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Before making a major financial decision you
should consult a qualified professional.
December 2010 wages, if not paid until January
2011, will be reported on a T4 for 2011, not 2010. There are some
cases in which it is not necessary to prepare a T4 for an employee.
Learn about filing T4 slips online - this can be done for up to 6 T4s
starting January 2011, without any software required.
It's a little late, but we've finally updated our table
of donation tax credit rates to show the 2010 rates, with notes to
indicate which rates will change for 2011.
The expense limitations for passenger vehicles remains
unchanged for 2011, with a ceiling of $30,000 (plus sales taxes) for
capital cost allowance purposes, and no change in the maximum allowable
deduction for interest ($300 per month) or leasing costs ($800 per month).
The limit on the amount that can be paid tax-free to
employees using their own vehicles for business purposes remains unchanged
for 2011, at $0.52 per km for the first 5,000 km driven, and $0.46 per km
for each additional km. The rates for the Territories are slightly
higher, at $0.56 and $0.50.
We have published the table of sales tax rates (GST,
HST and provincial retail sales taxes) for 2011. Quebec's QST rate
increases from 7.5% to 8.5% on January 1, 2011. The QC government
website provides information on transactions which straddle the 2010 year
end.
CRA has issued their annual Tax Alert regarding
donation arrangements where taxpayers obtain donation receipts worth much
more than the actual amount donated. Expect to be audited and your
donation claim denied if you participate in one of these.
Bill C-47 received Royal Assent on December 15,
2010. It includes, among other things, changes related to Registered
Disability Savings Plans (RDSPs), employee stock option changes, and
indexing of the working income tax benefit (WITB).
The BC MSP premium rates will increase on January 1, 2011, by
6.14% for single people and families of 3 or more people, and by 6.86% for
families of 2 people.
The 2010/2011 Income Tax Calculator for all provinces
and territories except Quebec has been published. The 2010 &
2011 working income tax benefit (WITB) amounts used in the calculator have
been estimated using the federal indexation factor. The WITB amounts
for Alberta, BC and Nunavut differ from the other provinces, and we have
not yet confirmed the 2010 or 2011 factors.
The 2010/2011 Income Tax Calculator for Quebec has
been published. The 2010 & 2011 working income tax benefit (WITB) amounts used in the calculator have been estimated using the Quebec indexation factor.
The 2011 TD1 forms are now available from Canada
Revenue Agency (CRA). If you are an employee, and some life changes
in 2010 will result in changes to your non-refundable tax credits, you
should provide updated federal and provincial TD1 forms to your
employer. This will help ensure that the correct tax amounts are
being withheld from your pay. The life changes could include a new
baby or adopted child, getting married or divorced, turning 65, or
becoming eligible for the disability tax credit (doctor certification
required).
This article has been updated regarding the HST changes
in 2010. Partnerships and sole proprietorships (self-employed
individuals) in BC, Ontario and Nova Scotia will use the higher HST rate
in the calculation of their ITCs based on capital cost allowance, even if
only GST or a lower rate of HST was paid when the vehicle was
purchased. There are no "interim" rates as there were when
the GST rate was reduced in 2006.
The tables of non-refundable personal tax credits for
2011 for all provinces and territories except Quebec (separate table -
see below) have been published.
The tax rate tables have been updated for Canada and
all provinces and territories, showing the combined federal and
provincial/territorial personal income tax
rates for 2010 and 2011 for eligible and non-eligible dividends, capital
gains, and other income.
Once a trip log has been maintained for a vehicle for a
continuous 12-month period, CRA has indicated they will "afford
considerable weight" to a logbook maintained for a smaller sample
period in subsequent years, as long as certain criteria are met.
The effective date of registration is important,
because it is the date that a new registrant becomes liable for collecting
GST/HST on sales, and eligible to claim input tax credits on sales.
If a business charges GST/HST on taxable sales before registering, the
effective date of registration is the first date that GST/HST is
collected. Otherwise, the effective date depends on whether the
registration is mandatory or voluntary.
