Archive for the ‘CRA’ Category

Bookkeeping – Working Smart

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Bookkeeping is not just entering transactions, reconciling your bank statement and saying, “I’m done!” Bookkeeping lays the foundation for everything that is extracted from your financial data, and business owners deserve data they can trust. Good bookkeeping does require work, but working smart now saves time, money and headaches later. Here are some tips for working smart.

Be organized and efficient – We’ve all been there – scouring pockets, wallets and vehicles searching for a missing receipt from months back. That’s human, but frustrating nonetheless. However, when you have a consistent and secure location for receipts and allocate expenses as you pay for them, you decrease the risk of missing receipts or transactions.

Be software friendly – Trying to save money by not upgrading to the latest software or software update is not working smart. Not using current software can leave your files vulnerable to cyber hackers, not to mention the frustration of a slow and glitchy software experience. Keeping current also means you’ll benefit from many new features and improvements that can make bookkeeping easier and more efficient.

Be financially separate from your business – It may take some time to set up business accounts and credit cards but doing so is working smart. It’s much easier to track business transactions, and you’ll save money as your accountant won’t have to spend time sorting business vs personal transactions at each year end.

Be reconciled to reconcile – Reviewing your bank statements, credit card and vendor statements monthly (at the very least) can help you catch errors or potential fraud early in the game.

Be mindful – Use a sticky note, set an alarm in your calendar – whatever it takes to prepare and file sales tax, employment and payroll tax, worker’s compensation and income tax ON TIME. Also, remit the amounts owing ON TIME to avoid penalties and interest.

Be careful – If your bookkeeper is unsure about the posting of any unusual or complicated transaction, they should seek guidance from your accountant. A quick call can save a lot of trouble down the road.

Working smart may mean some extra effort and diligence today, but is definitely worth it to have a successful tomorrow!

TFSAs – Do You Have Room?

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In November 2016, we blogged about Tax Free Savings Accounts. Since inception, CRA has been auditing TFSA accounts and this has resulted in penalties to taxpayers who have unknowingly over-contributed. How can you be sure you have room for your TFSA contributions? Here are some tips.

Understand TFSA Withdrawals

Let’s say you’ve withdrawn funds from your TFSA. This has left room to re-contribute later, right? Not necessarily. If you withdraw funds from your TFSA, you must remember that this does not create corresponding contribution room until the next calendar year. If you contribute sooner – you could be penalized.

Ensure TFSA Transfers Are Done Correctly

If you wish to transfer funds from one TFSA to another, the transaction should be processed as a “direct transfer” by your financial institution. Otherwise, it could be viewed as a “funds withdrawn” and “funds contributed” scenario. When the latter happens, contribution room for the withdrawal will not be reinstated until the next calendar year. So, when funds are not transferred correctly, and you contribute too soon – penalties may also apply.

Keep Up-to-date with Changing TFSA Room Limits

You can have more than one TFSA at any given time, but the total amount you contribute to all your TFSAs cannot be more than your available TFSA contribution room for that year or you could get dinged with a penalty. It’s good to check each year to see if the annual limit has changed:

Always Be Aware of Your TFSA Balance

CRA has made it easy to ensure that we don’t over-contribute. Before you contribute, log into CRA’s My Account for Individuals  >  Click RRSP and TFSA tab  >  Contribution Room  >  Next.

This takes you to your TFSA page where you can find out your contribution room as of the current taxation year.

Following these simple tips can help you save money without worrying about unexpected penalties. Happy saving!


Tax Credit Changes – 2017

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CRA giveth and CRA taketh away. Actually, more “taketh” than anything!

As you run around getting all your tax slips in order, we wanted you to be aware that the CRA has nixed some tax credits and modified some current ones for 2017.

Here are a few key changes:

  • The Children’s Fitness Tax Credit and the Children’s Arts Tax Credit are now gone.
  • The Public Transit Tax Credit is eliminated as of July 1, 2017. For 2017 only, qualifying fees paid from January 1, 2017 to June 30, 2017 are eligible for this credit.
  • For tuition fees, the Education Tax Credit and Textbook Tax Credit amounts (a part of the tuition credit) are eliminated this year.
  • The Infirm Dependent Tax Credit and Caregiver Tax Credit have been replaced by the Canada Caregiver Credit. If you have a parent over the age of 65 receiving the disability tax credit, you may be eligible to transfer this $6,883 credit to your personal tax return.

