual Canadian worker are matched by his or her employer and similarly remitted to the federal government on his or her behalf. Once the employee chooses to begin receiving CPP retirement benefits (anytime between age 60 and age 70), the amount of monthly benefit received will depend, for the most part, on the amount of contributions made over the individual’s working life.

The changes to be made to the CPP, which will be implemented over a seven year period beginning in 2019, are significant. The goal of increasing the amount of CPP benefits which can be received by retired Canadians will be achieved through both an increase in the percentage of income contributed by Canadians each year and in the maximum amount of income on which those percentage contributions are based.

Right now, Canadian workers are required to contribute 4.95% of their gross income, to a maximum income (known as the “year’s maximum pensionable earnings”, or YMPE) of $55,300. In calculating CPP premiums, the first $3,500 of income is excluded. Consequently, the maximum premium payable by an employee is $51,800 ($55,300 minus $3,500), times the contribution rate of 4.95%, or $2,564.10. With the employer’s matching contribution, the maximum total contribution amount credited to the employee’s CPP “account” for the year is $5,128.20. (Self-employed taxpayers are required to pay both the employer and employee portions of CPP contributions for the year.)

The current goal of the CPP program is to provide a retirement benefit equal to a maximum of 25% of earnings up to the YMPE, which is itself intended to approximate the average Canadian wage. However, given that contribution amounts are limited by the YMPE, individuals earning more than that amount will not be contributing at a rate which will provide the desired income replacement of 25% of average lifetime earnings. As well, although the maximum annual CPP retirement benefit in 2016 was $13,110, most individuals do not receive that amount. The average annual CPP retirement benefit received in 2016 was about $7,500.

The changes to the CPP intended to address these concerns will be implemented over a seven-year period starting in 2019. Percentage contribution rates will be increased, with the goal of raising the income replacement level to one-third of earnings. As well, a new, separate contribution will be payable in respect of earnings above the YMPE.

The changes will be implemented over the following time frame.

  • Increased contribution rates for the CPP will be phased in, starting in 2019. Figures released by the federal government indicate that an individual who earns at least the YMPE will pay about $6 per month in additional premiums in 2019. By 2025, that individual will be paying an additional $43 per month in premiums. Expressed as a percentage, the CPP contribution rate will increase by 1% for both employers and employees between 2019 and 2023.
  • Beginning in 2024, a separate contribution rate, which is projected to be 4% each for employers and employees, will be payable for earnings above the YMPE, to an upper earnings limit. The federal government expects that, upon full implementation in 2025, that upper income limit will be about $82,700. Both employers and employees who are required to make this additional contribution will both be able to claim a deduction for such contribution made when calculating taxable income.

Other, consequential, changes will also be made to the tax system. To help mitigate the impact of increased CPP contribution rates on lower-income Canadians, increased benefits will be provided under the Working Income Tax Benefit, a refundable tax credit that supplements the income of individual Canadians earning less than about $20,000 annually.

More details of the upcoming changes to the CPP can be found in a Backgrounder issued by Finance Canada, which is available on their website at www.fin.gc.ca/n16/data/16-113_3-eng.asp.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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Claiming a deduction for 2016 child care expenses (March 2017)

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

For all families who incur child care expenses, the good news is that most such costs can be claimed as a deduction (as opposed to a refundable or non-refundable credit) on the annual return, meaning that those costs reduce taxable income on a dollar-for-dollar basis. The tax treatment of expenses related to child care can, however, vary, depending on the kinds of expenses incurred and their purpose.

The basic rule is that child care expenses will be deductible when they are incurred in to order to allow a parent to earn income from either employment or self-employment, or to attend school. However, while those criteria for claiming the expense are broad, there are limitations on the amounts which may be claimed, no matter how large the actual expenditure.

For 2016, those dollar figure limitations are as follows:

  • up to $8,000 in child care expenses incurred for a child or children who are 6 years of age or under at the end of 2016; and
  • up to $5,000 in child care expenses incurred for a child or children who are between 7 and 16 years of age at the end of 2016.

Where a child is disabled, higher limits apply, and up to $10,000 in child care expenses can be claimed for 2016.

The total amount claimed for child care expenses, regardless of the age of the children or the number of children for whom such claims are made, is also subject to an overall limit of two-thirds of the income for the year of the parent making the claim. As well, in a two-parent family, any claim for child care expenses must generally be made by the spouse with the lower net income.

