Tax Tips

As Tax professionals, we believe and make sure that we are giving you quality tax tips. We also make sure that we get you more for your money in your taxes and S & M Tax Services will work with you all year round.

Important Dates to Remember:

March 1, 2023, the Final date for 2022 RRSP contributions

How do Charitable donations help with taxes?

A first-time donor is entitled to a one-time 40% federal credit for monetary donations of $200 or less and a 54% federal credit for donations between $200 and $1000. This credit can be claimed once in the first-time donor’s 2013 onwards taxation years.

The maximum amount of donations that may be claimed in a year is 75% of net income. Donations can be carried forward for five years if they are not claimed in the year made.

Claiming Medical Expenses in your taxes?

The claim for medical expenses is limited by an income threshold. In other words, the lower your net income, the more you can claim.

As a result, it’s generally beneficial to claim all family medical expenses in the lower-income spouse’s/partner’s return. Remember, though, this is a non-refundable credit, so the individual who makes the claim should have sufficient income tax payable — both federal and provincial — to absorb the entire credit.

What if I found Old receipts after my taxes are done?

In gathering your information, you may stumble across older receipts or slips that may have value in your taxation year return. Don’t worry call us we will do the adjustment for you. Some examples are below:

Charitable donations:  They can be carried forward and used in any of the five years after the year the gift is made

Medical expenses: They can be claimed during any 12-month period that ends in a taxation year if you haven’t claimed them previously.

In addition, under the taxpayer relief provisions, the CRA has the discretion to make adjustments to previously filed returns (10 years back) in relation to certain errors or omissions, at the taxpayer’s request.

What if Old income slips were missing when taxes were done?

On the other hand, if you stumble across old income slips that you may have missed, or if you receive a slip after filing your return, you may be tempted to leave it for the next year or let the CRA assess you based on its records. This is not a good idea because it would be considered a failure to report income, and if you have also missed any income in any of the three preceding years, you will be subject to a penalty for repeated failure to report income, which could be significant. Report any missed income as soon as you find it.

What are the benefits of filing returns for children/students?

In many cases, there may be benefits to filing tax returns for children even when it’s not required.

If your children had part-time jobs during the year or earned some money for small jobs, such as babysitting, snow removal, or lawn care, by filing a tax return they report earned income:

1. Establishes contribution room for purposes of RRSP 
2. Filing a tax return for teenagers is the availability of refundable tax credits.
3. There is also a GST/HST credit available for low- and no-income individuals aged 19 and up.

So anyone who will turn 19 years old prior to the Tax year should file their tax year return.

Finally, University students should always file tax returns and claim the eligible tuition and education amounts. Unused amounts are transferable to a supporting spouse, parent, or grandparent up to a maximum of $5,000 (federal) per person. Once established, credits that cannot be used or transferred in the current year can be carried forward and claimed by the student in a later year.

What is RRSP?

A Registered Retirement Savings Plan, or RRSP, is a special type of investment account designed to help Canadians save for retirement. The main advantage of an RRSP account, as compared to a regular investment account, is the tax benefits it offers.

How much can I contribute and deduct?

Generally, the amount you can contribute to your RRSPs or your spouse’s or common-law partner’s RRSPs, for a given tax year without tax implications is determined by your RRSP deduction limit. This is often called your “contribution room.” There are limits on how much you can contribute each year to your own RRSPs and your spouse’s RRSPs. Your total contribution room for the year is lower than 18% of your earned income for the previous year.

What is my RRSP deduction limit?
You can find your RRSP deduction limit by checking the amount (A) of the RRSP Deduction Limit Statement, on your latest CRA Notice of Assessment or notice of reassessment.

What Expenses can I deduct if I am renting my property?

If you renting out one or more rooms in your home, or if you own a rental property, there are many expenses that can be deducted in calculating your net rental income.

These expenses include:

• Mortgage interest
• Property taxes
• Utility costs
• House insurance
• Maintenance costs,
• Advertising
• Property management fees
• Accounting or Legal Fee

Business Return: Self-Employed Sole Proprietorship

Q: Do I need a T4?

A: As an independent contractor, Form T2125 is used to report your income and expenses an independent contractor. If you received other employment income, you may receive a T4 or T4a from those employers to claim as self-employed.

Tax Deductible Expenses

Next, you’ll want to gather all of your receipts, bills, and statements that you’ll be entering which may be eligible as deductible expenses. Common tax-deductible expenses for Uber Partners include:

• Fees
• Gas, oil, windshield washer fluid, brake fluid, antifreeze, and other maintenance expenses
• Repairs and routine oil changes
• Tires (including the cost of balancing/installation)
• Lease payments
• Car washes/detailing
• Supplies such as pens/paper and water/snacks provided to your passengers
• A portion of cell phone expenses

Mileage

Lastly, you’ll need to know a couple of mileage numbers from this tax year.

