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Life in the Tax Lane - February 2023 This FREE 10-minute video for Canadian Tax Professionals includes rapid-fire discussion of select recent developments in the wonderful world of Canadian tax presented…

Importante… new tax

Life in the Tax Lane - February 2023 This FREE 10-minute video for Canadian Tax Professionals includes rapid-fire discussion of select recent developments in the wonderful world of Canadian tax presented…

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Henry Gallo
Public Accountant

Temporada de taxes comienza Feb 15 y termina April 30. Aquellos que trabajan por su cuenta hasta Junio 15.

What Happens To Your CPP and OAS if You Retire Outside Canada?

What Happens To Your CPP and OAS if You Retire Outside Canada? Many Canadians are choosing to live in another country during retirement. So what happens to your government pensions if you decide to permanently relocate to a warmer climate outside of Canada?

It depends on how long you lived and worked in Canada.

Let's first look at CPP (The Canada Pension Plan). This is a contributory plan that is based on contributions made by both you and your employer during the time you worked in Canada between the ages of 18 to 65. The more you contribute to the plan and how long you contribute will determine how much you receive during retirement.

You will not pay any CPP contributions on the first $3500 of your income and you will not pay any contributions on any earnings above a yearly maximum that is set by CRA each year (In 2022 that will be $64,900). Any income between $3500 - $64,900 will have a deduction of 5.70% paid by you, as an employee, and 5.70% paid by your employer.

Because CPP is a "member contributed plan" it will always be yours, regardless of where you live in the world. If you paid in at least 1 CPP contribution, you are entitled to a benefit.

OAS, on the other hand, comes out of the general tax revenues.

If you live in Canada for at least 40 years between the ages of 18-65 you qualify for a full pension from OAS. If you live here for less than 40 years but more than 10 years you are entitled to at least 25% of the full pension. For every year above 10 years, you will get 1/40th of the full amount.

If you decide to leave Canada to live elsewhere in the world your eligibility to receive the OAS pension is based on having lived in Canada for at least 20 years. If you lived in Canada for less than 20 years then you will receive your pension cheque for 6 months after you have left and then it will terminate.

However, if you decide to return to Canada, you can start receiving your OAS pension again.

It is possible to have your CPP or OAS pension "direct deposited" into your bank account in your new country of residence in the local currency. You can get more information and a list of the countries where this is available from the government of Canada website.

If you did not live in Canada for long enough to get a full pension or you moved to Canada from another country you may also qualify to combine your pensions from both countries. Canada has many International Social Security Agreements with other countries to help citizens coordinate their benefits. Check to see if the country you are moving to or from is one of them.

Taxation of your benefits

CRA will automatically deduct a withholding tax of 25% from your CPP & OAS. You do need to be aware of this and look at ways you can reduce or eliminate the tax. Click here for more information.

You cannot benefit from what you do not know, so it pays to stay informed. If you want to learn more about CPP and OAS benefits then sign up to get your own online access to our complete seminar series.

Cañada Pensión Plan

Pension amount
The amount you receive each month is based on your average earnings throughout your working life, your contributions to the CPP, and the age you decide to start your CPP retirement pension. Your contributions to the CPP are based on your earnings.

The standard age to start the pension is 65. However, you can start receiving it as early as age 60 or as late as age 70.

If you start receiving your pension earlier, the monthly amount you’ll receive will be smaller. If you decide to start later, you’ll receive a larger monthly amount. There’s no benefit to wait after age 70 to start receiving the pension. The maximum monthly amount you can receive is reached when you turn 70.

There are different factors that can affect how much you'll receive, such as time taken off from work to care for young children. Find out more about how much you could receive.You can also work while receiving a CPP retirement pension.

How long will it take to process your application
We begin to process your application once we receive your completed application form. It will take:

7 to 14 days for online applications
normally within 120 days for applications delivered at a Service Canada Centre
normally within 120 days for applications sent by mail
It could take longer to process your application if Service Canada does not have a complete application.

You may also qualify for other CPP benefits
In addition to the CPP retirement pension, you may also quality for other CPP benefits listed below. Like the CPP retirement pension, you will need to apply for these benefits (except for the Post-retirement benefit if you already receive the CPP retirement pension).

Post-retirement benefit
Disability pension
Post-retirement disability benefit
Survivor's pension
Children's benefit
Death benefit
CPP enhancement
Starting in 2019, the Canada Pension Plan (CPP) contribution has gradually been increasing. The enhancement works as a top-up to the base, or original CPP, and will mean higher benefits in retirement in exchange for making higher CPP contributions. The CPP enhancement will only affect you if you work and make contributions to the CPP as of January 1, 2019.

The CPP enhancement will increase the:

CPP retirement pension
Post-retirement benefit
Disability pension
Survivor’s pension
There’s no change to qualifying for CPP benefits. The enhancement will only affect you if you work and make contributions to the CPP as of January 1, 2019.

Not sure if is CRA calling or a scam?

