FAQ

Starting with the 2016 tax year, individuals who sell their principal residence have to report it on their tax returns. Reporting will be required for sales that occur on or after January 1, 2016. If this was your principal residence the entire time you owned it, capital gains will not apply. If you sold your home on or after January 1, 2016 you must advise me of, the address (including postal code), acquisition year (the year you purchased the home you sold) and the price you sold it for (minus legal & real estate fees). Failure to do so may result in heavy penalties.

However, you may have a capital gain if:

a) at any time while you owned the home, you rented your home or a portion of your home to a tenant

b) you own another residence that is not your principal residence (ie cottage)

c)  your home was attained from a relative as part of an estate and was a rental property when you took ownership of the home

You can use CRA’s form at this link :  T2091 to calculate a capital gain.

You only need to complete form T2091 IF you have a capital gain.  If you sold your home for less than what you paid for it, and a) b) or c) applies to you, and you have loss, you do not have to complete this form.  But you still have to report the sale on your tax return.

I often get asked about this by my clients who own rental properties.  The Lifetime exemption is actually now $1 Million.

Unfortunately this exemption does not apply to rental properties.  It only applies to qualified:

• farm property;
• fishing property; or
• qualified small business corporation shares

For more information, please visit the Canada Revenue Agency’s website.

You need to advise the Canada Revenue Agency as soon as possible if your marital status changes.

Not doing so can cause you to have an over payment of GST, OTB and CCB – all of which will have to be paid back.

Example:  John and Jane got married on January 2, 2021 so they filed their 2020 tax return as ‘single’ as they were legally single on December 31, 2020.  They wait until the spring of 2022 and change their marital status to ‘married’ on their 2021 tax return.  During 2020-21, they both received $102 every 3 months in GST, Jane received $42 a month in OTB and she also received $230 a month in Child Tax Benefit.   After their taxes are filed, they will each receive an invoice for $404 (GST that must be paid back), Jane will receive an invoice for $504 (OTB that has to be paid back).  In addition, because ‘family’ income is used to calculate CCB entitlements, she would have only been entitled to $93 a month based on their combined income, therefore she received an over payment of $137 a month), she will also receive an invoice for $1,644 (CCB that must be paid back).  That is a total of $2,956 combined that they will have to pay back.

To ensure you meet the definition, please see CRA’s website:

http://www.cra-arc.gc.ca/bnfts/mrtl/menu-eng.html

You can call CRA at 1-800-959-8281 to change your marital status or by completing Marital Status Change Form (RC65)  and mailing it to :

Sudbury Tax Centre
1050 Notre Dame Avenue
Sudbury, ON   P3A 5C1

I won’t be using your address until I file your taxes so you can use the “Notification of Change of Information” form found in your tax package.

You can also send me an email at sauvetaxservices@hotmail.com to advise me and I’ll update your file.

You can update the information with Revenue Canada in several ways.

By Mail or Fax

You can change your address by completing RC325 Form – Change of Address (or pick one up at STS in a pre-addressed stamped envelope), or by sending a letter or fax to your tax centre in your letter your:

• signature
• social insurance number
• new address
• date of your move

By Fax:  1-855-338-5495

By Mail:

By Phone:
Call the CRA Individual Income Tax Enquiries telephone service at 1-800-959-8281.

Why is it important?

When you give them your new address in advance, you can avoid any disruption to benefit payments you may be receiving, such as the GST credit (including those from certain related provincial payments), and Canada Child Benefit payments (including those from certain related provincial or territorial programs), and working income tax benefit (WITB) advance payments.

Please remember that CRA is a federal department on its own.  Changing your address with them will not change your address for your Health Card, Driver’s License, CPP or Old Age Pension or any other provincial departments.  You should contact Service Ontario and Service Canada to ensure that all government departments have your new address.

OK – this is a BAD idea!!!

Even if you owe – whether you file on Feb 12th or April 29th, your balance owing is not due until April 30th and will remain the same with no interest or penalties.