1. The total kilometers you drove. A summary of the distance you drove just for business
2. The total kilometers you drove overall. Starting odometer readings should be from the day you started the business.

Q: Do I have to register for a GST/HST account?

A: If you live in a province/territory other than Quebec, your requirement to register for a GST/HST account depends on how much you earn from self-employment.

If you earn over $30,000 in gross income in a calendar year through self-employment, then you must register for a GST/HST account with the CRA.

Q: How do I register for a GST/HST account?

A: There are currently three ways to register – you can do it online, by telephone, or via mail/fax. More details from the CRA can be found by visiting  www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/rgstrng/menu-eng.html

Should I “Incorporate or Not” my business?

The decision of incorporating a business is based on an individual client’s circumstances and needs.

Listed under are some reasons why many businesses choose not to incorporate:

• Losses are trapped in the corporation
• Increased Tax reporting costs, have to file annual corporate returns to CRA

Listed under are some reasons why businesses choose to incorporate:

• Separate legal identity
• Limit liability
• Reduced Taxes
• Beneficial for Estate planning

As a general rule when starting a new business many owners choose not to incorporate as the company is more likely to incur losses in the beginning and small business owners are often unsure of the future viability of the business. This way they can offset the losses from their business income against other forms of income they may have. But as soon as they see potential growth and profitability businesses incorporate to take advantage of the benefits mentioned above.

What is first-time Homebuyer Credit?

First-time home buyers who acquire a qualifying home during the year are entitled to claim a federal non-refundable tax credit up to $5000 and worth $750 (5000×15%). To qualify, neither the individual nor his or her spouse or common-law partner can have owned and lived in another home in the calendar year of the new home purchase or in any of the four preceding calendar years. The credit is claimed by either the purchaser or spouse or common law.

What is DTC (Disability Tax Credit Program) and who qualifies for it?

According to the CRA, the Canadian Disability Tax Credit is a non-refundable tax credit that helps persons with disabilities or their caregivers reduce the amount of income tax they have to pay. This Canadian disability benefit creates greater tax equity by providing relief for disability costs.  A person with a severe and prolonged impairment in physical or mental functions may claim the disability amount once they are eligible for the DTC.
Currently, the disability tax credit is non-refundable, meaning that it’s worth nothing to you if you don’t earn enough to owe taxes. And while it may be possible to transfer all or part of the tax credit that can’t be used to one’s spouse, common-law partner, or another supporting person.
The requirements to be eligible for the disabled tax credit are laid out in the T-2201 DTC certificate application form. Click on the link above to view or download for printing the form.

Eligibility criteria for the Disability Tax Credit

Among other things, there must be a prolonged impairment in physical or mental functions that must have lasted, or be expected to last, for a continuous period of at least 12 months.

Click below on the link to find out if you’re eligible for the DTC

CRA Disability Tax Credit link

The disability tax credit can be claimed retroactively for up to 10 years if a person has been experiencing eligible impairments but has only now applied for the credit. That can add up to a major tax refund.

Content source#   https://www.canada.ca/en/revenue-agency/services/tax/individuals/segments/tax-credits-deductions-persons-disabilities/information-medical-practitioners/eligibility-criteria-disability-tax-credit.html

Canada Revenue CRA & Unfilled/Overdue Canadian Taxes

What happens when you don’t file your taxes or have overdue taxes?

There is an increase in the number of people who have not filed their tax returns. It is understandable that there are many priorities in everyone’s lives and it is becoming increasingly difficult for the person to catch up with their filing requirements.

The CRA however, is not very sympathetic. To CRA not being in compliance with the income tax act no matter what the cause, merits financial or legal punishment.

CRA will not offer any relief from CRA collection actions such as income garnishment or bank levy, until you complete and file all tax returns. So the sooner you file all your back taxes, the sooner the CRA will be willing to negotiate with you.

CRA will send you a demand to file for the current year’s tax return; CRA may also wait for a few years and then take increased measures to make you file( lock up your bank, garnish your income, bank levy, etc). You need to keep in mind that CRA will eventually find you and if they do, you will have to face the late filing of tax penalties and accumulated interests starting from the date when the tax is due.

With advances in technology, CRA has been using an enhanced database to identify people who have unfiled tax returns. If you have unfiled returns, you are automatically on the list of the most wanted people for tax collection. If you can act before CRA gets to you, you have a better chance of resolving your tax problems without going through the pain of legal action. Intentionally not filing, or filing a false return, is a crime. It is critical to take action to resolve your unfiled return problems before a simple mistake becomes a crime.

To control your damage right away, we do the assessment and determine your filing obligations. Then we will quickly help you to reconstruct all the financial information and locate all your missing pieces of tax information to report your returns properly.

Contact us today and we will help to get you the maximum return by taking advantage of all eligible tax credits and benefits at an affordable price.