Administration

by Jeff Kirshen

Is Tax Deducted from CPP Payments?

The Canada Pension Plan (CPP) operates throughout Canada, except in Quebec, where the Quebec Pension Plan (QPP) exists, aiming to provide contributors and families with partial replacement of earnings in the case of retirement, disability, or death. With very few exceptions, every person over the age of 18 who works in Canada outside of Quebec and earns more than the minimum amount of $3,500 a year must contribute to the CPP. If you are employed, you pay half the required contributions and your employer pays the other half. If you are self-employed, you make the entire contribution. Ultimately, your contributions determine your eligibility for CPP payments and the amount of the benefit you will receive once you become eligible.

 

Are CPP Payments Considered to be Taxable Income?

Put simply, yes. The CPP retirement pension is considered taxable income. Therefore, tax is ultimately deducted from your CPP payments. The amount of your CPP payment, however, is not affected by the amount of any other income you receive.

 

Am I Eligible for CPP Payments?

You are eligible for a CPP retirement pension if:

1. You have contributed to the plan; and
2. You are 60 years of age or older.

While the minimum age for receiving CPP benefits can be as early as 60 years old, these benefits can be delayed up to the age of 70. However, it is worth noting that when early pension is taken, the amount you receive is reduced for each month you take your pension before the age of 65. This is due to the fact that you will be receiving pension for an additional 5 years. While it may seem advantageous to begin receiving CPP payments as early as possible, as one cannot predict how long you will live, there are various benefits which may be applicable to you by waiting until 65. For example, starting your CPP later means a higher income, which could increase your Old Age Security (OAS) clawback if you have high income, or reduce your eligibility for Guaranteed Income Security (GIS) benefits if you have low income.

 

If you wish to know more about your CPP benefits, and ensure that you do not miss out on, or sacrifice any benefits you are eligible for, contact us and we would be happy to help you strategize and determine the best course of action moving forward in claiming your pension! Call us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

What is the Working Income Tax Benefit?

The Working Income Tax Benefit (“WITB”) is a refundable tax credit intended to provide tax relief for eligible working low-income individuals. Because it is a benefit / credit, taxpayers may be entitled to the Working Income Tax Benefit even if they do not pay federal income tax. It is designed to help individual families who have a low-income household.

 

Eligibility 

The general rule is that a taxpayer is eligible for the Working Income Tax Benefit if their working income is over $3,000.00 for the year and they meet the following two requirements:

1. The taxpayer must be at least 19-years-old on December 31^st of the tax year; and
2. Is a resident of Canada for income tax purposes during the same year in question.

A taxpayer may also be eligible for the Working Income Tax Benefit if they are 19-years-old, and have a common-law partner or spouse, or an eligible dependant on December 31^st of the year in question.

 

Exceptions

Taxpayers are not eligible for the Working Income Tax Benefit if they do not have an eligible dependent and are enrolled full-time as a student at a designated school for more than 13 weeks in a year. Taxpayers are also not eligible if they are in prison for 90 days or more during the tax year in question. Finally, a taxpayer is not eligible if they do not have to pay tax in Canada because they are a foreign diplomat or officer, or a family member or employee of a person in that position.

 

What Amount will I Receive?

The amount of benefit a taxpayer qualifies for is based on their working income. The premise of the Working Income Tax Benefit is to help taxpayers who have a low income. Thus, if a taxpayer made more money than the threshold amount established by the Canada Revenue Agency (“CRA”), they will not receive a benefit amount.

The threshold amounts established by the CRA are based on the status of the taxpayer’s family and where they are located. The taxpayer’s marriage status, whether they have dependents, and what province they live in impact the amount received as a benefit as well.

The CRA provides a chart that explains the various working income thresholds by family makeup. This is the chart you use to determine whether you are eligible for the benefit or not. The chart for 2017 is found here.

 

How to Determine the Working Income Tax Benefit Amount I will Receive

The CRA provides a child and family benefit calculator to taxpayers, which can be found here.This calculator will provide the taxpayer with a fairly accurate estimate of the benefit amount with which they qualify for.

