When you make a mistake on your (already filed) tax return
May 24, 2023
The vast majority of Canadians view completing and filing their annual tax return as an unwelcome chore, and generally breathe a sigh of relief when it’s done for another year. 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 (CRA) 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.
Over 94% of the returns which had been filed for the 2022 tax year by mid-April 2023 were filed through online filing methods (NETFILE or EFILE), meaning that they were prepared using tax return preparation software. The use of such software significantly reduces the chance of making a clerical or arithmetic error, like entering an amount on the wrong line or adding a column of figures incorrectly. However, no matter how good the software is, it can work only with the information that is provided to it. Sometimes taxpayers prepare and file a return, only to later receive a tax information slip that should have been included on that return. It’s also easy to make an inputting error when transposing figures from an information slip (for example, a T4 slip from one’s employer) into the software, such that $73,246 in income becomes $72,346. Whatever the cause, where the figures input are incorrect or information is missing, those errors or omissions will be reflected in the final (incorrect) result produced by the software.
In other cases, a receipt for something like a charitable donation may be overlooked when the taxpayer is completing the return, or may be received after the return has already been filed. Whatever the cause or reason for the error or omission in an already filed return, the question which immediately arises is how to make things right. And, no matter what the reason for the error or omission, the course of action to be followed by the taxpayer is the same.
Of the 17 million individual income tax returns for the 2022 tax year filed with the Canada Revenue Agency (CRA) by the middle of April 2023, no two were identical. Each return contained its own particular combination of types and amounts of income reported and deductions and credits claimed. There is, however, one thing which every one of those returns has in common: For each and every one, the CRA will review the return filed, determine whether it is in agreement with the information contained therein, and, finally, issue a Notice of Assessment (NOA) to the taxpayer summarizing the Agency’s conclusions with respect to the taxpayer’s tax situation for the 2022 tax year.
When all goes as it should, the information contained in the NOA is the same as that provided by the taxpayer in his or her return. In a minority of cases, however, the information presented in the NOA will differ from that provided by the taxpayer in his or her return. Where that difference means an unanticipated refund, or a refund larger than the one expected, it’s a good day for the taxpayer. In some cases, however, the NOA will inform the taxpayer that additional amounts are owed to the CRA. When that happens, the taxpayer has to figure out why, and to decide whether or not to dispute the CRA’s conclusions.
Making a payment arrangement with the Canada Revenue Agency
May 20, 2023
All Canadian individual taxpayers were required to pay any tax balance owed for the 2022 tax year on or before May 1, 2023. As of May 2, 2023, interest at a rate of 9% is levied on all such outstanding amounts, and such interest charges are compounded daily.
Where an individual cannot pay 2022 taxes owed, in whole or in part, it is possible to reach a payment arrangement with the Canada Revenue Agency (CRA) which allows the taxpayer to pay outstanding amounts over time.
CRA issues updated publication on taxpayer objection and appeal rights
May 12, 2023
Most Canadians were required to file an income tax return for the 2022 tax year by the end of April 2023. For each such filing, a Notice of Assessment is issued by the Canada Revenue Agency (CRA), outlining the Agency’s conclusions with respect to the individual’s tax situation (and tax liability) for the year.
Where the information on the Notice of Assessment differs from that which was provided by the taxpayer on the return (and particularly where those differences result in increased tax payable by the taxpayer), that taxpayer must decide whether to object to the CRA’s conclusions as outlined in the Notice of Assessment.
The CRA recently updated and re-issued its publication outlining the circumstances in which a taxpayer can file an objection to the Notice of Assessment and how to do so. The updated publication – Resolving Your Dispute – Objection Rights under the Income Tax Act 2022 (P148 (E) Rev. 22) can be found on the CRA website at https://www.canada.ca/content/dam/cra-arc/formspubs/pub/p148/p148-22e.pdf.
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May 1, 2023 deadline for payment of individual income taxes for 2022
April 28, 2023
Monday May 1, 2023 is the deadline by which all individual income taxes owed for the 2022 tax year must be paid. The May 1 payment deadline applies regardless of the date by which an individual must file their income tax return for 2022.
Taxpayers should note that the current labour disruption at the CRA does not affect or extend the payment deadline, which remains May 1, 2023.
May 1, 2023 deadline for filing of individual income tax returns for 2022
April 28, 2023
Most individual Canadian taxpayers must file their income tax returns for the 2022 tax year on or before Monday, May 1, 2023. Self-employed individuals and their spouses, however, have until June 15, 2023 to file their returns for 2022.
