Federal Personal Archives

Deadline approaching for 2011 RRSP contributions

Canadians should be advised that February 29, 2012 is the last day you can contribute to a RRSP for the 2011 tax year.

According to the Canada Revenue Agency web site, "Registered Retirement Savings Plans (RRSPs) are one of the most popular investment vehicles for Canadians. According to Statistics Canada, 6 out of 10 Canadian families held RRSPs in 2005."

The most recent information about your RRSP deduction limit is available through My Account at www.cra.gc.ca/myaccount.

View our list of important dates and deadlines for 2012.

Warning: If you donate to a gifting tax shelter, expect to be audited

According to a new Tax Alert published by the Canada Revenue Agency, "each year, Canadian taxpayers participate in gifting arrangements that result in donation receipts worth three or four times the actual amount donated by the taxpayer. The Canada Revenue Agency (CRA) continues to warn Canadians against these gifting arrangements and audits those who participate."

The tax alert continues its warning stating:

To date the CRA has denied over $4.5 billion in tax shelter gifting arrangement donations and reassessed over 130,000 taxpayers who have made donation claims through a gifting scheme. For most claims, the CRA has denied the gift entirely. The CRA audits gifting arrangement tax shelters that provide donation receipts three or four times the out-of-pocket cost.

Decisions in recent court cases have concluded that the "donation" made by the taxpayer was not a gift or, where it was a gift, the amount did not exceed the out-of-pocket cost to the taxpayer. In the Maréchaux case, the Federal Court of Appeal upheld the Tax Court of Canada (TCC) decision that there was no gift given as a result of the defendant's participation in a leveraged cash donation scheme. In the Lockie case, the TCC concluded that the gift in a buy-low-donate-high scheme was the amount paid by the taxpayer.

The CRA advises that anyone thinking of investing in a tax shelter gifting arrangement should get independent legal and tax advice from a tax professional who is not connected to the arrangement or the promoter.

For more information on previous tax alerts, go to www.cra.gc.ca/alert on the CRA Web site.

CRA Tax Tip: Homeowners - claim your credits!

New on the Canada Revenue Agency web site is the following tax tip reminding you to take advantage of all available credits.

From January until the end of March 2010, the Canada Revenue Agency (CRA) is issuing weekly tax tips with information geared towards specific groups that are most affected by new and existing credits, deductions, and benefits in the 2009 tax-filing season. This tax tip focuses on homeowners.

Own a home? If so, you may be able to benefit from certain credits, including:

First-Time Home Buyers' Tax Credit: If you are a first-time homebuyer, a person with a disability, or an individual buying a home on behalf of a related person with a disability, you may be able to claim a non-refundable tax credit of up to $750 for the acquisition of a qualifying home acquired after January 27, 2009 (closing after this date).

Home Renovation Tax Credit: If you are a homeowner, you may be able to claim a non-refundable tax credit of up to $1,350, based on eligible expenses incurred for work performed or goods acquired after January 27, 2009, and before February 1, 2010, in respect of a renovation or alteration to an eligible dwelling. The credit applies to expenses of more than $1,000, but not more than $10,000.

It is important to note that non-refundable tax credits can only be used to reduce your federal income tax payable. If the total of your non-refundable tax credits is more than your federal income tax payable, you will not receive a refund for the difference.

In addition to these, other credits and deductions may be available to you. For more information, go to www.cra.gc.ca/myhome.

Le crédit d'impôt pour la rénovation domiciliaire (CIRD)

Le crédit d'impôt pour la rénovation domiciliaire (CIRD) s'appliquera aux dépenses admissibles engagées pour des travaux effectués ou des biens acquis après le 27 janvier 2009 et avant le 1e r février 2010, aux termes d'accords conclus après le 27 janvier 2009. Ce crédit temporaire incitera les Canadiens à entreprendre sans délai des travaux de rénovation ou à accélérer les travaux qu'ils avaient prévus.

Le crédit d'impôt peut être demandé pour des travaux de rénovation ou de modification durables, effectués dans un logement ou sur le terrain où est situé celui-ci.

Fonctionnement du CIRD

Le crédit de 15 % peut être demandé à l'égard de la partie des dépenses admissibles qui dépasse 1 000 $ sans excéder 10 000 $. Le montant maximum du crédit est donc de 1 350 $.

Le CIRD peut être demandé à l'égard de dépenses engagées relativement à une ou plusieurs habitations admissibles d'un particulier. Les propriétés admissibles comprennent les maisons, les chalets et les condominiums utilisés à des fins personnelles.

Les coûts de rénovation liés à des projets comme l'aménagement d'un sous-sol ou le réaménagement d'une cuisine donneront droit au crédit, tout comme les dépenses qui s'y rattachent, dont l'obtention d'un permis de construction, les services professionnels, la location de matériel et les frais accessoires.

Les travaux courants de réparation et d'entretien ne donneront pas droit au crédit, pas plus que l'achat de mobilier, d'appareils ménagers, d'appareils audiovisuels ou de matériel de construction.

Nota – Les dépenses de rénovation admissibles demandées au titre du crédit d'impôt pour frais médicaux pourront également être demandées au titre du CIRD.

http://www.fin.gc.ca/act/hrtc-cird/hrtc-cird-fra.asp

compte d’épargne libre d’impôt (CELI)

Le nouveau compte d’épargne libre d’impôt (CELI) est un nouvel instrument d’épargne enregistré, souple et d’usage général, qui permet aux Canadiennes et aux Canadiens de gagner un revenu de placement libre d’impôt afin de combler plus facilement leurs besoins d’épargne tout au long de leur vie. Le CELI s’ajoute aux autres régimes d’épargne comme les régimes enregistrés d’épargne‑retraite (REER) et les régimes enregistrés d’épargne‑études (REEE).

Modalités du compte d’épargne libre d’impôt

• Les résidents canadiens âgés de 18 ans et plus peuvent cotiser jusqu’à 5 000 $ par année dans un CELI.
• Le revenu de placement généré par un CELI n’est pas imposé.
• Les sommes retirées d’un CELI ne sont pas imposées.
• Les droits de cotisation inutilisés des années antérieures sont reportés aux années futures et s’accumulent.
• Le montant complet des retraits peut être remis dans le CELI au cours des années futures.
• Vous pouvez choisir parmi une gamme d’options de placement, telles que des fonds mutuels, des certificats de placement garanti ou des obligations.
• Les sommes cotisées ne sont pas déductibles du revenu.
• Ni le revenu gagné dans un CELI ni les montants qui en sont retirés ne touchent l’admissibilité aux prestations fédérales et aux crédits fédéraux fondés sur le revenu, tels que les prestations de la Sécurité de la vieillesse, le Supplément de revenu garanti et la Prestation fiscale canadienne pour enfants.
• Vous pouvez fournir des fonds à votre époux ou conjoint de fait pour que celui-ci les investisse dans son CELI.
• Au décès, l’actif détenu dans un CELI peut généralement être transféré à l’époux ou au conjoint de fait.

Voyez: http://www.celi.gc.ca/

CRA Tax Tip: Tax savings at your fingertips - your 2009 tax information

The following tax tip is available on the Canada Revenue Agency web site.

Did you know...

... that the Canada Revenue Agency (CRA) has Web pages created specifically to tell you what you need to know about your 2009 income tax and benefit return?

To get information about the credits, deductions, and benefits to which you may be entitled or other information about your specific tax situation and CRA services available to you, go to www.canada.gc.ca/taxinfo.

The CRA will be issuing a series of tax tips to help you determine which credits, deductions, and benefits you may be able to claim. Starting on January 12, 2010, the CRA will publish weekly tips with tax information geared towards homeowners, persons with disabilities, tax preparers, child and family benefit recipients, seniors, students, tradespersons, and the self-employed. If you belong to one of these categories, stay tuned for our upcoming tips!

2010 Tax Deadline

As we turn the pages of our calendars to the new year, and the new decade, another tax filing year is almost upon us.

Remember to check out our list of Important Dates and Deadlines for tax filing, including the Canadian 2010 Tax Filing Deadline and the 2010 RRSP Contribution Deadline (for the 2009 tax year).

Home Renovation Tax Credit

The following news release from the Canada Revenue Agency is a reminder to Canadians to take advantage of the Home Renovation Tax Credit. The deadline for eligible expenses is February 1, 2010.

Rona Ambrose, Minister of Labour, and Christian Paradis, Minister of Public Works and Government Services today encouraged Canadians to take advantage of the Home Renovation Tax Credit (HRTC). Minister Ambrose and Minister Paradis spoke today at separate events on behalf of the Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food).

"A key component of Canada's Economic Action Plan (EAP), the HRTC provides powerful incentives for Canadians to invest in their homes, supporting employment in the construction and home-building industry, while realizing a significant tax savings of up to $1,350," said Minister Ambrose in Edmonton, Alberta at a Home Depot outlet. "Our Government strongly encourages all Canadians to take advantage of this opportunity over the next three weeks."

Canadians undertaking eligible renovations to their homes before February 1 will receive up to $1,350 in tax relief from the temporary HRTC. Approximately 4.6 million families in Canada are expected to take advantage of the credit, supporting jobs in the housing industry.

"Canadians are clamouring for information about the HRTC. The Canada Revenue Agency has had approximately 3.5 million enquiries and website visits related to the HRTC alone," said Minister Paradis in Gatineau, Québec at a Rona outlet. "The interest in the credit, with the tax relief it provides, shows its positive impact on renovation activity, which promotes job creation in construction and trades."

In the face of the deepest worldwide recession since the Second World War, the Government introduced the EAP, including one of the most comprehensive stimulus packages in the industrialized world. The Government's priority will be rapid and effective implementation of Phase II of the EAP, which includes restoring a balanced budget once the economy is fully recovered and building a strong foundation for our economic future.

For more information about the Home Renovation Tax Credit and how to claim it, go to actionplan.gc.ca or www.cra.gc.ca/hrtc, or call 1‑877‑959‑1‑CRA (in French 1‑888‑959‑1‑ARC).

CRA Tax Tip: Save the stamp, save the time – pay online!

The following Tax Tip is available from the Canada Revenue Agency.

Did you know…

That you can quickly and securely send a payment to the Canada Revenue Agency (CRA) from your bank account?

The CRA's new My Payment service simplifies the process of making a payment to the CRA. This service can help anyone—from a business submitting its goods and services tax/harmonized sales tax (GST/HST) instalments, to an individual making a payment toward a personal income tax amount owing. Now you can click your way to instantaneous payments—no more accounting for outstanding cheques, no more concerns over mailing time. This is an instant and immediate payment!

