Personal Tax

Find out how the 2016 tax changes impact you in minutes

One of my posts last year focused on the tax changes the federal government introduced for 2016. The changes impact almost everyone especially high earners with children.
But what do all these changes mean for your bottom line?
You can find out in a matter of minutes. The Office of Parliamentary Budget Officer has introduced a tool that lets taxpayers know not just their net tax difference compared to 2015 but also the exact measures that affect your overall taxes.
Take a minute to answers a few questions and find out whether you are better or worse off with 2016 tax changes:

Budget 2016: Tax Tool Calculator

 

Teachers, keep your receipts

Starting from Jan 1, 2016 teachers and early childhood educators will receive a refundable tax credit that applies to the purchase of up to $1,000 of school supplies each year, for a maximum credit of $150 per year.
In order for the cost of supplies to qualify, schools will be required to certify that the supplies were purchased for the purpose of teaching or enhancing learning in a classroom. Teachers making claims are required to keep their receipts for verification.

 

 

 

 

 

 

Canada Child Benefit

Starting July 2016 Universal Child Care Benefit (UCCB), Canada Child Tax Benefit (CCTB), and National Child Benefit Supplement (NCBS) will be replaced with the Canada Child Benefit (CCB). The new CCB will provide a maximum benefit of $6,400 per child under 6 and $5,400 per child aged 6 through 17.
The benefit will be reduced when adjusted family net income is over $30,000.  The rates of reduction will vary depending on the number of children, and when adjusted family net income is over $65,000. Entitlement to the CCB for July 2016 to June 2017 will be based on adjusted family net income for the 2015 taxation year.  According to the reduction rates once adjusted family net income reaches approximately $107,050, the benefit is reduced to zero.

 

Canada Child Benefit Phase-out Rates and Adjusted Family Net Income Thresholds
Number of children (for phase-out rates) Phase-Out Rates (%)
$30,000 to $65,000 Over $65,000
1 child 7 3.2
2 children 13.5 5.7
3 children 19 8
4 or more children 23 9.5

 

 

For your estimated benefits see the Canada Child Benefit Calculator

 

 

2016 Tax changes

Below is a summary of some of the changes between your 2015 and 2016 tax returns. I have discussed some of the important changes in more depth in supplementary articles:
Federal changes:

  • Four of the child tax credits (arts, fitness, education and textbooks) have been eliminated
  • Tax on income between $ 45,282 and $ 90,563 decreases from 22% to 20.5%
  • Tax on income over $200,000 rises from 29% to 33%
  • Family Tax Cut, which allowed couples with children under 18 to transfer up to $ 50,000 to the lower-income-spouse has been eliminated
  • Universal Child Care Benefit (UCCB) will be replaced with the Canada Child Benefit (CCB) beginning in July 2016
  • The TFSA annual limit will be drop from $10,000 to $5,500 for 2016
  • A slight increase in EI and CPP taxes due to the difference between inflation and wage growth
  • The basic personal amount and some other credits will increase by 1.4% for 2017
  • Introduction of teacher and Early Childhood Educator School Supply Tax Credit

Ontario changes:

  • Ontario will double the first-time homebuyers’ maximum land transfer tax refund to $4,000
  • Ontarians will receive a rebate of 8% on rising hydro bills

When is my Tax Return Due?

 

With the exception for self-employed individuals and their spouses, Personal income tax returns and the tax owing are normally due by April 30th.  Penalties and interest may be charged for late returns or late payments.

This year however, the due date is extended to Monday, May 1, 2017 because April 30, 2017 is a Sunday. Individual taxpayers can apply this rule to other CRA deadlines. According to the CRA information on Important Dates for Individuals “When a due date falls on a Saturday, a Sunday, or a public holiday, we consider your payment to be paid on time or your return to be filed on time, if we receive it or if it is postmarked on the next business day.”

It’s important to stress that this rule applies only to individual taxpayer and does not apply to the remittance of an deduction and amounts withheld (for example payroll taxes, CPP, EI or GST/HST remittances), or payable by a corporation.  The CRA deems these amounts to have been made on the date the CRA receives them. For more information see section 248(7) of the income tax act.

 

The Canada Revenue Agency (CRA) may allow a grace period for taxpayers who are experiencing delays in submitting their return online.  The amounts owed to the CRA are still due by the April 30th (or May 1st for this year) to avoid any penalties.

The deadline for Self-employed individuals is Thursday, June 15, 2017 to file their 2016 personal tax returns, but if the self-employed taxpayer owes an amount, the balance must still be paid by May 1st.

Remember the CRA applies a late-filing penalty and interest so even if you can’t afford to pay by the deadline, you can avoid late-filing penalties which may be as high as 34%. See my penalties article for more details.

CRA Penalties and interest

Let’s get the simple stuff out of the way first:

  • Your tax return is considered late if it is not received by the due date and a penalty applies
  • If you don’t owe or are owed a refund there is no penalty
  • Penalties are fixed and apply to returns that are late; interest is variable and depends on how long the owing amount was outstanding

Late-filing penalty

If a taxpayer owes tax for 2016 and does not file a return by May 1, 2017, the CRA will charge a late-filing penalty. The penalty is 5% of your 2016 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months (i.e. as high as 13%)

 

If a taxpayer is charged a late-filing penalty on their return for 2013, 2014, or 2015 their late-filing penalty for 2016 may be 10% of their 2016 balance owing, plus 2% of their 2016 balance owing for each full month your return is late, to a maximum of 20 months (i.e. as high as 50%).

Conclusion:

  • Always try to file and pay by the deadline
  • Even if you can’t pay on the deadline, file your return by the deadline
  • If you can’t afford to pay the entire amount owing you or you representative call CRA’s debt management call centre at 1-888-863-8657 from 7 a.m. to 11 p.m., Eastern time.

 
CRA prescribed rates can be found here

Employees Rejoice

Technological advances pay off for taxpayers

If you are employed, the filing deadline for filing your 2015 taxes is on April 30 at midnight. Those who have overpaid taxes will get a refund and will not be changed a penalty for filing late; however, if you owe taxes, filing late can costs you. So be sure to file on time.
The CRA is arguably one of the most technologically advanced government agencies in Canada. This means that they are progressively improving their methods of catching tax dodgers by focusing on anomalies and matching their records with the information they receive from taxpayers. But technology is not always ominous; it sometimes works in the taxpayers’ advantage.
In early 2016 the CRA announced that it will make certain tax-related information available online for taxpayers and their accountants, not just for 2015 but for the past 10 years. This information includes Notices of Assessment, income slips such as T4s, T5s, T3s, T4Es, and other tax-related information such as RRSP contributions and room and Home-Buyers-Plan.
Furthermore, it improved the function of an exciting service which was previously called Tax Data Delivery and renamed it Autofill My Return. Accountants can use Autofill My Return to automatically download their clients’ income slips to their software. This means that, we as tax preparers can practically eliminate the risk of human-made errors and do our job more efficiently and effectively. It also means that if you misplace your T4 or T5, you don’t have to wait for weeks to obtain a duplicate copy.
So what does this mean for taxpayers?
It means:

  • For the first time ever having your taxes prepared by a professional accountant could cost the same or even less than buying an off-the-shelf software.
  • No more reassessments for missed or partially-prepared slips.
  • You will receive a secure electronic copy of your tax return so you never have to look for it when you need it
  • A Chartered Professional Accountant will represent you if the CRA inquires about your account

Call (416) 836-4731 or email info@mkg-cpa.com to book an appointment today.