The government is inviting comments to be made by
February 25, 2011, on their consultation paper regarding the taxation of
corporate groups. This includes a discussion of different approaches
to group taxation and loss utilization.
A November 17th news release announced the suspension
of the proposed tax reductions for 2011. The next budget will be
tabled on February 15, 2011, with no new initiatives beyond what is
statutorily required.
Haven't filed your 2000 tax return yet? Taxpayers
are running out of time to file requests under the taxpayer relief
provisions for the 2000 tax year and any reporting period that ended in
the 2000 calendar year.
Why do you sometimes pay tax on the full price when you
think you're buying something on sale? Many stores have
in-store coupons that they apply, without the customer having to bring the
coupon to the store themselves. Often, when a coupon is applied to
reduce the price, the tax is charged on the full price before the coupon.
When a GST/HST registrant is able to receive an input tax credit (ITC) for
an item for which a manufacturers' rebate has been received, special rules
apply to the ITC. When a vendor charges GST/HST on the full price
before a coupon is applied, they must remit a portion of the coupon amount
as GST/HST.
Our article on the changes to the CPP retirement
pension indicated that the changes would not affect those currently
collecting their CPP retirement pension. It will not affect the
benefits of these people, but further contributions will be required
starting in 2012 for those earning pensionable earnings, unless they have
reached the age of 65, at which time it is possible to elect not to pay
the contributions.
Budget 2010 proposed to allow a tax-deferred rollover of a deceased
individual's RRSP/RRIF or RPP proceeds to the Registered
Disability Savings Plan (RDSP) of a financially dependent infirm child
or grandchild. This will be effective for deaths occurring on or
after March 4, 2010. The actual transfer to the RDSP, however,
cannot be made until after June 2011. Transitional rules are
provided for individuals who die after 2007 and before 2011.
Legislation was included in Bill C-47, introduced in the House of Commons
on September 30th.
The maximum Canada Pension Plan pensionable earnings
for 2011 will be $48,300, as compared to $47,200 for 2010. The rate
remains unchanged at 4.95%, and 9.9% for self-employed. The maximum
employer and employee contribution for 2011 will be $2,216.60, and the
maximum self-employed contribution will be $4,435.20.
Taxpayer relief provisions are in effect which would
assist any individual or business unable to meet their tax obligations
because of Hurricane Igor. Requests are considered on a case-by-case
basis.
Effective July 2011, Quebec's solidarity tax credit
replaced three other tax credits. Individuals must meet eligibility
requirements to receive this tax credit, and must be registered for direct
deposit to receive payment of the tax credit.
Capital gains can be eliminated by donating capital
property, such as securities, to qualified donees. This should be
done by November or early December to avoid the busy season and ensure the
transactions are completed before year end.
The superficial loss rules provide a method for capital
losses to be transferred to a spouse. The spouse must hold the
shares for more than 30 days for this to work, so to do this for 2010 you
would have to act soon.
As a result of the HST being introduced in BC and
Ontario, there are many new forms and publications related to GST and HST. On our
GST/HST page under the GST/HST Topics for Businesses, we
have added a link to all GST/HST forms and publications.
The 2010 Tax Comparison by Province has been updated to
include the tax changes in Nova Scotia and Newfoundland and
Labrador. There are now 2 tables, one comparing taxes paid by a
single person, and one comparing taxes paid by a married person with 2
children, with the spouse having no income.
Draft legislative proposals were released for
consultation on August 27, 2010. These proposals are to implement
tax measures from Budget 2010 as well as several previously announced tax
initiatives.
A loan by an employer or a third party to an employee, or
the subsidization of an employee loan, may result in a deemed
taxable benefit being included in the income of the employee. However,
when a home relocation loan to an employee results in a taxable benefit
being included in the employee's income, a home relocation loan benefit
deduction is available to the employee, which would partially offset the
taxable benefit.