To use the calculator, you will need to answer questions about your working income for the year and your family makeup. After providing this information, the calculator will tell you whether you qualify for a benefit, and if so, how much you qualify for.

 

How do I Claim the Working Income Tax Benefit? 

Another way to calculate your Working Income Tax Benefit refundable tax credit amount is by completing Schedule 6, Working Income Tax Benefit for your province or territory income tax specific return. As mentioned above, once this amount is calculated using the above-mentioned form, you then claim the amount on line 453 of your income tax return.

 

What if I am Disabled?

Taxpayers may also claim a “disability supplement” if they are eligible for the Working Income Tax Benefit and the disability amount. Further requirements for eligibility of this supplement can be found here.

 

If you have questions about the Working Income Tax Benefit, or the CRA is giving you trouble regarding yours, call us today! We can help!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

What Kind of Medical Expenses are Tax Deductible in Canada?

While health care in Canada is publicly funded, there are various out-of-pocket medical expenses that taxpayers incur on a daily basis. Examples include over-the-counter medications, eyeglasses, vitamins and other items not covered by provincial or private health insurance. What many taxpayers do not know is that certain health expenses are tax deductible. This leads to taxpayers not keeping tax receipts for expenses they could be otherwise claiming.

 

CRA Medical Expenses

The CRA has a large list of health care expenses that are accepted as being tax deductible. This list can be found directly on the CRA website here. Some examples include assisted breathing devices, laser eye surgery, dental visits, braces for a limb, among many others. The cost of any health care expense that appears on the CRA’s list can be claimed on a taxpayer’s tax return.

As a reminder, for all expenses, a taxpayer can only claim the portion of the expense that the taxpayer or the person they are claiming the expense for, will not otherwise be reimbursed for. Alternatively, an expense can be claimed if the reimbursement is included in the taxpayer’s, or the other person’s income, and the reimbursement was not deducted somewhere else on the income tax and benefit return.

 

CRA Non-Medical Expenses

The CRA also has a long list of health care expenses that are not claimable. It is important the taxpayer ensures they review whether the expense is on the claimable list before claiming. Examples of non-claimable expenses include organic food, non-prescription birth control or similar devices, personal response systems, among various others. Again, it is imperative that you review the CRA’s list of allowable expenses before claiming them.

 

CRA Medical Expenses and Health Care Premiums

For many Canadians, health care premiums are often a question when it comes to medical expenses. Health care premiums paid to private health service plans are tax deductible medical expenses. Taxpayers can claim health care premiums paid to plans that offer a wide variety of benefits, including medical, hospital and dental visits.

 

Claiming CRA Medical Expenses on Tax Returns

The Canada Revenue Agency (the “CRA”) is fairly flexible about the length of time you can claim medical expenses. You do not necessarily need to claim medical expenses incurred between January 1st and December 31st of said year.

A taxpayer can claim eligible medical expenses on their tax return if incurred during any 12-month period, as long as it ends in the current tax year, and the taxpayer did not already claim the expenses in another tax year. As a general rule, a taxpayer can claim all amounts paid, even if they were not paid in Canada. As a strategy, taxpayers should consider choosing the 12-month period with the highest medical expenses to maximize their deduction.

 

If you have questions about what CRA allows as deductible medical expenses, or you are being audited for your medical expenses, contact us today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

Do You Have to Pay Tax on Rental Income?

What is Rental Income?

Rental income is any income earned for allowing others the use of a specific space. This includes houses, apartments, individual rooms, office space, or any other real or moveable property.

 

Do You Have to Pay Tax on Rental Income?

In short, yes. If a rental property is owned in your personal name, it must be accounted for on your personal tax return and will be taxed on your T1 personal income tax return. Therefore, the amount you will be required to pay will depend on your applicable marginal tax rate.

If the rental property is owned in the form of a partnership, then each partner must include their respective share of the property in their personal income. Like a sole proprietorship, a partnership is not a separate legal entity. Therefore, a separate tax return is not required.

If the rental property belongs to a corporation, different considerations come into play. The corporate tax rate is comprised of both the federal and provincial tax. The structure of the corporation will determine the ultimate taxation rate, given that the government may provide tax breaks, and will determine the tax credits you are eligible for.

