Newsletters

Below are many short informative newsletters about various income tax, business, and financial planning matters. Please scroll through the list as these easy to read newsletters are updated regularly. 

Tax Alerts

For several generations, reaching one’s 65th birthday marked the transition from working life to full retirement, and, usually, receipt of a monthly employee pension, along with government-sponsored retirement benefits. That is no longer the reality. The age at which Canadians retire can now span a decade or more, and retirement is more likely to be a gradual transition than a single event.


It’s something of an article of faith among Canadians that, as temperatures rise in the spring, gas prices rise along with them. Whether that’s the case every year or not, this year statistics certainly support that conclusion. In mid-May, Statistics Canada released its monthly Consumer Price Index, which showed that gasoline prices were up by 14.2%. As of the third week of May, the per-litre cost of gas across the country ranged from 125.2 cents per litre (in Manitoba) to 148.5 cents per litre (in British Columbia). On May 23, the average price across Canada was 135.2 cents per litre, an increase of more than 25 cents per litre from last year’s average on that date.


By the middle of May 2018, the Canada Revenue Agency (CRA) had processed just over 26 million individual income tax returns filed for the 2017 tax year. Just over 14 million of those returns resulted in a refund to the taxpayer, while about 5.5 million returns filed and processed required payment of a tax balance by the taxpayer. Finally, about 4.4 million returns were what are called “nil” returns — returns where no tax is owing and no refund claimed, but the taxpayer is filing in order to provide income information which will be used to determine his or her eligibility for tax credit payments (like the federal Canada Child Benefit or the HST credit )


While the Canadian real estate market seems, by all accounts, to have retreated from the record pace it was setting in 2017, there is still plenty of activity. According the statistics released by the Canadian Real Estate Association (CREA), more than 35,000 homes were sold across Canada in the month of April alone. And that means that an equal number of households will be moving in the upcoming months.


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


For almost a decade now, Canadians have been living, and borrowing, in an ultra-low interest rate environment. As of the end of April 2018, the bank rate (from which commercial interest rates are derived) stood at 1.5%. The last time that the bank rate was over 1.5% was in December of 2008. Effectively, adult Canadians who are under the age of 30 have had no experience of managing their finances in high (or even, by historical standards, ordinary) interest rate environments.


The arrival of warmer weather signals both the start of spring and the approaching end of the school year. For many families, it also means the need to begin researching the availability of suitable child care or summer daytime or overnight camp arrangements for the summer months. There are many such options available to parents, but what each of those options have in common is a price tag – sometimes a steep one. Some options, like day camps provided by the local recreation authority or municipality can be relatively inexpensive, while the cost of others, like summer-long residential camps or elite level sports or arts camps, can run to the thousands of dollars.


There are a number of income sources available to Canadians in retirement. Those who participated in the work force during their adult life will have contributed to the Canada Pension Plan and will be able to receive CPP retirement benefits as early as age 60. Earning income from employment or self-employment will also have entitled those individuals to contribute to a registered retirement savings plan (RRSP). A shrinking minority of Canadians will be able to look forward to receiving benefits from an employer-sponsored pension plan.


By the end of April 2018, more than 20 million individual income tax returns for the 2017 tax year will have been filed with the Canada Revenue Agency (CRA). And, inevitably, some of those returns will contain errors or omissions that must be corrected – last year the CRA received about 2 million requests for adjustment(s) to an already-filed return.


Virtually no one looks forward to dealing with the need to file a tax return each spring, and while some of that reluctance is undoubtedly due to the complexity of our tax system, there’s another factor at work.

Many (even most) taxpayers don’t know, until they have actually completed their return for the year, whether additional taxes will be owed. And, no matter what the taxpayer’s financial circumstances, finding out that money is owed to the tax authorities is bad news.


The reach of Canada’s system is broad – residents of Canada are taxed on their world-wide income, and the income or capital amounts that escape the Canadian tax net are few and far between.

One of the most significant of those exceptions, particularly for individual Canadian taxpayers, is the “principal residence exemption”. Plainly put, when a Canadian taxpayer sells his or her home, the proceeds of sale are not included in his or her income for the year (and therefore not taxed), no matter how much that home has appreciated in value since it was acquired. And, of course, given the real estate market conditions that have prevailed in recent years, especially in some urban centers, the difference between the original cost of the family home and its later sale price can be very substantial.