The QC My Account Online can now be used to claim the
QST credit, obtain information on claiming the QST credit or the credit
for individuals living in northern villages, or to claim the tax credit
for home improvement and renovation, or adjust a claim.
We have added a table showing most of the Quebec tax
credits and deductions that are adjusted for inflation each year.
Amounts for 2010 and 2009 are included.
A gift or award given to an employee is usually a
taxable benefit to the employee. Canada Revenue Agency now has an
online series of questions which can be answered by an employer to
determine if there is a taxable benefit for any item provided to an
employee.
Several provinces have tax credits which are paid in
combination with the GST/HST credits. Some of these are paid
quarterly, and some are paid annually. The new BC HST credit is one
of these, and will be paid for the first time this month.
The Nova Scotia and Newfoundland and Labrador tax rates have been
updated in the Borrow to Invest Calculator, TFSA vs RRSP Calculator, and
RRSP vs Mortgage Calculator. Saskatchewan enhanced dividend tax
credit rates were updated in the Borrow to Invest Calculator.
A June 25th news release announced that Canada Revenue
Agency acknowledges that there has been genuine confusion about the TFSA
rules, and will be as flexible as possible when a genuine misunderstanding
of the rules has occurred. The June 30th deadline for responding to
a TFSA return letter has been extended to August 3, 2010.
The enhanced dividend tax credit for NL for dividends
received from January to June 2010 is automatically reduced from the 2009
rate due to the reduction of the gross-up percentage. Eligible
dividends received from July to December will be subject to the higher
dividend tax credit rate proposed in the NL 2010 Budget.
It appears that many people did not understand that a
TFSA withdrawal does not increase contribution room until the following
year. This article deals with what must be done if you have an
excess contribution.
Businesses which are registered to collect GST/HST can
recover the GST/HST that they have paid, with certain temporary exceptions
for large businesses. We have added information on these temporary
restrictions, with links to detailed information on the Ontario Ministry
of Finance website.
Businesses which are registered to collect GST/HST can
recover the GST/HST that they have paid, with certain temporary exceptions
for large businesses. We have added information on these temporary
restrictions, with links to detailed information on the BC Ministry of
Finance website.
See our new article on Place of Supply Rules for goods,
services, and intangible personal property (IPP), some of which have
changed effective May 1, 2010. Information is also included
regarding HST self-assessment and rebates of the provincial component of
the HST.
Cottage owners may apply to defer all or a portion of
the increase in property taxes resulting from the 2010 general
reassessment of property values in Manitoba.
The first payments of the Ontario Sales Tax Transition
Benefit will be made to Ontario residents this month. A new link has
been added to the OSTTB information, to a Canada Revenue Agency Questions
and Answers web page.
Most rebates of the provincial component of the HST
regarding residential energy will be provided to consumers on the supplier
invoice. For purchases of residential energy products such as wood
stove pellets and firewood, consumers can apply to the government for a
residential energy rebate regarding the provincial component of the HST.
The BC Ministry of Finance web page Jobs and the
Economy - Facts about the HST, includes information for businesses and
individuals, and includes a document which shows in detail which items
will be subject to a higher tax
under the HST, and which ones will not.
This Ontario Ministry of Finance web page has tables
which show in detail which items will be subject to a higher tax
under the HST, and which ones will not.
The Consumption Tax Rebate and Transition Act,
eliminating the Provincial Sales Tax (PST) and preparing BC for the HST, was passed in the BC
Legislature on April 29th.
The Department of Finance has released the draft
legislation and explanatory notes regarding proposed Tax-Free Savings
Account technical changes that were announced in October 2009.
The Nova Scotia 2010 budget was tabled on April 6th,
announcing a new high-income personal income tax bracket for 2010, offset
by an elimination of the high-income surtax. The HST rate is being
increased to 15% effective July 1, 2010. Two new refundable tax
credits were introduced for low-income individuals/couples.