So you bring me your taxes on April 29th and I advise you that you are missing slips in order for me to file your taxes! This happens all the time!

It’s a Friday and you cannot get a hold of anyone until Monday.  So you will be 3 days late filing your taxes.

Even if you are 1 single day late, the penalties are 5% of your balance owing.  So if you owe $1000, that is a $50 fine.  If you owe $4,000, it’s a $200 fine.

Don’t procrastinate!!  If you owe, the earlier you file…the better!

Cost-Sharing Arrangement:  When you rent to a relative or a close friend, and you are charging them less than the fair-market value, you cannot write them a receipt nor can you claim rental expenses.  This is considered an arm’s length transaction and as such, does not qualify as deductions for you and your relative (or friend) cannot benefit from it claiming it on their taxes to receive more Ontario Trillium Benefits (OTB).

Rental Income From a Boarder:  If you are renting a room (or several rooms) in your home with the intention of making a profit, you can write each boarder a rent receipt for the rent they pay you (rent must not include groceries).  This will help them receive their entitled OTB payments for the rent they paid you.    You will then complete a Rental Activities Log (under Business Client) and submit this with your tax return to claim the expenses of running your home.

Examples

1. Lucy’s mother Ethel moves in with her in January 2017.  Ethel is giving Lucy $400 a month to help with the groceries and utilities.   This is a cost-sharing arrangement and does not qualify as rent paid by Ethel or Rental income collected by Lucy.
2. Fred has a 4 bedroom house and lives alone but lives near the college.  He places an ad in the newspaper and soon has 3 college students living with him.  He charges each student $450 a month in rent and all are responsible for their own groceries.  At the end of the year, Fred will issue a rent receipt to each student for the rent they paid him.  This is considered a non-arm’s length transaction as Fred is doing this to make a profit.  The rent receipts will ensure that each students receives the OTB they are entitled to.

The TD-1 and the TD1-ON are forms that you must complete when you start a new job or periodically during your employment when your situation changes or tax situation change.

95% of all individuals will only claim Line 1 – their basic personal exemption on both forms.  After you enter your personal information at the top, simply enter the total of Line 1 onto line 13 on the TD1 and sign it.  After you enter your personal information at the top, simply enter the total of Line 1 onto line 10 on the TD1-ON and sign it.

You are done !

If you are part of the other 10% that will claim more than your basic personal exemption which means:

• you are a single parent with primary custody of your child
• you support a non-working spouse
• you support a non-working disabled spouse or child who qualifies for the disability tax credit
• you qualify for the disability tax credit yourself
• you are in school
• you have a child in school who will transfer their tuition to you
• you have a grandparent, parent living with you who is 65 or older
• you have a relative living with you who is disabled.

If any of these apply to you, than enter the amount from that line number on the line provided.

When you add up your exemption, it will include your basic personal exemption and any of the line items above that apply to you.

This means that your employer will take a lot less taxes for you during the year.

Just remember that if you chose to enter any of the above amounts other than your Basic Personal Exemption, it means you will get a very small refund or no refund at all.

For example, if you don’t claim the exemption for being a single parent on your TD-1 and TD1-ON, your refund could be in excess of $3,000. If you claim the exemption, your refund might be $280.  However, your pay would have been $250 extra each month because you claimed the exemption.

You can find out more information by visiting the CRA website on how to complete the TD-1

STS will gladly start direct deposit for you at tax time while e-filing.  This is the only time that STS can start it for you.
All I need is either a “void” cheque or a Direct Deposit Enrolment Form from your bank.  In a lot of cases, you can actually print one directly from your online banking website.

At any other time, please go to the CRA website where you can start your direct deposit by internet, mail or phone.

