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Koroll & Company Blog

Midyear Tax Checkup

[fa icon="calendar"] Jul 28, 2020 11:26:00 AM / by Allen Koroll

Mid Year

Most Canadian taxpayers will have filed their 2019 income taxes by now, and likely received the Notice of Assessment which summarizes their tax situation for the year. 

At this point in time, you have made half of your years’ worth of payments toward your income taxes for 2020 through deductions taken at source from each of your paycheques. In addition, you’ll have incurred 6 months’ worth of expenses, some of which will result in tax credits, benefits and deductions that can offset your tax owing come the next tax filing season. 

That makes now the perfect time to review your current tax position and create a strategy that will ensure there are no surprises when it comes time to file your 2020 taxes. While you can wait until later in the year, planning ahead will give you an opportunity to take advantage of even more opportunities you may have otherwise missed the chance to take.

Make Sure Your Tax Filing Obligations Are Up To Date for 2019

2020 was outside the norm for submitting taxes, which means it may have slipped some people’s minds or you may be confused about dates. For all taxpayers (individual and self-employed) this year's filing deadline was June 15, 2020. 

If you have yet to file your tax return, it’s important that you make plans to do so soon. You are currently incurring late-filing penalties. NOTE: Tax payments for 2019 are not due until September 1, 2020 to help Canadians with the ongoing COVID pandemic.

Even if you expect to receive a return (versus owing taxes), you should file. Delaying will result in the temporary or permanent loss of certain benefits, such as the GST/HST credit or Canada Child Benefit. 

This is because these credits are calculated based on your previous year’s income. If you do not file, the government will not have the information required to determine your eligibility and the amount you are to receive. 

Ensuring Current Tax Obligations Are Being Met and Adjusting Where Necessary

As mentioned above, once you file your taxes, you can expect to receive a Notice of Assessment. Best case scenario, your refund or taxes owing will be little to none. 

While the best-case scenario may seem like a large refund, this means that you overpaid your taxes and provided the government with an interest free loan. 

In contrast, a large balance owing means you paid too little in taxes throughout the year. If one of the latter two are true (i.e. you paid too much or too little) you will want to adjust the amount of tax you pay the government throughout the year, where possible. 

To determine whether you need to make an adjustment, you must first determine a reasonable estimate of your tax liability. If your income and expenses have not changed greatly since last year, you can simply use your 2019 income to make a reasonable estimate of your 2020 income and taxes owing. 

For a more precise estimate, however, we recommend finding current tax rate brackets and credits on the Canada Revenue Agency (CRA) website or reaching out to your professional tax preparer.  

Once you have arrived at a reasonable estimate of your 2020 tax situation, you must now figure out whether income tax payments made to date, either by source deductions or instalment payments, match your liability figure. 

If your liability is greater than payments made, you will want to increase your installment payments or deductions made at the source. Increasing deductions at the source can be done by reaching out to your employer. Increasing installments can be done by contacting the CRA. 

If your liability is substantially lower than your payments, employees will want to file a Form T1213 to reduce deductions at the source while installment payers will want to simply adjust their installment payment to reflect their actual 2020 tax liability.

For help determining whether your current payments will accurately meet your tax liabilities for 2020 and to discuss strategies to optimize your after-tax position for the 2020 tax year, contact us today.


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The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.



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Topics: Tax Deductions

Allen Koroll

Written by Allen Koroll