The filing deadline is not affected by the current labour disruption at the Canada Revenue Agency. While the processing of returns (especially paper-filed returns) may be delayed, the filing deadline nonetheless remains Monday May 1, 2023, and late-filing penalties will apply where returns are filed after that date.
Some tax filing strategies for the 2022 return (April 2023)
April 18, 2023
It is an axiom of tax planning that the best year-end tax planning begins on January 1. And while it’s true that opportunities to make a significant dent in one’s tax payable for the year diminish as the calendar year winds down, it’s not the case that the time frame for taking advantage of such opportunities has passed.
Most tax planning strategies, in order to affect one’s tax liability for the year, must be put in place prior to December 31. The one major exception to that rule is contributions made to one’s registered retirement savings plan (RRSP), but even that must be done within 60 days after the end of the calendar year.
At this point there are a couple of ways to minimize the tax hit for 2022 – by claiming all available deductions and credits on the return, and also by making sure that those deductions and credits are structured and claimed in the way which will give the taxpayer the greatest tax benefit. It would seem logical to claim every possible deduction, to the maximum extent possible, but that’s not in fact always the best approach. It is counterintuitive, but sometimes the best overall tax result can be obtained by deferring tax deduction or credit claims to a future year, or by transferring them to another family member.
Two of the mostly widely available opportunities to do so involve claims for tax credits involving medical expenses incurred and charitable donations made. What follows is an outline of how those medical and charitable donation expense and credit claims can be structured to reduce tax payable for 2022, and in some cases, for future years.
Charitable donations
Taxpayers are entitled to make a claim on the annual tax return for charitable donations made in the current (2022) year or any of the previous five years. The reason it can sometimes makes sense not to claim a charitable donation in the year it was made arises from the way in which the charitable donations tax credit is structured to encourage higher donations.
That credit, at both the federal and provincial/territorial levels, is a two-tier credit. Federally, the first $200 in donations receives a credit of 15% of the total donation, or $30. However, donations above the $200 level receive a credit equal to 29% of the donation amount over $200.
Take, for example, a taxpayer who makes a regular contribution to a favourite charity of $100 each month, or $1,200 per year. Where he or she claims that donation on the annual return each year, that claim will result in a federal credit of $320 ($200 times 15%, plus $1,000 times 29%). Where, however, the same taxpayer defers the claim to the following year and claims a total of $2,400 in donations on a single return, he or she will receive a federal credit of $668. ($200 times 15%, plus $2,200 times 29%). Where the donations are accumulated and claimed once every five years, the federal credit received will be $1,712 ($200 times 15%, plus $5,800 times 29%). Under each scenario, the total charitable donation made is the same, but the amount of credit received increases with each year that the claim is deferred. Since each of the provinces and territories provide a two-tier credit (at varying rates, depending on the jurisdiction), the same result will be seen when calculating the provincial/territorial credit.
It’s important to note as well that charitable donations made by either spouse can be combined and claimed on the return for one of those spouses, thereby increasing the amount of charitable donations available to claim and possibly the amount of credit which can be received.
Medical expenses
Notwithstanding our publicly funded health care system, there are a great (and increasing) number of medical and para-medical expenses for which coverage is not provided and which must be paid on an out-of-pocket basis. In many instances, it’s possible to claim a medical expense tax credit for those out-of-pocket costs.
The federal credit for such expenses is 15% of allowable expenses. As is usually the case, the provinces and territories also provide a credit for the same expenses, at varying rates.
Many taxpayers, with some justification, find the rules on the calculation of a medical tax credit claim confusing. First, there is an income threshold imposed. Medical expenses eligible for the credit are qualifying expenses which exceed 3% of net income, or (for 2022) $2,497, whichever is less. Put more practically, for 2022 taxpayers who have net income of $83,250 or more can claim medical expenses incurred over $2,497. Those with lower incomes can claim medical expenses which exceed 3% of that lower net income. For instance, a taxpayer having $35,000 in net income could claim qualifying medical expenses incurred over $1,050 (3% of $35,000).
The other aspect of the medical expense tax credit which can be confusing is the calculation of the optimal time period. Unlike most tax credit claims, the medical expense tax credit can be claimed for qualifying expenses which were paid in any 12-month period ending during the tax year. While confusing, this rule is beneficial, in that it allows taxpayers to select the particular 12-month period during which medical expenses (and therefore the resulting credit claim) is highest. The only restrictions are that the selected 12-month period must end during the calendar year for which the return is being filed and, of course, any expenses which were claimed on a previous return cannot be claimed again.
