Tax Alerts

MKP Chartered Professional Accountants Newsletter

Today, we are thrilled to share news that marks a significant and exciting chapter in the journey of MKP Professional Corporation.

The Future of MKP: A Merger with PDC Accounting Evolved

Effective November 1, we are delighted to announce a merger between MKP Chartered Professional Accountants and PDC Accounting Evolved. This merger will usher in a dynamic new era for our firm, and we are excited to introduce Dome Duong as the Managing Partner, who will work closely with Martin Payne.

Most Canadians contemplate retirement with a mixture of anticipation and trepidation. While the benefits of an end to the day-to-day grind of work and commuting (while also having more free time to spend with family and friends) are undeniable, giving up a regular paycheque also means experiencing a degree of financial anxiety. For the majority of Canadians who are not members of a defined benefit pension plan, the overriding concern is how to manage retirement savings in a way that will generate sufficient income to provide a comfortable retirement, while still ensuring that accrued savings will last the remainder of one’s life. How, in other words, to avoid the dismal prospect of outliving one’s savings, or spending too much early in retirement and being left with insufficient income to meet one’s expenses late in life? And, of course, it’s impossible to find a definitive answer to that question, since none of us knows what the future holds, in terms of either health or longevity.

By the time summer arrives, nearly all Canadians have filed their income tax returns for the previous year, have received a Notice of Assessment from the tax authorities with respect to that return, and have either received their tax refund or, more grudgingly, paid any balance of tax owing.

By this time of the year, virtually all Canadian residents have filed their income tax return for 2023 and have received the Notice of Assessment issued by the Canada Revenue Agency (CRA) with respect to that tax filing. Most taxpayers, therefore, would consider that their annual filing and payment obligations are done and behind them for another year.

Most Canadians, understandably, think of our income tax system as a government “program” that takes money out of their paycheques and out of their pockets. And, while it’s certainly true that virtually every Canadian who earns an income must allocate a portion of that income to paying federal and provincial personal income taxes, that’s not the whole picture. Our tax system does, in fact, provide Canadians with a number of direct benefits, through a variety of tax credit and benefit programs which actually put money into the hands of Canadians. And when that money can be obtained with minimal effort (and be received tax-free) it’s a win-win for the recipient.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

The Canadian tax system is a “self-assessing” one, in which taxpayers are expected (and, in most cases, required) to file an individual income tax return each spring. On that return the taxpayer provides a summary of income earned during the previous calendar year and claims available deductions and credits. Those calculations determine the amount of tax owed for the year and any amount owed must then, of course, be paid on or before April 30.

As the school year draws to a close, the thoughts of millions of Canadian parents turn to the question of how to find – and pay for – child care throughout the summer months. While many Canadians are still able to work from home for some portion of the work week, few (if any) have the kind of work arrangement which allows them to dispense entirely with child care arrangements during the summer months.

Each spring and summer, tens of thousands of Canadian families sell their homes and move – sometimes to a bigger and better property in the same town or city, and sometimes to a new city or even another province. At the same time, university students make the annual move from their university residences or apartments back to the family home for the summer. And, whatever the reason for the move or the distance to the new location, all moves have two things in common – stress and cost. Even where the move is a desired one, moving inevitably means upheaval of one’s life and the costs involved can be very significant. There is not much that can diminish the stress of moving, but the associated costs can be offset somewhat by a tax deduction which may be claimed for many of those costs.

Many (if not most) taxpayers think of tax planning as a year-end exercise, one to be carried out in the last few weeks of the year, in order to take the steps needed to minimize the tax bill for that year. And it’s true that almost all strategies needed to both minimize the tax hit for the current year and to ensure that there won’t be a big tax bill come next April must be put in place by December 31 (the making of registered retirement savings plan (RRSP) contributions being the notable exception). Nonetheless, there’s a lot to recommend carrying out a mid-year review of one’s tax situation for the current year. Doing that review mid-year, instead of waiting until December, gives the taxpayer the chance to make sure that everything is on track and, especially, to put into place any adjustments needed to help ensure that there are no unpleasant tax surprises when the return for 2024 is filed next spring. And, while the deadline for implementing most tax saving strategies may be December 31, it’s also the case that opportunities to make a significant difference to one’s current-year tax situation diminish as the calendar year progresses.

Most retired Canadians receive income from two government-sponsored retirement income programs – the Canada Pension Plan (CPP) and the Old Age Security (OAS) program. While benefits from both are paid to recipients by the federal government on a monthly basis, there are significant differences in how the two plans are funded, the amounts which can be received, and, most significantly for retirees, in how entitlement to benefits is determined each year.

This year, the Canada Revenue Agency (CRA) will receive and process more than 30 million individual income tax returns for the 2023 tax year. No two of those returns will be identical, as each such return will have its own particular combination of amounts and sources of income reported, and deductions and credits claimed. There is, however, one thing which every one of those returns has in common: for each and every one, the CRA will review the return filed, determine whether it is in agreement with the information contained therein, and, finally, issue a Notice of Assessment (NOA) to the taxpayer summarizing the Agency’s conclusions with respect to the taxpayer’s tax situation for the 2023 tax year.

