Frequently Asked Questions
Common Questions From Clients
How long should I keep my tax records?
You should keep your tax records for six years.
Also, I would recommend you keep the 1994 personal income tax return on hand for those that have filed the capital gains election within that tax year.
Why use a CPA vs a basic tax service?
A CPA is a highly trained professional with a University Degree and has passed national professional exams.
Also, each firm is inspected every three years and is required to have liability insurance to protect the public. As part of licencing requirements a minimum number of courses and training are required each year.
A basic tax service is very basic and unregulated. The person doing your taxes is normally not well trained, and they usually don't have the schooling to provide proper advice for RRSP's, TFSA's, RRIF's, rental properties, or any specific business advice. So it's buyer beware when using these types of low cost providers. Also, they generally miss items that cost you more in taxes plus their fee which makes their cost, at times, very expensive as compared to having your return completed by a CPA.
Do I need to do my taxes?
By doing your taxes it may put some money in your pocket even if you don't owe at the time of filing.
You need to do your taxes in order to receive, or continue to receive, certain social programs that you may be eligible for. These social programs include Canada child benefit, the GST/HST credit, the Guaranteed Income Supplement, CPP benefits, and
Ontario Trillium Benefit.
You also have to do your taxes if you owe taxes.
Additionally, if you have a balance owing under the Home Buyers’ Plan, or the Lifelong Learning Plan, your taxes need to be up-to-date.
Also, if you are buying a property, you will need two years of Notice of Assessments to qualify for a mortgage at most main stream financial institutions.
Lastly, if you sold your principal residence in 2021 then you need to file the paperwork within your tax return in order to keep your principal residence tax free (new rules since 2017).
So yes, you should file your taxes every year and on time when possible.
When Are My Personal Income Taxes Due?
For most tax payers the due date for filing your taxes in 2021 are as follows:
April 30, 2022 – the deadline for most Canadians as employees for 2021
April 30, 2022 - the foreign reporting deadline for those that own more than $100,000 of foreign assets at any time during the 2021 calendar year.
June 15, 2022 – the deadline if you or your spouse/common-law partner if one of you are self-employed and/or a sole proprietor.
Please note that if you owe money on your taxes, you should file and pay your bill by April 30, 2022 as an employee.
For sole proprietors only, you can file up to June 15, 2022 and you’ll be charged interest from May 1, 2022 until fully paid. The CRA interest rate is currently 5% per annum and non tax deductible.
Also, you can estimate the taxes and pay by April 30, 2022 and then file up to June 15, 2022 as a sole proprietor.
What Happens If I Missed Something at Time of Filing?
The best thing is not to miss an item. So for those that use my personal tax services, you receive a personal tax checklist near the end of February each year just before you file your taxes. The checklist is a helpful guide so you can see what you need to provide me in order to get all the tax deductions and credits available. Thus, if you read the tax checklist and provide the information, I am sure that for most people it will lower the overall tax cost to themselves and/or avoid penalties.
However, once the taxes are filed, you can still make adjustments to the tax return up to at least one year from the due date of the tax return. I file my adjustments on line to the government as the client representative. One can also make an adjustment by
using the newer service called re-filing your return.
Why do people adjust their returns? In my experience the most common missed items requiring adjustments are as follows;
a)Missed allowable medical costs for deduction,
b) RRSP claims with all the receipts, c) donation receipts missed, d) late received investment slips, e) missed tuition fees and transfers, f) missed disability tax credits, g) missed rental income, h) missed home office claim and i) lost slips in the mail. So lots of potential to miss something that requires adjustment.
Do I have to declare my Tip Income and/or Side Jobs?
Since Canada taxes your world wide income the answer is yes to both items. Your income includes any cash jobs and or tips that you may earn during a year.
The CRA has become far more aggressive to those that have online sales using e-bay, amazon, and then use paypal accounts or other web based services to collect the sales income. The government is aggressively trying to ensure that the income made over the web is declared, especially GST/HST.
Also, lately contractors that use Home Depot and Lowes are having their purchases tied back to HST accounts and their tax returns to ensure the declaration of the income.
The CRA has been hiring more auditors to detect the underground economy. The most recent CRA tactic is for searches at the municipal office regarding building permits and ensuring that the General Contractors listed on building permits are declaring the income. So declare your income and avoid the CRA hassles, penalties, fines, and in very serious cases jail time.
If you missed declaring income or have simply been in the underground economy and want to come forward and make things legitimate, then please contact me.
Serious consideration should be given to the Voluntary Disclosure Program. This program allows those to come forward with no penalty and reduced interest rate. However, this program has lots of rules and professional help is highly recommend with these filings. Please contact me for further advice.
When Am I Considered to Be Common Law For Personal Income Tax Purposes?
Under the federal Income Tax Act, common-law couples are treated the same as married couples.
The definition of common-law partner under the Act is:
“A person with whom you live in a conjugal relationship who is not your spouse, and he or she:
has been living with you at least 12 continuous months (includes any period you were separated for less than 90 days because of a breakdown in the relationship); OR is the parent of your child by birth or adoption; OR has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.”
If you meet the definition of a common-law partner under the Income Tax Act, you must indicate that you are living in a common-law relationship on your tax return.
You and your common-law partner must each file your own tax return with Canada Revenue Agency (CRA). I would recommend that they be filed at the same time and linked together.
The CRA calculates government benefits based on your household income. This means the CRA combines the income for both partners to determine eligibility for certain tax credits and government benefit amounts.
So a disadvantage of being common law are that Child Tax Benefit, GST credit, and Ontario Trillium Benefits may be significantly lower. Also, child care has to be claimed by the lower income spouse which means at times less refund. The Climate Action Inventive (re Carbon Tax Rebate) must be allocated to one taxpayer for the couple in Ontario, Alberta, Manitoba and Saskatchewan and is lower than if claimed incorrectly individually.
However, some advantages to filing as a common-law partner are that you maybe able to maximize certain tax credits and deductions. For example, you may be able to:
combine receipts such as medical expenses and charitable donations to maximize your credits and pay less tax
contribute to a spousal RRSP
pension splitting has significant savings to couples with government pensions
for low income spouses you can claim both the federal and provincial tax credits (if applicable). So if you supported your partner financially and they earned below a certain amount for the year a tax credit arises.
one person with the higher income can claim the entire $5,000 Home Buyers tax credit amount which is one claim per home purchase.
if one person passes away, the assets can transfer tax free to the other living spouse. If you don't have a spouse then the deceased will have a large tax bill on passing if single for RRSP's or capital gains on stocks, cottage gain as examples. Also, CPP spousal death benefits are available to a spouse.
So file your returns properly and avoid the CRA enforcement. CRA enforcement includes address matching on personal returns to filers, Child Tax Benefit Applications that link to the other parent, they use address matching on T4's to find spouses, Lastly, they have the tax tip hotline for tax cheaters and the number 1-866-809-6841 (ex spouses and ex business partners use this often). The CRA has other programs to ensure that common law spouses are filing properly vs single and getting more benefits than allowed.