For more information on this or other CRA tax tips, see:
http://www.cra-arc.gc.ca/nwsrm/txtps/2009/tt091124-eng.html

CRA News release: Paying the correct amounts to eligible taxpayers

According to a Canada Revenue Agency news release, the CRA issued benefit payments worth $16 billion to over 11 million Canadians last year. To keep the system fair for all taxpayers, the CRA works to ensure that benefit payments are issued to only those eligible to receive them and that they are in the correct amounts.

"The CRA's validation process includes reviews to ensure eligible individuals are issued the benefits they are entitled to receive. In 2007-2008, more than 253,000 benefit accounts were reviewed and 65% were adjusted. Adjustments uncovered almost $195 million in benefit and credit overpayments.

Validation-related adjustments were also made for individuals and families who were not being issued the full amount of benefits they were entitled to receive. In 2007-2008, adjustments favouring benefit recipients amounted to $81 million."

For more information, see:

http://www.cra-arc.gc.ca/nwsrm/rlss/2009/m04/nr090422-eng.html

financial help for first-time home buyers

In response to the federal budget release last month, the Canada Revenue Agency has prepared information explaining the budget measure to increase the amount that Canadians can borrow from their Registered Retirement Savings Plan (RRSP) from $20,000 to $25,000 as part of the first-time home buyers plan.

Following is text from the news release on the CRA web site. The full text of the news release appears at:
http://www.cra-arc.gc.ca/nwsrm/rlss/2009/m02/nr090202-eng.html

Canada's Government introduces financial help for first-time home buyers Ottawa, Ontario, February 2, 2009... The Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister John Baird, Canada's Minister of Infrastructure, Transportation and Communities and Member of Parliament for Ottawa West - Nepean, highlighted key initiatives from Budget 2009: Canada's Economic Action Plan that will benefit first-time home buyers.

Canada's Economic Action Plan supports the Canadian home construction and real estate industries, with a First-Time Home Buyers' tax credit that will provide up to $750 in tax relief to first-time home buyers; and an increase in the amount that they can withdraw from an RRSP to purchase a home from $20,000 to $25,000.

CRA has denied over $2.5 billion in tax shelter gifting arrangement donations

According to the Canada Revenue Agency web site, despite numerous warnings and audit actions by the CRA, some taxpayers are still participating in tax shelter gifting schemes that are likely to result in reassessment and donation claims being outright denied.

"The CRA reminds taxpayers that tax shelter numbers are used for identification purposes only. A tax shelter with an identification number does not guarantee that taxpayers are entitled to receive the proposed tax benefits."

The CRA indicates that it plans to audit all tax shelter gifting arrangements and that to date well over $2.5 billion in claimed donations have been denied.

For more information, see:
http://www.cra-arc.gc.ca/nwsrm/lrts/2008/l081204-eng.html

Tax Freedom Day for Canada

Ottawa: The Canadian Taxpayers Federation (CTF) today responded to news from the Fraser Institute that Tax Freedom Day for Canada will occur on Saturday, June 14th. Tax Freedom Day is the day of the year when taxpayers finally start working for themselves after paying the total tax bill imposed on them by all governments. The original release and calculations are available at:
www.fraserinstitute.ca.

"Although Tax Freedom Day falls four days earlier than it did in 2007, it does not lessen the importance of lowering taxes. Canadian taxpayers are still working five and a half months to pay the taxes collected by all three levels of government, chewing up 45 per cent of average family income," stated CTF federal director John Williamson. "Pleasantly, Finance Minister Jim Flaherty has stated taxes in Canada are still too high. Yet, voters know talk is cheap in Ottawa. At the top of the Conservative agenda should be a broad-based income tax cut because Canada has the highest personal income tax burden of any G-7 nation. We pay more income tax than even the French and Italians do."

- 2008 Provincial Tax Freedom Days* -

Alberta May-28
Ontario Jun-09
Quebec Jun-19
New Brunswick Jun-03
Nova Scotia Jun-12
Saskatchewan Jun-20
P.E.I. Jun-04
B.C. Jun-13
Newfoundland Jun-30
Manitoba Jun-08
*Maritime provinces experience TFD earlier due to the larger federal
transfers as a portion of their revenues.
Source: Fraser Institute

High taxes have fuelled record spending growth by governments and balanced budgets should not be confused with good fiscal management. When Ottawa finally balanced the nation's books in fiscal 1997-98, the idea of setting annual spending targets in a budget and operating within those limits was abandoned. According to the C.D. Howe Institute a decade of fat surpluses resulted in lawmakers spending more than budgeted "for a cumulative spending overrun of an eye-popping $28.7-billion, a sum almost equivalent to what Ottawa spends on elderly benefits a year."

"Millions of Canadians recognize our politicians don't tax to collect the money it needs, instead governments always find a need for the money it collects. And if taxes cannot be reduced when Tax Freedom Day is arriving in mid-June it signals Canadian governments have a spending problem, not a revenue problem," concluded Williamson.

Ottawa's annual expenditures now exceed the 200-billion-dollar mark. Given the Conservative's rhetoric, taxpayers might find it surprising that under their management the size of the federal government has grown by an astounding 14.8 per cent after only two years. By comparison, Paul Martin's free-spending minority government, which lasted two-years, grew the federal government by 14 per cent.

John Williamson
Federal Director
Canadian Taxpayers Federation

Tax tip: It pays to get fit!

The Canada Revenue Agency has provided the following tax tip on its web site to remind Canadians of the $500 fitness credit for children.

Did you know...

That for 2007, you may be able to claim the fees paid for physical fitness programs for your children under the age of 16 at the beginning of the year? The children's fitness tax credit provides parents with an annual credit of up to $500 per child to help cover the cost of their child's physical fitness programs or sporting activities fees. Under proposed legislation, if the child qualifies for the disability amount and is under the age of 18 at the beginning of the year, you may be able to claim an additional $500 credit.

For more information on this tax credit for 2007, visit www.cra.gc.ca/fitness.

http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080320-e.html

Tax Tip: Are you a newcomer to Canada?

The Canada Revenue Agency provides the following Tax Tip:

Did you know…

That if you are a newcomer to Canada, you may be eligible for credits and benefits such as the Canada Child Tax Benefit, the Universal Child Care Benefit, and the GST/HST credit?

For more information, visit www.cra.gc.ca/individuals and select “N” from the drop-down menu for “Newcomer to Canada.”

For more information on this or other CRA tax tips, please see;
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080208-e.html

CRA Tax Tip - Service Complaints

The following tax tip is available from the Canada Revenue Agency web site.

Did you know that...

The Canada Revenue Agency has introduced a new complaint resolution process? If you have a service-related complaint that has not been resolved through our normal channels, you have the right to make a formal complaint about mistakes, undue delays, poor or misleading information, or staff behaviour through CRA – Service Complaints.

For more information, visit the Canada Revenue Agency Web site at cra.gc.ca/complaints.

For more information on this or other CRA tax tips, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080128b-e.html

Keep your records to support your tax return

The Canada Revenue Agency issued a new release on January 25, 2008 advising Canadians who plan to file their tax returns electronically, (or who do not submit information slips and receipts with their paper-filed return) to keep their tax records in case they are contacted by the Canada Revenue Agency (CRA).

Once tax returns are filed, the CRA begins work to verify the income reported, as well as the credits and deductions claimed. These reviews are an important way the CRA ensures that Canadians are paying their taxes. Last year, the tax returns of approximately 2.7 million individuals were reviewed and an additional $700 million in taxes was assessed by the CRA.

Some initial reviews of deductions and credits are conducted when returns are filed, and before taxpayers receive their Notice of Assessment. However, the majority of reviews take place later in the year, as the CRA works to verify the information on an individual's tax return and compare it with the information provided by other parties, such as an employer or a spouse or common-law partner.

For more information about on this news release and on reviews of tax returns by CRA, see:
http://www.cra-arc.gc.ca/newsroom/releases/2008/jan/nr080125-e.html

Toward a single tax rate

By John Williamson & Mark Milke

Don't believe the nattering nabobs who say Ottawa can't lower taxes. The Conservative government can – and should – table significant personal income tax relief in the federal budget.

According to the Organization for Economic Co-operation and Development (OECD) and even the federal finance department, Canada's personal income tax burden is the highest of all G7 nations. Canadians pay more income tax than the French and Italians, despite being neighbours with the lower-taxed United States. Income taxes in Canada are complex, relatively high and create significant economic distortions. There is an alternative.

Imagine a personal income tax form that could be easily completed without help from professional accountants or computer software. One that, in April of every year, allowed taxpayers to list their income; subtract basic, spousal and child deductions, and RRSP contributions, to calculate taxable income; apply a single rate to calculate tax owing; subtract the tax already paid; and pay the balance or collect any refund.

If Canadian taxpayers like the simplicity and fairness of this idea, they are not alone. Since the fall of the Berlin Wall in 1989, 15 eastern and central European countries have adopted variations of a flat-or single-tax model. In 2007, Iceland was the first western European nation to move to a single rate of income tax.

There are several reasons why Canada should aim for a single rate of tax. First, a single rate of tax if combined with vastly fewer deductions and credits would end complexity and thereby reduce compliance costs for taxpayers and administration costs for the federal government.

Second, the reality of fewer credits and deductions would allow for a lower overall single rate. Third, a single rate of tax is effectively progressive in a way that a multi-bracket system with multiple credits and deductions is not. The proponents of a multi-bracket system ignore the litany of exemptions that come with it. Those exemptions and deductions help to lower tax rates, especially for wealthy individuals.

In contrast, single-rate systems are progressive because the existence of a basic personal exemption means the higher one's income, the higher the proportion of one's income paid in tax. Consider Alberta, where the basic personal exemption was $15,435 in 2007 and where the provincial single-rate tax is 10%. At $20,000, the taxpayer paid out $456 in provincial income tax, representing 2.3% of income. At $100,000 of income, the tax paid was $8,456 and 8.5% of all income.

Two other benefits include reduced tax avoidance and superior incentives to work, save and invest under a flatter system.

To achieve such a model, the federal government will need to move in two steps. First, in stages between 2009 and 2012, the federal government should collapse the number of brackets from four to two rates of 15%, and 25% on income above $80,000. Canada currently has four income tax rates of 29%, 26%, 22% and 15%.

Over that same period, the basic personal and spousal exemptions should be raised to $15,000 each with the per child credit raised to $2,200. Concurrent with such a reform, most other deductions and tax credits should be eliminated with the exception of universal deductions and credits that pertain to charitable giving, RRSPs, seniors and a handful of disability amounts.

