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Interesting Times and it's almost Canada Day -July 1st, 2022


Six Months in Public Accounting- What's Happening?


The half year mark for 2022 is almost here and where did the time go?


What a year so far as February was payroll and related filing processing, March and April personal taxes were completed for employees, a week in May was COVID19 for me and a few weeks of a lingering cough along with it. Then corporate work and personal income tax returns. The June 15th deadline for sole proprietor taxes came and went, and now wrapping up corporate work regarding the December 31, 2021 year ends and March 31 HST returns. Canada Day is coming on July 1 2022 and I will be at the Toronto Blue Jays game (can't wait)!


What is New and Changing?


So lot's is new in the accounting and tax area as follows;


a) New Court case involving a Poker player and his winning are now tax free after 10 years of fighting with CRA. It came down to if the business had an expectation of profit or not. The poker player believed that in poker you can't have a long term expectation of profit as it's just luck and a hobby. The Judge in the Federal Tax Court has ruled on this in the taxpayers favour and not the CRA. The CRA took the position that he was in a business of playing poker which in this case it was not because of the lack of long term profitability. However, it is not certain whether CRA will an appeal regarding this decision or not.


b) Bill C8 passed so those teacher returns with school supplies and farmers fuel tax refund can now get processed after June 9th, 2022 as the bill received Royal Ascent.


c) Bill C8 passed also put in place UHT Underused Housing Tax on a Federal basis for foreign vacant home ownership. This new annual tax is already effective January 1, 2022 and more details are still coming.


Here is a bit more detail on this as follows;


Underused Housing Tax ( Mainly impacting Foreign Owners) Federal Government


Under the UHT Act, the 1% Underused Housing Tax applies each year to every person that is an owner (other than an excluded owner) of a residential property in Canada as of December 31 of the calendar year. To calculate the Underused Housing Tax, the owner must generally multiply the assessed value of the property by 1%. The owner may elect to use the fair market value, instead of the assessed value, of the property as determined any time from January 1 of the calendar year to April 30 of the following calendar year. If there are multiple owners of one property, each owner would be liable for this tax in proportion to their "ownership percentage" in the property.

Exemptions The Underused Housing Tax rules do not apply to "excluded owners", which include:

a) Individuals that are Canadian citizens or permanent residents of Canada

(unless they hold the property interest as a partner in a partnership or as a trustee of

a trust)

b) Corporations incorporated in Canada or a province whose shares are listed on a

Canadian stock exchange for the most part

c) Registered charities

d) Cooperative housing corporations, municipalities, colleges and universities

e) Trustees of mutual fund trusts, real estate investment trusts (REITs) or specified

investment flow-through (SIFT) trusts (as these terms are defined in the Income Tax

Act).

In addition, the rules provide other exemptions from the Underused Housing Tax, including for: Specified Canadian corporations (i.e., a corporation incorporated (or continued) in Canada), depending on the status of direct and indirect shareholders or for a corporation without share capital, the residence status of the chairperson and certain directors

  • Specified Canadian partnerships and specified Canadian trusts, depending on the status of direct and indirect partners or beneficiaries, respectively

  • Where the owner meets a minimum "qualifying occupancy" test

  • Where the owner dies

  • Where a dwelling unit within the property is uninhabitable for a period of at least 120 consecutive days in the calendar year as a result of a renovation without unreasonable delay, and this exemption was not used for any of the nine prior calendar years

  • Where construction of the property is not substantially completed before April of the calendar year

  • Where construction of the property is substantially completed after March of the calendar year, the property is offered for sale to the public during the calendar year and has never been occupied by an individual during the calendar year

  • Property that is newly acquired in certain circumstances

  • Property that is not suitable for year-round use as a place of residence

  • Property that is the primary place of residence of:

  • The owner

  • The owner's spouse or common-law partner, or

  • The child of the owner or the owner's spouse or common-law partner if the child occupies the property for the purposes of certain authorized studies.

Compliance Affected owners are required to remit this tax on or before April 30 of the following calendar year. This new tax generally requires owners (other than excluded owners) to file an annual prescribed return with the CRA for each Canadian residential property they own, beginning with the 2022 calendar year (which would be due on or before April 30, 2023).

The UHT Act also contains anti-avoidance rules, along with administration- and enforcement-related rules (including penalties and interest for failing to file required UHT returns).

______________________________________________________________

City of Toronto also passed similar rules as follows effective January 1, 2022;

A home will be considered vacant if it has been unoccupied for more than six months during the previous calendar year, or it is deemed to be vacant under the bylaw. However, some exemptions include death of the owner, homes under renovations, snowbirds, or if the owner is in medical care.

The tax rate will be set at 1% (one per cent) of the property’s current value assessment (CVA) for the year the home is vacant. The forms will be due in early 2023 and no date has yet been set for the payment and filing. Lastly, no forms are available at this time.

_____________________________________________________________


d) CRA is now following up on the $2,000 CERB payments made to individuals which may be an over payment.


e) Bill C19 passed and those that are Diabetic 1 will now qualify for the Disability Tax Credit

New definitions are now in place to make this a more liberal and easier to claim. Also, the T2201 has now been updated again.


f) Court looked a CERB claim/dispute involving a Taxi driver. The CRA was against his COVID 19 benefits as they believed the driver had quit voluntarily. The Judge believed the drivers macro environment had changed so significantly with minimal business available with everyone staying at home and working remotely that it was still COVID related. Thus, the Judge believed the driver was negatively impacted by COVID19 that he still should qualify for benefits.


Thus, after 2 CRA officials declined his benefits, the Judge has ruled to have CRA look at it for the 3rd time. The Judge can't rule on this directly as it must be referred back for another look by the CRA is the way the legislation was made. Therefore, this has been referred back to CRA for another agent to go over the case.


g) For those clients that have a IPP - individual pension plan and require a Review or Audit

will see lots of disclosures for the defined benefit plan pension. The accounting rules Section 3462 is relevant here and a updated bulletin is available since August 2021 on this from CPA Canada.


h) Since it's summer time, the new Ontario StayCation Rules in 2022 are in effect in Ontario.


Ontario residents can claim 20% of their eligible 2022 accommodation expenses in Ontario, for example, for a stay at a hotel, cottage or campground, when filing their personal Income Tax and Benefit Return for 2022. You can claim eligible expenses of up to $1,000 as an individual or $2,000 if you have a spouse, common-law partner or eligible children, to get back up to $200 as an individual or $400 as a family. However, the leisure stays of less than a month and only in Ontario can be claimed.


So keep those receipts and remember the accommodation expenses must have been paid by you, your spouse or common-law partner, or your eligible child, as set out on a detailed receipt provided by a supplier registered for the Goods and Services Tax (GST)/Harmonized Sales Tax (HST).


The detailed receipts must contain the following information for any eligible expenses you claim for the credit. Those receipts must include:

  • the location of the accommodation

  • the amount that can reasonably be considered to be for the accommodation portion of a stay

  • the amount of any GST/HST paid

  • the date of the stay

  • the name of the payor

Ontario Staycation Tax Credit is a refundable personal income tax credit.


Have a great Canada Day and summer. If you need any assistance, please contact Peter at 905-898-3355 or email peter@taxhome.net



June 29, 2022


Copyright © 2022 by Peter Wiesner CPA


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