Please give us a call if you have any questions. Happy personal tax season to all!

Registered Education Savings Plan (RESP): Withdrawals

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So, you did your homework and started a RESP for your child. Bravo! However, now junior is grown up and ready to go off to University – YIKES! Where did the time go? Certainly, time can seem as fleeting as our money. Below are some tips to ensure the RESP you so diligently cared for will yield the best results.

When can you start withdrawing from your child’s RESP?

Once a child is enrolled in a qualifying post secondary program, the RESP subscriber (usually a parent) can withdraw money on behalf of the child.

  • For full-time programs, withdrawals are limited to $5,000 for the first 13 weeks of enrollment. There are no limits on the amounts you can withdraw thereafter.
  • For part-time programs, withdrawals are limited to $2,500 for every 13-week period they are enrolled.

What are the tax implications of RESP withdrawals?

The RESP balance is made up of three different pools.

  • Contributions you make personally – Withdrawing from the contributions pool has no tax implications.
  • Government grants and investment income – Withdrawing from either of these pools can result is taxable income in the year they are withdrawn. We suggest ensuring your total annual withdrawals are made from these pools first until it results in the child having a high annual income. If more needs to be withdrawn in that year, consider drawing from the contributions pool. The flexibility around drawing from each of these pools varies between plans – so check with your plan administrator.

Plan to ensure the RESP account is fully withdrawn before the child graduates. There is a grace period of six months after graduation for the RESP to be fully withdrawn or transferred. Otherwise, there are penalties.

Ways to transfer the balance and avoid penalties

  • Transfer the taxable portions to your RRSP if you or your spouse have RRSP contribution room.
  • If you are in a RESP family plan, you can transfer the taxable portions to any siblings.
  • If you are eligible, you can also transfer it to a Registered Disability Savings Plan (RDSP). For this option, the beneficiary for the RESP and RDSP must be the same.

What are the penalties?

If the RESP is not fully withdrawn before the six-month deadline, any remaining government grant will have to be repaid to the government and any investment income becomes immediately taxable at your child’s marginal rate plus 20%. The contribution portion can still be withdrawn tax free even if the child has graduated. We suggest speaking with your financial institution about how you would like these funds handled ahead of time. Feel free to contact us if you have any other questions.

Disability Tax Credit – Are You Eligible?

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How do you know if you are eligible for the disability tax credit (DTC)?

CRA’s website has a tool available where you can review some questions in order to figure out whether you are eligible to apply for the Disability Tax Credit Certificate. If you want to go through the questionnaire yourself, click on this link.

We have also prepared a Disability Tax Credit Eligibility Decision Tree to help you determine whether you are eligible for the disability tax credit or not. Check it out!

Registered Education Savings Plans (RESPs)

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What is it? A Registered Education Savings Plan (RESP) is a special investment account that helps families plan for post-secondary education funding, and provides future tax-saving and tax-deferring opportunities. Also, the RESP allows access to the Canadian Education Savings Grant (CESG), a government freebee that makes an RESP even more attractive!

What’s a Beneficiary? The beneficiary is the student who is expected to make use of the RESP to fund his or her education. The lifetime contribution limit for a beneficiary savings $50,000. Over-contribution results in a penalty tax of 1% per month on the over-contributed amount, until it is withdrawn. From 2007 on, there is no annual limit for RESP contributions.

There is no age limit for being a beneficiary of an RESP; the only drawback is that adult beneficiaries are not eligible for the CESG. Contributions can be made over a 31-year period, and the plan must be wound up by the end of its 35th year.

How does the CESG work? The CESG is a government incentive implemented to encourage people to make use of RESPs: the government will match 20% of your annual contributions, up to a maximum of $500 every year, until the child turns 17 years old. Then things get more complicated – that’s for another discussion. The point is that is free money that instantly provides a return on your investment into the plan that’s frankly impossible to beat! The total CESG that can be paid into a plan by the government is $7,200 over the life of the plan.

In order to receive maximum CESG, it would therefore be better to make minimum annual payments of $2,500 instead of making one big payment to the RESP. Unused CEGC contribution room can be carried forward. For instance, if you do not make a RESP contribution in year 5 but contribute $5,000 in year 6, you will be able to receive $1,000 of CESG in year 6. However, the maximum CESG is $1,000 in any given year.