While everyone knows that the best results are obtained when tax and financial planning take place on an ongoing basis, the reality is that most Canadians focus on their tax situation only once a year, at tax filing time. And the harsher reality is that, by then, the opportunity to take steps which will make a significant difference in one’s tax liability for 2017 is lost.


The rules surrounding income tax are complicated and it can seem that for every rule there is an equal number of exceptions or qualifications. There is, however, one rule which applies to every individual taxpayer in Canada, regardless of location, income, or circumstances. That rule is that income tax owed for a year must be paid, in full, on or before April 30 of the following year. This year, that means that individual income taxes owed for 2017 must be remitted to the Canada Revenue Agency (CRA) on or before Monday, April 30, 2018. No exceptions and, absent extraordinary circumstances, no extensions.


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.


For most of the year, taxpayers live quite happily without any contact with the Canada Revenue Agency (CRA). During and just following tax filing season, however, such contact is routine – tax returns must be filed, Notices of Assessment are received from the CRA and, on occasion, the CRA will contact a taxpayer seeking clarification of income amounts reported or documentation of  deductions or credits claimed on the annual return. Consequently, it wouldn’t necessarily strike taxpayers as unusual to be contacted by the CRA with a message that a tax amount is owed or, more happily, that the taxpayer is owed a refund by the Agency. Consequently, it’s the perfect time for scam artists posing as representatives of the CRA to seize the opportunity to defraud taxpayers.


By the end of June all individual taxpayers have filed their 2015 income tax returns and most will have received a Notice of Assessment outlining the Canada Revenue Agency’s (CRA’s) conclusions with respect to that taxpayer’s income and tax position for the year. In most cases, the Notice of Assessment won’t vary a great deal from the information provided by the taxpayer in his or her return. Where it does, and the change is to the taxpayer’s detriment, taxable income assessed is greater than the amount reported by the taxpayer, or a deduction or credit is denied, then the taxpayer has to decide whether to dispute the CRA’s assessment.


By now, most Canadians are familiar with the use and the benefits of a tax-free savings account (TFSA), which have proven to be a very popular savings vehicle since they were introduced in 2009. What’s proven to be harder to do is keeping track of one’s annual TFSA contribution limit. The annual TFSA contribution limit contribution allowed by law has been something of a moving target, subject to change after change by successive governments. As well, withdrawals made from a TFSA are added to one’s annual contribution limit, but not until the following taxation year – a fact that has escaped many TFSA holders and sometimes even their financial advisers. And finally, the Canada Revenue Agency (CRA) used to provide information on a taxpayer’s current year TFSA contribution limit on the annual Notice of Assessment, but that’s no longer the case, meaning that the taxpayer has to make an extra effort to obtain that information.


There has been much discussion in recent years about whether Canadians are adequately prepared for retirement and, more specifically, whether Canadians are saving enough to ensure a retirement free of undue financial stress. While the financial health of current and soon-to-be-retirees (essentially, the baby boomers) is a concern, the focus is more on the question of whether our current system is such that younger Canadians can expect to have some degree of financial security in retirement. The workplace has altered dramatically in the past quarter century and many of the retirement income options which were relied upon by previous generations – especially an employer-sponsored defined benefit pension plan – are all but unknown to private sector workers under the age of 30 or even 40.


The forest fires affecting Northern Alberta and the Canada’s Revenue Agency’s (CRA’s) offer of administrative tax relief to those affected by the fires and the resulting evacuations has highlighted a federal government program of which few taxpayers are aware – the CRA’s Taxpayer Relief Program. In a nutshell, that program offers relief from interest charges, penalties, and collection actions for those who are unable, due to circumstances outside their control, from fulfilling their tax filing and/or payment obligations.


By the beginning of June, most taxpayers have filed their annual return for the previous year and have most likely received a Notice of Assessment in respect of that return, containing the good or bad news about their tax situation for the year. At this point, most Canadians are probably happy to put taxes out of sight and out of mind until next year’s filing season rolls around. For a number of reasons, however, that’s not the best strategy.


As the end of the school year draws closer, and with it the start of two months of summer holidays, families who don’t have a stay-at-home parent (and likely some who do) must start thinking about how to keep the kids supervised and busy throughout the summer months. There is no shortage of options — at this time of year, advertisements for summer activities and summer camps abound — but nearly all the available options have one thing in common, and that’s a price tag. Some choices, like day camps provided by the local recreation authority can be relatively inexpensive, while the cost of others, like summer-long residential camps or elite level sports or arts camps, can run to the thousands of dollars.


