Tax season is right around the corner.
Get ready to tell the government how much money you made last year, how much you already paid in tax and hope that the difference will put a few dollars back into your pocket.
But whether you’re in for a refund or a tax bill this year, simply filing your return can be stressful. There are old receipts to be gathered, deadlines to put on your calendar and a new rules you
should know about.
When’s the deadline?
As usual, April 30 is the date most Canadians need to keep in mind. For the majority of tax filers, this is the deadline to both pay any tax due and file your return.
If you’re self employed, this year you have until June 17 to file (the deadline is normally June 15, but that falls on a Saturday this year). Remember, though, that if you owe taxes, you still need
to pay up by April 30.
If you’re late to either settle your balance or send in your paperwork, you’ll face late-filing penalty and daily interest charges on any taxes owed.
When’s the earliest I can file?
If you just can’t wait to get that big refund, know that the Canada Revenue Agency (CRA) will start accepting electronic returns on Feb. 20.
Most people want to skip the tax-processing queue because they anticipate getting money back. But having a big tax bill is also a good reason to file early. That allows you to set up a plan to pay
your tax in installments. The more you manage to pay by April 30, the fewer extra charges you’ll face.
You can put money into your registered retirement savings plan (RRSP) any time. But if you
want to get a tax refund for your RRSP contribution with your 2018 return, the cutoff for adding funds is March 1.
What’s new this year?
A few things:
New and improved tax breaks:
• Climate Action Incentive. Canadians who live in Saskatchewan, Manitoba, Ontario and New Brunswick are in for an extra tax credit this year. The money, which may create or boost a tax refund or
reduce a balance owing, is meant to offset the cost of the carbon tax in provinces that haven’t established a carbon price of their own. Once the tax goes into effect on April 1, it will push up the
cost of gasoline by 4.42 cents a litre, that of natural gas by 3.91 cents per cubic metre and that of propane by 3.1 cents a litre, according to government estimates. In an unusual move, Ottawa is
putting cash into Canadians’ pocket before they incur the extra expense. According to the federal government’s calculations, the average household (defined as 2.6 people) in Saskatchewan will spend
$403 more but receive $598 under the climate-action incentive. In Manitoba, the math works out to $232 out and $336 in. In Ontario, that’s $244 in added costs and $300 in average tax credit. For
families in New Brunswick the breakdown is $202 in extra outlays and $248 in tax credit. In all jurisdictions, residents of small and rural communities will receive an additional 10 per cent
supplement. The amount of the tax credit depends on family size — you can use this table to calculate how much your household can claim. It’s important to note that the tax credit applies to the
household, not the individual taxpayer this means that only one person for every family living under the same roof should claim the credit on her return, she added. All you have to do to receive the
credit is file taxes and claim the credit in a new schedule that will come with the income-tax package in the four affected provinces. Yukon and Nunavut are also adopting the federal carbon pricing
scheme, but because they did so voluntarily, the revenue generated by the tax will flow to the territorial governments rather than directly to taxpayers.
• Medical expense tax credit for service animals. In certain circumstances, Canadians
suffering from severe mental impairment will now be able to claim the cost of caring for service animals as a medical expense. The credit is only for animals trained to perform specific tasks that
help their owners cope with their impairment. Examples of those tasks include things like “guiding a disoriented patient, searching the home of a patient with severe anxiety before they enter, and
aiding a patient experiencing night terrors,” according to H&R Block.
• Accelerated capital cost allowance rates. Self-employed Canadians and business owners,
listen up. This year you might be able to get more money back for the cost of things like business equipment, office furniture and computers. All those things lose value as they age, so the CRA
allows you to gradually claim the cost of these purchases over the years. The good news is that in your 2018 return you’ll be able to get a bigger tax break for equipment bought after Nov. 20 of last
year. For example, say you spent $1,000 last December on a new couch for your office. In the past, you’d have been able to claim only $100 of that expense for the first year. Now, you’ll be able to
claim 50 per cent more than that, or $150. The change will apply for purchases of eligible equipment made up until the end of 2023 and be phased out between 2024 and 2027. The capital cost allowance
reduces your taxable professional or business income.
Tax breaks you can no longer claim:
• Lower tax rate for small business. The federal small business tax rate applies to business income up to $500,000 dropped from 10.5 per cent to 10 per cent in 2018 and came down another notch, to
nine per cent, as of Jan. 1, 2019. On the other hand, Ottawa also tightened the rules on so-called passive income. This is the income businesses earn when they invest surplus profits in things like
mutual funds and real estate. As long as the extra cash stays inside the company, it is taxed at the corporate tax rate, which is lower than the rates that apply to individuals. The federal
government contends many Canadians have been using passive income and its low corporate tax rate to grow their personal savings, so it tightened passive income rules. Under the new regimes,
businesses with less than $50,000 in annual passive income can claim the full $500,000 at the small business rate. The federal government also cracked down on the practice, common among business
owners, to sprinkle income to relatives in lower tax brackets as a way of reducing the family tax bill. With the new rules there’s no tax advantage to income sprinkling unless business owners can
prove that family members are, or have been within the previous five years, actively engaged in the business. The reduction in the small-business tax rate softens the effect of the tighter passive
income and income sprinkling rules. For some business owners, the changes will cancel each other out, he said. “When people file through the software, everything calculates itself in the back end, so
people aren’t going to see a change in the income they’re claiming.”
Service upgrades from the CRA:
• CRA has a new phone system. More than a year after the auditor general blasted the CRA for issues at its call centers, the agency has migrated to a new phone platform. When Canadians call this
year, the CRA is promising they will receive an estimated wait time to speak with an agent instead of the familiar busy signal or message to call back later. Callers will have the choice to wait on
the phone, call back later or use automated options. The new system will also be able to route calls to agents with the skills necessary to deal with the question or issue at stake, the agency said.
The auditor general found that even when Canadians did manage to get through to a CRA agent, they would get wrong information almost 30 per cent of them. This tax season will be the test of whether
the agency has made meaningful progress.
• Pay your taxes with an app. Many Canadians already pay most of their bills through their phones. Starting in February they’ll be able to do so with taxes, too. The My Cra web-based app will let you
view and pay your tax balance with Interac, Visa Debit or Debit MasterCard, or by pre-authorized debit. You can also use the app to pay your taxes at a Canada Post outlet for a fee by generating a
quick response (QR) code.
• Email notifications about account information changes. If you’ve signed
up for this service, starting on February 11, the CRA will begin to send you email notifications about account changes like updates to your address or direct-deposit information. This should make it
easier to spot suspicious activity in your account.
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