The Quebec 2010 budget was tabled on March 30th, with
the introduction of a health contribution as of July 1, 2010, further
increase of the QST in 2012, and a new solidarity tax credit to replace 3
other tax credits.
Newfoundland & Labrador's 2010 budget was tabled on
March 29th, with reductions in the top 2 personal tax rates, increases to
the age amount tax credit and Low Income Senior's Benefit, increase to the
enhanced dividend tax credit, and reduction of the small business
corporate income tax rate.
Manitoba's 2010 budget was tabled on March 23rd,
announcing a new Tuition Fee Income Tax Rebate Advance, expansion of the
Fitness Tax Credit, and a new refundable Fertility Treatment Tax Credit.
A GST registrant in BC or Ontario should not be
invoicing or collecting the provincial portion of the HST prior to
May 1, 2010, for goods or services provided in BC or Ontario, even
if the goods or services are to be provided on or after July 1,
2010. Some non-consumers may have to self-assess the
provincial portion of the HST.
We have added links to several information sheets
published by CRA regarding the transition to HST, and point-of-sale
rebates for various categories such as books, newspapers, prepared food
and beverages, feminine hygiene products and children's goods.
We have added links to several information sheets
published by CRA regarding the transition to HST, and point-of-sale
rebates for various categories such as books, motor fuels, feminine
hygiene products and children's goods.
The caregiver tax credit may be available to you if a
parent or grandparent over 65 lives with you, even if they are not your
dependent. This credit may also be available if certain other
dependent relatives live with you. When you are able to claim the
caregiver credit (or could have, if the relative had no income) for a
relative who is eligible for the disability amount tax credit, you may
also be able to transfer to yourself any unused portion of their
disability tax credit.
In order to avoid doing an adjustment to your 2009 tax
return later, RRSP contributions made in the first 60 days of 2010 should
be reported on Schedule 7 of your 2009 tax return, even if you are not
claiming the deduction for 2009.
Budget 2010 includes expansion of CCA Class 43.1 and
Class 43.2, which provide accelerated capital cost allowance at the rate
of 30% or 50% per year. The Budget also includes proposals to
enhance and clarify the special GST/HST accounting method available for
the direct selling industry. The Government is creating the Vehicle
and Equipment Financing Partnership to increase the availability of credit
at market rates for dealers and users of vehicles and equipment.
There were no new changes announced to the amount of
personal tax credits or tax brackets, or to tax rates. Changes are
being made to the way Universal Child Care Benefits (UCCB) are included in
income by single parents. Some beneficial changes are proposed
related to Registered Disability Savings Plans (RDSPs). The tax
deferral election for stock options is repealed, and provisions are
proposed to assist taxpayers who previously used this election.
The 2010 Budget includes the change to HST. There
will be a refundable BC HST credit of $230 per person for low and modest
income individuals and families. MSP premiums will be increased for
2011. A property tax deferment program is being introduced for 2010
for families with children. The PST on private sales of vehicles,
which are not subject to HST, will increase to 12% effective July 1,
2010. See details on these and other changes in the BC Budget
documents.
Most of the time, the amount that can be deducted for food,
beverages and entertainment is 50% of the lesser of the actual cost, or a reasonable amount under the circumstances.
This article has been revised to add information on what constitutes a
reasonable amount.
We have finally completed the much more sophisticated
Quebec Tax Calculator, similar to the Canadian Tax Calculator. It
now calculates the tax for taxpayer and spouse, with choice of the year
2009 or 2010. It includes the most common Quebec tax credits.
The TFSA vs RRSP Calculator, which helps a person
decide if it is better to contribute to a TFSA or to an RRSP, has been
updated to include 2010 income tax rates.
From a tax perspective, certain types of investments are better to be
held in a non-registered account than in an RRSP/RRIF or TFSA. This
depends mostly on the tax treatment of the income from the
investments. We have summarized our opinions on where to place
different types of investments.
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