The tax relief is substantial. Adopting this two-rate plan will deliver $68.8-billion in personal income tax relief over four years. It is based on prudent assumptions and is achievable without running budgetary deficits.

And according to the Toronto-based C.D. Howe Institute, the federal government can accommodate such a tax regime merely by restraining federal spending to 2.5% growth per year starting in 2008. If it can slow annual spending increases, Ottawa could deliver the two-rate tax cut plan, run a surplus in 2012 and still have an additional $3-billion available for debt reduction that year.

It makes sense for Canadians to eventually pay one federal rate of tax. So the second stage, post-2012, would involve moving to a single rate as budgetary conditions allow. This cannot be done overnight, but we should begin implementation as soon as possible. A fairer tax and a healthier economy will be the result when we do.

John Williamson is the federal director for the Canadian Taxpayers Federation. Mark Milke, a former provincial director with the CTF, lectures in political science at the University of Calgary. They are the authors of Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada, available at: www.taxpayer.com.

John Williamson
Federal Director
Canadian Taxpayers Federation

CRA Tax Tip: Claiming medical expenses

The Canada Revenue Agency has posted the following tax tip available at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080115-e.html

Did you know… That you can claim, as a non-refundable tax credit, medical expenses for yourself, your spouse or common-law partner, and your children born in 1990 or later? For 2007, the total expenses have to be more than 3% of your net income, or $1,926, whichever is less.

You may also be able to claim medical expenses for the following persons if they depend on you for support:

- you or your spouse or common-law partner's child or grandchild who was born in 1989 or earlier; and
- you or your spouse or common-law partner's parent or certain close relatives who lived in Canada at any time in the year.

For more information on medical expenses, visit www.cra.gc.ca/tax/individuals and select "M" from the drop-down menu for "Medical expenses".

CRA Tax Tip: The age amount has increased

The following tax tip was provided by the Canada Revenue Agency.

Did you know…

That if you were 65 or older on December 31, 2007, and your net income was less than $65,449, you can claim the age amount? You may also be able to transfer unused portions of the age amount to your spouse or common-law partner.

For more information, visit www.cra.gc.ca/individuals and select “A” from the drop-down menu for “Age amount.”

CRA Tax Tip: Pension Income Splitting

The Canada Revenue Agency has provided the following Tax Tip on its web site.

Did you know...

That you could benefit from the new pension income splitting tax measure? When you and your spouse or common-law partner file your 2007 income tax returns, new tax rules allow eligible taxpayers to allocate up to half of their eligible pension income (income that qualifies for the pension income tax credit) to their lower-earning spouse or common-law partner.

To make this election, you and your spouse or common-law partner must each complete Form T1032, Joint election to split pension income.

For more information on pension income splitting, visit www.cra.gc.ca.

CRA News Release: Resolve to correct your tax information

According to the CRA web site, "last year the CRA processed 8,244 disclosures for taxpayers who used the Voluntary Disclosures Program and got a second chance to comply with their tax obligations. Coming clean saved these taxpayers from an audit or a criminal investigation, which can result in penalties, fines, and even jail time. Their valid disclosures involved more than $525 million in taxes."

The CRA is advising Canadians to "Begin the New Year with a clean slate and a clear conscience!"

The Canada Revenue Agency's (CRA) Voluntary Disclosures Program allows people to come forward and correct their tax information and, thereby, avoid being penalized, criminally investigated and/or prosecuted.

For more information on this news release, visit the CRA web site at http://www.cra-arc.gc.ca/newsroom/releases/2008/jan/nr080103-e.html

CRA Fact sheet: 2008 Indexation Adjustment for Personal Income Taxes

According to the Canada Revenu Agency, each year certain personal income tax amounts are indexed to inflation using the Consumer Price Index (CPI) data reported by Statistics Canada.

Increases to tax bracket thresholds, personal amounts and other amounts relating to non-refundable credits, as well as the refundable medical expense supplement and Old Age Security repayment threshold, will take effect as of January 1, 2008. Increases to the Canada Child Tax Benefit (including the National Child Benefit supplement and the Child Disability Benefit) and the Goods and Services Tax Credit will take effect as of July 1, 2008, to coincide with the beginning of the "program year" for payment of these benefits.

A chart comparing the indexed amounts for the 2007 and 2008 tax years is available on the CRA web site at the address below. The chart reflects an indexation increase of 1.9% for 2008.

For more information, see:
http://www.cra-arc.gc.ca/newsroom/factsheets/2007/dec/fs071219-e.html

CRA informs Canadians on tax relief measures

The Canada Revenue Agency has provided a news release informing Canadians on tax relief measures.

According to the CRA, the Minister of National Revenue Gordon O'Connor assured Canadians that the CRA "is ready to support taxpayers to ensure that they understand the new tax measures passed by Parliament [Friday December 14, 2007] and are able to take full advantage of them."

"Canadians will start to see the impact of these tax cuts on January 1, 2008 because of the proactive steps being taken by the Canada Revenue Agency to implement rate reductions", said Minister O'Connor. “The CRA is taking action to ensure all businesses have the information they need to implement the rate reductions so that Canadians can start benefiting from the GST/HST tax cut on January 1, 2008."

The CRA has set up a toll-free GST/HST rate reduction line for businesses and consumers at 1-866-959-7797 (1-866-959-7798 in French), which is available from 8:15 a.m. to 8:00 p.m. (local time), Monday to Friday, across Canada.

For more information on this news release, see:
http://www.cra-arc.gc.ca/newsroom/releases/2007/dec/nr071217-e.html

Tax Alert Warning: Investing in schemes that promise you tax-free withdrawals from RRSPs and RRIFs could result in you losing your retirement savings

According to a tax alert issued by the Canada Revenue Agency, the CRA is finding an increasing number of questionable Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) tax-free withdrawal schemes. As such, the CRA is warning Canadians that "investing in such schemes could result in you losing your entire retirement savings to unscrupulous promoters and in a reassessment of your tax returns."

Stats and Facts
- To date, the CRA has reassessed over 3,100 taxpayers who participated in these schemes resulting in additional taxable income of approximately $144 million.
- Audits of another 1,800 taxpayers with $84 million in RRSP and RRIF investments are currently underway.
- Audits on other arrangements are about to begin.

Questionable RRSP/RRIF schemes
Taxpayers should avoid schemes that promise the following:

- Withdrawal of funds from an RRSP or RRIF without paying tax. Promoters often promise to return part of the taxpayer's investment by offshore debit or credit cards, offshore bank accounts, or loan-back arrangements;
- Immediate access to assets in “locked-in” RRSPs or RRIFs;
- Income tax deductions of three or more times the amount invested in an RRSP;
- Unrealistic returns on investments.

For more information on this tax alert, please see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a071129-e.html

CRA News release - Be an Informed Donor

According to the Canada Revenue Agency web site, tips for protecting individuals from fraud when donating to registered charities will be shared through public notices that will be published in newspapers across Canada beginning the week of November 19, 2007.

"Canadians are very generous people. As a matter of fact, close to 5.8 million Canadians claimed donations to registered charities on their income tax returns last year", said Gordon O'Connor, Minister of National Revenue. "As a government, we have taken steps to encourage charitable giving and to inform Canadians on the ways that they can ensure that every dollar given to charity has the maximum possible impact and stays out of the hands of fraudsters."

The public education initiative aims to help donors become more informed by accessing CRA resources such as the CRA Charities Listings (available at www.cra.gc.ca/donors) to research registered charities before they give.

For more information, please see:
http://www.cra-arc.gc.ca/newsroom/releases/2007/nov/nr071120b-e.html

Tax Alert: Email Fraud Alert

The Canada Revenue Agency is warning Canadians about email fraud. According to the CRA, "numerous individuals are receiving emails that are falsely identified as coming from the Canada Revenue Agency (CRA) confirming the registration of a complaint case. This email is not from the CRA." The fraudalent emails pertain to complaints made to the CRA by individuals about identity theft.

The web links within the fraudulent email contain harmful software. If you receive this email, you should delete it. The CRA has already notified the proper authorities of this illegal activity.

A copy of the fraudulent email, which identifies individuals by name, is included on the CRA web site to help you better identify the scam.

For more information, including a sample of the fraudalent email, please see:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a071119-e.html

How Canadians pay their taxes

According to the Canada Revenue Agency (CRA), to date (for 2006 tax filing), the CRA has received over 18.3 million payments. According to the CRA web site, "the vast majority of Canadians prefer to pay their taxes through their financial institutions, electronic banking, or by cheque. Cash payments continue to decline and make up only 0.3% of all payments."

For more information on how Canadians pay their taxes, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2007/june/nr070622-e.html

Electronic filing continues to be the choice of Canadians

According to statistics provided by the Canada Revenue Agency (CRA), for the 2006 tax filing the majority of Canadians continue to use electronic filing as their method of choice. According to the CRA, "to date, over 23.6 million tax returns have been filed, with the average refund being $1,254.26."

"The most popular methods, EFILE and NETFILE, recorded a combined increase of 5.2% compared to 2006. Paper filing continues to decrease, recording a 4.3% decline from 2006."

For more information on this news release, please see:
http://www.cra-arc.gc.ca/newsroom/releases/2007/june/nr070614-e.html

Only three days left to file your 2006 tax return!

A reminder from the Canada Revenue Agency that Canadians have until midnight Monday, April 30, 2007, to file their 2006 income tax returns and pay any amounts owing without penalty.

"The filing deadline for self-employed individuals and their spouses is June 15, 2007. Individuals who owe tax for 2006 will have to pay their balance owing by April 30, 2007, whether their return is due then or on June 15."

"The CRA has extended the hours for general and business telephone enquiries to 10 p.m. on weekdays, and from 9 a.m. to 1 p.m. on weekends. These extended hours are in effect until April 30. For more information, visit www.cra.gc.ca/contact."

Root Canal Narrowly Outpolls Tax Audit as More Unpleasant Experience

CTF public opinion poll also finds only 13% of Canadians expect to benefit from tax relief in the Conservative budget.

Ottawa – The Canadian Taxpayers Federation (CTF) released results of a public opinion poll in advance of Monday’s deadline for Canadians to file their 2006 income tax returns. The poll was conducted by Innovative Research Group for the CTF on (1) the tax relief in the federal budget, and (2) whether Canadians would prefer a root canal or a tax audit.

Canadian unconvinced they will personally benefit from tax relief in the new budget –

When Canadians were asked about the recent federal budget and how much the tax relief will help them a paltry 2% said “a lot” and only 11% said “somewhat.” A 67% majority of Canadians stated they will not personally benefit from the federal government’s tax relief. Of this sum 32% responded “not very much” and 35% “not at all.” The remainder either “don’t know” (2%) or “have not heard enough to say” (17%).

