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Tax Year 2019 – Preparing & filing your Individual Income…

Deadline

The deadline for most individuals to file their 2019 tax return and for all individuals to pay any amounts due is April 30, 2020.

Self-employed

For those who are self-employed, or who have a spouse or common-law partner who is self-employed, the deadline to file your tax return is June 15, 2020.
To avoid interest or penalties, make sure you pay any amount you owe by April 30, 2020. After this date, the CRA will charge interest on any amount you owe until your balance is paid.

Deceased persons

When filing a tax return for someone who has passed away, the due date for their return will depend on the date of death, and if the person owned a business in 2019.
The due date for filing the return of a surviving spouse, or common-law partner who was living with the deceased, is the same as the due date for filing the deceased person’s final return. However, any balance owing to the surviving spouse or common-law partner still has to be paid on or before April 30 of the following year to avoid interest charges.

Gather your tax information

Get everything you need to calculate your income and support any credits, deductions, and expenses you’ll claim.
If you were employed or had an investment income in 2019, your employer or financial institution will send you statements commonly referred to as ”slips”. Here are some common examples:
• T3 Statement of Trust Income Allocation and Designations
• T4 Statement of Remuneration Paid
• T5 Statement of Investment Income
If you have not received a tax slip for the current year, or you misplaced it, you can ask the issuer of the slip for a copy. You can also get copies of your slips by logging into the Canada Revenue Agency’s My Account service.

Methods for completing your tax return

Choose one of the following secure options for filing your tax return.

Electronically by software:

You will find a list of certified desktop, online, and mobile software products at canada.ca/netfile-software. Some of these products are free of charge.

On paper

You can print the 2018 income tax and benefit package online or you can order a copy from the CRA. If you filed your taxes on paper last year, the CRA will automatically mail the T1 Income Tax package to your home before the deadline.

By phone

Those who are eligible will receive an invitation letter in the mail in mid-February, to use our automated phone service called File my Return, you may be able to complete and file your return for free by phone. The personalized invitation is sent to eligible Canadians who have low or fixed incomes, and whose situation doesn’t change from year-to-year.

The Community Volunteer Income Tax Program

If you have a modest income and a simple tax situation, volunteers at a free tax clinic may be able to complete your tax return for you. Free tax clinics are generally offered between February and April across Canada, while some are open year-round. To learn more, or to find a tax clinic near you, go to Canada.ca/taxes-help.
Program volunteers will complete your income tax and benefit return for you.

Fill out your tax return

If you decide to complete your tax return using certified software, you may be able to use a feature called Auto-fill my return. This service makes it easier to do your taxes by automatically filling in parts of your tax return with information the CRA has on file. All you need to do to use this service is to register for My Account.

Step 1: Provide and update your personal information

Keeping your personal information up-to-date with the CRA can save you time when doing your taxes. Tell the CRA if any of the following has changed:
• your marital status
• the number of children in your care
• your banking information
• your home address
It is important to let the CRA know about these changes as soon as possible, to make sure you get the right benefit and credits you are entitled to.

Step 2: Report your income

Income is money you earn through employment, self-employment, and investments you have or the benefits you receive. On your return, you must report income from all sources, both inside and outside Canada. This is true even if you were paid in cash, which includes money you earn as a side job or tips you have received.

Step 3: Claim your deductions, tax credits, and expenses

Reduce the amount of tax you pay by claiming your deductions, expenses and tax credits. You’ll have to use the receipts and records you kept during the year to support your claims.

Send in (file) your tax return

There are several ways to send your tax return to the CRA. Ultimately, this may be dependent on how you decided to complete your return.
• By software (electronically): If you selected a NETFILE certified software, it will communicate directly with the NETFILE application servers and transmit all required information on your behalf directly to the CRA via the web service.
• By paper: Mail your completed income tax package to your tax centre.
• By phone: Follow the instructions in the invitation letter for File my Return that you received from the CRA.

IMPORTANT: Remember to keep all your receipts

Regardless of how you submit your tax return, you must keep all your tax documents for at least six years. If you claimed expenses, deductions or tax credits, make sure you keep all your receipts and any related documents in case the CRA asks to see them.

What to do after filing your taxes?
If you file online and are registered for online mail, you could get your notice of assessment (NOA) shortly after you file your tax return using the Express NOA service.

When to expect your refund

If you file your tax return online and choose direct deposit, you could receive your refund in as little as eight business days. If you send CRA a paper tax return, it generally takes eight weeks before the CRA issue your notice of assessment and any refund.

Pay a balance owed

There are many ways to make a payment to the CRA. To avoid interest or penalties, make sure you pay any amount you owe by April 30, 2020. After this date, the CRA will charge interest on any amount you owe until your balance is paid. Interest applies after April 30, even if you are self-employed.

If you cannot pay the balance you owe in full

You can make a payment arrangement with the CRA. The CRA can grant relief from penalty or interest, in certain circumstances.

Need to make a change to your return?

If you forgot to include information or made a mistake on your tax return, wait until you get your notice of assessment from the CRA. Then, you can change your return.