While amounts paid for day care or after-school care comprise the majority of child care expenses incurred by families, those aren’t the only costs. Where family finances allow, children may attend an overnight summer camp or a sports school, and a portion of the costs incurred for such camps may also be claimed as child care expenses. As is the case with the basic child care expense claim, there are limitations on the amounts which can be claimed and deducted, as follows:

  • up to $200 per week in such costs incurred for a child or children who were 6 years of age or under at the end of 2016; and
  • up to $125 per week in such costs incurred for a child or children who are between 7 and 16 years of age at the end of 2016.

And, as with the basic child care expense deduction, higher limits apply in the case of a disabled child, for whom up to $275 per week in such costs may be claimed.

There is a third category of expenses which many families incur for children, and those expenses are subject to different tax treatment. That category includes costs incurred to enroll children in extracurricular athletic or arts-focused activities.

While other child care costs are deductible from income, costs incurred for extracurricular activities are eligible for a non-refundable tax credit. Essentially, the federal income tax payable for the year by the parent who claims the credit is reduced by 15% of the amount paid to enroll a child or children in those activities.

Once again, there is a limit on the amount of eligible costs for which a credit can be claimed, and those limits have been reduced for 2016. The 2016 limits are as follows:

  • where a child is engaged in athletic or sports activities, a parent can claim a non-refundable credit on up to $500 of costs incurred for such activities;
  • where a child is enrolled in arts or cultural-related activities, a parent can claim a non-refundable credit on up to $250 of costs incurred for such activities.

It’s readily apparent that costs which are eligible for either of these credits could also qualify, in the right circumstances, for the child care expense deduction. The rule in such circumstances is that where an amount would qualify for both, such amount must first be claimed as a child care expense, with a tax credit then claimable on any unused remainder.

The number and variety of extracurricular activities available for children is, of course, enormous, and so the Canada Revenue Agency (CRA) has prescribed rules which apply to determine whether a particular activity qualifies for either of these credits. Information on those rules, and on the credit generally, can be found on the CRA website at www.cra-arc.gc.ca/fitness/ and www.cra-arc.gc.ca/artscredit/.

A deduction for child care expenses is claimed on line 214 of the annual tax return, but details of child care expenses incurred, and the computation of the available deduction, is done on Form T778, and that form also includes a useful summary of the applicable rules. The T778 is not included in the General Income Tax Return and Guide Package, but is available on the CRA website at www.cra-arc.gc.ca/E/pbg/tf/t778/README.html.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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Authorizing a representative to deal with the CRA (March 2017)

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

Of course, information about anyone’s tax affairs is confidential and is protected, by law, from disclosure to any third party – even to a spouse, parent or child of the taxpayer. Consequently, any taxpayer who wants someone else to deal with the Canada Revenue Agency (CRA) on their behalf – whether it’s a family member, a friend, or a commercial tax return preparation service or tax discounter – must provide the Agency with permission to provide such access. And, although taxpayers are not required to provide such permission in order to have a third party prepare and EFILE their tax return, it’s not unusual for tax return preparers or tax discounters to ask their clients for such an authorization. In many cases, having that authorization will give the tax return preparer access to information – like the amount of available carryforward amounts of tuition or education credits, or the amount of RRSP contribution room – which is needed to complete the return.

That said, the vast majority of taxpayers who are asked to sign a form granting such permission to the person or firm preparing their tax return will likely do so without hesitation, and in most cases without reviewing that form carefully. That’s not the best approach, as a decision to grant anyone access to one’s confidential tax information is a significant step, and the consequences can be more far-reaching than might be apparent at first glance.

The CRA provides a prescribed form – the T1013(E), Authorizing or Cancelling a Representative (available on the CRA website at www.cra-arc.gc.ca/E/pbg/tf/t1013/README.hml), which can be used by anyone to name any other person or company as their representative. It is also possible, for those who are already registered for the CRA’s My Account service, to authorize a representative online.

No matter how the authorization is given, the first question for the taxpayer who is granting authorization is to consider the purpose for which such authorization is being provided.

The CRA’s T1013(E) form provides for two levels of access to an individual’s tax accounts and tax information. Broadly speaking the first, Level 1, provides the named representative with the right to receive information, while the higher Level 2 access enables that representative to make changes to the individual’s tax accounts.

The specific rights granted to a representative at each level are as follows.