"It suggests the Conservatives missed an opportunity to brand themselves as the party of lower taxes. The governing Conservatives must do more on tax cuts if they want to make a positive impression on Canadian taxpayers,” said CTF federal director John Williamson. “The 2007 Budget did not provide broad-based personal income tax cuts and instead targets the tax relief. But very few taxpayers lucky enough to qualify for a tax break call it dramatic, deep or significant.”

Canadians divided on whether a “root canal” or a “tax audit” is more unpleasant –

When asked which is more unpleasant, 47% of those surveyed responded “root canal” and 38% said a “tax audit.” The remaining 15% “didn’t know.” Only Atlantic Canadians are wearier of the taxman (45% versus 43%), and Ontario respondents are split – with 45% saying a “tax audit” is more unpleasant and 45% believing a “root canal” is more disagreeable.

The online survey was conducted from April 4 to April 11, 2007, among 1,445 Canadian adults 18 years-of-age and older. The sample used has been weighted according to 2001 Census data to accurately reflect region, gender and age. The results are considered accurate to within +/-2.58 percentage points, 19 times out of 20.

The results are available online: http://www.taxpayer.com/pdf/CTF_Poll.pdf

John Williamson
Federal Director
Canadian Taxpayers Federation

CRA Tax Tip: Community Volunteer Income Tax Program

The Canada Revenue Agency offers the following Tax Tip to Canadians:

Did you know... That the Canada Revenue Agency (CRA) can help you if you're having a difficult time filing your 2006 income tax return? The CRA’s Community Volunteer Income Tax Program offers tax help for people who have a simple tax-filing situation. For tax help, please call the Community Volunteer Income Tax Program at 1-800-959-8281. You can also visit our Web site at www.cra.gc.ca for helpful forms, guides, and other information.

You can authorize a representative online!

The Canada Revenue Agency (CRA) has issued the following Tax Tip:

Did you know...

That you can authorize your representative online if they have registered with our Represent a client service? Authorizing a representative online gives your representative instant, secure access to the information needed to help complete your income tax and benefit return and to complete certain transactions on your behalf. You can authorize a representative online 21 hours a day, 7 days a week. You can also change or revoke your representative's authorization at any time.

All you have to do is log in to the My Account service, select Authorize my representative, and complete the four easy steps.

For more information, visit www.cra.gc.ca/myaccount

CRA Taxpayer Alert: Where you live matters!

The Canada Revenue Agency has issued a Taxpayer Alert reminding Canadians of the importance of properly indicating their province of residence on tax filings.

The Canada Revenue Agency (CRA) is warning Canadians to properly indicate their province or territory of residence on their tax returns. The CRA catches and fines people who attempt to evade taxes by filing a tax return claiming to live in one province but who actually reside in another.

It's the law.

The CRA wants you to know that in addition to paying the proper amount of federal taxes, it is your legal responsibility to pay the proper amount of taxes to the provincial/territorial administration where you reside. If you don't, you are participating in inter-provincial tax avoidance. Failure to accurately report your province or territory of residence could result in undesirable consequences including fines and penalties.

For more information, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a070327-e.html

CRA Tax Tip: Everyone benefits from good child care

The Canada Revenue Agency has issued the following Tax Tip:

Did you know...

That if you have a child or children under the age of six you can receive the Universal Child Care Benefit (UCCB)? This benefit is designed to help Canadian families, as they try to balance work and family life, by supporting their child care choices through direct financial support. The UCCB is paid for children under the age of six years in instalments of $100 per month per child. To receive UCCB, complete the Canada Child Tax Benefit application.

For more information about UCCB, visit www.cra.gc.ca/uccb or www.universalchildcare.ca.

CRA announces business resumption plan

The Canada Revenue Agency has indicated its timeline to bring services back on line, indicating all services will be back online by no later than Thursday March 15, 2007.

According to CRA Commissioner Michel Dorais:

“We have begun to bring some of our systems into production. We expect to have all of our taxpayer services, including EFILE, NETFILE, Change My Address and return processing back into full service no later than on Thursday March 15th, 2007.”

According to the news release, the CRA is bringing back its temporary employees Thursday morning to begin processing all outstanding files.

For more information on this fact sheet, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/factsheets/2007/march/fs070312-e.html

Electronic Tax Filing Glitch at CRA

The Canada Revenue Agency has released an important message concerning technical difficulties the agency is experiencing with its electronic tax filing services.

From the CRA web site:

"The Canada Revenue Agency (CRA) is experiencing electronic system difficulties that prevent the public from accessing some electronic services such as NETFILE, TELEFILE and EFILE. We have temporarily shut down public access to electronic services to ensure the integrity of taxpayer information.

The CRA has a team working to restore its systems to normal operations but it will be a matter of days before the system problems are completely resolved. The security and integrity of taxpayer data has not been compromised. This problem is not the result of illegal activity, computer hackers or a virus.

We have now traced the source of the problem to software maintenance conducted on March 4, 2007. We are currently working to bring all systems back online gradually."

For more information, visit the CRA web site at www.cra.gc.ca

CRA Tax Tip: Save on gas, get your transit pass!

The Canada Revenue Agency (CRA) has issued the following Tax Tip reminding Canadians about the tax credit for public transit passes. Save those transit passes!

Did you know...

That individuals can claim a non-refundable tax credit for public transit passes? You will be able to claim the cost of buying a monthly (or longer duration) pass for commuting on buses, streetcars, subways, commuter trains and local ferries for this proposed non-refundable tax credit.

You can claim the full amount paid for a public transit pass, or for the cost of passes for multiple transit systems, for the amounts you have paid for travel that occurred after June 30, 2006. You can include the cost of passes for yourself, your spouse or common-law partner or your children under age 19.

You will need to keep the expired monthly transit passes for the months after June 2006 to support your claim.

For more information, visit http://www.cra-arc.gc.ca/whatsnew/items/transit-e.html or www.transitpass.ca.

CRA Tax Tip: It's all here!

The Canada Revenue Agency (CRA) has issued a Tax Tip reminding Canadian tax filers about the convenient My Account feature.

"Did you know...

That you can use My Account for individuals whenever and wherever you want to manage your tax and benefit information online? With My Account you can track your refund, check your benefit and credit payments, check your registered retirement savings plan limit, change your address, change your return, and so much more! To use My Account, you have to register for a Government of Canada epass, which includes the mailing of a Canada Revenue Agency security code."

For more information on this tax tip and other tax tips, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070212-e.html

CRA Tax Tip: It pays to get fit!

The Canada Revenue Agency has issued a Tax Tip reminding Canadians that starting in 2007 you may be able to claim some expenses for your children's physical fitness programs.

"Did you know...

Starting in 2007, you may be able to claim the fees paid for physical fitness programs for your children under the age of 16? The newly proposed children's fitness tax credit provides parents with an annual credit of up to $500 per child to help cover the cost of their child's physical fitness programs or sporting activities fees."

For more information on this tax tip, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070208-e.html

Where Are Tory Tax Promises?

Conservative rule? This was the pledge Stephen Harper made to Canadians, but it hasn’t come to pass. During last winter’s election campaign, his candidates vowed to end wasteful programs and control government spending, which increased dramatically under the old Liberal regime. Opposition Conservatives told Canadians that if elected they would prioritize spending and govern responsibly. Certainly, no scandals have erupted under Prime Minister Harper, but that does not mean all is well in Ottawa. The federal government is growing as fast as ever and this puts the prospect of meaningful tax relief in jeopardy.

Prime Minister Harper was applauded last year for limiting the size of his cabinet to 26 members. His streamlined executive was down significantly from 37 under former Prime Minister Paul Martin. Taxpayers were told this smaller cabinet would save them $48-million.

Yet just last month, Mr. Harper decided bigger is better by adding six secretaries of state to his team. These junior ministers are paid an additional $53,000 on top of an already generous MP pay package of $147,700. When a government spokesman was asked what additional expenses might crop up, he responded there wouldn’t be any, “They do in fact get a car and driver, but there’s no added cost to the taxpayer because the costs are being absorbed within the departments through reallocation.” Oh boy, if the Conservatives believe their own spin, taxpayers are in big trouble.

Additional limos, chauffeurs, and pay are the tip of the iceberg. Junior ministers do not attend Cabinet meetings, but each is nonetheless entitled to additional political staff. And what is Ottawa’s starting salary for a “senior” twenty-something staffer fresh out of school, who reports to a junior minister, who in turn reports to a minister, who reports to the Prime Minister? Try $85,000, up to a maximum of $110,700. Throw in benefits, travel and suddenly taxpayers are shelling out real money. It might not be $48-million, but it’s closer to that figure than zero – notwithstanding the government’s absurd denial.

Forget cutting the size of the state; the Conservative government is unwilling to even abide by its own commitment to hold the line on spending or change the pork-barrel culture. The party’s 2006 election manifesto stated spending had grown to an unacceptable level: “Far too much taxpayers’ money is absorbed by the Ottawa bureaucracy or spent on ineffective or inefficient programs.” To fix this problem Mr. Harper’s team said it would begin by limiting future growth of government to the inflation plus population growth rate.

But it hasn’t happened. Instead Foreign Affairs Minister Peter MacKay tells voters in Atlantic Canada that electing a provincial Tory candidate will open regional development taps, “He’s going to come knocking and we’re going to deliver,” he said. In Quebec, Public Works Minister Michael Fortier demands military contracts be directed to his province. In December, Senator Fortier announces industrial giant Pratt & Whitney will receive a $350-million subsidy. Bombardier has also been informed it will receive a similar sized corporate welfare handout – courtesy of taxpayers – should the aerospace firm build a new regional jet. On top of this, the government recently resurrected goofy environment programs it cancelled after assuming office last year. What’s next, Rick Mercer plugging the Two-Tonne Challenge?

Remember the days when opposition Tory MPs lampooned the government for boosting annual government spending by an average 8.2% each year during the Liberals’ final five years in office? This expansion meant the state was increasingly interfering in the lives of Canadians, at work and at home.

The federal government continues to meddle by imposing regulations on businesses, over-taxing families and adopting the vote-buying policies perfected by the Grits. According to the finance department, Ottawa will grow by another $12.4-billion this fiscal year. That increase works out to 7.1% – well above inflation and population growth. Spending is budgeted to grow by another 4.5% in 2007/08. Taxpayers have no reason to believe this lower figure any more than the previous commitment to reduce spending.

