Getting your income tax filed and paid up if you owe money is just something that you have to make a priority, no matter what. It’s too expensive not to.
The Penalties for Paying Late
For one thing, if you don’t pay your outstanding income tax balance by midnight on April 30th, 2014, the Canada Revenue Agency (CRA) starts charging compound daily interest the very next day, May 1 – and keeps charging it every day until you’ve fully paid off whatever money you owe.
On May 1st they will also start charging you interest on any penalties assessed on your tax, such as the late-filing penalty. (See the next section.)
The interest rate for overdue taxes from January 1, 2014 through March 31, 2014 is 5%, but this is subject to change. The rates are calculated quarterly, so the interest rate that will be applied in May, 2014 may be higher or lower than this. You can see the current and past prescribed interest rates here.
The Late-Filing Penalty
If you don’t get your personal income tax for 2013 filed by the April 30th, 2014 deadline, you will also be charged a late-filing penalty, which is 5% of your 2013 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
If you’re a “repeat offender”, the penalty is more severe; If the CRA charged you a late-filing penalty on your return for 2010, 2011, or 2012, your late-filing penalty for 2013 may be 10% of your 2013 balance owing, plus 2% of your 2013 balance owing for each full month your return is late, to a maximum of 20 months.
No Benefit Payments
And eligibility for many benefits, such as the Canada child tax benefit and the GST/HST credit, depends on the information on your income tax form such as your net income. If your income tax return is filed late, your benefit payments will be interrupted, as the CRA will not know what your current eligibility status is.
Advice for Late Payers
1) Don’t put off filing your taxes on time because you think you may owe money or are worried about being able to pay all the tax you owe. If you do, you’re just making things even worse for yourself financially.
Instead, make sure that you get your income tax filed by April 30th even if you can’t pay all the tax you owe on that date. That way, even though you may be charged interest on the unpaid balance, at least your benefit payments will keep coming and you won’t be charged a late-filing penalty on top of everything else.
2) Check out the possibilities of paying over time or having your interest penalties for paying late waived.
The Canada Revenue Agency is open to making payment arrangements with taxpayers who can’t pay all the income tax they owe by the deadline. When the time comes, call them at 1-888-863-8657 if you need to.
Also, under the CRA’s Taxpayer Relief Provisions, interest penalties may be cancelled or waived in the case of
To make such a request, you will need to complete and send in Form RC4288, Request for Taxpayer Relief.
So if you find yourself in this situation come April, don’t panic. Instead, contact the Canada Revenue Agency as soon as possible and get the situation resolved.
Why pay to do and file your income tax if you don’t have to?
TurboTax believes that people pay enough tax already and that simple tax returns should be filed for free.
To that end, we offer free income tax filing for:
People who have only T4 income slips to file.
This free TurboTax online software is perfect for people who have no investment income or RRSPs and are not self-employed. Other than that, it doesn’t matter if you’re just starting your career or a pensioner; there’s no income limit. All you have to have is a simple tax situation where all you have to file is T4 slips.
Did you pay tuition in 2013? Did you have a household income of $20,000 or less? Then you can use our Student online software to reclaim your tuition, textbook and other education expenses for free.
People with household incomes of $20,000 or less.
If your gross household income (your income before taxes) was $20,000 or less in 2013, including all your T4 slips and any charitable donations that you’ve made, you qualify for the TurboTax Freedom Program. Click on the blue ‘Get Started’ button to get your free tax filing underway.
People who served in the Military or Police overseas in 2013.
If you are a member of the military or police who were on active overseas duty during the 2013 tax year or are the spouse of a qualifying member and you file your return together, you can choose the TurboTax Online product that fits your personal situation best, and complete and file your income tax for free.
If you’re married, be sure you choose the option to prepare your and your spouse’s return together. That way you’ll ensure you get both tax returns done and filed for free.
The Best Part
And the best thing about these free TurboTax options? They’re just like any other version of TurboTax.
Whichever one you use:
Do you remember your first time?