Where a representative has been provided by the taxpayer with Level 1 access, the CRA can disclose information about the following to that representative:

  • information included on the taxpayer’s income tax return;
  • adjustments made to the taxpayer’s income tax return;
  • information about the taxpayer’s registered retirement savings plan (RRSP), Home Buyers’ Plan, Tax-Free Savings Account (TFSA), and Lifelong Learning Plan (LLP);
  • accounting information with respect to the taxpayer’s tax account, including balances, payments on filing, and instalment payments or transfers;
  • information about the taxpayer’s benefits and credits, including the Canada child benefit (CCB), goods and services/harmonized sales tax (GST/HST) tax credit, and the working income tax benefit (WITB); and
  • the taxpayer’s marital status (but not information related to the taxpayer’s spouse or common-law partner).

A representative who has been provided by the taxpayer with Level 2 access has all the powers of a Level 1 as well as the right to request adjustments to the taxpayer’s income, deductions, and non-refundable credits, and to effect accounting transfers. A Level 2 representative is also able to obtain personalized tax remittance forms in the taxpayer’s name, submit a request for relief from interest or penalty charges under the Taxpayer Relief Program, and to file a Notice of Objection from an assessment or a Notice of Appeal from a decision of the Minister.

There are some actions which cannot be taken by either a Level 1 or a Level 2 representative who has been authorized to act under a Form T1013(E). Such representatives are not allowed to change the taxpayer’s address, marital status, or direct deposit information, to authorize, view, or cancel other representatives on the taxpayer’s file, to get information about the children who are in the taxpayer’s care, or to apply for child benefits.

Where another person is engaged in preparing a taxpayer’s return or otherwise dealing with tax matters on their behalf, it can obviously be useful for that person to be able to obtain relevant tax-related information about that taxpayer. Taxpayers who are contemplating providing authorization to another person or company should, however, consider the following potential issues and potential pitfalls when deciding how much access to grant and, consequently, how to complete the T1013(E).

First, it’s possible to deal with the CRA through a number of avenues – by telephone, in writing, in person, and online. A taxpayer who is authorizing a representative has to decide, specifically, whether to grant that representative the ability to deal with his or her tax affairs online (through the CRA website) or to limit that access to contacts with the CRA by telephone, in writing, or in person. It is an important decision for this reason. Where the taxpayer completes Part II, Section B of the T1013(E), he or she is granting the representative access only by telephone, writing, or in-person (and not including online access), and the taxpayer can, on the same form, specify the tax years for which access is being authorized, and the level of authorization (Level 1 or 2) being granted for each year. Where, however, the taxpayer completes Part II, Section A, he or she is also providing his or her representative with online access through the CRA website, and such access must be provided for all taxation years, without limit, although the taxpayer can still specify whether such access is at Level 1 or 2.

Second, where a taxpayer engages the services of a tax return preparation service or a tax discounter, it is frequently the case that the business itself, rather than an individual, is named as the taxpayer’s representative on the T1013. Taxpayers should be aware, however, that where a business is named as the representative, everyone employed by that business will, as a result, have access to the taxpayer’s confidential tax information. If the taxpayer wants to limit such access solely to the person with whom they are dealing in relation to their tax return preparation or other tax matter, it is necessary to specify, on the T1013, the name of both the business and the specific individual for whom such authorization is being provided.

Third, when a taxpayer signs a T1013(E) appointing a representative, that T1013(E) does not expire, unless the taxpayer specifies a termination date, or subsequently cancels the appointment, or the CRA is notified of the taxpayer’s death. Taxpayers who have been asked to sign an authorization when engaging a tax return preparation firm or a tax discounter often assume that such authorization will be in effect only until the return is done. Unless a termination date is specified in the authorization, that is not the case.  A representative named in a T1013(E) in which no termination date is specified will have the continuing right to obtain information from the CRA about that taxpayer, even after the taxpayer has finished his or her dealings with the representative. (The CRA does provide a measure of protection for the taxpayer by cancelling inactive authorized representatives after a period of two years.) The good news is that cancelling the representative’s authorization can be done quite easily over the phone. The taxpayer need only call the CRA’s Individual Income Tax Enquiries Line. In order to satisfy the CRA’s information security requirements, the taxpayer will be asked to provide identifying information – at a minimum, his or her name, social insurance number, address, and data from a recently filed tax return. The T1013(E) authorization can then be cancelled.