When a government uses a fire hose for spending, they are left with only an eyedropper for tax relief. The Conservatives obviously find it easier to spend the rising surplus rather than control expenditures and cut taxes – just as the Liberals did. But can they really believe re-election efforts will be any easier when taxpayers cannot see a significant difference between Conservative and Liberal spending levels or their records on lowering taxes?

John Williamson
Federal Director
Canadian Taxpayers Federation

CRA Tax tip: Cool cash for your tools!

The Canada Revenue Agency (CRA) has published the following tax tip:

"Did you know...

That if you are a tradesperson you may be able to deduct your tool expenses? The newly proposed tradesperson's tools deduction provides employed tradespersons with an annual deduction of up to $500 to help cover the cost of new tools necessary to their trade. The deduction applies to the total cost of eligible tools in excess of $1,000 acquired by an employed tradesperson after May 1, 2006."

For more information on this or other CRA tax tips, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070201-e.html

CRA Tax Tip: Claiming medical expenses

The Canada Revenue Agency (CRA) has issued a Tax Tip on claiming medical expenses on your 2006 tax return:

Did you know that you can claim, as a non-refundable tax credit, medical expenses for yourself, your spouse or common-law partner, and your children born in 1989 or later? For 2006, the total expenses have to be more than 3% of your net income, or $1,884, whichever is less.

For more information on claiming medical expenses on your taxes, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070125-e.html

CRA Tax Tip: If you're 65 or older...

The Canada Revenue Agency (CRA) has released the following Tax Tip:
"Did you know… That as of January 1, 2006, the age amount maximum increased from $4,066 to $5,066? If you were 65 or older on December 31, 2006, and your net income was less than $64,043, you can claim the age amount. You may also be able to transfer unused portions of the age amount to your spouse or common-law partner."

For more information regarding Canadian tax filing tips for seniors 65 and old, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070122-e.html

Canada Child Tax Benefit Payments

January 2007 Canada Child Tax Benefit payments information is now available on the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2007/jan/nr070119-e.html

CRA Tax tip: Take it to the limit!

The Canada Revenue Agency is reminding all eligible Canadians that March 1, 2007 is the deadline for making a contribution to a registered retirement savings plan (RRSP) for the 2006 tax year. For more information on this tax tip, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070115-e.html

CRA Alert: Don't get involved in illegal tax filing!

The Canada Revenue Agency has issued an alert to inform Canadians that if the refund sounds too good to be true, maybe it is!

"If you hear about a tax preparer offering larger refunds than other preparers, don't be fooled! While most preparers provide excellent service to tax filers, a few unscrupulous return preparers file false and fraudulent tax returns and ultimately defraud their clients.

Remember that even if someone else prepares your tax return, you're the one responsible for all the information on the return."

For more information on this alert, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a070109-e.html

Canadians to Pay Less, Thanks to Lower Income Tax Bite and GST Cut

Every year the Canadian Taxpayers Federation (CTF) releases projected income and payroll tax changes that kick in on January 1. The good news is that all taxpayers will pay less tax this year. A new employment tax credit – called the Canada Employment Credit – will increase to $1,000 for the 2007 tax year, up from $250 in 2006. This credit works like the basic personal exemption, which is set at $8,929 this year, and means workers will not pay income tax on the first $9,929 of earnings.

A fourfold increase in the Canada Employment Credit permits the Conservative government to truthfully assert taxes are going down even though Canadians will pay more payroll taxes and the lowest personal income tax rate, applied to the first $37,178 of income, will rise a quarter-point to 15.5% from 15.25%. This pleasant testimonial is only strengthened by the one-point GST reduction that will save consumers approximately $4.5-billion in ’07.

Some taxpayers will benefit much more than others. Ottawa will take less from the average individual taxpayer, but the amount is a pittance – 106 dollars to be exact. (See chart for federal income and payroll tax changes.) Low-income individuals, earning less than $25,000 annually, profit the most because they benefit from the employment credit and less income is subject to the 0.25% income tax rate increase.

Employment Insurance (EI) premium rates will drop by seven cents on January 1 to $1.80 for employees (per $100 of insurable earnings) from the current rate of $1.87. (The corresponding employer rate will drop by 10 cents to $2.52 from the current rate of $2.62.) Yet this gain is mostly offset because the tax rate will be applied to more income. Ottawa is giving tax relief with one hand and taking it back with the other. The maximum insurable earnings will rise from $39,000 to $40,000. This was not an inflationary boost as the previous EI threshold increase was in 1995. Ottawa was wrong to increase the EI threshold when the program continues to amass an annual $2-billion surplus. The seesaw EI changes represent a mere $9.30 reduction from 2006 levels.

Canada Pension Plan (CPP) payroll taxes will also rise by $79.20. While the tax rate will remain unchanged, the income threshold will increase to $43,700 from the 2006 level of $42,100. The bottom line is the net payroll tax bill on workers will increase by $69.90 (and $65.40 for employers) because EI tax reductions will be gobbled up by a higher EI threshold and rising CPP payments.

Children’s Fitness tax Credit

Information on the new children's fitness tax credit is now available on the Canada Revenue Agency website at www.cra.gc.ca/fitness.

According to a CRA news release:

"Following the report of a panel of health and physical fitness experts, Finance Minister Jim Flaherty announced on December 19, 2006 his intention to introduce regulatory changes that would clearly define eligible programs of physical activity for the purposes of the tax credit, which was initially proposed in the 2006 Federal Budget.

Parents are encouraged to ask for and keep all receipts when they register their children in 2007 for physical activity programs that may qualify. Information about how to claim the tax credit will be included in the General Income Tax and Benefit Guide – 2007."

The full text of the CRA news release can be found at:
http://www.cra-arc.gc.ca/newsroom/releases/2007/jan/nr070105b-e.html

CRA Alert: Don’t be fooled by unsolicited e-mails or phone calls!

The Canada Revenue Agency (CRA) is warning the public to beware of a number of scams in which individuals falsely identify themselves as officials from the CRA or the Department of Finance Canada. The scams are circulating by both e-mail and telephone.

According to the CRA website, "There are many versions of the scam, but the general concept remains the same: the victim receives an unsolicited phone call from an individual claiming to be a government official or an e-mail from a legitimate-sounding generic e-mail account that appears to come from a government organization." The individual asks the victim to send money in order to receive a lottery winning or tax refund.

The CRA reminds Canadians, "Do not, under any circumstances, respond to any unsolicited e-mail or telephone call asking you for money or confidential banking information. Instead, immediately contact your local police department or the Royal Canadian Mounted Police."

For more information on these e-mail and telephone scams, and for tips on avoiding being a victim of these scams, please see the CRA website at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a070104-e.html

Tax Savings in 2007

Tax Savings in ’07 – Modest Gains for Individuals, Families with Young Children Win Big

Ottawa: The Canadian Taxpayers Federation (CTF) today released projected income and payroll tax changes kicking in on January 1st, 2007.

“All taxpayers will pay less tax in the New Year,” said CTF federal director John Williamson. “The new employment tax credit will increase to $1,000 for the 2007 tax year, up from $250 in 2006. This fourfold increase permits the finance minister to truthfully assert taxes are going down even though Canadians will pay more payroll taxes next year and the lowest personal income tax rate will rise a quarter-point to 15.5% from 15.25%.”

News Editors: It has been reported the value of the employment tax credit – unveiled in the 2006 budget – is $500 for the 2006 tax year. This is wrong. Please refer to the Canada Employment Credit, page 219, Annex 3 of The Budget Plan 2006. CTF calculations, which are prepared annually, include the new $1,200 (pre-tax) Universal Child Care Benefit for consistency as tax figures also incorporate the Canada Child Tax Benefit. These calculations do not measure the one-point GST reduction, the effect of pension splitting or the impact from tax credits that benefit some, but not all taxpayers.

Federal Income & Payroll Taxes 2007 vs. 2006 – Select Incomes (CTF Calculations)

See Chart 1 & 2 for calculation notes and provincial income tax amounts (web links are below).

“Without a doubt the biggest winners are families with young children. They will rocket ahead thanks mostly to the monthly $100 payment for each child under age 6,” stated Mr. Williamson.

Provincial Income Tax Changes –

Chart 1 – http://www.taxpayer.com/pdf/tax_savings_2007.pdf – details overall federal-provincial tax savings province by province for various income scenarios.

“Low-income individuals, earning less than $25,000 annually, benefit the most from Ottawa’s new employment tax credit. Also noteworthy are that the larger tax savings for individuals earning $80,000 is due to indexation and how unevenly families with similar income levels are taxed,” said Williamson. “One the provincial front, Manitoba taxpayers will realize the largest savings due to a drop in its middle income tax rate.”

Payroll Taxes Continue to Increase –

Effective January 1st, 2007, Employment Insurance (EI) premium rates will drop by seven cents to $1.80 for employees (per $100 of insurable earnings) from the current rate of $1.87. The corresponding employer rate will drop by 10 cents to $2.52 from the current rate of $2.62. However, the maximum insurable earnings will rise from $39,000 to $40,000. The previous EI threshold increase was in 1995. The seesaw EI changes represent a mere 1.3% reduction from 2006 levels.

Canada Pension Plan (CPP) premium rates (per $100 of insurable earnings) will remain unchanged at 4.95% paid by employees and 4.95% paid by employers. The threshold will increase to $43,700 in 2007 from today’s $42,100 level. See Chart 2 for 2007 and historical EI and CPP tax changes:

http://www.taxpayer.com/pdf/payroll_taxes_2007.pdf

“The net payroll tax bill on workers will increase because the EI tax reductions will be gobbled up by a higher EI threshold and rising CPP payments. Workers will pay $70 more in payroll taxes and employers $65 more,” said Williamson. “Ottawa was wrong to increase the EI threshold when the program continues to amass an annual $2-billion surplus. It is another example of giving a tax break with one hand, by lowering the EI tax rate, and taking it away with the other, by raising the threshold.”

A Tax Cut Plan for All Canadians –

The CTF proposes to increase both the basic personal and spousal exemptions to $15,000 over four years. This will save taxpayers $940 a year. In addition, the top two personal income tax rates should be reduced by 3% – phased-in over three years – from 29%-to-26% and 26%-to-23%.

“It is not sufficient for parliamentarians to only discuss cutting taxes for low- and modest-income Canadians,” concluded Williamson. “According to the OECD and even Canada’s finance department, our personal income tax burden remains the highest of the G-7 nations. This standing has not changed in almost a decade. Broadly-based tax relief in the ’07 budget is necessary to ensure all income earners benefit from lower taxes.”

John Williamson
Federal Director
Canadian Taxpayers Federation

CRA News Release: CPP pensionable earnings ceiling up for 2007

The Canada Revenue Agency announced on November 2, 2006 that the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2007 will be $43,700-up from $42,100 in 2006.