While only expenses which exceed the $2,497 / 3% threshold may be claimed, it’s also possible to aggregate expenses incurred within a family and make a single claim for those expenses on the return of one spouse. Specifically, the rules allow families to aggregate medical expenses incurred for each spouse and for all children born in 2005 or later. While medical expenses incurred by a single family member might not be enough to allow him or her to make a claim, aggregating those expenses is very likely (especially for a family that does not have private medical insurance coverage) to mean that total expenses will exceed the applicable threshold.
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 the 3% of net income / $2,497 threshold, 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 otherwise 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.
What to expect when you hear from the Canada Revenue Agency (April 2023)
April 18, 2023
Most Canadians live their lives with only very infrequent contact with the tax authorities and are generally happy to keep it that way. Sometime between mid-February and the end of April (or June 15 for self-employed taxpayers and their spouses) a return must be filed by the taxpayer and a Notice of Assessment is then issued by the Canada Revenue Agency (CRA). In most cases, the taxpayer will receive a tax refund by direct deposit to his or her bank account, while in a minority of cases the taxpayer will have to pay a tax amount owing on or before May 1, 2023.
Sometimes, however, the process does not play out in quite that way. In some cases, the CRA will have questions about information reported on the taxpayer’s return – perhaps an income amount reported does not match up with the amount reported to the CRA by the payor of that income. In other cases, the taxpayer may have claimed a deduction or credit, and the CRA wants the taxpayer to provide them with the receipt or other documentation to support that deduction or credit claim. In both cases, the CRA may contact the taxpayer to resolve the discrepancy or to obtain the information needed to finish processing the taxpayer’s return. In some cases, that contact will occur before the CRA issues the Notice of Assessment with respect to the taxpayer’s return, while in others it will not take place until after the Notice of Assessment has been issued.
While no one particularly likes hearing from the tax authorities, it is critical that the taxpayer respond to any enquiry from the CRA. Failing to do so will mean, at a minimum, that the processing of one’s tax return will be delayed; or worse, a claim made on the return will be denied because the taxpayer has not responded to requests to provide the CRA with supporting documentation.
The problem which arises for the taxpayer is determining whether a communication received is in fact a legitimate request from the CRA or is part of a scam, phishing, or fraud attempt. Scams in which fraud artists claim to be from the CRA have become ubiquitous over the past decade or so, to the point that almost everyone has (or knows someone who has) received a fraudulent communication purporting to be from the tax authorities and requesting information from the taxpayer.
In an effort to address this issue, the CRA recently posted on its website a guide to how to distinguish legitimate queries received from the Agency from scams or phishing attempts. The Agency’s goal is two-fold: the first, of course, is to help taxpayers avoid becoming yet another victim of such frauds, and the second is to prevent situations in which taxpayers ignore legitimate communications from the Agency, having dismissed them as just another phishing attempt.
To help taxpayers verify that a contact is legitimately from the CRA, the Agency utilizes a number of strategies and security measures. First, any initial contact from the CRA will be by way of letter or phone call. The CRA does not send or receive emails pertaining to confidential individual tax matters. It also does not contact taxpayers by text message or on any social media sites. Taxpayers who have not signed up for the CRA service My Account will receive a letter from the CRA by regular mail, or will receive a phone call. Those who have signed up for My Account will be able to access any letters or electronic communication from the Agency on the CRA website, but only after signing into My Account. My Account, like all of the CRA’s sign-in services, now requires multi-factor authentication.
Where an unsolicited contact from the CRA to an individual taxpayer is by telephone, it can be difficult to determine whether that unfamiliar voice on the telephone is in fact a CRA employee. Any legitimate CRA employee will identify themself when they contact a taxpayer and will provide that taxpayer with their name and phone number to call them back, if needed. (Taxpayers should be aware that relying on call display to verify the source of the call is not a good idea, as scammers have been able to manipulate that technology to display what looks very much like, or even the same as, a legitimate CRA phone number.)
The Agency suggests that where there is any doubt about the identity of a caller claiming to be from the CRA, taxpayers consider taking the following steps to ensure that they are, in fact, speaking to a CRA employee.
Tell the caller you would like to first verify their identity.
Request and make a note of their:
name,
phone number, and
office location.
End the call. Then check that the information provided during the call was legitimate by contacting the CRA. It is important to do this BEFORE providing any information to the caller.