As a precaution against fraud, Revenue Canada sends a letter to all individuals who have authorized an individual or tax firm as their representative.  If you signed form T1013 this year, you may get a letter or receive a phone call asking you to confirm that you did indeed make me your authorized representative.  The letter or CRA caller would basically ask if YOU have authorized Josée Sauvé, RepID: 9XXXXX3 (info hidden for privacy) as your Representative.  If the name of the person is NOT me and the RepID number (first and last digits) DO NOT MATCH, contact Revenue Canada immediately.

Generally, if you have direct deposit, 5-10 business days.

If you do not have direct deposit and receive a cheque, 30 business days.

If your taxes had to be paper-filed (which takes CRA 10-12 weeks to process), 3-4 months.

Not all tax returns are processed at the same time.  Example John and Claire Smith’s taxes were both filed on April 1.  She received her refund on April 9th, he received his on April 28th.

Please refrain from emailing or calling me asking me why you haven’t received your refund yet because it’s been 10 business days – this is not something I can explain to you or look into until at least 3 weeks have passed since your taxes have been filed.  CRA will advise you the same.

The estimated deadlines for slips is as follows:

• February 28^th T4, T4OAS, T4P, T4AP, T4RSP, T5007, WSIB, T2202A, Charity Receipts
• March 1^st  Deadline to make RRSP Contributions
• March 15^th T5, RRSP Contribution Receipts
• March 31^st T3, T5013

However, CRA does not have a enforcement division to ensure that the deadlines are adhered to so there is no course of action you can take to ensure that you get these slips by the deadlines.  So it is a good idea to make sure the deadlines have passed by at least ten business days (2 weeks) before filing your taxes.

Every year, I have clients who have their taxes prepared before they have received all their slips (usually the ones that bring them to me in early February).  A week or two later, they are back with a slip they received after I filed their taxes.

CRA processes adjustments at a much slower rate than tax returns.  You could have a balance owing and you’ve paid it, but then an adjustment causes you to have a refund or you have another balance owing.  CRA must issue you a cheque or you must send them another cheque…not to mention the $15 cost to file an adjustment!   To avoid having to file an adjustment this year, make sure you are truly ready to file your tax return:

• Use the Readiness Checklist that I provide to make sure you have everything you need before filing your taxes.
• Do you have automatic monthly RRSP contributions? You may not get your January and February receipts until mid to late March – THESE CANNOT BE SAVED FOR Your 2022 Tax Return – contributions made in Jan & Feb 2022 must be claimed on your 2021 income tax return.
• Do you have interest-bearing accounts such as, savings, chequing, GIC, insurance policy dividends, Saving Bonds, dividends from a company you own shares in etc?  Your will receive this slips only in Mid to Late March.
• Makes sure the deadlines have passed for your slip
• You could look through last year’s envelope to compare what you received this year.
• And last but not least, call or email me!  I’ll be glad to take a look at last year’s return on the computer and let you know what you should have – it only takes a moment!

Whatever you do, do not simply file the slip away thinking you can claim in on your next year’s income tax return.  CRA will automatically re-assess you later if you do this.  However, should you fail to file a slip for 2 years in a 3-year period, you will also be assessed you a penalty equal to 10% of the amount that was not reported.  For example, if you failed to file an RRSP withdrawal of $5,000, you would be assessed a federal penalty of $500 and a provincial penalty of $500 for a total of $1,000.  This is non-negotiable.  As long as you file any missing slips prior to April 30th, no penalties will be assessed.  Even if you file them later – you will not be penalized – as long as you file them before CRA finds your unfiled slip.

If you cannot pay the full amount owing, you must still submit your Income Tax Return before April 30th to avoid steep penalties!

When you receive your assessment, you can call 1-800-959-2250 to make suitable monthly payment arrangements.

Revenue Canada is very reasonable and helpful with these arrangements.  They are also more likely not to harass you if you send them a series of post-dated cheques instead of mailing them a monthly cheque.  You will be charged interest on any balance owing after April 30th (approximately 12% per annum).

If you have a balance owing and you do not file by April 30th, you will be penalized 5% of your balance (ie. If you owe $1000 and submit later than April 30th, Revenue Canada will fine you $50.00).   This amount will also go up for every month you are late.