In this age of Cloud Computing, Secure and Fast Processing, Clearwater Professional Corporation strongly recommends its client to generate monthly financial statements and monitor their personal and business growth and plan their future monthly, rather than waiting for the end of the year, as by then it is too late to take advantage of many opportunities, such as
1. Investing in the best financial and non financial products
2. Keeping your Bank reconciliations up to date
3. Keeping your renewals and data up to date
4. Planning your tax strategy in advance in order to save tax
5. Generally being aware of your financial situation and be able to navigate and fix it, if it needs fixing
6. Improve your Credit Score

You would not incur any additional costs, on the contrary, save a lot more by planning ahead, saving wisely and generally being on top of things.
In this day of Cloud Accounting systems, accountants are better equipped to provide far better security, processing speed, lower fees and with the Clearwater Advantage monthly on one CFO Advisory session.

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Canadian Tax Year 2018

As 2018 draws to a close, it’s a good time to meet with your accountant and have an informed discussion about maximizing tax savings for the past year. Small business owners, in particular, have many opportunities to save on their yearly taxes, so take a few minutes to review your options with an expert before 2018.

In this blog, we’ll take a look at some of the changes in tax provisions that will affect individuals and small businesses below:

Eligible Deductions & Credits

If you pay the following expenses by December 31, 2017, they will be eligible for the deductions of tax credits. In other words, you’ll have to pay less for the past tax year:

  • Childcare expenses
  • Moving expenses
  • Investment council fees
  • Charitable donations
  • Accounting fees
  • Medical expenses
  • Tuition fees
  • Deductible support payments
  • Political donations
  • Interest paid on loans used to purchase investments

Contribute to Your RRSP

The most popular tax tool available to the average person is investing in a Registered Retirement Savings Plan (RRSP). Contributions to RRSPs are tax deductible and the income earned within the RRSP grows until you retire — with taxes deferred. You can claim a contribution of up to 18% of your earned income from 2016 (to a maximum of $26,010).

Earned income includes the following sources:

  • Employment income
  • Business income
  • Net income from rental properties
  • CPP disability pension
  • Certain types of royalties
  • Spousal or child support payments that are included in your income

Remember that your contribution limit may be subject to a pension adjustment reversal from 2016. So if your employer is making contributions to a pension plan, or actuarial commitments to such plans in the year 2016, then these will be reflected in this pension adjustment.

It is also important to remember that the age limit for RRSP contributions is 71. The age limit for converting an RRSP to an annuity or RRIF is also 71.

Finally, don’t overcontribute — a severe penalty will result. If you have any questions about RRSP contributions, talk to a professional accountant today.

Capital Gains Exemption Deduction

The Lifetime Capital Gains Exemption Deduction applies to individuals who dispose of shares in a qualified small business corporation, or in a qualified farm or fishing property. The exemption is $835,716 for small businesses and $1,000,000 for farms or fishing properties.

If you have already claimed the $100,000 Personal Capital Gains Exemption, which ended in 1994, then this will reduce the amount of Lifetime Capital Gains Exemption available to you.

You must also verify whether you have claimed allowable business investment losses (ABIL) in prior years or have cumulative net investment losses (CNIL) as of December 31, 2017. These items will also affect the amount of exemption that can be claimed.

Use Your Capital Losses to Reduce Income Taxes

Did you know that you can use your 2017 capital losses to reduce your current year’s income taxes, by applying such losses against your 2017 capital gains?

This can be an effective strategy for reducing what is owed in a given tax year — but you must be careful of the superficial loss rules, which prevent you from claiming a capital loss on an identical asset that you reacquired 30 days before or after the sale date.

If your capital gains were realized in the years 2014 to 2016, and net capital losses were incurred in 2017, then you can carry these losses back against previous years’ capital gains. You can also carry the unused 2017 losses forward to future capital gains.

The last 2017 transaction date effective for publicly-traded securities is December 22, 2017.

Other Tax Planning Recommendations

There are many other strategies available for individuals and business owners who want to save on their income taxes in 2017. Here are some quick recommendations from our team, which you may want to consider:

  • Consider a Registered Education Savings Plan (RESP) for your children.
  • Set up a Tax-Free Savings Account (TFSA).
  • Review your December income tax instalment.
  • Make a low-interest loan to your spouse.
  • Repay outstanding shareholder loans and pay interest on employee loans.
  • Contribute to your spouse’s or common-law partner’s RRSP to the extent of your RRSP deduction limit for 2017. This doubles the amount a couple can withdraw for the Home Buyer’s plan.
  • Consider a Registered Disability Savings Plan for a child with a severe disability.
  • Claim you personal tax credits.
  • Keep your transit passes (up to June 30, 2017).
  • Pay reasonable salaries to family members in 2017.
  • Convert non-deductible debt to deductible interest.
  • Review your will every 5 years.
  • Split pension income with a spouse.
  • Apply for Home Buyer’s tax credit, if you are a first-time homebuyer.

Got questions about these recommendations or anything else in this article on 2017 taxes? Contact the team of Chartered Professionals Accountants at Clearwater for more advice.

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