 

Calculating your Rental Income or Loss

The Canada Revenue Agency (“CRA”) puts out Form T776, which is the form that taxpayers are supposed to complete when they have a rental property. It provides a step by step guide as to how to calculate the income and expenses.

In most cases, you would calculate your rental income using the accrual method. For this method you would:

1. Include the rents in income for the year which they are due, whether or not you receive them; and
2. Deduct your expenses in the year they are incurred, whether you pay them in that period or not.

If you have no amounts receivable and no expenses outstanding at the end of the year, then the cash method can be applied. This method can only be used if the net rental income or loss would be nearly equal if using the accrual method. In this method you would:

1. Include rents in income the year you receive them; and
2. Deduct expenses in the year you pay them.

 

What Expenses can you Deduct?

The following are expenses that you can deduct while owning a rental property:

• Expenses incurring to prepare the property to be rentable;
• General Cleaning and Maintenance;
• Repairs;
• Advertising Costs;
• Local Property Taxes;
• Depreciation;
• Commissions;
• Mortgage Interests;
• Insurance Premiums;
• Management Fees and Office Expenses;
• Utilities;
• Specific Travel/Vehicle Expenses; and
• Garbage Removal Fees.

 

Consequences of not Reporting Rental Income

If you do not declare your rental income, you are at risk of being audited, in addition to owing more than you would have.

Firstly, any tax owing from income that had been unreported can be subject to interest. This interest is compounded daily.

Secondly, you may be subject to large penalties and fines. The CRA has the ability to penalize you for late filing. This amount will be backdated to the period when the income should have been reported. This amount will also be subjected to interest as well. More broadly speaking, not reporting income to CRA is a form of tax evasion, which can result in extremely large fines, and incredible difficulty in repayment.

As we mentioned above, you should declare your rental income, and pay the taxes owing from it. How you are taxed, however, depends on the structure of ownership of the property in question. While it may at first seem beneficial to avoid declaring rental income, one must take into consideration the numerous monetary and legal consequences that may ensue as a result of this decision. Therefore, if you wish to reach a common ground between choosing not to declare your rental income, and the taxes associated with doing so, also take into consideration the numerous expenses that are deductible, and the potential tax breaks and credits that you may be eligible for by owning a property.

 

If you require any guidance on how to properly declare your rental income, have questions with regard to deducting expenses, or have been contacted by the CRA due to an audit on your income or rental property, we can help! Call us to learn more!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

What is Wage Garnishment?

A wage garnishment is when a creditor seizes some, or all of your earnings to pay off your amount owing. It is often used by the Canada Revenue Agency (“CRA”) to collect outstanding balances owed to them. Garnishments are not just limited to your employer; a garnishment can be served on your bank, or your receivables in an effort to seize the money.

 

CRA Wage Garnishment

The CRA’s process by which they garnish wages is vastly different from the processes followed by other creditors. Other creditors must initially obtain a judgment against you in court, thus providing you with knowledge of the ensuing garnishment. Other creditors are also required to provide you with formal notice before they commence garnishments. Once formal notice has been provided, and your employer has been notified of the garnishment, they must begin to forward the appropriate portion of your wages to the appropriate creditor to pay off your debt.

Alternatively, with CRA garnishments, no Order of the court is required to commence garnishments on a taxpayer. Instead, a notice is sent directly to one’s employer notifying them of the garnishment. This is called a “requirement to pay”, or an “RTP”.

Your employer is then immediately required by law to comply with the garnishment of your wages. If one’s employer refuses to comply with the garnishment, they could face legal action. Unfortunately, this process leads to some taxpayers being unaware that the CRA has implemented garnishment until they receive a paycheque that is less than expected.

 

CRA Wage Garnishment – Employment or Independent Contractor

If you are an employee on payroll, with taxes deducted at source, the CRA can garnish up to 50% of your wages. Meanwhile, if you are a sub-contractor, or receive a different form of income, the CRA can garnish up to 100% of said income. An example of this, would be if you received pension income.