It’s readily apparent that naming someone as your representative with the CRA, even at the lowest level of authorization for a limited period of time gives that person access to an enormous amount of personal tax and financial information. Taxpayers should be aware, when providing an authorization, exactly what they are agreeing to and for what length of time. When it is determined that providing such access is necessary, careful consideration should be given to the level of access the representative will need, the tax year or years for which such access is required and, possibly most important, providing a date on which that authorization will expire.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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Filing your tax return for 2016 (March 2017)

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

Aside from that administrative concession, there aren’t a lot of changes this year to the process of completing and filing the annual return. If the trend of the past several years continues, as it likely will, the vast majority of taxpayers will file their returns electronically, either by paying someone else to prepare and file the return, or by doing it themselves through the CRA website.

The CRA has for several years been encouraging taxpayers to move away from paper-filing of returns to online filing, and those efforts have been overwhelmingly successful. Last year, 84% of returns filed were filed online, while only 16% of taxpayers continued to paper-file.

Taxpayers who want to paper-file their returns have found it more difficult in recent years, as the CRA has discontinued its practice of mailing personalized returns to Canadians who had used the paper-filing option in the past. However, it is still possible to obtain and use a paper return. Tax return forms and guides (including a return envelope for mailing) are available from Service Canada offices and post offices across the country. If those sources run out of return packages (as has happened in previous years), taxpayers can have a return package mailed to them, by calling the CRA’s Individual Income Tax Enquiries line at 1-800-959-8281 and making a request. As well, a printable version of the return can be found on the CRA’s website at www.cra-arc.gc.ca/formspubs/t1gnrl/menu-eng.html.

The majority of taxpayers who choose to file online have two options – NETFILE and E-FILE. The first of those – NETFILE – involves preparing one’s return using software approved by the CRA and filing that return on the Agency’s website, using the NETFILE service. The second method – E-FILE – involves having a third party file one’s return online, and the group of service providers which are authorized by the CRA to E-FILE individual income tax returns include both tax return preparation services and tax discounters.

It seems that most Canadians prefer to have someone else prepare and file their tax returns. Last year, 56% of individual income tax returns filed came in by E-FILE, while exactly half that number, or 28% of returns were filed using NETFILE, and the balance of 16% were paper-filed. (A fourth option – TELEFILE – which allowed Canadians to file using a touch-tone phone was discontinued by the CRA several years ago and is no longer available.)

The majority of Canadians who would rather have someone else deal with the intricacies of the Canadian tax system on their behalf can find information about E-FILE on the CRA website at www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/fl-nd/menu-eng.html. That site will also provide a listing (searchable by postal code) of authorized E-FILE service providers across Canada.

Those who are more comfortable preparing their own tax returns and filing online can use the CRA’s NETFILE service, and information on that service can be found at www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/netfile-impotnet/menu-eng.html. While there are some kinds of returns which cannot be NETFILED (for instance, a return for a taxpayer who died in 2016), the vast majority of Canadians who wish to do so will be able to NETFILE their return. As well, while it was once necessary to obtain an access code in order to NETFILE, that is no longer the case. The CRA’s NETFILE security procedures can be satisfied by providing specific personal identifying information, including social insurance number and date of birth.

NETFILE can only be used where a return is prepared using tax return preparation software which has been approved by the CRA. While such software can be found for sale just about everywhere this time of year, approved software which can be used free of charge is also available. A listing of both free and commercial software approved for use in preparing individual returns for 2016 can be found on the CRA website at www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/netfile-impotnet/crtfdsftwr/menu-eng.html.

Finally, taxpayers who are not comfortable preparing their own returns, but for whom the cost of engaging a third party to do so is a financial hardship have another option. During tax filing season, the CRA runs a number of Community Volunteer Tax Preparation Clinics where taxpayers can have their returns prepared free of charge by volunteers. A listing of such clinics (which is regularly updated during tax filing season) can be found on the CRA website at www.cra-arc.gc.ca/tx/ndvdls/vlntr/clncs/menu-eng.html.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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What’s new on the 2016 tax return? (March 2017)

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

As a result, it’s easy for a situation to arise in which taxpayers to fail to report income received, or in which they miss out on newly available deductions or credits, both due to a lack of knowledge. And, it’s worth noting that while the Canada Revenue Agency (CRA) will almost certainly pick up on a taxpayer’s failure to report income as required, the CRA does not (and, in fact, cannot) provide the taxpayer with deductions or tax credits to which he or she is entitled, but has failed to claim on the return.

There were a significant number of tax changes which took effect during the 2016 tax year which affected individuals, and which are reflected on the 2016 return to be filed this spring. Some of the more important of those changes are outlined below.