According to the CRA news release, "contributors who earn more than $43,700 in 2007 are not required or permitted to make additional contributions to the CPP. The basic exemption amount for 2007 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP."

For more information, please see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2006/nov/nr061102-e.html

CRA News Release: Warning: Tax shelters are risky

The Canada Revenue Agency (CRA) has issued a news release on its web stie warning Canadians of the financial risks associated with participating in certain tax shelter gifting and donation arrangements. These include gifting trust arrangements, leveraged cash donations, and buy-low, donate-high arrangements.

“Be wary of any ad that uses tax savings as a key selling point, said CRA Commissioner Michel Dorais. The CRA reviews all tax shelters and challenges any arrangement that does not comply with the Income Tax Act. We will audit the tax returns of investors who participate in these tax shelters.”

The CRA has indicated that it is currently auditing many gifting arrangements.

For more information on this news release please see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2006/oct/nr061031-e.html

CRA debunks common tax myths!

In a recent taxpayer alert, the Canada Revenue Agency has issued a warning about certain tax myths being propogated by "a small number of unscrupulous individuals and groups... many of them claiming that you can lawfully refuse to pay taxes or file a tax return".

CRA advises Canadians:

"Be wary of such claims because they are based on faulty arguments and are not supported by law. Accepting them as fact could have serious legal implications for you, including fines, penalties and even jail time, plus any taxes and interest owed."

Some of the most common tax myths are identified in the taxpayer alert on the CRA website at:

http://www.cra-arc.gc.ca/newsroom/alerts/2006/a060425-e.html

CRA Tax Tip: You get an extra day to file your return!

Since April 30 falls on a Sunday in 2006, you have until midnight May 1, 2006, to file your 2005 Canadian income tax return. (You can file either electronically or by mail.) If you don't file on time, late-filing penalties will apply on balances owing.

Self-employed tax filers have until midnight on June 15, 2006, to file a return although you still have to pay any amounts owing by May 1, 2006.

For more information on this CRA tax tip or others, visit the Canada Revenue Agency Web site at: http://www.cra-arc.gc.ca/newsroom/taxtips/2006/tt060424-e.html

CRA Tax tip: For better or worse

The following tax tip is now available on the CRA Web site:

"If your marital status changed during the 2005 tax year, the calculation of benefits and credits paid by the Canada Revenue Agency (CRA) could be affected. You should notify the CRA of the change, in writing, as soon as possible after it takes place, and also update your marital status on your 2005 tax return. In some situations, you may be eligible for additional Canada Child Tax Benefit (CCTB) and/or goods and services tax/harmonized sales tax (GST/HST) credit payments. Notifying the CRA of this change also ensures that you are not subject to CCTB or GST/HST credit overpayments, and that your benefit and credit entitlements are correct."

For more information on this tax tip visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2006/tt060314-e.html

CPP pensionable earnings ceiling for 2006

The Canada Revenue Agency (CRA) announced today that for 2006 the maximum pensionable earnings under the Canada Pension Plan (CPP) will be $42,100, up from $41,100 in 2005.

According to the CRA news release

"The new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada.

Contributors who earn more than $42,100 in 2006 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2006 remains $3,500. Individuals who earn less than that amount do not need to contribute to the CPP."

For the full text of the news release and more information, please visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2005/nov/nr051102-e.html

My Account - a handy tool

My Account is a Canada Revenue Agency (CRA) online service designed to give you the convenience and flexibility of managing your personal income tax, Canada Child Tax Benefit (CCTB), and Goods and Services Tax (GST) Credit accounts on a secure website.

My Account allows you to access personal information such as your:
• tax refund or balance owing;
• account balance and payments;
• actual income tax returns;
• instalment account;
• Registered Retirement Savings Plan, Home Buyers’ Plan, and Lifelong Learning Plan status;
• CCTB and related provincial and territorial programs payments and account balances; and
• GST Credit and related provincial programs payments and account balances.

You can use My Account to manage your personal income tax account online, including:
• changing your address or telephone number;
• changing your tax return, after it has been filed and assessed; and
• disagreeing with your assessment – although we strongly urge you to consult with your accountant before taking this step yourself.

You cannot make payments through My Account. Likewise, you cannot print instalment reminder statements from My Account for purposes of remitting an instalment at your bank. This is because the remittance form has special magnetic ink required for processing by the financial institutions.

To access the services available through My Account, you will have to register for a Government of Canada epass. Registration is a three-step process wherein you:
1. authenticate yourself with the CRA by providing specific personal information (your social insurance number, your date of birth, the amount reported on line 150 of your 2003 or 2004 income tax return, and your postal / zip code);
2. create an epass User ID and Password, after which CRA will mail your personal CRA Activation Code to you; and
3. upon receipt of the activation code (which has an expiry date), return to the My Account page and enter the code.

This service is secure and you can help keep it that way by not providing your personal information to others (i.e. SIN, line 150 amount, activation code, etc). If you are logged into the My Account service and you do not perform any activity for more than 20 minutes, your session will automatically close and you will have to log in again to continue.

Currently, My Account is not accessible by third parties including your spouse and other family members, your accountant or your banker / broker. Even if your accountant has authorization allowing CRA to speak directly with them, they cannot access your information through My Account. In 2006, CRA is expecting to offer an online service for representatives that will allow them, when authorized, to access information and services for clients.

The CRA website http://www.cra-arc.gc.ca/eservices/tax/individuals/myaccount/menu-e.html has very helpful, easy-to-read information about My Account and the process for using My Account is quite user-friendly. It’s a terrific tool for determining, confirming or changing / updating personal information. Depending on your specific needs at the time, it’s a great alternative to the busy signals and long waits when calling CRA. There is tremendous future potential with this system.

Caren MacLeod, CGA
Tax Manager
Scott, Rankin & Gardiner

What’s really behind “Tax Freedom Day”

According to the Fraser Institute, an independent public policy organization in Canada, Sunday June 26, 2005 is "Tax Freedom Day", the day when Canadians allegedly have earned the amount of their income that will go to taxes. For the remainder of the calendar year, Canadians are working to put money in their own pockets.

According to the Institute, the tax rate remains unchanged from last year but the day falls one day later due to the leap year in 2004. The Fraser Institute's news release reads:

"Since 2001, Tax Freedom Day for the average Canadian family has steadily advanced. Tax Freedom Day fell on June 19 in 2001, June 23 in 2002, June 24 in 2003, and June 25 in 2004. This year, Tax Freedom Day falls on the same day as it did in 2000, the latest Tax Freedom Day in Canadian history."

Yet, in a news release issued by the Canadian Centre for Policy Alternatives, entitled Don’t believe the hype: What’s really behind the Fraser Institute’s "Tax Freedom Day" a study by the CCPA's Neil Brooks claims that the Institute's reported date understates the income of Canadians, overstates their taxes, and misuses the concept of averages.

Brooks states:

"The concept of Tax Freedom Day is a gimmick designed to suggest that Canadians derive no benefit from the taxes they pay when nothing could be further from the truth. With their taxes, Canadian citizens buy their most valued goods and services: high-quality public schools, world-class universities, excellent medical services, public parks and libraries, safe streets, and livable cities."

While reinforcing the notion that the goods and services we receive through our taxes do not enlarge our freedoms or enrich our lives, the author does indicate that the methods used by the Fraser Institute to calculate Tax Freedom Day are flawed.

For more information on the Brooks study, see the CCPA news release on the CCPA web site. Brooks' study appears to be a more indepth analysis of an editorial previously prepared by the CCPA's Marc Lee in 2002 entitlted The tax freedom daze.

Refer to the Fraser Institute web site for its news release Canadians Celebrate Tax Freedom Day on June 26th.

CTF Comments on Tax Freedom Day

Tax Freedom Day Arrives Sunday – Finally a Weekend to Celebrate

Calgary: The Canadian Taxpayers Federation (CTF) today responded to news from the Fraser Institute that Tax Freedom Day for Canada will occur on Sunday, June 26th.

Each year, the Fraser Institute calculates Tax Freedom Day as the day of the year when taxpayers finally start working for themselves after paying the total tax bill imposed on them by governments. Prior to the Tax Freedom Day, the equivalent of all money earned by taxpayers is required to pay the numerous taxes, fees and levies imposed by federal, provincial and municipal governments. The original release and calculations is available at: www.fraserinstitute.ca

"Canadians this year will work 177 days to feed the appetite of all three orders of government, chewing up 48 per cent of average annual household income," stated CTF federal director John Williamson.

"From New Year’s Day until noon on April 14th, taxpayers worked for the Canada Revenue Agency. After lunch on April 14th until the lunch break on June 17th, we toiled away for the provincial tax collectors. And from noon on June 17th until close of business Saturday, we worked for City Hall," added Williamson. "This year Tax Freedom Day falls on Sunday, the day of rest for weary taxpayers."

John Williamson
Canadian Taxpayers Federation
www.taxpayer.com

You're late filing: So now what?

If you didn't know it, the filing deadline for your 2004 personal income tax return has come and gone. Tax returns received by CRA or postmarked after midnight May 2 are considered late.

So what happens when you're late? Late-filing penalties and interest on amounts owing. And each day you wait it only gets worse.

Just because you've procrastinated this long doesn't mean you should delay it any longer. For your 2004 return, CRA charges compound daily interest starting May 1, 2005, on any unpaid amounts owing, including any balance owing if they reassess your tax return. Furthermore, you will be charged interest on any penalties starting the day after your return is due. (The rate of interest changes every three months. See CRA's prescribed interest rates.)

What if you have a good excuse for not filing? You may be in luck. CRA may cancel and waive penalities and interest on unpaid taxes under certain circumstances. For more information about these extenuating circumstances, refer to CRA's fairness provisions.

For more information about late-filing penalties and interest rates, see the CRA web site at:
http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/interest/menu-e.html

Filing Deadline: Time is running out...

The deadline for filing your taxes and remitting amounts owed on your personal taxes without penalty is quickly approaching. However, did you know you have a bit more time this year?

Since April 30 falls on a Saturday in 2005, you have until midnight on May 2, 2005 to file (paper or electronically) your 2004 income tax return. By sending CRA your tax return on time, if you have a balance owing you will avoid being charged a late filing penalty.

For more information on filing your personal tax return, see the Canada Revenue Agency site at:
http://www.cra.gc.ca/individuals

CRA Tax Tip: Paying Electronically

Did you know that you can pay your personal or business income tax through most Canadian financial institutions, including electronically through their telephone and Internet banking services?