Other types of wages that can be garnished include severance or termination pay, because they arise as a result of your employment. For Ontario residents, the Ontario Works Act establishes that basic financial assistance is not subject to garnishment, attachment, execution or seizure by the CRA, as of right now. The only exception to this rule is support orders under s.20 of the Family Responsibility and Support Arrears Enforcement Act which can be garnished.

Long term disability payments provided through a “company disability pension” are considered by the law to be a replacement for lost wages. Thus, they are considered to be wages and can be garnished as deemed fit by the CRA. That said, income support under the Ontario Disability Support Program (ODSP) Act, is not subject to garnishment, attachment, execution or seizure, except for support orders as mentioned in the previous paragraph.

Important to note, for the most part, you will be notified of your tax debt to the CRA well in advance of any potential garnishments. Ample steps are normally taken before garnishments are taken from your income.

 

CRA Wage Garnishment – What can I do?

The best way to prevent garnishment of wages is to pay your debt in full. Often, this can be done by obtaining a loan to pay off the garnisheeing creditor in full. If you cannot pay your tax debt in full, you have other options. Two of which are making a consumer proposal or setting up a payment plan. Often, an experienced lawyer can help negotiate a repayment plan with your creditor or the CRA. Another option is bankruptcy, which also helps protect you from your debts.

 

If your wages are being garnished, or the CRA is threatening to garnish your wages, call us! We can help!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

What is the CRA Reassessment Period?

The CRA Reassessment Period is the amount of time the Canada Revenue Agency is allowed to adjust a personal, corporate, GST/HST, or payroll return. Each of these returns have different CRA Reassessment Periods, and the Canada Revenue Agency may even extend the CRA Reassessment Period in certain circumstances.

 

Personal Taxes and the CRA Reassessment Period

Generally, the Canada Revenue Agency, sometimes referred to as the Minister, cannot reassess a taxation year (tax return from that specific year) after the normal reassessment period of three years has passed. The CRA Reassessment Period is the period after the date of the notice of assessment within which the CRA may reassess a taxpayer’s tax return.

A tax year is considered as statute barred three full years after the date of the original notice of assessment issued from the CRA, and not your reassessment dates.

As mentioned above, once a taxpayer files their tax return, they should receive a notice of assessment. The date of the taxpayer’s notice of assessment is important to track because the Canada Revenue Agency (the “CRA”) can reassess a tax return at any time for three years from the date on the notice of assessment.

The CRA Reassessment Period may be extended if the taxpayer has committed fraud or there was a misrepresentation on the tax return. If this is the situation, the CRA can review tax returns as far back as they choose to suffice their requirements.

Also, the taxpayer may sign a waiver which allows the CRA to ignore the CRA Reassessment Period and audit beyond the general three-year limit. If a waiver is requested by the CRA, you should consult a professional before signing. You may be able to make the waiver specific to particular issues or focus the waiver on something else.

 

Corporate Taxes and the CRA Reassessment Period

The normal reassessment period for a T2 (corporate) tax return depends on whether or not the corporation was a Canadian-controlled private corporation (CCPC) at the end of the tax year.

The CRA can usually reassess a return for a tax year:

• Within three years of the date they sent the original notice of assessment for the tax year, if the corporation was a CCPC at the end of the year; or
• Within four years of the date they sent the original notice of assessment for the tax year if the corporation was not a CCPC at the end of the year.

The normal CRA Reassessment Period can be extended for an extra three years for any of the following reasons:

• You want to carry back a loss or credit from a later tax year;
• A non-arm’s length transaction involving the corporation and a non-resident affects the corporation’s tax;
• The corporation pays an amount or receives a refund of foreign income or profits tax;
• A reassessment of another taxpayer’s tax for any of the above reasons affects the corporation’s tax;
• A reassessment of another tax year (it must be a prior tax year if the reassessment relates to the loss or credit carryback) for any of the above reasons affects the corporation’s tax;
• The reassessment results from a non-resident corporation’s allocation of revenue or expense for the Canadian business, or from a notional transaction, such a “branch advance”, between the non-resident corporation and its Canadian business or
• To give effect to the application of the non-resident trust rules in section 94 or to the application of the foreign investment rules under sections 94.1 and 94.2.