What are the tax benefits? The investment pool grows free of any tax each year (possibly for many years) and the withdrawals for the capital invested are return to the contributor tax free. The accumulated income and the CESG are distributed to the beneficiary when they attend a qualifying post secondary educational program, and included in their (typically low) income, usually attracting tax at lower rates. Not a bad result!

RRSP Season For The 2016 Taxation Year is Ending Soon!

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A Registered Retirement Savings Plan (RRSP) is a personal savings account registered with Canada Revenue Agency (CRA) to help you save for retirement and reduce your current income taxes. RRSP contributions are tax deductible and the earnings are tax-free as long as the money stays in the plan. Once the funds are withdrawn or payments are made from the plan, you will be taxed. You are able to contribute to your RRSP up to a certain limit for any tax year and any unused RRSP contribution room will be carried forward until December 31st of the year you turn 71.

Contribution Limit

The RRSP deduction limit, which is the maximum annual contribution limit, changes annually and it is calculated as follows:

  1. 18% of your earned income[i] from the previous year, up to a dollar limit which for 2016 is $25,370 (2017 – $26,010), less
  2. the pension adjustment (PA) that was reported on your previous year’s T4.

If you have unused RRSP contribution room at the end of the previous year, you can increase your current year contribution accordingly. A quick way to find out your contribution limit is to look it up in the “RRSP Deduction Limit Statement” section of your latest notice of (re)assessment from the CRA.

Over-contributions and Penalties

RRSP contribution is a great retirement saving and tax deferral tool, but if you over-contribute you may be subject to penalty taxes. Over-contribution in excess of $2,000 is subject to a 1% penalty tax per month, until you withdraw the excess amount. A T1-OVP tax return is required for reporting the penalty tax. This return must be filed with the CRA by March 31st of the following tax year to avoid a late-filing fee.

If the excess RRSP contribution is $2,000 or less, there is no penalty tax, but the excess contribution is not deductible until a new RRSP contribution room is available.

Contribution Deadline for 2016 Tax Year

The last day to make RRSP contributions that are eligible for the 2016 deduction is March 1st, 2017 (60 days from December 31, 2016). Therefore, it is important to include and report all the RRSP contribution tax slips up to March 1, 2017 on your 2016 tax return.

Other RRSP tax planning opportunities, such as spousal RRSP contribution, home buyer’s plan or lifelong learning plan, are available. Please contact us for more information.


[i] Earned income includes salaries, wages, and rental income, but excludes investment income.

Principal Residence Exemption

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The Latest Principal Residence Exemption Rule Affects Every Canadian Homeowner

You’ve sold your home and there’s lots of financial matters on your mind – legal fees, moving expenses, renovations. Well, get ready to add one more thing to the list – reporting the sale of your home on your personal income tax return.

CRA’s new tax reporting rule

On October 3, 2016, Finance Minister Bill Morneau announced a change to Canada Revenue Agency (CRA) reporting requirements for the sale of a “principal residence”. For taxation years ending on or after October 2, 2016, any sale of a principal residence must be reported in the seller’s personal tax return for the year of sale. These changes target foreign investors in an effort to ensure that they abide by current Canadian tax rules – which makes sense. However, the reprocussion is that this new rule will also affect every Canadian homeowner.

Why the new rule

Actually, it’s not exactly a new rule – rather it’s more of a stricter adherance to an existing one. Why do we say that?

For many years, Canadians have benefitted from the Principal Residence Exemption (PRE) when it applies to the sale of their principal residence, while not entirely grasping the full compliance expectation or the full complexity of the PRE rules. The CRA has long had an administrative policy that allowed taxpayers not to report anything on the sale of their principal residence – as long as the entire gain was sheltered by the PRE.  This has led to some confusion and unintentional non-compliance. Some taxpayers were under the impression that, because of the PRE, there was no tax on the sale of any residential property owned by them or their spouse.

However, those days of “report nothing” have come to an end.

What this means for Canadian homeowners

  • Individuals who sell a principal residence at any time during 2016 (even before October 3, 2016) must report the disposition in their 2016 tax return. This is true even if the entire gain is fully protected by the PRE – now you have to prove that it is an exempt gain.
  • Previously for individuals, the reassessment period was three years from the date of the initial notice of assessment, with some exceptions. Now however, if the taxpayer fails to report a disposition of a principal residence, CRA can reassess a taxpayer outside of the normal three year reassessment period. So non-compliance will not get swept under the carpet by the passage of time.
  • If the disposition of the principal residence is not reported on the tax return as required, a late-filing penalty can be imposed @ $100 per month times the number of months late, to a maximum of $8,000.