By May 23, 2016, the Canada Revenue Agency (CRA) had processed just under 26 million individual income tax returns filed for the 2015 tax year. About half of those returns (56%) resulted in a refund to the taxpayer. About 18% of returns filed and processed required payment of a tax balance by the taxpayer. Slightly over 20% were what are called “nil” returns – returns where no tax is owing and no refund claimed, but the taxpayer is filing in order to provide income information which will be used to determine his or her eligibility for tax credit payments (like the Canada Child Tax Benefit or the HST credit ).


Canada’s tax system is a self-assessing and self-reporting one, in which taxpayers are expected (and required) to provide the tax authorities with an annual summary of their income and any deductions and tax credits claimable, along with payment of any tax amount owed. Although no one really likes doing their taxes, or paying those taxes, the vast majority of Canadians nonetheless do file their returns on time, and pay up. For a significant minority, however, completing and filing the return is something that just doesn’t get done. Sometimes the cause is just procrastination, while in other cases, a taxpayer is worried that there will be a large balance owing and he or she avoids completing and filing the return for that reason.


Springtime and early summer is moving season in Canada. The real estate market is traditionally at its strongest in the spring, and spring house sales are followed by real estate closings and moves in the following late spring and early summer months. All of this means that a great number of Canadians will be buying or selling houses this spring and summer and, inevitably, moving. Moving is a stressful and often expensive undertaking, even when the move is a desired one — buying a coveted (and increasingly difficult to obtain) first home, perhaps, or taking a step up the property ladder to a second, larger home. There is not much that can diminish the stress of moving, but the financial hit can be offset somewhat by a tax deduction which may be claimed for many of those moving-related costs.


By now, most Canadian taxpayers (excepting the self-employed and their spouses, who have until June 15) will have filed their 2015 income tax returns. Once the Canada Revenue Agency (CRA) has processed those millions of returns, over the next few weeks and months, taxpayers across Canada will begin to receive Notices of Assessment for 2015. In most cases, the Notice of Assessment issued will simply confirm the information which the taxpayer provided on the return, perhaps with some minor arithmetical corrections. However, not infrequently, the Notice of Assessment will indicate that the CRA has disallowed or changed the amount of certain deductions or credits, or has included in income amounts not declared by the taxpayer on his or her return. When that happens, it’s time for the taxpayer to decide whether to dispute the CRA’s assessment of their tax situation.


In recent years, there has been a great deal of public discussion about the availability (and the viability) of federal income support programs for retirees. It’s not news that Canada’s population is aging, and the demands placed on government-sponsored retirement income programs will of course increase as greater numbers of Canadians reach the age at which they will be entitled to receive monthly benefit payments from those programs.


Over the next academic and calendar year, post-secondary students will find that a number of changes are taking place with respect to the rules governing the financing side of post-secondary education. Some of those changes will be welcome, and others will not.


For several decades, Canadian families have received financial assistance from the federal government to help offset the cost of raising children, through a range of benefits and allowance programs. Those programs have taken a variety of forms, from direct payments to parents to credits provided on the annual tax return. Some amounts provided under some such programs were taxable, while others were not. The one constant throughout those decades is that such programs are in a continual state of change and revision, resulting in a sometimes confusing patchwork of entitlements.


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 488 lines of the federal tax return (plus 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.


Any taxpayer told of a strategy that offered the possibility of saving hundreds or thousands of dollars in tax and increasing his or her eligibility for government benefits while requiring no advance planning, no expenditure of funds, and almost no expenditure of time could be forgiven for thinking that what was proposed was an illegal tax scam. In fact, that description applies to pension income splitting which is a government-sanctioned strategy to allow married taxpayers over the age of 65 (or, in some cases, age 60) to minimize their combined tax bill by dividing their private pension income in a way which creates the best possible tax result.


For several years, the Canada Revenue Agency (CRA) has been seeking to convince Canadian taxpayers of the benefits of filing their annual tax return online, and it seems that their efforts have been successful. Last year, over 80% of Canadian taxpayers filed their returns by electronic means. The change has been a rapid one, as nearly 40% of tax filers filed a paper return in 2011, with that number dropping to less than 20% in 2015.


While filing a tax return is an annual event for just about every Canadian, the return that is filed, and sometimes the process of filing it, changes each year. Differences in the return itself arise from changes made in our tax laws, which occur on a regular basis. Changes to the filing process generally come about because of changes in the Canada Revenue Agency’s (CRA) administrative procedures, which themselves are usually the result of improvements in technology. The process of filing returns for 2015 includes both types of changes.


