Annual Message From The Partners
As we approach another tax season, we want to take a moment to express our sincere appreciation for your ongoing support and loyalty. It is truly thanks to clients like you that we love what we do and are able to continue providing top-notch service.
Tax season is objectively not great (unless, of course, you are an accountant, in which case it is easily the most incredible 3 months!), so we are here to make the process as painless as possible. Think of us as your tax season champions, ready to tackle any challenges and ensure that you have a smooth and stress-free experience.
So, as we gear up for the months ahead, we just wanted to say thank you. Thank you for being amazing clients, thank you for allowing us to be a part of your financial journey, and thank you for the opportunity to serve you once again.
Here is to a successful and hassle-free tax season! We cannot wait to work with you and ensure that this year’s tax experience is the best one yet.
Warmest regards,
Steve, Catherine, Girija and Ana
COVID-19 Benefits Discontinued
All of the programs listed below have been canceled and will not be offered beyond December 31, 2022:
- The Canada Worker Lockdown Benefit
- The Ontario Staycation Tax credit
- Home Office deduction using the temporary flat method up to $500
It should be noted that an expense for home office using the detailed method has always been available and continues to be available for employees that work over 50% of the time at home by written or verbal agreement, are not reimbursed for their expenses and received a signed copy of Form T2200 from their employer.
First-time Home Savings Account (FHSA)
Starting April 1, 2023, qualified individuals may open a First-time Home Savings account to help save to buy their first home located in Canada. A yearly contribution of $8,000 to a maximum lifetime contribution of $40,000 is available. The contributions are deductible in the year it is made, and income earned in the FHSA are tax free.
A qualified individual is a Canadian resident, over the age of 17 and he/she or spouse did not own a qualifying home anytime in the part of the year before the account is open or any time in the 4 preceding years.
Withdrawals to purchase a qualifying home are not taxable, draws for any other purpose would be fully taxable. The account is for your first home only and must be closed within one year of the purchase.
Any excess contribution is subject to a monthly penalty of 1% on the highest excess FHSA amount in that month.
Transfers from an RRSP to FHSA are available.
As the income and draws are not taxable, the interest on borrowed money to fund the FHSA is not deductible.
Multigenerational Home Renovation Tax Credit (MHRTC)
Introduced in the 2022 budget, the MHRTC provides a tax credit on renovation expenses incurred in 2023 and beyond to create a secondary unit for a family member over 65 or 18, if they qualify for the disability tax credit.
The credit is 15% of the qualifying expenditures to a maximum expense of $50,000. Therefore, if you spend $50,000 or more on your renovation, the maximum credit is $7,500 (50,000 x 15%).
A secondary unit is defined as a self-contained housing unit with a private entrance, kitchen, bath and sleeping area.
For more information see: https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/budget-2022-plan-grow-economy-make-life-more-affordable/multigenerational-home-renovation-tax-credit.html
Residential Property Flipping Rule
New deeming rule which started January 1, 2023, deems sales of residential properties that would ordinarily qualify for either principal residence exemption or capital gain treatment will now be taxed fully as business income if bought and sold within 365 days. This applies to rental properties and assignment sales. Exemptions to the deeming rules includes death, breakdown of marriage or common-law partnership, eligible relocations, and other life events.
Increase to the Interest and Penalties on Unpaid Taxes
Unfiled taxes see penalties of 5% on the balance owing plus an additional 1% for each full month after the filing deadline up to a maximum of 12 months. If, however, you were late in filing in any 3 past years and receive a demand to file request the penalty on the balance owing is now 10% plus 2% for each full month after the filing deadline to a maximum of 20 months.
In addition to the filing penalties, unpaid taxes will be charged interest at an annual rate of 10% compounded daily.
Farnham Expense Template
For our applicable clients, we have provided a template which will assist you with the summarization of your business expenses to be reported on your personal tax return. The new template will minimize possible errors and improve efficiency during the preparation of your tax returns. Please enter the expenses in the excel spreadsheet, which can be downloaded from our website, and submit to us along with your tax documents. If there are any questions regarding how to complete the template, please connect with your Farnham representative.
Reminders
Filing Deadlines – Personal tax returns and any balance owing is due Tuesday April 30th. Self-employed individuals and their partners’ filing due date is June 17th, however any balance owing is due April 30th.
RRSP Contributions – Due to the leap year, February 29th is the RRSP contribution deadline. Any contributions made between January 1st, 2024 to February 29th, 2024, can be deducted in either 2023 or 2024 tax filings, subject to your RRSP room available. Review your 2022 Notice of Assessment for your available room, or check online with CRA “My Account”, if registered. An overcontribution above $2,000 will trigger a 1% monthly penalty.
TFSA Contributions – Canadian residents over 18 years of age can open a tax-free-savings account (TFSA). The annual limit is $6,500 for 2023 and $7,000 for 2024. At any time in the year, if you overcontribute to the TFSA you will be taxed at 1% of the highest excess in the month for each month you are in excess.
Late Slips – Typically, T3 (trust) and T5013 (partnership) slips are not issued until the end of March and foreign slips can be even later. If you receive a late or amended slip after filing, please notify us as soon as possible to amend your return. The CRA’s matching program will identify any missing slips and impose penalties.
Paying CRA – Three payment options:
- Pre-Authorized Debit (PAD): A one time draw directly from your bank account on a specified withdrawal date. The PAD form must be filed at least 5 days before the withdrawal date and therefore must be submitted by April 24th to meet the April 30th deadline.
- Online: Sign-in through your financial institution and add CRA as a payee. Your account number would be your 9-digit SIN.
- Remittance Voucher: We can issue a voucher that you can mail with a cheque or take to your bank for a direct transfer.
Note: Payments made after 2023, section 160.5 of the income tax act, requires remittances over $10,000 to be paid electronically unless the remitter cannot reasonably pay in that manner. A penalty of $100 will apply for failure to remit electronically, however it is anticipated that there will be a grace period before the penalty is imposed.