Maybe it was in a strip mall plaza. Perhaps, it was right after you got married, and you felt like you had to. Or maybe you had been on your own for a bit and you were looking to take charge.
We can relate. Have a look at our First Time Confessionals and be sure to share them with others who may be feeling reluctant. As you’re trusted partner, we’re here to help!
Watch all four videos here:
But let’s be honest. It’s not the life of Daisy the scullery maid and her downstairs drudges that we’re green about; it’s the luxurious life of Lady Mary and her titled family and friends. There’s just something appealing about doing nothing much all day and being waited on hand and foot while you do it.
But suppose, through some warp of time and geography, you were able to run your own Downton Abbey right here in Canada. What would that do to your income tax?
First of all, whether you liked it or not, most of your income would come from farming, making you self-employed in terms of your taxes. You would also have rental income from your tenants. And hopefully you would be a smarter investor than Lord Grantham and would also have some income from your investments.
You’re going to need all the income you can get. If your situation parallels Lord Grantham’s, you have a personal household of very expensive dependents (witness the way Mary and Edith dress), all of whom are over 18 so you won’t be able to claim them as tax deductions. Strangely, you seem to keep taking in more relatives (such as Rose) all with equally expensive tastes.
You will get one break; as your spouse has no income, you’ll be able to claim the spouse or common-law partner amount (line 303 on your T1 return). It would be wise to invest heavily in a spousal RRSP!
Of course, as a self-employed person running an estate, you will have lots of expenses to claim as tax deductions.
The cost of insurance on all your valuable possessions. Check.
The cost of maintenance and repairs to the estate. Check.
The cost of your new BMW or Ferrari. Nope. You would have been able to if you bought it for business purposes. So if you did buy something more suitable to tool around the estate and check on your animals and tenants, you could write that off over several years through Capital Cost Allowance. Ditto any new farm machinery or other equipment.
And the cost of that club in the city you regularly visit? Nope, you can’t write that off either.
On the other hand, besides being a farmer and a landlord, you are also an employer. Besides being able to deduct the wages of all those housemaids and footmen, you’ll also be able to deduct your food and entertainment expenses for the annual Christmas party for employees.
On the downside though, being an employer means a lot more tax responsibilities for you. Like every other employer, you’ll have to maintain employee records, deduct taxes from your employees’ paycheques, and file all the relevant forms such as T4 information slips.
And because you also provide room and board to all your servants, which is a taxable benefit, you’ll have to add to each employee’s salary the fair market value of the board and lodging you provide and fill in yet another box on each employee’s T4 slip.
You’ll be happy to know that providing uniforms that employees must wear during the course of their duties is not a taxable benefit, so you won’t have to add that cost on too.
But you won’t be able to deduct the cost of them as an expense because they’re not an expense related to producing income.
Almost makes you start wishing that were just a regular Joe or Jolene again, doesn’t it? But remember; you wouldn’t have to deal with all this by yourself. If you were the owner of a Canadian Downton Abbey, you’d certainly be able to afford to hire your own accountants and tax lawyers – and they’d be a tax deduction, too!
Canada has been a Winter Olympics powerhouse since the Vancouver games in 2010, where we won 26 medals and is dominating at Sochi, but what if there was a Tax Olympics? How well would we fare then?
Imagine the scene: tables of immaculately dressed men and women seated behind the respective desk-paperweight flags of their countries, fingers poised over their cell phones and tablets.
Behind them stand ranks of stern looking officials to supervise and fact check the answers of the participants – especially important as there is one important difference between this and the Olympics devoted to winter sports. The participants don’t want to win. Their goal, instead, is to stay out of the limelight and cringe-inducing publicity that winning a medal would bring.
A pistol shot cracks. The games begin!
Which country has the highest personal tax rates?
Hearing what the heat is about, the Irish taxlete starts edging toward the exit. Another medal will finish off her country and in 2012, the personal tax rate in Ireland was 48% measured in percentage of income based on marginal tax rates.
But Ireland is in no danger; the marginal tax rate in Canada and Israel is also 48%. Even better (or worse, depending on how you look at it) is that there are scads of countries with higher personal tax rates than this and Ireland, Canada, and Israel will be nowhere near the medal podium.