If you get a letter from Revenue Canada requesting further information from you to substantiate claims you made on your income tax return – DON’T PANIC!!!   BUT DON’T IGNORE IT!!!

Some of the claims made on your income tax return do not have to be supported by receipts or proof (i.e. donations, childcare, medical, rent receipts, employment expenses, etc) when your taxes are filed.  However, Revenue Canada has the right to ask for the ‘proof’ up to 6 years after you file your income tax return.

From mid-May to mid-November, Revenue Canada does just that and turns their attention to “REVIEWING” individuals.  This is not personal…they are NOT targeting you.  It is simply a means of keeping Canadians honest by having them prove the claims they made on their tax returns.

If you feel comfortable, you may send the information in yourself by following the instructions Revenue Canada gives in their letter.  From experience, it is advisable to send photocopies.  Please note that these are form letters and are sometimes 3 pages long.  You only need to send the information that applies to you.

It is part of my service to assist you in this process and I do so at NO CHARGE (the only exception are postal costs if sending information by mail or if it is a lengthy review).  If you would like me to take care of this for you, simply drop off the letter that Revenue Canada has sent you  AND the envelope that contains your Income Tax Return (and supporting documents).  This is the one I gave you that has the sticker on it that said you must keep it for 6 years (with a destruction date included).  I will fax the information requested for you, and keep it for you until the next taxation year.   Simply use the secure mail slot in the front door to drop off the paperwork anytime between 9:00AM and 9:00PM.

Either way, do not ignore the request for information that you receive from Revenue Canada.  If you do not send in the requested information by the date given, they will re-assess you assuming you cannot substantiate your claim, and you will then have a balance owing which will include interest from April 30^th to date.

If you are receiving any of the 3 tax credits that have been rolled into the Ontario Trillium Benefit, the benefit year runs from July of one year to June 30 of the following year and is based on information from your prior year personal income tax return. For example, the July 2022 to June 2023 benefit year is based on your 2021 tax return.

If you qualify for Ontario Trillium Benefit and your benefit is over $360, you will receive monthly payments on the 10th of each month.

If your Ontario Trillium Benefit for is $360 or less, and you file your tax return by April 30th, you should receive the entire amount as a single payment in July.

Starting with the 2014-2015 benefit year,  you have a choice between getting your Ontario Trillium Benefit payments monthly or as a single payment at the end of the benefit year.

For example, you can choose to have a single payment on June 10 2023 (EXAMPLE: if your benefit is $1200, you will receive 1 cheque on June 10, 2023 for $1200) instead of monthly payments during the benefit year, which begins July 2022 (EXAMPLE: if your benefit is $1200, you will receive $100 a month between July 10, 2022 and June 10, 2023).

Find out more: The Ontario Trillium Benefit: More Choice for People.

If you choose to wait until June 2023 to receive your lump sum, you must advise me when you drop off your tax return, otherwise, monthly payments will continue.

Every year I get a couple of really pissed off clients because someone they know is claiming as single while living with their boyfriend or girlfriend in a common-law relationship.

And who can blame them for being angry! These ‘thieves’ get the full benefits of Social Services, HST, OTB and Child Tax Benefits etc. as a single parent but actually have a two-parent income.  Your tax dollars probably provide a bonafide single parent with 2 children an average of $2,000 in benefits every month.

 Your tax dollars also do the same for an individual claiming single when they are not.   There is no other word for it except fraud.

 Mad enough to do something about it?

1-866-809-6841   (Tax Fraud Reporting)

 1-800-394-7867   (Social Services Fraud Reporting)

Call both to optimize the odds of something being done as quickly as possible.  The wheels of justice do not move quickly in Canada but they do move.  And remember you do not have to provide your name, just the information that you know.  Its up to the enforcement divisions of these departments to follow the leads you give them and see if they are true or not.