Please call us any time if you would like to discuss this in further detail. Also, you can read more directly on the CRA website:

Tax Free Savings Accounts (TFSA)

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The Tax Free Savings Account (TFSA) is a savings account that allows any individual over the age of 18 and who has a valid Canadian SIN to invest in assets and earn tax-free investment income.


Contribution limit, accumulation, and penalties

There is a limit to the amount you can contribute to the account. In previous years from 2009 to 2012, the contribution limit was $5,000 per year. In 2013 and 2014, the limit has increased to $5,500 per year. Then in 2015, the limit increased again to $10,000. However, starting Jan 1, 2016, the limit was decreased to $5,500.

Investment income earned and changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years.

You can have more than one TFSA at any given time, but the total amount you contribute to all your TFSAs cannot be more than your available TFSA contribution room for that year. Any amounts that exceed the contribution room will be subject to a monthly penalty tax of 1% of the excess amount, until the excess is withdrawn.

On the other hand, if your contribution for the year did not meet the limit, the unused portion is carried forward to future years. This increases your contribution limit for next year.



Withdrawals from your TFSA are tax-free, regardless of the amount. These can generally be done any time you want, depending on your investments. Withdrawals will be added to your TFSA contribution room at the beginning of the following year. For example, if you withdraw $2,000 from you TFSA in 2015, your 2016 contribution room will be $7,500 ($5,500+$2,000).

Re-contributing your withdrawals is also allowed – however this will not change your contribution room for the year. For example, in 2016 taxpayer opened his/her TFSA and contributed maximum amount allowed of $46,500. Later in 2016, the taxpayer withdrew $8,000. The date that a taxpayer can re-contribute the $8,000 without incurring penalties is Jan 1, 2017. Therefore any re-contribution should be done carefully to avoid penalties from over-contributing.



Funds given to your spouse or common law partner to contribute to their own TFSA is permitted, without any restrictions or tax consequences.

Fund transfers between your own accounts or to ex-spouse/ex-common law partner are considered qualifying transfers. These can be done without any tax consequences, as long as they are directly transferred by your financial institution.


Death of a TFSA holder


A TFSA holder may:

  • Name a successor holder for the account-the survivor automatically becomes the holder of the account at the time of the former holder’s death.
  • Designate a beneficiary for the account – the account will cease to exist and the funds will be distributed to the beneficiary.


 Tax implications


Successor holder

The TFSA holder may only appointed his/ her survivor (i.e., the holder’s spouse or common-law partner at the time of death) as the successor holder for the account. Any income earned after the death of the holder will continue to accrue on a tax-free basis in the TFSA and the deceased’s spouse of common-law partner may make withdrawals from the TFSA free from tax.

Where the success holder has their own TFSA, they may choose to consolidate the two plans by the direct transfer of all or part of the assets of the holder’s plan to their own plan. In general, the direct transfer will not affect the successor holder’s TFSA contribution room.

Going forward, the successor holder may make additional contributions to the combined TFSA based only on their own unused contributing room.



In general, the fair market value at the date of death may be viewed as a non-taxable capital receipt to the designed beneficiary and maybe withdrawn free of tax. Any accretion in value after death will be subject to tax in the hands of the designated beneficiary.

If the TFSA holder’s spouse or common-law partner was designated as beneficiary, the situation is more complicated. When the estate is settled, the full value of the TFSA will be paid to his/her spouse. Deceased’s spouse or common-law partner has option to contribute all or portion of the funds received from the former holder’s TFSA to their own TFSA as an exempt contribution without affecting their own unused contribution room.

In order to do this, the exempt contribution payment must be made before the end of the calendar year following the year of death, the payment may not excessed the fair value of the holder’s TFSA at the date of death and the prescribed designation election from must be filed within 30 days after the contribution is made. In addition to the above requirements, any income or growth earned by the TFSA after the former TFSA holder dies is fully taxable to his/her spouse.

TFSA is a great tool to take advantage of, to save for the future. In order to make sure that the TFSA passes to your spouse of common-law partner as simply and as tax-effectively as possible, the successor holder method will allow for it in a less complicated manner.

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