Changes to the Income Tax Act that may affect your 2016 personal tax return

As the Income Tax Act is ever evolving here are the top five changes you should be aware of:

  1. Sale of Principle Residencenew – Individuals who have sold their home on or after January 1, 2016 and claim the principle residence exemption because it was their primary residence for all of the years the home was owned now need to report this transaction on schedule 3. For more information on this new reporting requirement please visit CRA’s website on this topic.
  1. Teachers and Early Childhood Educator School Supply Tax Credit – new –This new tax credit allows teachers and early childhood educators to claim a 15% tax credit on up to $1,000 of eligible teaching supplies. For more information on this new reporting requirement please visit CRA’s website on this topic.
  1. Back-to-School Amount – new – Residents of British Columbia may claim a $250 tax credit for each child, who is at least 4 years of age and under 17 years of age, attending school. No receipts are required to claim this tax credit.
  1. Children Fitness and Art Tax Credit – change – The maximum amounts that can be claimed for the Children’s Fitness and Art Tax Credit has been reduced to $500 and $250 respectively.
  1. Family Tax Cut Credit – eliminated – This non-refundable tax credit that was available in the 2014 and 2015 taxation years has now been eliminated.

2016 Community Volunteer Income Tax Clinics

If you had modest income in 2016 and a simple tax situation then you may be able to have your 2016 personal tax return prepared for free at a Community Volunteer Income Tax Clinic.  For information on the definition of modest income and simple tax situation please visit this Canada Revenue Agency webpage.  This webpage also includes a link to assist in finding a tax clinic near you.

Top 10 Personal Tax Season FAQs

We are beginning our 2016 personal tax return preparation season tomorrow.  Although we very much enjoy assisting our clients with the preparation of their personal tax returns, we work long hours at this time of year to do our best to sure everyone’s personal tax return is accurate and filed on time.  If we were super heroes we would be “super-organized” – not as exciting as being invisible, but it enables us to get the job done.

  1. “When are my taxes due?”

Although most Canadians have been required to file their personal tax return on April 30th each year (or the next business day if April 30th falls on a weekend) since as long as I can remember, we understand the confusion here as our neighbours to the south have a April 15th personal tax return filing deadline.

The filing due date for 2016 personal tax returns is May 1, 2017 (since April 30th falls on a Sunday this year) unless one of the following applies:

  • If you or your spouse or common law partner have self-employment business income you have until June 15, 2017 to file your personal tax return.
  • If you died last year between November 1st and December 31st, the due date for your final return is six months after the date of death.
  1. “I am going on vacation until April 25th. Can I bring all of my personal tax information in on April 26th”?

Yes you can bring your information in but we likely won’t have time to complete it until we return from our holidays.  See point 10 below.

  1. “When are my 2016 personal taxes due?”

May 1, 2017, since April 30, 2017 falls on a Sunday, no matter when your filing due date is.

  1. “How do I pay my tax liability?”

I recommend that clients set the Canada Revenue Agency (CRA) up as a payee in their online banking, using their social insurance number as the account number, and remit a payment this way.

Not everyone participates in online banking.  One of our clients enjoys going directly to a CRA office each year and standing in what he calls the “crying and paying line”. There are several other ways to pay the Canada Revenue Agency.  Here is a link to other payment options.

  1. “Do you need all of my tax slips?”

Yes

  1. “My printer is broken.”

We email our clients forms during our personal tax return season that require to be printed, signed and returned. To facilitate this process, now is a good time to give your printer a check-up, replace your printer or find an alternative way to print the documents we send to you.  Before you do please see point 8 below.

  1. “I don’t have any toner for my printer.”

Now is a good time to buy some toner.  Before you do please see point 8 below.

  1. “My scanner is broken.”

In this crazy hi-tech world we live in, perhaps the need to purchase a separate machine to scan documents is over.  There are several apps available for your phone that can receive a document, place your signature on the document and return the document. Tiny Scanner and Tiny Scans are two examples of these apps.

  1. “You look tired.  Are you tired?”

Yes

  1. Are you taking a vacation soon?”

Yes on May 2, 2017 and we will be back in the office on May 15, 2017.

Canadian Industry Statistics: How do I Compare?

The Government of Canada provides analysis and detailed information on economic indicators using the most recent data from Statistics Canada on the website, www.ic.gc.ca/eic/site/sis-sic.nsf/eng/home.  This website can help small to medium sized businesses understand the dynamics of their industries.  Users can focus on a single industry over time or compare one industry against another.

Data is segregated based on the North American Industry Classification System (NAICS) code.  Within each specific NAICS code is detailed financial performance data.  Such data includes, for example, average gross margins, detailed breakdowns of expenses (e.g. repairs and maintenance, labour, professional and business fees) as a percentage of revenues, and certain financial ratios (e.g. current ratio, return on total assets).

Consider using this site to compare your costs as a percentage of revenues to other Canadian companies in your industry.

*** As published in the 2016 Fourth Quarter edition of Tax, Tips & Traps***

Be a Santa and not a Scrooge to your staff

T’is the time of year to thank your employees for their hard work and dedication.  You may do this with gifts and a holiday party.  As you want to be a Santa and not a Scrooge, it is important to plan the gifts and social event so that they are not considered taxable benefits according to the Income Tax Act and consequently included in your employees’ employment income for the year.

Here are some of the main points:
All cash or near-cash gifts (i.e. gift certificates or gift cards) are considered taxable benefits.
If an employee receives non-cash gifts during the year with a value of $500 or less, the non-cash gifts are not considered a taxable benefit. 
If the value of the non-cash gifts received by an employee during the year total $600, then the employee will be deemed to have received a taxable benefit of $100 ($600 less $500).
Holiday parties in which all employees are invited and cost $100 or less per person are not considered a taxable benefit. 
If the holiday party costs $200 per person, the entire cost of the holiday party is considered a taxable benefit.