Not infrequently, a taxpayer will contact the CRA through one of its individual or business tax help lines, which are answered by call center agents. Each of those telephone services offers an automated callback service – when wait times reach a certain threshold, the taxpayer is given the option of receiving a callback rather than continuing to wait on hold. Where the taxpayer chooses the callback option, he or she is provided with a randomized four-digit confirmation number. The CRA call center agent who returns the taxpayer’s call will repeat that number, so that the taxpayer can be certain that it is a CRA employee who is calling.
Finally, there are some actions which, if taken by anyone purporting to be from the CRA, should lead the taxpayer to immediately end the telephone call, including the following:
the caller does not give you proof of working for the CRA, for example, their name and office location;
the caller pressures you to act now, uses aggressive language, or issues threats of arrest or sending law enforcement;
the caller asks you to pay with prepaid credit cards, gift cards, cryptocurrency, or some other unusual form of payment;
the caller asks for information you would not enter on your return or that is not related to money you owe the CRA, for example, a credit card number;
the caller recommends that you apply for benefits:
do not provide information to callers offering to apply for benefits on your behalf;
you can apply for benefits directly on Government of Canada websites or by phone.
In addition, a CRA representative will never:
demand immediate payment from the taxpayer by any of the following methods:
Interac e-transfer,
Cryptocurrency (Bitcoin),
Prepaid credit cards,
Gift card from retailers such as iTunes, Amazon, or others;
ask the taxpayer for a fee to speak with a contact centre agent;
set up a meeting in a public place to take a payment from the taxpayer;
use aggressive language or threaten the taxpayer with arrest, deportation, or sending the police;
leave voicemails that are threatening to the taxpayer, or that include the taxpayer’s personal or financial information; or
send an email or text message with a link to the taxpayer’s refund.
While scams and frauds and their perpetrators have been around for literally centuries, changes in technology mean that most taxpayers are now accustomed to and at ease with conducting much of their personal and financial lives online, making it much easier to carry out such deceptions. And even newer technology, like artificial intelligence, poses additional threats for the future. In such an environment, the taxpayer’s best protection is to take whatever steps are needed to verify the legitimacy of any unsolicited contact received with respect to matters of tax or personal finances. Doing so is no longer just prudent, it’s a necessity.
What to do when you can’t pay your tax bill (April 2023)
April 18, 2023
Fortunately for the Canadian taxpayer, most individual income tax returns filed result in the payment of a tax refund to the tax filer. Notwithstanding, a significant number of taxpayers find, on completing the annual tax return, that money is owed to the Canada Revenue Agency. Of the returns for the 2022 tax year that were filed between mid-February and mid-March this year, over half a million taxpayers found themselves in that position. It’s likely, as well, that those who owe money on filing aren’t eager to file early, and so the number of taxpayers who must pay a tax balance for 2022 will almost certainly increase significantly between now and the payment deadline of May 1, 2023.
While receiving a refund is the best possible outcome, the worst-case scenario for all taxpayers is to find out that they are faced with a large tax bill and an imminent payment deadline, and that they just don’t have the money to make the required payment by that deadline. Right now, many Canadians are already living with significant financial constraints, as they cope with both inflationary increases in the cost of household goods (especially groceries) and the impact of eight successive increases in interest rates since this time last year.
For the many Canadians who don’t have the means to pay a tax bill out of existing resources, that can mean borrowing the needed funds. And, while that will mean paying interest on the borrowing, the interest cost incurred will likely be less than that which would be levied by the Canada Revenue Agency on the unpaid tax bill.
Where, however, a tax bill can’t be paid in full out of either current resources or available credit, the Canada Revenue Agency is open to making a payment arrangement with the taxpayer. While, like most creditors, the CRA would rather get paid on time and in full, its ultimate goal is to collect the full amount of taxes owed. Consequently, the Agency provides taxpayers who simply can’t pay their bill for the year on time and in full with the option of paying an amount owed over time, through a payment arrangement.
There are two avenues available to taxpayers who want to propose a payment arrangement with the CRA. The first is a call to the Agency’s automated TeleArrangement service at 1-866-256-1147. When making such a call, it is necessary for the taxpayer to provide his or her social insurance number, date of birth, and the amount entered on line 15000 of the last tax return for which the taxpayer received a Notice of Assessment. For taxpayers who are up to date on their tax filings, that will be the Notice of Assessment for the return for the 2021 tax year. The TeleArrangement Service is available Monday to Friday, from 7 a.m. to 10 p.m., Eastern time.