To even be in the running, it turns out you have to have a personal tax rate above 50%. And while both Spain and the Netherlands qualify with tax rates of 52%, their representatives both heave sighs of relief when they discover that there are three countries with even higher rates!
Denmark takes the Bronze with a tax rate of 55.4%.
Sweden scores a Silver medal with a tax rate of 56.6%.
And sobbing, the taxlete for Aruba is forced to accept the Gold; the personal tax rate in his country is a heart-pounding 59%.
The contestants are befuddled. Isn’t that a good thing, having a high GDP, especially when you measure it in dollars by purchasing power parity per capita? Wouldn’t the citizens of their countries like to have one?
Indeed, explains an official. Which is why it’s such a perfect finale. It’s your only chance to get any positive press from these games. And whoever wins a medal in this heat will be allowed to give all their medals back if they’ve already won!
There’s a flurry of flashing screens as the taxletes pore over the data on their devices.
But signs of despair are almost instantaneous.
The Russian taxlete bellows in rage and announces that he will immediately lodge a protest against the unfairness of the question. Russia’s GDP was $18,670.53 in 2012.
The Swedish taxlete slumps over as he realizes that a GDP of $42,037.48 isn’t going to cut it. Ireland has edged them out with a GDP of $42,806.38.
But a cry from Canada – we’re in this one with our GDP of $43,344.79!
Celebrations are short-lived though as other countries announce their numbers. The United States places seventh with a GDP of $51,248.21. Norway vaults over them with a GDP of $56,663.47.
And that’s still not enough!
Singapore wins the Bronze medal with a GDP of $61,567.28.
Luxembourg wins the Silver with a GDP of $79,593.91.
And Qatar pulls off the victory for Gold with a sky-high GDP of $105,091.42.
Sighing and muttering, all the other contestants start packing up. Next year. Next year will be different, each of them vows.
Except the Canadian. She knows that being in the middle of the pack is sometimes a very good thing.
The United States is up first. Their taxlete is looking smug. While Kansas gives hot air balloon rides a tax break if they’re untethered, Texas taxes belt buckles, and Tennessee taxes the possession of illegal drugs, the American representative points out that these are all state laws, not federal ones, and is allowed to sit down because of a technicality.
The Swedish representative is also looking confident. In Sweden, parents have to have the names of their children approved by the Swedish tax agency before they turn five or be fined up to 5,000 kroner ($770). But the law protects children from having outlandish names, which really isn’t that strange. The judges agree and he gets to sit down.
Our Canadian taxlete is looking a bit worried at this point. She’s going to have to admit that the Canada Revenue Agency doesn’t distinguish between legal and illegal income – which explains why one BC marijuana activist paid over $580,000 in provincial and federal income tax on the sale of marijuana seeds alone.
Fortunately, even though most of the judges shake their heads at this, this isn’t enough to force Canada to medal.
The Bronze medal goes to Russia because of their tax on beards. During the time of Peter the Great, men had to be clean shaven – or else.
The Silver goes to the United Kingdom for their window tax, where the more windows a house had in the 18th and 19th centuries, the more tax its owner paid, a tax that led to the bricking up of many windows.
And the Gold goes to Ireland, where cows are taxed because of the methane they produce.
Combing over your income tax looking for every possible deduction? Don’t forget about the people around you – your family! Spouses, children, aging parents – they’re all sources of potential tax deductions that can pump up your refund.
Here are some of the most common family-related deductions that you may be able to take:
The spouse or common-law partner amount: If you supported your spouse or common-law partner at any time during the year and his or her net income was less than $11,038, you can claim this amount (minus his or her income). If you’re also claiming the Family caregiver amount, his or her income must be less than $13,078.
Support payments: Did you make support payments to your current or a former spouse or common-law partner during the past tax year? If so, you can claim the deductible portions of the support you paid on your tax return.
