Canada Tax Alerts

August, 2010

Tax-Free Savings Accounts and notices thereon.

If you received a letter from the CRA regarding your Tax Free Savings Account, it does not mean that you will automatically be subject to a tax. It may mean that the CRA needs more information. You must respond to the CRA letter no later than August 3, 2010, by providing additional information and explanations that you may have in respect to your contributions. Once your information is received, the CRA will assess the return and issue a notice of assessment. Be sure and retain all correspondence from the CRA and that you send to the CRA for further analysis if you require administrative relief.

July, 2010

Protecting your Charitable Donation Deduction

Be sure that the organization that you give your charitable contributions to is a qualified organization under the Canadian Income Tax Act. Most of the approximately 85,000 charities registered in Canada abide by the tax laws. When non–compliance is suspected based on public complaints or the information provided on annual information returns, the CRA undertakes an audit. Last year, 810 charities were selected for audit, and as a result, the CRA revoked the charitable status of 40 organizations for serious infractions of the law. Many additional charities also lost their charitable status for failure to file their annual return.

When charitable status is revoked, an organization can no longer issue official tax receipts for the donations it receives and is no longer a qualified donee under the Income Tax Act. The organization is no longer exempt from income tax, unless it qualifies as a non–profit organization, and it may be subject to a tax equal to the full value of its remaining assets.

June, 2010

How to make your payments

You may make your payments to the Canada Revenue Agency in several ways. The My Payment option lets you make one or more payments in one simple online transaction. You can use this service if you have access to online banking at a participating financial institution.

You can make your payment free of charge at your financial institution in Canada. To do so you must use the remittance form in your personalized tax package or Form T7DR (A) Efile Remittance Form.

May, 2010

Canada Child Tax Benefit (CCTB)

The Canada Child Tax Benefit is a tax–free monthly payment made to eligible families to help them with the cost of raising children under the age of 18. The CCTB may include the National Child Benefit Supplement (NCBS) and/or the Child Disability Benefit (CDB).

You should apply for the CCTB as soon as possible after your child is born, a child starts to live with you, or you become a resident of Canada. Entitlements are calculated every July and are based on your family net income for the previous year. In order to qualify for this benefit, you and your spouse or common–law partner must file income tax returns even if you have no income to report.

April, 2010

Filing Deadline

You have until midnight on April 30, 2010 to file your 2009 income tax and benefit return and to pay any balance owing. If you or your spouse or common–law partner carried on a business in 2009, you have until midnight on June 15, 2010 to file your 2009 return, but you still have to pay any balance owing by April 30, 2010.

Employment Insurance Measures for the Self–Employed

Effective January 2010 there are new Employment Insurance (EI) measures that you can take advantage of if you are a self-employed person, as defined in these new measures. You will be able to voluntarily enter into an agreement with Service Canada to be eligible for EI special benefits. If you enter into such an agreement, you will be required to calculate and pay EI premiums on your tax returns for the applicable years.

Employment Insurance Benefits for Self-Employed People

Beginning in January 2011, self–employed Canadians will be able to access Employment Insurance (EI) special benefits. There are four types of EI special benefits:

• maternity benefits;
• parental benefits;
• sickness benefits; and
• compassionate care benefits.

Eligibility information

You may be eligible to access EI special benefits beginning in January 2011 if you:

• are a self–employed person; and
• are a Canadian citizen or a permanent resident of Canada; and
• have entered into an agreement with the Canada Employment Insurance Commission through Service Canada.

March, 2010

Northern Residents Deductions

There are special deductions for permanent residents in a prescribed northern zone or a prescribed intermediate zone. You must live in one of the zones for at least six months to take advantage of two types of deductions.

• The first deduction is for living in a prescribed zone. That’s it. All you have to do is live there and you are eligible for the deduction.
• The second deduction is for taxable travel benefits received from employment in the prescribed zone. If you received travel benefits from your employer that would qualify as extra income, you may be able to claim travel expenses as a deduction.

If you lived in the prescribed northern zone you can claim a full northern residents deduction. If you lived in the intermediate zone you can claim one half of the maximum northern residents deduction. The CRA has a test to determine whether you were in either a prescribed zone as a permanent resident or on a temporary basis. This test looks at the number of times you were absent from the zone and the purpose and length of the absence.

February, 2010

The deadline for contributing to a registered retirement savings plan (RRSP) for the 2009 tax year is MARCH 1, 2010!

Not only can contributions to a RRSP reduce your taxable income but any income you earn on the RRSP is tax exempt as long as it is in the plan. When you withdraw amounts or receive payments from the RRSP you will be taxed on those amounts.

Not only can you get a reduction of your tax but you can use the funds in the RRSP to help with your education through the Lifelong Learning Plan (LLP). Finally you can use RRSP amounts to help purchase a home through the Home Buyers’ Plan (HBP)

January, 2010

What is new for the completion of returns for deceased individuals?

Beginning in 2009, if the value of a registered retirement savings plan (RRSP) or RRIF decreases between the date of death and the date of final distribution to the beneficiary or estate, the legal representative for the deceased person can request the amount of the decrease to be carried back and deducted on the deceased’s final return. The RRSP may or may not have matured at the time of death. Depending on the situation, the amount you include in the deceased’s income can vary. With the added ability to carry back the decrease in value this can have a noticeable impact on the decedent’s return.