For the majority of Canadians, the due date for filing of an individual tax return for the 2023 tax year was Tuesday April 30, 2024. (Self-employed Canadians and their spouses have until Monday June 17, 2024 to get that return filed.) When things go entirely as planned and hoped, the taxpayer will have prepared a return that is complete and correct, and filed it on time, and the Canada Revenue Agency (CRA) will issue a Notice of Assessment indicating that the return is “assessed as filed”, meaning that the CRA agrees with the information filed and the amount of tax payable determined by the taxpayer. While that’s the outcome everyone is hoping for, it’s a result which can be derailed in any number of ways.

As everyone knows, buying one’s first home – achieving that elusive first step on to the “property ladder” – has always presented a challenge, and that challenge has rarely been greater than it is now. The two unavoidable hurdles which must be cleared by first time home buyers are putting together sufficient funds for a down payment, and qualifying for mortgage financing under mortgage lending requirements which have become increasingly stringent in recent years. Soaring house prices and mortgage interest rates which have steadily increased over the past two years combine to make it difficult to clear either or both of those hurdles.

Most Canadians rarely have reason to interact with the tax authorities, and for most people, that’s the way they like it. In the vast majority of cases, Canadians file their tax returns each spring, receive their refund or pay any balance of taxes owing, and forget about taxes until filing season rolls around the following year.

Most taxpayers sit down to do their annual tax return, or wait to hear from their tax return preparer, with some degree of trepidation. In most cases taxpayers don’t know, until their return is completed, what the “bottom line” will be, and it’s usually a case of hoping for the best and fearing the worst.

Our tax system is, for the most part, a mystery to individual Canadians. The rules surrounding income tax are complicated and it can seem that for each and every rule there is an equal number of exceptions or qualifications. There is, however, one rule which applies to every individual taxpayer in Canada, regardless of location, income, or circumstances, and of which most Canadians are aware. That rule is that income tax owed for a year must be paid, in full, on or before April 30 of the following year. This year, that means that individual income taxes owed for 2023 must be remitted to the Canada Revenue Agency (CRA) on or before Tuesday April 30, 2024. No exceptions and, absent extraordinary circumstances, no extensions.

No one likes paying taxes, but for taxpayers who live on a fixed income having to pay a a large tax bill can mean real financial hardship – and the majority of Canadians who live on fixed incomes are, of course, those who are over 65 and retired. Adding to their financial stress is the reality that such individuals have been coping, for the past two years, with inflationary increases in the cost of just about all goods and services, especially food and shelter.

For the past two years, Canadians have had to continually adjust their household budgets to accommodate price increases for nearly all goods and services. The impact of rising prices is felt most by those who are living on a fixed income and who, of necessity, spend a larger than average share of their income on non-discretionary expenditures like housing and food. And, while such individuals and families can be found in all age groups, retirees make up the largest Canadian demographic who live on such fixed incomes.

Most Canadians don’t turn their attention to their taxes until sometime around the end of March or the beginning of April, in time to complete the return for 2023 ahead of the April 30, 2024 filing deadline.

While owning one’s own home brings with it many intangible benefits, home ownership also provides some very significant financial advantages. Specifically, it provides the opportunity to accumulate wealth through increases in home equity, and to realize that wealth on a truly tax-free basis.

While our tax laws require Canadian residents to complete and file a T1 tax return form each spring, that return form is never exactly the same from year to year. Some of the changes found in each year’s T1 are the result of the indexing of many aspects of our tax system, as income brackets and tax credit amounts are increased to reflect the rate of inflation during the previous year. Other changes, however, arise from the introduction by the federal government of new deductions or credits, changes to the existing rules which govern the availability, amount, or delivery of such deductions or credits, and, inevitably, the end of some tax credit programs.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

Each year, the Canada Revenue Agency publishes a statistical summary of the tax filing patterns of Canadians during the previous filing season. The final statistics for 2023 show that the vast majority of Canadian individual income tax returns – just over 92%, or just under 30 million returns – were filed by electronic means, using one or the other of the CRA’s web-based filing methods. About 2.5 million returns – or just under 8% – were paper-filed.

Income tax is a big-ticket item for most retired Canadians. Especially for those who are no longer paying a mortgage, the annual tax bill may be the single biggest expenditure they are required to make each year. Fortunately, the Canadian tax system provides a number of tax deductions and credits available only to those over the age of 65 (like the age credit) or only to those receiving the kinds of income usually received by retirees (like the pension income credit), in order to help minimize that tax burden. And in most cases, the availability of those credits is flagged, either on the income tax form which must be completed each spring or on the accompanying income tax guide.

If there is one invariable “rule” of financial and retirement planning of which most Canadians are aware, it is the unquestioned wisdom of making regular contributions to one’s registered retirement savings plan (RRSP). And it is true that for several decades the RRSP was the only tax-sheltered savings and investment vehicle available to most individual Canadians.

Sometime during the month of February, millions of Canadians will receive some unexpected mail from the Canada Revenue Agency (CRA). That mail, entitled simply “Instalment Reminder”, will set out the amount of instalment payments of income tax to be paid by the recipient taxpayer by March 15 and June 15 of this year.