Taxpayers who would rather speak directly to a CRA employee can call the Agency’s debt management call centre at 1-888-863-8657 or can complete an online form (available at https://apps.cra-arc.gc.ca/ebci/iesl/showClickToTalkForm.action) requesting a callback from a CRA agent.
No matter what payment arrangement is made, the CRA will levy interest charges on any amount of tax owed for the 2022 tax year which is not paid on or before May 1, 2023. Interest charges levied by the CRA tend to add up quickly, for two reasons. First, the interest rate charged by the CRA on outstanding tax amounts is, by law, higher than current commercial rates – the rate which will be charged from April 1 to June 30, 2023 is 9.0%. Second, interest charges levied by the CRA are compounded daily, meaning that each day interest is levied on the previous day’s interest charges. It is for these reasons that a taxpayer is, where at all possible, likely better off arranging private borrowing in order to pay any taxes owing by the May 1 deadline.
Finally, regardless of the taxpayer’s financial circumstances, there is one strategy which is always ill-advised. Taxpayers who can’t pay their tax bill by the deadline sometimes conclude that there is no point in filing if payment can’t be made. Those taxpayers are wrong. Where an amount of tax is owed and the return isn’t filed on time, there is an immediate tax penalty imposed of 5% of the outstanding tax amount – and interest charges start accruing on that penalty amount (as well as on the outstanding tax balance) immediately. For each full month that the return isn’t filed, a further penalty of 1% of the outstanding tax amount is charged, to a maximum of 12 months. Higher penalty amounts are charged, for a longer period, where the taxpayer has incurred a late-filing penalty within the past three years. In all cases, no matter what the circumstances, the right answer is to file one’s tax return on time. This year, for most taxpayers, that means filing on or before Monday May 1, 2023. For self-employed taxpayers (and their spouses) the filing deadline is Thursday June 15, 2023. However, for all taxpayers, the payment deadline for all 2022 income tax amounts owed is Monday May 1, 2023.
Avoiding (or minimizing) the OAS clawback (April 2023)
April 18, 2023
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 employment or self-employment income 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.
Each of those income sources requires that an individual have made contributions during his or her working life in order to enjoy benefits in retirement. The fourth major source of retirement income for Canadians – the Old Age Security program – does not. Entitlement to OAS is based solely on the number of years of Canadian residence, and individuals who are resident in Canada for 40 years after the age of 18 can receive full OAS benefits. As of the first quarter of 2023, the full OAS benefit for individuals under the age of 75 is $687.56 per month.
The OAS program is distinct from other sources of retirement income in another, less welcome way, in that it is the only such income source for which the federal government can require repayment by the recipient. That repayment requirement comes about through the OAS “Recovery Tax”, which is universally known as the OAS “clawback”.
While the rules governing the administration of the clawback can be confusing, the concept is a (relatively) simple one. Anyone who received OAS benefits during 2022 and had income for that year of more than $81,761 must repay a portion of the benefits received. That repayment, or clawback, is administered by reducing the amount of OAS benefits which the individual receives during the next benefit year.
For example, an individual who receives full OAS during 2022 and has net income for the year of $95,000 will be subject to the clawback. He or she must repay OAS amounts received at a rate of 15 cents (or 15%) of every dollar of income over the clawback income threshold, as in the following simplified example:
Total OAS benefit for the year: $8,200
Total income for the year: $95,000
OAS income clawback threshold: $81,761
Income over clawback threshold: $13,239 times 15% = $1,985.85
Repayment amount required: $1,985.85
The federal government becomes aware of an individual’s income for 2022 only once the tax return for that year is filed, usually by May 1, 2023. At that time, it will become apparent that $1,985.85 in OAS benefits received must be repaid. Consequently, in the following benefit year (which will run from July 2023 to June 2024), OAS benefits received will be reduced by $165.48 per month ($1,985 divided by 12 months).
The OAS clawback affects only individuals who have an annual income of at least $81,761, and it’s arguable that at such income levels, the clawback requirement does not impose any real financial hardship. Nonetheless, the OAS clawback is a perpetual irritant to those affected, perhaps because of the sense that they are being penalized for being disciplined savers, or good managers of their finances during their working years, in order to ensure a financially comfortable retirement.
While any sense of grievance can’t alter the reality of the OAS clawback, there are strategies which can be put in place to either minimize or, in some cases, entirely eliminate one’s exposure to that clawback. Some of those planning considerations are better addressed earlier in life, prior to retirement, However, it’s not too late, once one is already receiving OAS, to make arrangements to avoid or minimize the clawback.