Spousal RRSP deduction: As long as you have enough contribution room (see your Notice of Assessment from last year for your RRSP deduction limit), you can contribute to a spousal RRSP in lieu of or in addition to your own – giving you even more of a tax deduction and sheltering more of your income from tax.
Child-care expenses: Fees paid to a baby sitter, nursery school or day care center; they all count if you’ve had to pay for child care because you or your spouse was working or in school this past tax year. Generally the spouse with the lower net income (even if it’s zero income) has to claim these expenses.
Amount for children born in 1996 or later: For each child under 18 at the end of the year you get to claim $2,234. And if a child has a physical or mental impairment you may be able to claim the Family caregiver amount of $2,040 as well.
Children’s fitness amount: You can claim to a maximum of $500 per child the fees paid in 2013 relating to the cost of registration or membership for your or your spouse’s or common-law partner’s child in a prescribed program of physical activity such as hockey, martial arts or gymnastics.
Children’s art amount: And the same thing applies to any “artistic, cultural, recreational, or developmental activity” you registered your child in in 2013; you can deduct a maximum of $500 per child for those program fees as well.
Tuition, education and textbook amounts: Your older children can also provide you with a tax break if they’ve attended a post-secondary educational institution, either full- or part-time in 2013. They get to claim tuition, education and textbooks amounts on their income tax. But once their income is zeroed out, they can transfer up to $5,000 (less the amount they needed to use to eliminate their own tax payable) to a parent or grandparent.
All the Family
Medical expenses: You’re not limited to claiming your own medical expenses on your tax return; you can claim the medical expenses of your spouse (or common-law partner) and your children under age 18 as well, as long as they’re eligible medical expenses you haven’t claimed before and fall within the 12-month period ending in the current tax year that you’ve chosen.
While only expenses that exceed the lesser of $2,152 or three percent of net income can be claimed, getting above that threshold isn’t difficult for the typical family when you take a look at all the expenses that are eligible.
Tax Tip: Don’t forget to claim all the medical expenses on the tax return of the spouse with the lowest net income.
Amount for an eligible dependant: Is one of your parents infirm and living with you? Or are you living with a child under 18 who is related to you or adopted and has impaired physical or mental functions? Then you may be able to claim this tax credit.
(Note though that only one person in your household can claim this amount and you can’t claim this amount for a common-law partner or spouse.)
There is also a separate amount for infirm dependants age 18 or older. This credit allows you to claim up to $6, 530 which includes the $2,040 family caregiver amount; for each of your or your spouse’s or common-law partner’s dependent children or grandchildren only if that person had an impairment in physical or mental functions and was born in 1995 or earlier.
Family caregiver tax credit: If you have a dependent with an impairment in physical or mental functions, you may be eligible to claim an additional amount of $2,040 for one or more of the following amounts:
Public transit amount: You can claim the cost of monthly public transit passes or passes of longer duration for travel within Canada on public transit for 2013, for you, your spouse or common-law partner and each of your children. Subways, buses, commuter trains, ferries – they all count, as long as you have the right kind of passes.
Take the spousal RRSP, for example. (Although it’s called a spousal RRSP, you don’t have to be married to use one; a common-law partner is considered to be a spouse, too.)
How a Spousal RRSP Works
A spousal RRSP is an Registered Retirement Savings Plan set up in your spouse’s name which she or he controls.
You can contribute to your own RRSP, your spouse’s RRSP or both in any given tax year. When you contribute to a spousal RRSP, you get the tax deduction, even though the money goes into your spouse’s RRSP account.
But Spousal RRSPs Can Be a Beautiful Thing…
The most often touted benefit of the spousal RRSP is that it allows you to split your retirement income.
Because RRSPs become income when you retire, if one spouse has a lot more money in their RRSP than the other, the spouse with the higher income will end up paying a lot more income tax than he might otherwise pay if the couple had used a spousal RRSP to balance the amounts in their RRSP portfolios. And depending on the amounts involved, using a spousal RRSP could even put one or both partners into lower tax brackets, giving them even more tax savings.
But a spousal RRSP can also be a big help in getting the money together to buy a house.