The taxability of disability benefits paid to employees depends on who pays the premiums for the plan.  If an employee pay 100 per cent of the premium cost, the plan is considered an employee-pay-all plan, and benefits are not taxable.  If the employer makes any contribution towards the premium cost, any payments received by an employee under the disability income benefit plan are subject to income tax.

In order for disability benefits to be non-taxable, a legal obligation for employees to pay the full premium must be in place.  The Canada Revenue Agency may ask an employer for a plan document or other material that confirms employees are required to pay 100 per cent of disability premiums.  An insurance company contract is a supporting document only and forms part of the plan, but it is not necessarily evidence of the complete plan itself.  

The employer must also show that, in actual practice, the plan is employee-pay-all.  If the employer remits premiums on behalf of employees, the premium amounts should be reflected as additional salary on employees’ regular pay stubs and on their T4s.  

For example, an employer with a 100 per cent employee-pay-all plan might, after discussion with an accountant, make arrangements to increase employees’ gross salary to account for their monthly premium costs.  The employer would then reflect the employees’ premium contribution as payroll deduction and forward the premium amounts to the insurance company.

If an employer remits premiums on behalf of employees in this way, the additional gross salary paid and corresponding payroll deductions should be reflected on employees’ payroll stubs and T4s.  The employer may also be paying the retail sales tax for employees in those jurisdictions that assess retail sales tax on premiums to benefit plans.  To maintain a plan’s employee-pay-all status, the retail sales should should be assessed to employees as a taxable benefit.

Amounts that are not taxed

You do not have to report certain amounts in your income, including the following:

• any GST/HST credit or Canada child tax benefit payments, as well as those from certain related provincial and territorial programs;
• child assistance payments and the supplement for handicapped children paid by the province of Quebec;
• compensation received from a province or territory if you were a victim of a criminal act or a motor vehicle accident;
• lottery winnings;
• amounts paid to replace earnings after being injured at work by the Workplace Safety Insurance Board;
• most gifts and inheritances;
• amounts paid by Canada or an ally (if the amount is not taxable in that country) for disability or death due to war service;
• most amounts received from a life insurance policy following someone’s death;
• most payments of the type commonly referred to as strike pay you received from your union, even if you perform picketing duties as a requirement of membership; and
• most amounts received from a tax-free savings account (TFSA). For more information, see Guide RC4466, Tax-Free Savings Account (TFSA), Guide for Individuals.

I thought I would get more….

Every year, a few clients walk away disappointed.  Some feel they should have received a bigger tax refund.  Many of these feelings stem from fellow co-workers or family members convincing my clients that because their demographics are similar, they should have received about the same refund (ie. my buddy at work received $1,200, we are both married, we both have 2 kids, and my refund was only $80 – I don’t understand).  It also stems from seeing all those H&R Block Commercial’s on TV saying that the average refund is $1800…but H&R Block counts only refunds – not balances due (according to Statistics Canada, the average Canadian received a refund of $468 in 2020).

The “he said” and “they said” comments all stem from average every day people who know absolutely bupkis about income tax preparation somehow convincing people that they should get bigger refunds.  Should you listen to them?  Absolutely not!   Here are just a few examples of how one small difference between identical families dramatically affects the amount of their tax refund.

As you can see from the above examples, it takes only a very small variance to determine the refund a person gets.

Family A&B:

RRSP contributions almost always results in a refund (the average formula is $1,000 in RRSP Contributions = $300 refunded)

Family C&D:

Although both families paid the exact same in babysitting, the fact that family D has a receipt and can claim it as a Child Care Expense gives them a much bigger refund.

Family E&F:

Because Jen works “under the table”, her revenue is nil allowing Bobby to claim a non-refundable tax credit of $14,398 for her.  Claire can only claim $2,500 for Stan.

A co-worker who is receiving a $1200 refund may not even know WHY he is getting it if his/her tax preparer did not explain it.  In reality, the payroll deduction system is set up so that you should neither OWE or be OWED when you have your taxes prepared.  One thing is certain, you will not get a large refund unless you have non-refundable tax credits*, or you have expenses & deductions to apply against your income (ie daycare, RRSPs).

