Koroll & Company Blog

The end of summer means back to school for students of all ages. For parents of elementary and secondary school students the focus is on obtaining back to school clothes and supplies and starting the process of enrollment in after-school activities for the fall.

For those already in (or starting) post-secondary education, choosing courses, finding a place to live and paying the initial bills for tuition and residence are more likely to be on the immediate agenda.

What both groups of parents and students have in common this school year, however, is that this is the first full school year which will be affected by previously announced tax changes.

Although they aren’t usually thought of in such terms, Canadian charities can be big businesses. The difference between them and a large corporation is that they collect and disperse money in order to support and advance causes, which create a public benefit.

As such, charities are afforded special status under Canadian tax laws.

Our tax system effectively subsidizes the activities of charitable organizations by providing a tax deduction or tax credit to companies and individuals that contribute to those organizations and by exempting the charities themselves from the payment of income tax. 

As it usually does when a natural disaster occurs, the Canada Revenue Agency (CRA) issued a press release, reminding affected taxpayers that they could seek relief from any interest and penalties which might otherwise be imposed as the result of late filing or payment of taxes.

Such relief is provided under the federal Taxpayer Relief Program and, although natural disasters are the most publicized instances in which the Program is utilized, it is in fact available to all Canadian taxpayers in a variety of circumstances.

While Canadians typically think of taxes only in the spring when the annual return must be filed, taxes are a year-round business for the Canada Revenue Agency (CRA). The CRA is busy processing and issuing Notices of Assessment for individual tax returns during the February to June filing season.

To date, in 2017, the CRA has received and processed just under 28 million individual income tax returns. That volume of returns and the CRA’s self-imposed processing turnaround goals (two to six weeks, depending on the filing method) mean that the CRA cannot possibly do an in-depth review of each return filed prior to issuing the Notice of Assessment.

The traditional idea of retirement – working full-time until age 65 and then leaving the workforce completely to live on government-sponsored and private sources of retirement income – has undergone a lot of changes over the past couple of decades, and Canada’s government-sponsored retirement income system has evolved in response.

Generally, the changes to the Canada Pension Plan (CPP) and Old Age Security (OAS) programs have increased the flexibility of those programs and, in particular, have given individuals a greater range of choices with respect to, especially, the timing of their receipt of CPP and OAS.

The downside of that increased flexibility has been to make the system — and therefore the choices available to Canadians — more complex. One aspect of that complexity is the (relatively) new CPP post-retirement benefit, or PRB.

Sometime around the middle of August, millions of Canadians will receive unexpected mail from the Canada Revenue Agency (CRA), and that mail will contain unfamiliar and unwelcome news. Specifically, the enclosed form will advise the recipient that, in the view of the CRA, he or she should make instalment payments of income tax on September 15 and December 15^th of this year – and will helpfully identify the amounts which should be paid on each date.

No one particularly likes receiving unexpected mail from the tax authorities, and correspondence which suggests that the recipient should be making payments of tax to the CRA during the year (instead of when he or she files the return for the year next April) is likely to be both perplexing and somewhat alarming. It’s fair to say that most Canadians aren’t familiar with the payment of income tax by instalments, and are therefore at a loss to know how to proceed the first time they receive an Instalment Reminder.

The variety of amounts and kinds of income, deductions taken, and credits claimed on individual income tax returns filed by Canadians each spring is almost limitless. However, each of those returns has one thing in common, and that is that each will be assessed by the Canada Revenue Agency (CRA), and each will result in a Notice of Assessment summarizing the Agency’s conclusions with respect to the information filed by the taxpayer.

Most important, from the taxpayer’s point of view, the CRA will communicate the amount of federal and provincial tax it believes the taxpayer is required to pay for the tax year just passed.

Tax-free savings accounts (TFSAs) have been part of the Canadian tax system now for nearly a decade, and millions of Canadians utilize them as a savings vehicle, whether for short-term or long-term purposes.

Of all of the tax-deferral or tax-savings plans available to Canadians, TFSAs undoubtedly provide the greatest flexibility, as the TFSA rules allow taxpayers to both carryover allowable contribution room to future years and to re-contribute amounts withdrawn.

However, that very flexibility (especially the ability to re-contribute previous withdrawals) also has the potential to cause taxpayers to run afoul of the rules by getting into an inadvertent over contribution position, resulting in the imposition of penalty taxes.