Under the Home Buyer’s Plan, you can use up to $25,000 from your RRSP – and you and your spouse are both eligible. So if you still have the contribution room left after you’ve saved enough in your own RRSP, you can contribute to your spouse’s RRSP, doubling your Home Buyer’s Plan withdrawal.
Can’t contribute to your own RRSP because of age?
Once you turn 71, you are no longer allowed to contribute to your own RRSP. But if your spouse is younger than you are, you can still contribute to her spousal RRSP and get a tax deduction on your income tax. You can continue to contribute to your spouse’s RRSP until the end of the year in which she turns 71.
Young, middle-aged, retired or about to be – spousal RRSPs are always a good idea. But if you want to contribute to one this year, the time is now; the RRSP deadline for tax year 2013 is March 3rd.
The Age Amount – If your net income (line 236 on your T1 tax return) is less than $80,256 and you were 65 or older on December 31st, 2013, you can claim the Age Amount deduction.
How much you can claim depends on your income.
If your net income was $34,562 or less, enter $6,854 on line 301. If your income was more than $34,562, but less than $80,256, you’ll need to complete the chart for line 301 on the Federal Worksheet to calculate your claim.
(Don’t forget to claim the corresponding provincial or territorial non-refundable tax credit, too.)
Pension Income Amount – If you had eligible pension, superannuation, or annuity payments in the past tax year, you may be able to claim up to $2,000.
If you are 55 to 64, the only pension income that is eligible is pension income that you have received as a result of the death of your spouse or common-law partner.
Bare in mind that once you hit 65, many different kinds of pension income qualify, including Registered Retirement Income Fund (RRIF) income, Registered Retirement Plan (RRSP) income, and Deferred Profit Sharing Plan (DPSP) income. This chart on the Canada Revenue Agency website shows all the types of pension income that are eligible.
The pension income amount is calculated by filling out the Line 314, Pension income amount on the Federal Worksheet , which is part of your T1 income tax package, and then entering the resulting amount on line A or $2,000, whichever is less, on line 314 of your T1 return.
Or, if you use TurboTax to do your income tax, you can just enter the relevant amounts shown on your T4A, T4RSP, or foreign income slips in the T-Slip entry screens as directed and TurboTax will calculate your pension income amount and transfer it to the proper line on your T1 income tax return (line 314).
And don’t forget that pension income that qualifies for the pension income amount can be split with your spouse or common-law partner. Pension splitting can seriously reduce the income tax you have to pay. And TurboTax has a built-in Pension Splitting Optimizer that will let you see exactly how much your tax bill could be reduced.
The Disability Amount (for Self) – If you are eligible for the disability tax credit (DTC), you may be able to claim the disability amount on your income tax return. To be eligible, you must have “a severe and prolonged impairment in physical or mental functions” and you and a qualified medical practitioner must complete Form T2201, Disability Tax Credit Certificate and have it approved by the Canada Revenue Agency.
If you are eligible for the disability amount (for self), you will be able to claim $7,697 on line 316 of your tax return.
Attendant Care Expenses – If you have had to pay for attendant care during the past tax year, whether the care occurred in your home or in a retirement or senior home, you can claim the cost of the care as a tax deduction.
Generally, you can claim the entire amount paid for full-time care in a nursing home or at a school or institution. In all other cases, the fees claimed must be for salaries and wages paid for attendant care services – and you can claim the amounts paid to an attendant only if the attendant was not your spouse or common-law partner and was 18 years of age or older when the amounts were paid.
Claim your attendant care expenses under your medical expenses. And remember, the attendant care expenses don’t have to be for care you personally received; you can also claim attendant care expenses you paid for the care of your spouse or common-law partner or a dependant.
It’s especially easy to claim your medical expenses using TurboTax. If you know that none of your medical expenses are subject to limitation, you would add them up and enter the total amount of your medical receipts when prompted. (Of course, if some of your medical receipts are subject to limitation, or if you just prefer it, you can still choose to enter your medical receipts one at a time.)