Changes to child and family benefits

As of July 1, 2016, the child and family benefits paid to Canadian families underwent a significant change. Prior to July 1, the federal child and family benefit program consisted of the Canada Child Tax Benefit (which was not taxable), the National Child Benefit Supplement (which was not taxable) and the Universal Child Care Benefit (which was taxable). All of those benefits were replaced, effective July 1, with the Canada Child Benefit, which is not taxable.

What all of that means from the perspective of a family which received child and family benefits from the federal government during 2016 is that the only amount which must be reported on a return for 2016 (generally, on the return of the parent with the lower net income) is any Universal Child Care Benefit which was received between January and June 2016. Any and all other child and family benefits received during the year are not taxable and so do not need to be included in income on the return for 2016.  

Changes to children’s fitness and arts credits

For several years, parents have been able to claim a non-refundable tax credit to help offset the cost of enrolling their children in fitness or arts-related activities.

Those credits may still be claimed on the return for 2016, but they have been reduced. For 2016, the maximum eligible fees per child for purposes of the children’s fitness tax credit has been reduced to $500. Eligible fees per child for purposes of the children’s arts credit have been reduced even further, to $250.

Looking ahead, it’s worth noting that both credits have been entirely eliminated as of 2017, so parents should not plan on claiming either credit when they file their returns for the current taxation year in the spring of 2018.

Elimination of Family Tax Cut

In 2014 and 2015, families with children under age 18 were able to engage in income splitting, through the notional reallocation of income from a higher earning spouse to the spouse with the lower income. That strategy, known as the “Family Tax Cut”, generally allowed up to $50,000 in taxable income to be notionally reallocated to the lower earning spouse, and taxed (at a lower rate) in his or her hands. The maximum tax savings which could be claimed was $2,000.

However, taxpayers who search the 2016 return form for a place to claim the Family Tax Cut won’t find it, as it has been eliminated for 2016 and subsequent taxation years. 

New home accessibility expense tax credit claim

Beginning with the 2016 taxation year, taxpayers can claim a non-refundable tax credit for changes made to a home in order to make it safer or more accessible for a senior or for someone who is disabled. The credit is equal to 15% of qualifying costs incurred, to a maximum of $10,000 in such costs.

The home accessibility tax credit is claimable, not just by the person for whom the qualifying renovations are made but, generally, by family members who support that individual.

In order to be claimed on the return for 2016, any eligible renovations must of course have been done before the end of that year, so the deadline for making such renovations claimable on the 2016 has passed. However, as many common home “renovation” projects do qualify for the credit (for example, installing a grab bar in a bath or shower), it’s worth checking to see whether any such expenditures were made during 2016.

And, of course, such qualifying expenditures made during 2017 will be claimable on the return next spring. More information on the kinds of home renovation expenses that will or won’t qualify for the credit is available on the Canada Revenue Agency website at www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns360-390/398/398-eng.html#R_lgbl_HATC.

Reporting the sale of a principal residence

For many years, Canadian taxpayers have received a tax exemption (the “principal residence exemption”) on any profit (or “gain”) they make on the sale their home, as such amounts are not included in taxable income. Until now, it hasn’t even been necessary to report the sale of one’s home on the annual tax return. As of the 2016 tax year, that has changed.

An individual taxpayer who sells his or her home must now report the sale on Schedule 3 to the annual return. On that Schedule 3, the taxpayer is required to certify the year the property was acquired, the number of years during which the property was his or her principal residence during the period of ownership and the amount for which the property was sold.

There is a related change with respect to the CRA’s ability to enforce the new reporting requirement. Also effective as of 2016, the Agency can at any time (meaning that the usual time limits for reassessments don’t apply) reassess your income tax return if you fail to report a sale of real estate.

Claiming a labour-sponsored funds tax credit

Taxpayers who invest in the shares of federally or provincially (or territorially) registered labour-sponsored venture capital corporations (LSVCCs) can claim a federal tax credit for that investment. Changes have been made, effective for the 2016 tax year, to the percentage claims which can be made.

For 2016 and subsequent years, the federal credit rate percentage for investments in provincially or territorially registered LSVCCs has been restored to 15%.

Conversely, the federal tax credit for the purchase of shares of federally registered LSVCCs has decreased to 5% for 2016. As well, 2016 is the last year for which a credit can be claimed for investments in federally registered LSVCCs, as the federal credit is eliminated for 2017 and later tax years.


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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New Quarterly Newsletters (February 2017)

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

Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues. They can be accessed below.

Corporate:

Issue #39 Corporate

Personal:

Issue #39 Personal


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
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