 

If the reassessment results from a provincial income reallocation, the normal CRA Reassessment Period can be extended for one year from the later of:

• The day on which the CRA is advised of the provincial reassessment; or
• 90 days after the notice of the provincial reassessment was sent.

 

If the CRA is trying to issue a notice of reassessment to you, outside of the allowed CRA Reassessment Period, you should contact Rosen Kirshen Tax Law today. We have experience fighting for you, and your rights. Don’t let the Canada Revenue Agency walk all over you. Call us to learn more.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

What are the Penalties for Tax Evasion?

What is CRA Tax Evasion?

The Canada Revenue Agency states that an individual or business engages in tax evasion when they intentionally ignore Canada’s tax laws. More specifically, it is the willful decision to suppress or avoid disclosing income required to be reported, inflating expenses, or falsifying records and claims.

 

What Qualifies as CRA Tax Evasion?

Does Owing Money Qualify as CRA Tax Evasion?

The short answer is no. Given that tax evasion is defined as the willful attempt to suppress or not disclose information required to be reported, simply owing money to the CRA would not fall under this category. Instead, this might require a payment arrangement with the CRA for tax arrears, objecting to the assessment or reassessment provided, or finding an alternative route to repay the debt.

Is Filing a Late Tax Return Considered Tax Evasion?

The short answer is maybe. Engaging in tax evasion is inherently reliant on a subjective analysis. What is key to its determination is whether the decision to file a late tax return was based on the willful decision to ignore Canada’s tax laws. Since the CRA is incapable of determining the subjective intention of another individual remotely, there may be times where the late filing of a tax return can be characterized by the CRA as an attempt to evade taxes.

Is Making a Mistake on a Tax Return Seen as Tax Evasion?

The short answer, once again, is maybe. Just like with filing a late tax return, the CRA is unable to determine remotely the intention of the taxpayer. Therefore, the CRA may characterize the mistake as an attempt to engage in tax evasion. This does not mean, however, that one is without recourse if such a situation were to arise.

 

CRA Tax Evasion Scenarios:

• Not filing tax returns;
• Filing tax returns, but willfully excluding income;
• Filing tax returns, but willfully misrepresenting the purpose of amount of income;
• Attempting to receive income in a way that would allow the willful exclusion of that income from a tax return; and / or
• Categorizing a transaction in a way that disguises the real purpose or benefit of the transaction.

 

Can CRA Tax Evasion Lead to Criminal Prosecution?

By law, tax evasion is a crime. To combat significant cases of tax evasions, the CRA makes use of its Criminal Investigations Program (CIP) to investigate and, where appropriate, refer the case to the Public Prosecution Service of Canada for criminal prosecution.

Most often, the CIP would investigate cases that meet one or more of the following criteria:

• Tax evasion cases of a serious nature with an international element
• Promoting complex tax scamming schemes intended to deceive the government
• Cases which involve commercial fraud investigated by the RCMP and other law enforcement agencies
• Income, GST or HST tax evasion cases of a serious or material nature, such as operating within the underground economy

 

What are the Consequences of being Convicted for CRA Tax Evasion?

Taxpayers convicted of tax evasion must repay the full amount that was owed, in addition to any interest and civil penalties assessed during this period by the CRA. Furthermore, the court may then fine the taxpayer between 50% to 200% of the taxes evaded and potentially up to two years imprisonment. If convicted under an indictment, one can face a fine between 100% to 200% of the evaded taxes and a jail term up to five years. Finally, if convicted of fraud under Section 380 of the Criminal Code of Canada, the sentence may lead to a term of imprisonment up to 14 years.

 

If you think you have a CRA tax evasion issue, give us a call today. CRA tax evasion could result in fines, penalties, and even jail time. Hiring an experienced tax lawyer to navigate these issues for you is your best way of minimizing potential issues with the CRA.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

How Far Back Can CRA Audit?