Family Caregiver Amount – Have you been the one providing care for your physically and/or mentally impaired spouse over the past year? Then you may be able to claim an additional amount of $2,040 when you claim your Spouse or Common-Law Partner Amount on line 303 of your T1 return.
To do so, your spouse or common-law partner’s net income must be less than $13,078 and you must have a signed statement from a medical practitioner showing when the impairment began and what the duration of the impairment is expected to be (an approved Form T2201, Disability Tax Credit Certificate).
Properly planning your retirement will lead to security, peace of mind, and overall happiness. But this entails much more than opening a savings account and devising a payment schedule. It means considering your long-term goals, leaving room for surprises, and understanding the resources that are available to you. The following tips will help you on your journey.
1. Set Realistic Goals
Conventional thinking says that you will want to replace approximately 70 per cent of your former annual income each year that you are retired. This is a great place to start, but remember to tailor your plan to your desired lifestyle and specific goals. And most importantly: plan for the unexpected. Aiming higher will ensure that you have what you need should a crisis arise.
2. Explore New Opportunities
Have you always had a great business idea that you never had time to bring into reality? What about a profession that you were always curious about, but just didn’t have the opportunity to try? Retirement is what you make it and more and more retirees are supplementing their post-work incomes by dabbling in new ventures. You should keep this in mind when deciding how much money to put aside. Before diving in, make sure you understand the impact on any pension payments you may be receiving.
3. Know Which Resources Are Available To You
Canadians have access to many programs that will help them with their retirement. For instance, the Canada Pension Plan (CPP), Guaranteed Income Supplement (GIS) and Old Age Security pension (OAS) are all designed to provide assistance. You can determine what you will receive ahead of time using resources from Service Canada. Also, don’t forget to set up and contribute to your Registered Retirement Savings Plan (RRSP).
Retirement, like any major life change, can be daunting, but it’s also an opportunity. By planning well ahead and taking into account some of the above considerations, you will be better prepared to enjoy it.
For more retirement tax tips and what it means for you, please visit http://turbotax.intuit.ca/tax-resources/retirement-taxes/index.jsp
In the grip of the polar vortex, many Canadians look southward, heading to Florida and other more forgiving climates. This annual ritual is not just an extended vacation for retirees; it’s a lifestyle. While the goal of these trips is inevitably relaxation, they also have certain tax implications. Below you will find some very important – and often overlooked – considerations for Canadian snowbirds.
You Can Have Too Much of a Good Thing
In the winter months, the southern sun can be addictive, but staying too long can prove very costly. For instance, if you stay for 183 days or more in a calendar year, you could be subject to US taxes. This is also true should you go to the US for an average of 120 days per year in a consecutive three-year period. And this will lead to plenty of additional fees, so be conscious of the length of your visit.
If You Own US Property, Be Wary of High Estate Taxes
You’ve been heading south frequently, so you’ve decided to buy property. Thanks to affordable real estate and a strong Canadian dollar, this has become very common in the last several years. However, should you purchase a home, be careful how you go about it. Why? Because owners that pass away are vulnerable to costly US estate taxes, which can put their family at serious financial risk. To avoid this, it is possible to buy property through a partnership or trust. Before you do so, make sure that you consult an licensed attorney who can help you to draft, register and effectively navigate the management of the trust or partnership.
Beware of Changing Legislation
Last autumn, the US Senate proposed a new piece of legislation – the JOLT (Jobs Originated through Launching Travel) Act – that would change the tax structure for snowbirds, provided they were at least 50 years old, didn’t work or seek assistance, were still Canadian residents, and owned an American residence or had a long rental agreement. Though JOLT would allow them to stay up to 240 days, it would bring the 183-day-rule into play. Furthermore, it would not exempt them from Canadian taxation, increasing the risk even further. For now, the bill has been defeated, but it could be revisited within the next few years, so always stay abreast of ongoing developments.
Remember: if you plan on heading south for the winter – even if you’ve been doing it for years – make sure you’ve got a handle on how this impacts your tax situation.
For more information on Taxes and retirement, click here: http://turbotax.intuit.ca/tax-resources/retirement-taxes/index.jsp.