Depending on the services provided by the financial institution, you may even be able to schedule post-dated payments. Your financial institution may also provide information as to how to file your GST/HST return or remit any balance owing through the Canada Revenue Agency's GST/HST-EDI service.

For more information, see the CRA Tax Tip at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0412ottawa-e.html

CRA Tax Tip: Doing it all online

The Cananda Revenue Agency provides tax tips on its web site. A recent tax tip identifies the convenience and benefit of doing everything tax-related online from your computer.

"My Account is a fast, easy, convenient, and secure way to manage your income tax information, Canada Child Tax Benefit and goods and services tax/harmonized sales tax credit information, and more."

To view this CRA Tax Tip go to:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0322ottawa-e.html

To use the My Account feature you can log on via the CRA Web site and clicking on My Account. For more information on My Account, visit the Canada Revenue Agency Web site at: http://www.cra.gc.ca/myaccount/.

There are also numerous tax preparation software packages that are available and approved by CRA for filing your taxes both online and offline. For more information on tax filing software available for your computer, see the Taxes.ca list of tax software and read reviews on our blog. You can even write your own reviews!

Donations

While we generally donate to charities because we want to help others, there are tax incentives we should be aware of and make use of. In order to do so, we also have certain responsibilities in respect of such donations.

A charitable donation is a "voluntary transfer of money or property without any expectation of return". It may be in the form of cash or a gift in kind such as securities, certified cultural property, life insurance policies, real estate, residual property, etc. Donations may also be made at the time of death via the taxpayer's will. A gift in kind is generally valued based on its fair market value at the time of disposition. There are special rules for donating capital property, in particular the ability to select a value between the cost and the fair market value. Despite the need for and importance of volunteers, volunteering one's time or services does not qualify for tax credits.

The donor is responsible for ensuring the recipient of the donation is a qualified donee. Qualified recipients include:
- Canadian Registered Charities;
- Certain universities outside Canada;
- Registered Canadian amateur athletic associations;
- Tax exempt housing corporations resident in Canada that only provide low-cost housing for seniors;
- Canadian municipalities;
- Certain gifts to Canada, a province or a territory;
- Registered national arts service organizations;
- The United Nations or its agencies; and
- Charitable organizations outside of Canada to which the Government of Canada made a donation in the tax year, or in the previous tax year.

Individuals who make charitable donations are entitled to a federal tax credit at a rate of 16% on the first $200 of donations and 29% for donations in excess of $200. For most provinces and territories, the tax rate that applies to the lowest income bracket will apply to the first $200 of donations and the rate that applies to the top income bracket will apply to donations in excess of $200.

Qualifying donations are generally limited to 75% of an individual's net income for the year, plus 25% of capital gains from gifts and 25% of recapture from depreciable property gifted. The 75% limit is increased to 100% in the year of death.

Each form of donation has different tax implications for both the donor and the donee. Cash is the most commonly-used form; but the donation of securities may be a preferable option for some donors. The federal government has cut in half any capital gains owed on donations of qualifying securities (generally meaning a security listed on a stock exchange and mutual funds). If the donor is already planning to sell such securities and donate cash, it could be beneficial to donate the securities directly. The donor would be taxable on 1/4 of the capital gain (rather than 1/2) and the value of the donation itself would not change.

Tax credits for donations made may be claimed in the year of donation or carried forward up to five years. For some, it may be worthwhile accumulating donations so as to minimize the 16% federal credit (on first $200 of donations) and maximize the higher credit. It is also advisable for spouses to combine their donations and claim them all on one return. If reported separately on their respective tax returns, each must exceed $200 before obtaining the higher tax credit. By claiming together on one return, that $200 at 16% occurs only once.

To obtain general information on donating, including a feature to search the listing of Canadian Registered Charities, check the Canada Revenue Agency's Charities Directorate page.

Caren MacLeod
Scott Rankin & Gardiner
www.srgg.com

CRA Tax Tip: Child care

Canada Revenue Agency has added the following tax tips to its web site.

Canadians are reminded that you may be eligible to claim payments for child-care expenses such as nursery school, day-care, day camps, boarding schools, and sports schools. Expenses can be claimed if you or your spouse incurred the expenses in order to work, carry on a business, or attend school.

Also, if your child is under the age of 18 and works part time or full time, he or she may be entitled to a refund on taxes withheld. There is even a benefit to filing wether tax has been withheld or not. Filing an income tax return to report the income earned will increase your child’s RRSP contribution limit for future years.

For more information, see the CRA web site at the following addresses:

Tax tip: Claim the care for your kids
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0222kids-e.html

Tax tip: Cheque for your child
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0308child-e.html

You Could Have US Tax Issues

If you spend a significant amount of time in the United States, own rental property in the US, do business in the US, or are a US citizen or "Green Card" holder, then you need to be sure you’re onside with any required US filings. While compliance often does not result in US taxes owing and may simply consist of filing a single form, penalties for non-compliance are severe.

Are you a snowbird? You must keep track of the number of days you spend in the US (including travel days). The US Internal Revenue Service (IRS) will consider you a US resident if you meet the "substantial presence test", which is a formula calculated based on the number of days you were in the US in the current year, the preceding year and the second preceding year. Unlike the 183-day misnomer, if you spend, on average, 4 months per year or more in the US then you may meet the test and be deemed a US resident.

You can avoid being considered a US resident by claiming the "closer connection exception". This requires the filing of US Form 8840 to establish that your ties to Canada are closer than those to the US. Such ties include permanent home, family, personal belongings, banking, and participation in social, religious or professional organizations. If you spent more than 183 days in the US in the current year or if you have applied for a Green Card (permanent resident status in the US) then you cannot claim the closer connection exception.

It is possible to be a resident of both Canada and the US – a dual resident. Under these circumstances, we must turn to the "tie-breaker" rules in the Canada-US Tax Convention (treaty) to determine who has ultimate jurisdiction to tax you (i.e. which country you are, in fact, a resident of). If the rules result in Canadian residency, then a US tax return must be filed to report US-source income, while a Canadian return must be filed to report world-wide income. If the rules result in US residency, then the opposite is necessary. Foreign tax credits are used to the extent possible to provide relief from double taxation.

Perhaps you own US real property that you rent out. It is important to elect, in a timely manner, to be taxed as though the income is effectively connected with a US trade or business. Without the proper election, the tenants are obliged to withhold 30% of the gross rent and remit it to the IRS. By making the appropriate election, you can file a US return reporting gross income and deducting expenses to end up paying tax at the marginal rate on the net income – a far better scenario than 30% of gross income.

If you are a US citizen or Green Card holder residing in Canada you are still required to file a US tax return to report your world-wide income. As a Canadian resident you are also required to file a Canadian tax return to report your world-wide income. Again, foreign tax credits are used to the extent possible to provide relief from double taxation. It is also imperative to file your US return in order to not lose the right to claim a "foreign earned income exclusion" and to make certain elections.

Regardless of your filing status, it is important to file when required and to claim any and all treaty exemptions that are available to you, such as electing to defer taxation of any income or gains accrued in a retirement plan, such as an RRSP.

The US also has Estate Tax issues that should be considered. US estate tax arises on the death of an individual and is applied at graduated rates to the fair market value of the individual’s taxable estate. If you are a non-resident, then the estate tax applies only to the value of property in the US. A US citizen or US resident must pay estate tax on their world-wide estate.

Currently US estate taxes are being phased out – the tax rate is being reduced while the exemption amounts are being increased. By 2010, there will be no estate tax; however that may change. Under US legislation, there is a "sunset clause" which essentially means these changes will not apply after December 31, 2010. So, unless further steps are taken, the repeal of the estate tax will last for only one year – 2010. In 2011, the system will revert back to the rules that applied before this phase-out started.

In general, US forms and returns are due April 15 (vs. April 30 in Canada). For US citizens residing outside the US, there is an automatic two-month extension. For non-citizens, it may be possible to request a filing extension. For everyone, regardless of extensions, any tax owing is still due April 15 and subject to interest if not paid on time.

The bottom line is that many people don’t realize they have filing obligations with the US. You may be at risk for severe penalties and lose the ability to rely on tax benefits and treaty protection.

Caren MacLeod
Scott Rankin & Gardiner
www.srgg.com

"My Account" Service

Are you aware of the Canada Revenue Agency's "My Account" service? It's an online service that allows individuals to access and manage such things as personal income tax, GST credit, Registered Retirement Savings Plan room, instalments, Canada Child Tax Benefit and, most recently, change in address. To enhance security, a Government of Canada epass is now required to use this service.

Check out the details at CRA

RRSP Pointers

Deadline
A reminder that today, March 1, 2005, is the deadline for making a deductible contribution to your Registered Retirement Savings Plan (RRSP) for the 2004 taxation year.

Reporting
Please note that contributions made in the first 60 days after the calendar year must be reported on your personal tax return for the previous calendar year (i.e. Jan 1 - Mar 1, 2005 contributions must be reported on your 2004 T1). The reason this is more critical then ever is that the Canada Revenue Agency (CRA) is implementing a "matching program" much like the system they use for the various T-slips. If the total contributions you report, in the remainder of the calendar year and in the first 60 days after the calendar year respectively, do not agree with the information CRA has on file (from the various issuing financial institutions), then you can expect an inquiry, and possibly even an audit, by CRA. For example, if you contributed $5,000 on February 28, 2005 and $10,000 between March 2 and December 31, 2005, you cannot report $15,000 of contributions in the remainder of 2005 as this will not agree with the $10,000 CRA has on record.

So, it's very important you report the contributions in the correct taxation year, regardless of whether you can, or want, to take the RRSP deduction in that year.

Key Strategies
I encourage you to read the February 8, 2005 article "RRSPs: Key Strategies" written by Daniel Saikaley of CIBC Wood Gundy. This article, which can be accessed on this website, provides some excellent RRSP tips.

Caren MacLeod
Scott Rankin & Gardiner
www.srgg.com

Child Tax Benefit payments, Feb. 18

Today the Canada Revenue Agency issued the February Canada Child Tax Benefit (CCTB) payments. Payments totalled more than $736 million, to more than 2.9 million recipients across Canada.

From the CRA Web site:

"Recipients who are expecting a benefit payment and have not received it by February 25, should contact the Agency's CCTB enquiry service at 1-800-387-1193. This service is available weekdays from 8:15 a.m. to 5:00 p.m., local time.

In order to receive, or continue to receive, CCTB payments, recipients and their spouses or common-law partners have to file a tax return."

More information is available at:
http://www.cra-arc.gc.ca/newsroom/releases/2005/feb/0218cctb-e.html

CRA Tax Tip: Claiming transport costs for medical treatment

Canada Revenue Agency has released a new tax tip on its web site reminding Canadians that you may be eligible to claim transportation travel costs relating to medical treatment unavailable where you live.