In all cases, no matter what strategy is employed, the goal is to “smooth” one’s income from year to year, so that net income for each year comes in under the OAS clawback threshold and, not incidentally, minimizes exposure to the higher federal and provincial income tax rates which apply once income exceeds around $100,000.
The starting point, for taxpayers who are approaching retirement, is to determine how much income will be received from all sources during retirement, based on CPP and OAS entitlement, any savings accrued through an RRSP, and any amounts which may be received from a private pension plan. Anyone who has an RRSP must begin receiving income from that RRSP in the year after that person turns 71. However, it’s possible to begin receiving income from an RRSP at any time. Similarly, an individual who is eligible for CPP retirement benefits can begin receiving those benefits anytime between age 60 and age 70, with the amount of monthly benefit receivable increasing with each month receipt is deferred. The same calculation applies to OAS benefits, which can be received as early as age 65 or deferred up until age 70.
Once the amount of annual income is determined, strategies to smooth out that income can be put in place. Those strategies can include receiving income from an RRSP prior to age 71, so as to reduce the total amount within the RRSP and so thereby reduce the likelihood of having a large “bump” in income when required withdrawals kick in at that time.
Taxpayers are sometimes understandably reluctant to take steps which they view as depleting their RRSP savings, but receiving income from an RRSP doesn’t mean spending that income. While tax has to be paid on any withdrawals (no matter what the taxpayer’s age), the after-tax amounts can be contributed to the taxpayer’s tax-free savings account (TFSA), where they can compound free of tax. And, when the taxpayer has need of those funds, in retirement, they can be withdrawn free of tax and, they won’t count as income for purposes of the OAS clawback.
Taxpayers who are married can also “even out” their income by using pension income splitting, so that neither of them has sufficient income to be affected by the clawback. Using pension income splitting, the spouse who has income over the OAS clawback threshold re-allocates the “excess” income to his or her spouse on the annual return, and that income is then considered to be income of the recipient spouse, for purposes of both income tax and the OAS clawback. To be eligible for pension income splitting, the income to be reallocated must be private pension income, which is generally income from an RRSP or registered retirement income fund (RRIF), or from an employer-sponsored pension plan.
There are two reasons why pension income splitting is a particularly attractive strategy for avoiding or minimizing the OAS clawback. First, there is no need to actually change the source or amount of income received by each spouse, as the reallocation of income is “notional”, existing only in the return for the year. Second, no decision has to be made on pension income splitting until it’s time to file the return for the previous year, meaning that spouses can easily calculate exactly how much income has to be reallocated in order to avoid the clawback, and to reduce tax liability generally. More information on the kinds of income eligible for pension income splitting, and the mechanics of the process, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/pension-income-splitting.html.
Federal government announces OAS payment amounts for second quarter of 2023
April 6, 2023
Old Age Security (OAS) benefits paid monthly to eligible Canadians are indexed to inflation on a quarterly basis, meaning that such benefit amounts increase to reflect that indexing at the beginning of each calendar quarter.
The federal government has announced the full OAS benefit amounts which will be paid during the second quarter of 2023 (April to June). Such benefit amounts will be indexed by 0.5%, meaning that the full monthly benefit for recipients under the age of 75 will be $691.00. Individuals aged 75 and older will receive $760.10.
Penalty and interest waiver available for Underused Housing Tax returns
April 6, 2023
The federal government imposes a 1% annual Underused Housing Tax (UHT) on the ownership of vacant or underused housing in Canada. While the tax usually applies to non-resident, non-Canadian owners it can, in some situations, also apply to Canadian individuals and corporations. Those subject to the UHT are required to file a return for that tax for each property owned on December 31, 2022, and that return is due on or before April 30, 2023.
The Canada Revenue Agency has announced that, as a transitional measure, it will be providing a waiver of any penalties and interest with respect to UHT for the 2022 calendar year. This transitional relief means that although the deadline for filing the UHT return and paying the UHT payable is still April 30, 2023, no penalties or interest will be applied for UHT returns and payments that the CRA receives before November 1, 2023.
Maximize your tax refund this year with Expert Fiscalistetax services for your T1 and TP-1 2022 Income Tax Returns, call or text us at 514-954-9031 or send us a email will@expert-fiscaliste.ca or visit our web site. In addition, we offer an important advantage with CRA and Revénu Quebec being your Authorized Representative for all taxation years. We also provide a secure portal to securely share documents, data and reports. Contact us now at 514-954-9031, we are accepting new 2022 clients for a limited time.