The Difference Between a CRA Audit, and a CRA Review

The Canada Revenue Agency (“CRA”) has two options when looking at reassessing or adjusting tax returns. First, “tax reviews”, which are not formal audits, but rather a process that promotes awareness and compliance with tax laws. Meanwhile, audits are used by the CRA to protect and maintain the self-assessment tax return system.

 

How Far Back can CRA Audit?

There are limits as to how far back the CRA can audit with respect to reviewing someone’s tax returns. However, there are also times where CRA can audit as far back as they would like. Normally, the CRA will audit the most recent two or three tax years. So if 2017 filings were just completed, the CRA will usually audit the 2014 through 2016 tax years. If the CRA discovers huge errors, it is possible that they go back even further and audit other years. If the CRA sees fraud or serious issues with your tax returns, there are no limits as to how far they can audit.

Offshore audits looking for unreported income or assets held outside of Canada are usually longer than a typical audit because it is more serious and there is potentially, more money for the CRA to recover. That is why offshore audits encompass usually ten years worth of tax returns. So if an offshore audit is started in 2018, it usually asks for information and documentation starting in 2008.

Simple reviews where the CRA is only looking for proof of a credit typically only ask about one year.

So, how far back can CRA audit? The answer is that there is no limit as long as they can justify their results by claiming the taxpayer is lying and / or cheating on their tax returns.

 

Assessments and Reassessments

There are also limits as to how far back the CRA can go with respect to reassessing someone’s tax return. As mentioned above, the CRA administers assessments to promote awareness of and compliance with the laws it administers. The CRA conducts these assessments upon the completion of an audit on the taxpayer. The normal period for reassessment for Canadian income taxes is three (3) years from the date your tax return was initially assessed. For example, if you file your 2015 income tax return on April 30, 2016, the CRA will issue an initial Notice of Assessment on June 1, 2016. This also means that the Reassessment period will last until June 1, 2019.

However, as with audits, there are situations where the CRA can extend the Reassessment period. If the CRA believes the taxpayer has misrepresented their Tax Return due to carelessness or willful action, then the CRA can reassess the Tax Returns at any time. The CRA can do the same if it expects fraud by the taxpayer.

That said, the CRA must be able to prove fraud, neglect or wilful fraud. Simple mistakes on a taxpayer’s return do not equate to fraud. There must be more substantial errors and purposeful errors. The CRA can also reassess a taxpayer’s returns after the three (3) year period has passed if it can produce a waiver that was signed by the taxpayer.

 

How Long Should I keep CRA Records?

It is important to note that the year limits discussed above are different from how long you are required to retain your financial records and supporting documentation. Taxpayers are required to keep their financial documents and records for six years in case the CRA requests them. For example, you cannot destroy your 2017 tax returns or supporting documentation until 2023.

As an exception, if you filed late returns, the six-year rule applies to the date of filing, not the tax year. Documents should be maintained until the last date of appeal expires, or the six-year period ends. Taxpayer’s should use the latest date as their guideline.

For reassurance, taxpayers should keep their original tax records including the original tax return, invoices, receipts, cancelled cheques and anything else that supports the declarations they made in their respective tax return.

 

If you are being audited or reviewed by the CRA, we can help. It is in your best interest to have a tax lawyer on your side, because auditors are only after one thing, your money. Contact us today to learn more.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

What is a Taxable Benefit?

What is a Taxable Benefit?

A taxable benefit is a benefit that a taxpayer receives, typically paid for by a corporation, that is more related to personal choices than business expenses.  If this is the case, then the taxable benefit is counted as income to the person who receives it.

For example, in 2008, the head of Cirque du Soleil took a trip to the International Space Station. It was paid for by his corporation. He claimed that the trip was for advertising and promotion of his business. The Canada Revenue Agency disagreed and ruled that it was his personal choice to go to Space, and this should have been counted as his personal income, and not a business expense.

 

Are all Benefits Taxable?

The answer is no. Some benefits are not considered taxable benefits. There is a Canada Revenue Agency analysis found here, that determines whether a simple benefit will be deemed taxable or not. Essentially, the question is whether the taxpayer receives an economic advantage or benefit that can be measured in money, and whether the taxpayer is the primary beneficiary of the benefit.

 

What if the CRA thinks I received a Taxable Benefit, but I disagree?