"To claim transportation costs, the place where the treatment is received must be at least 40 kilometers from where the patient lives. To claim additional travel costs such as meals and lodging, the place where the treatment is received must be at least 80 kilometers from where the patient lives."

For more information, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0215medical-e.html

Taxpayer Issues Back on Radar Screen?

CTF Gets Together With Finance Minister in Pre-Budget Meeting Tomorrow

Ottawa – The Canadian Taxpayers Federation (CTF) welcomes the news, reported over the weekend, of possible tax savings for Canadians that will be announced in the 2005/06 budget. Federal Director John Williamson will meet with Finance Minister Ralph Goodale on Tuesday morning in Ottawa to discuss this issue as well as other CTF budget priorities.

"The CTF will take this opportunity to discuss the need to provide broadly based personal income tax relief, particularly when Ottawa is over-taxing Canadians and running multi-year billion dollar surpluses," said Mr. Williamson. "It appears two signature CTF issues are on the budget drawing board, namely a gas tax transfer to cities on a per capita basis, and a tax cut in the form of either a higher basic personal exemption or lower rates. We also want to discuss the need to control government spending, and pay down Canada’s $500-billion debt."

The CTF’s top budget priorities include:

- Raising both the Basic Personal Exemption (BPE) and Spousal Exemption to $15,000 within five years to provide tax relief for all Canadians. This change will remove 1.8 million Canadians from the tax rolls and benefit the remaining 13.8 million taxpayers.

- Adopting the CTF’s Municipal Roadway Trust as the most expedient and equitable way to return gas tax revenues to roads in Canadian cities.

- Limiting expenditure growth to a maximum annual amount of inflation and population growth.

- Redressing inequalities in the Employment Insurance payroll tax regime by lowering and harmonizing employer premiums with those of employees.

- Abandoning proposals to subsidize institutional daycare and instead introduce a per child tax credit that is available to all Canadian families. Public policy bias on this issue must be neutral as parents are best able to decide what type of child care arrangements most suits their family.

- Instituting a legislated debt repayment schedule with annual payment of 5 per cent of revenues.

"Hopefully, Minister Goodale will give taxpayers reason to believe the government is preparing a more balanced approach to budgeting by offsetting spending increases with debt repayment and tax relief," concluded Williamson.

John Williamson
Federal Director
Canadian Taxpayers Federation
www.taxpayer.com

CRA Tax Tip: Home tax deductions for the self-employed

As a self-employed individual running your business out of your home or apartment may allow you to deduct a corresponding part of your operating costs, such as utilities. Furthermore, any specific expenses that are directly related to the business are also deductible.

For more information, including conditions and rates, see the CRA web site:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0211home-e.html

CRA Tax Tip: Charitable Donations

The Canada Revenue Agency issued a new Tax Tip on its web site today reminding Canadians about the tax credit benefits of making charitable donations.

"You get a 16% federal tax credit on the first $200 of charitable donations, and you get a 29% federal credit for donations of more than $200 (provincial and territorial rates vary)."

For more information see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0208help-e.html

T-Slips

Following is a quick refresher on some of the various T-slips you may receive and when you should expect to receive them.

T4
T4's are used to report employment income including salaries and wages, commission income, and taxable allowances and benefits. These payments are subject to payroll withholdings (CPP, EI and income tax as applicable). Employers are required to file their T4 returns and issue the T4 slips to their employees by February 28. Don't forget to ensure your employer has a current Form TD1 on file, especially if your circumstances warrant reduced income tax withholding.

T4A
T4A's are issued if you received pensions, retiring allowances, annuities and other income. Such payments may be subject to income tax withholding depending on the nature of the income. T4A returns must also be filed by February 28, along with the issuance of the T4A slips.

Other T4 slips that may be applicable include T4A(P) for CPP benefits, T4A(OAS) for Old Age Security payments, T4E for Employment Insurance benefits, T4RSP for Registered Retirement Savings Plan income (including withdrawals from an RRSP other than those withdrawn under the Home Buyers Plan), and T4RIF for registered retirement income funds.

T5018
If you are in the construction business, amounts paid to subcontractors must be reported on the T5018 "Contract Payments". Payors of such amounts can prepare the slips on either a calendar year basis or a fiscal year basis; however, issuance can be no later than six months after the end of the reporting period. For example, if the payor chooses the fiscal year basis and the fiscal year end is March 31 then the T5018 return is due September 30.

T5
T5's are used to report investment income including interest, dividends, and certain foreign income. These may be issued in Canadian dollars or in a foreign currency depending on the nature of the investments. The slip will clearly indicate which foreign currency, if any, is applicable so that the amounts can be converted to Canadian dollars for reporting on the tax return. Payors are required to file the T5 returns and issue the T5 slips by February 28.

T3
T3's are used to report income and designations from a trust or an estate. This covers a range of payments from interest and gains on mutual funds to certain distributions from inter vivos (living) trusts and testamentary trusts (created on death via a will). T3 returns must be filed and T3 slips must be issued within 90 days of the trust's taxation year. Only testamentary trusts are allowed to have a year end other than the calendar year, though many with that option still choose a December 31 taxation year. Thus, for the majority of trusts and estates, you can expect to receive the T3 slip around March 31.

If you don't receive your slips within a few days of the respective deadlines, you should contact the issuer to follow up. Always be sure the issuer has the correct and current information (i.e. name spelled correctly, correct SIN, current address).

Caren MacLeod
Scott, Rankin & Gardiner Chartered Accountants
www.srgg.com

Interest Paid on Student Loans Deductible

As of 1998 interest paid on a student loan has qualified as a tax credit. To be eligible to claim the interest paid on your loan in 2004 or the preceding 5 years, you must have received the loan under
the Canada Student Loans Act, the Canada Student Financial Assistance Act, or a law of a province or territory governing the granting of financial assistance to students at the post-secondary level.

You can not claim interest that you have already claimed but amounts you do not claim this year can be carried forward to any of the next five years. Only you can claim the interest paid on your student loans even though someone other than you (such as a parent) may have paid it.

For more information see the CRA web site for information on completing line 319 of your 2004 tax return:
http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/319-e.html

CRA Tax Tip: Deducting Moving Expenses

The Canada Revenue Agency posted a new tax tip on its web site today reminding Canadians that moving expenses may be tax deductible.

If you move within Canada to start a new job or business, some of your moving expenses may be deductible from the income you earn in the new location. Expenses that can be deducted include hiring movers or renting vans to move, furniture storage, meals and lodging for you and your family, and the cost of breaking a lease or selling your home. Expenses are deductible from the income earned at the new location in the year you move. Expenses that are not claimed in the year of the move can be carried forward and claimed in years after you move against income earned at the new work location.

For more information see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0202moveon-e.html

CRA Tax Tips

Did you know that Canada Revenue Agency provides Tax Tips on its web site? For instance, this month they released advice on claiming your medical expenses.

"You can claim, as a non-refundable tax credit, medical expenses for yourself, your spouse or common-law partner, and your children born in 1987 or later. For 2004, the total expenses have to be more than 3% of your net income, or $1,813, whichever is less."

For more information on CRA Tax Tips, visit:
http://www.cra-arc.gc.ca/newsroom/taxtips/menu-e.html

High Time for Another 5-year Tax Cut Plan

January 20, 2005
A big yawn is the reaction most Liberal MPs will give a recent economic report highlighting how the prosperity of Canadians has barely improved over the past 15 years. A study by the Toronto Dominion Bank found that between 1989 and 2004 Canada’s per capita gross domestic product (which measures the nation’s economic output) grew by 25.5 per cent; whereas the after-tax income per Canadian worker increased by an abysmal 3.6 per cent. The reason for this lopsided increase: Ever higher taxes, government policies that have not improved the economic well-being of citizens, and costly programs that waste tax dollars.

But what might wake government MPs up from their slumber is the report’s co-author, TD’s chief economist Don Drummond, who until now has been supportive of Liberal budgets in general, and Paul Martin in particular.

Yet given how government spending has risen since the budget was balanced in 1998 and that Mr. Martin is unwilling to act fiscally responsible as prime minister, Mr. Drummond’s advocacy for a lighter tax burden and smarter spending is not surprising. He worked at the Finance Department when Ottawa was trying to spend less and eliminate the deficit.

Ottawa once again has a spending problem. When the last budget was tabled in March 2004, Finance Minister Ralph Goodale said program spending would increase by 3.1 per cent this year. Yet when the books were updated in November – only eight months later – Mr. Goodale revealed spending will, in fact, grow by 6.5 per cent – more than a two-fold increase.

The prime minister and finance minister tell Canadians tax relief is not a priority, and continue to hang their government’s hat on a five-year tax reduction program that was launched in the February 2000 budget – when Jean Chrétien was in charge. But just how big was that tax cut?

When then-Finance Minister Martin announced the tax relief package in 2000, he and government MPs distorted the true size of the plan as a $100-billion tax cut. But in fact, $20.7-billion of this amount included the ending of bracket creep, which did not lower taxes but indexed tax brackets with inflation.

In addition, a $28-billion hike in Canadian Pension Plan premiums was not included. So while personal income taxes decreased they were partially offset by increasing CPP taxes over the same period. Finally, almost $6-billion in Canada Child Tax Benefit payments were incorrectly identified as tax relief, instead of being properly classified as government expenditure. The real five-year tax cut, fully implemented at the end of 2004, amounts to $46-billion. While this is an impressive figure and welcome news to taxpayers, it is a far cry from the $100-billion as advertised by the government.

Only a foolhardy politician would say the job of ensuring tax rates remain competitive or improving living standards of Canadians is done. But this is what Messrs. Martin and Goodale are saying when tax reform is an ongoing process, much like fixing health care or improving the readiness of Canada’s Armed Forces.

The time for a new round of tax cuts – phase 2, if you like – has arrived and Ottawa’s $9-billion surplus makes it easy to do. Indeed, a principle of taxation is that the tax code should generate revenues necessary to cover the cost of essential government programs and services, no more, no less. The high level of over-taxation has the federal government swimming in cash. Indeed, the surplus exists because Ottawa continues to over-tax Canadians and will do so again this year, next year and in the years ahead.

Broadly-based tax relief would leave more money in the pockets of taxpayers and improve the fortunes of families. It should be a budget priority for the government. If Mr. Martin and his colleagues decide to spend the entire surplus, Canadians will know the Liberals are asleep at the economic switch.

John Williamson
Federal Director
Canadian Taxpayers Federation
www.taxpayer.com