Unless your friend or co-worker has intimate knowledge of your finances or you of theirs, and you know without a doubt that your demographics match EXACTLY, it is very difficult to compare tax refunds.  It really is like comparing oranges and apples!

Who is doing your taxes?

Every year, new clients ask me to review their income tax returns from previous years as they feel they were not prepared correctly. In most cases, if they were indeed prepared by a tax professional, they are correct.

However, I have consistently found numerous and substantial errors made by some tax preparers in the Cornwall area. Of course, I cannot name them, but I can give you examples of tell-tale signs to be wary of and if you know anyone having their taxes done this way, please warn them.

1. MANUAL CALCULATIONS – All professional tax preparers now use software and offer efiling or netfiling – if a tax preparer is still doing taxes manually on paper, they are most likely missing important loopholes and deductions (I can vouch for this as I have corrected over 250 tax returns over the last 10 years with calculation errors and omissions from having them done by manually on paper).
2. OVERCHARGING – Because doing an average tax return manually on paper takes 2-3 hours (while it takes only 15-20 minutes by computer), you are probably paying for unnecessary labour
3. LENGTHY RETURN – A tax professional should not take longer than 1 or 5 days (at the very most) to do an individual tax return – if it’s taking 2 to 3 weeks (or months), something is wrong or you are not considered important enough !
4. ERRORS & OMISSIONS INSURANCE – It is very important that whoever does your taxes, whether an individual or a firm, that they are insured in case they make an error or omit information that could cause you to be reassessed or audited.  You might save $10 by using a tax preparer who does not pay $1200 a year for their insurance, however, you could face hundreds or maybe thousands of dollars in fines and interest if they make a mistake.  BE CAREFUL and take the time to ask the question “Do you have E&O Insurance?”.

There are times when I’m not as busy as others.  Generally, your taxes will be ready in 48 hours or less.  However, there are some busy times that it could take 4 to 5 days.

This is a guideline only:

As a precaution against fraud, Revenue Canada sends a letter to all individuals who have authorized an individual or tax firm as their representative.  If you signed form T1013 this year, you may get a letter or receive a phone call asking you to confirm that you did indeed make me your authorized representative.  The letter or CRA caller would basically ask if YOU have authorized Josée Sauvé, RepID: 9XXXXX3 (info hidden for privacy) as your Representative.  If the name of the person is NOT me and the RepID number (first and last digits) DO NOT MATCH, contact Revenue Canada immediately.

OUR HOME

Sometimes I think I scare people with all my notes and comments about business hours and phone calls.

It is very difficult to run a business out of your home when your home is where the clients must come to do said business.   We have business hours for a reason – this is when we expect clients.  We are not in our pyjamas or having a glass of wine or having dinner.  There is nothing more aggravating than trying to eat dinner and having someone come bang on the front door then go to the back door and ring the bell 2-3 times then go back to the front door and bang on it some more (yes – this really happens).

Yes we are home but the office is closed and we will not answer the door.   It would be greatly appreciated if you could respect our business hours.

OUR PHONE

Phone calls are also a big issue.  If we don’t answer please leave only your name and number (no personal information) and I’ll call back.  You do not have to leave a long-winded message about why you are calling – I’ll find out when I call you back AND our answering machine is in the front office, which means if we have a client in the office, they can hear everything you are saying !

Please do not hang up and then call again 5 minutes later, and 5 minutes after that and 5 minutes after that (yes – this really happens – ALL THE TIME!).  It would be greatly appreciated if you could call, leave a short message that contains only your name and phone number and for goodness sake don’t hang up and try every 5 minutes.  It’s also appreciated if you do not call before 9am (too early) or after 9pm (too late).   Receiving phone calls at 11:30pm is reserved for emergencies and deaths in the family – not for asking tax questions!