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


The early months of the new calendar year can feel like a never-ending series of bills and other financial obligations. Credit card bills from holiday spending, or perhaps a mid-winter vacation, are due or coming due. The RRSP deadline of February 29, 2016 is approaching, and the May 2, 2016 deadline for payment of any final balance of 2015 income taxes owed is not far behind.


Millions of Canadians receive Old Age Security (OAS) benefits, meaning that millions of Canadians may be subject to the OAS “recovery tax” or, as it is more commonly referred to, the clawback. Unfortunately, very few Canadians are familiar with that tax or how it works, and even fewer incorporate the possibility of having to pay the tax into their retirement income planning. There are, however, strategies which allow taxpayers to minimize or avoid the OAS clawback in retirement.


Canadian taxpayers don’t need a calendar to know that the registered retirement savings plan (RRSP) contribution deadline is approaching — the glut of television, radio and internet ads which fill the airwaves and screens this time of year are reminder enough. And, while RRSP planning and retirement planning generally are best approached as an ongoing, year-round activity, it is true that an imminent deadline tends to focus the minds of taxpayers on such issues


As the time for the traditionally strong spring housing market approaches, the current state of Canadian real estate is on the minds of a lot of Canadians these days. It’s also a concern for Finance Canada, which has made a change to Canadian mortgage financing rules which will take effect on February 15, 2016, in time for that spring housing market.


Planning for 2016 taxes when the year has barely started and the filing deadline for 2015 returns is still months away may seem more than a little premature. Nonetheless, taking some time to review one’s tax situation—and perhaps putting a few strategies in place—at the beginning of the year can help avoid a cash flow crisis or other financial shock when the RRSP contribution deadline looms or it is tax filing (and tax payment) time in the spring of 2017. And, while many tax planning and tax saving strategies can be implemented throughout the tax year, getting an early start on such planning usually leads to the best results.


The Employment Insurance premium rate for 2016 is 1.88%.

Yearly maximum insurable earnings are set at $50,800, making the maximum employee premium $955.04.

As in previous years, employer premiums are 1.4 times the employee contribution. The maximum employer premium for 2016 is therefore $1337.06.


The Canada Pension Plan contribution rate for 2016 is unchanged at 4.95% of pensionable earnings for the year.


Dollar amounts on which individual non-refundable federal tax credits for 2016 are based, and the actual tax credit claimable, are contained herein.


The indexing factor for federal tax credits and brackets for 2016 is 1.3%. Contained herein are the federal tax rates and brackets will be in effect for individuals for the 2016 tax year.


Each new tax year brings with it a listing of tax payment and filing deadlines, as well as some changes with respect to tax planning strategies.


Old Age Security (or OAS) is one the two main components of Canada’s government-sponsored retirement income system—the other being the Canada Pension Plan (CPP). There are also federal and provincial supplements which are available to lower-income seniors. While many retired Canadians receive both OAS and CPP benefits every month, the two plans are quite different. The only determinants of the amount of Canada Pension Plan benefits receivable are one’s contribution amount and the age at which one elects to begin receiving benefits; other sources of available income or one’s overall income level are not considered. Eligibility for OAS, on the other hand, is based on Canadian residency. Essentially, a person aged 65 and older who has lived in Canada for at least forty years after the age of 18 is eligible for full OAS benefits. Where the length of Canadian residency after age 18 is less than forty years, a partial pension is earned at the rate of 1/40th of the full monthly pension for each full year lived in Canada. OAS benefits are fully indexed to inflation.


The Canadian tax system is a complex one, and while there are some deductions and credits—like RRSP contributions or charitable donations—which are familiar to just about every taxpayer, others are not so well known. One of those is the deduction which can be claimed by any taxpayer who must pay union dues or professional fees or professional liability insurance premiums.


Thousands of Canadians, usually retirees, spend some or all of the Canadian winter as far south of the border as possible, often in Florida or Arizona. While the declining value of the Canadian dollar has made such sojourns much more expensive, meaning that some vacation plans may have to be scaled back, many Canadians will be planning at least a short stay in a warmer place this winter.


One of the many changes resulting from developments in Canada’s economy over the past quarter century has been the need for, more or less, continuous learning. At one time, it was possible to set a career goal, acquire the necessary training or skills for that work and make a lifelong career in that field. It’s abundantly clear that that is no longer the reality for most Canadian workers, whatever their field of work.


© 2017 J. Kirby & Company Inc.