If the Canada Revenue Agency is auditing you, or your company, and determines that you received a taxable benefit, there are ways of fighting it. First, you may argue that what you received is not a taxable benefit because it benefited the company, and was not a personal choice. If that argument fails, you may attempt to argue that even if it was a benefit, it cannot be measured in money. This is typically the argument for those who accumulate credit card points through a business, and then use those points personally. There are a number of Tax Court decisions on this issue, but the vast majority have ruled that unless the benefit can be measured in money, it cannot be considered a taxable benefit.

If the CRA determines that the benefit is measurable in money, and adds that amount to your income, you will need to file a notice of objection to any notice of reassessment you receive. You will then have the opportunity to argue any of the above points again, and you may even choose to argue that the benefit is worth less than what the Canada Revenue Agency is claiming.

 

Taxable benefits are a difficult subject because there are many business expenses that may be considered more of a personal choice than a business expense. However, these expenses typically do provide benefit to the company paying for them, as well as the person who receives the benefit. If the CRA is asking you about taxable benefits, or if they ruled that you received a taxable benefit, you have right. Call us today to see what we can do for you!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

Tuition Tax Credits

The Tuition Tax Credit

The tuition tax credit (“TTC”) is a non-refundable tax credit that helps Canadian students who are currently attending, or recently finished attending post-secondary education. The cost of post-secondary education represents a financial detriment to many Canadian students and their families. As many students know, tuition is a significant portion of students’ fees. Thus, the TTC was created to offset part of the expense of post-secondary education.

 

Requirements

To be eligible for the TTC, you must submit a T2202A Tuition and Enrolment certificate. For the most part, these are obtained from your post-secondary institution on the student portal of the main website. If not, you can obtain from the link above.

 

Calculations

 To calculate a TTC, you add together all the eligible tuition fees and then multiply the amount by the lowest federal tax rate percentage for the current tax policy.

As an example, in 2017, the lowest federal tax rate was 15%. Therefore, a student who was paying tuition fees of $8,000 would multiply that by 15% and be eligible for a TTC worth $1200.

As mentioned, the TTC is a non-refundable credit. Thus, if the tuition amount is higher than the tax owed, the non-refundable credit may only be used to reduce the claiming students’ provincial or federal tax bill, but the person will not receive a refund.

Fortunately, if you are not able to use the full amount of the credit, all unused credit can be “carried forward” to subsequent tax years, or the extra credit can be transferred to a spouse, common-law partner, parent or grandparent.

To transfer a TTC, the student must designate the amount of the transfer and the individual receiving the transfer. You can do this by completing and filing a T2202A, TL11A, TL11B or TL11C. The maximum amount that can be transferred is $5,000 less the amount of tuition for the current year that is claimed on the student’s return.

Further, amounts carried forward from previous years must be used by the student before the present year’s amounts are used. Any amounts that are carried forward, and not completely used by the student in the present year, can only be claimed by the student in a subsequent year, and they cannot be transferred.

 

Licensing Examination Fees

Examination fees paid to an educational institution, professional association, provincial ministry or other similar institution, to take an occupational, trade or professional examination that is required to obtain a professional status recognize by federal or provincial statute, or to be licensed or certified as a tradesperson, to allow you to practice the profession or trade in Canada, may be eligible for the TTC.

You should be provided with a receipt to substantiate your eligible exam fees.

 

Limitations

You are unable to claim the following tuition fees:

1. Fees paid or reimbursed by your employer, or an employer of one of your parents, where the amount is not included in your or your parent’s income;
2. Fees paid by federal, provincial or territorial job training program, where the amount is not included in your income; and
3. Fees paid (or eligible to be paid) under a federal program to help athletes, where the payment or reimbursement has not been included in your income.

For more types of expenses that you are unable to claim, please go to the following CRA page.

 

Textbook and Education Amounts

Finally, a recent policy change, beginning January 1^st, 2017, has eliminated the Textbook and Education credits. Students may no longer claim these costs for credit.

 

If your tuition tax credits, or other credits are being reviewed by the Canada Revenue Agency, give us a call today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.