How to make sure the caller is a CRA employee and not a scammer
A legitimate CRA employee will identify themself when they contact you, providing you with their name and phone number to call them back, if needed.

If you’re suspicious, you can make sure the caller is a CRA employee before providing any information over the phone.

Here’s how:

Tell the caller you would like to first verify their identity.
Request and make a note of their:
name
phone number
office location
End the call. Then check that the information provided during the call was legitimate by contacting the CRA. Please do this before you give any information to the caller.
In the provinces:
Individuals:
1-800-959-8281

Businesses: :
1-800-959-5525

In the territories:
Individuals:
1-866-426-1527

Businesses: :
1-866-841-1876

Once you complete these three steps, you can call the CRA employee back to discuss the reason for their call.

Note that our individual tax, benefits, and business enquiries lines offer an automated callback service. When wait times reach a certain threshold, you have the option for a callback, rather than waiting on hold. If you opt for a callback, we will give you a randomized four-digit confirmation number. This number will be repeated back to you by the call centre agent at the time of the callback. This is to provide you with assurance that the call comes from a legitimate CRA employee.

When to be suspicious
Red flags that suggest a caller is a scammer include, but are not limited to, the following:

The caller does not give you proof of working for the CRA. For example, their name and office location.
The caller pressures you to act now, uses aggressive language, or issues threats of arrest or sending law enforcement.
The caller asks you to pay with prepaid credit cards, gift cards, cryptocurrency, or some other unusual form of payment.
The caller asks for information you would not enter on your return or that is not related to money you owe the CRA, for example, a credit card number.
The caller recommends that you apply for benefits. Do not provide information to callers offering to apply for benefits on your behalf! You can apply for benefits directly on Government of Canada websites or by phone.
For more tips and helpful information, visit our Be Scam Smart page.

We may review your return
One reason we may contact you is if we are reviewing your income tax and benefit return. This could include reviewing your GST/HST, T4, or T5 information. You may receive a letter or a phone call telling you that the CRA is reviewing your return. If your correspondence preference is set to electronic mail, we will send you an email telling you that your letter is available in My Account.

Scammers are also trying to trick people into clicking links by sending fraudulent emails and text messages. To know what to expect when the CRA contacts you, what we may or will not ask for, as well as examples of recent CRA-related scams, visit the Scam prevention at the CRA page.

In most cases when we are reviewing a return, it is a routine check. Replying and sending all of the information requested as soon as possible will help us review your file quickly and easily.

It’s also important that you call the number printed in your letter for either of the following situations:

You can’t get the documents we’re asking for
You need more time to reply
By calling, we can give you more time to respond if you need it. We can also help you if you have any questions. If you don’t reply, we may disallow a claim of yours and you could have a balance owing.

If you own a small business or are self-employed, we may call you or send you a letter to offer free tax help through our Liaison Officer service. We will only use email to contact you if you provide your email address and consent to the CRA.

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The 9 Biggest Tax Changes Canadians Need to Know in 2023

Tax filing season is right around the corner, and many new changes have been put into effect for the 2022 tax year that may have an impact on your situation, including new credits and deductions that you may be eligible for.

To make things simple, we’ve provided a breakdown of how these changes will affect you, and put together 9 of the most important changes you should know about when filing your return in 2023.

Key Takeaways
Tax brackets and many contribution amounts and limits have been increased to account for rising living costs.
Work-from-home tax credit amount remains at $500 this year.
There’s a number of new or updated credits and deductions that you may be eligible for.
1. Repaying COVID-19 benefits

If you received COVID-19 benefits from the CRA in 2022, such as the Canada Recovery Benefit (CRB), Canada Sickness Recovery Benefit (CSRB) or Canada Recovery Caregiving Benefit (CRCB) you will receive a T4A slip with the relevant information you need for your tax return.

If you received the CRB and your net income after certain adjustments is more than $38,000, then you may have to repay all or part of the benefits you received in 2022.

If you have repaid all or parts of COVID-19 benefits in 2022, you can choose which year to claim the tax deduction. You can either claim the deduction in the year you received the benefit, or the year you repaid it.

Plus, any one-time provincial payments to help you through COVID-19 will not be taxable, and you don’t need to report them as income on your 2022 tax return.

2. You can claim up to $500 for work-from-home expenses

Making a return from last year, you can once again claim the work-from-home tax credit. If you’ve been keeping track of your expenses, you can go ahead and claim your calculated total. Otherwise, you can use the flat rate method of $2 for each day worked from home during the pandemic.

3. The Basic Personal Amount (BPA) has been increased

As part of their policy to continue increasing it over time until it reaches $15,000 in 2023, the government increased the Basic Personal Amount for the 2022 tax year to $14,398. This means that every Canadian will get a slight boost to their return this year, and it’s likely you can expect another increase next year as well.

4. Tax brackets have shifted to account for inflation

The government has adjusted tax brackets for 2022 to maintain buying power for Canadians as prices of goods continue to slowly increase.

The new federal tax brackets for 2022 are as follows:

$0 to $50,197 of income (15%)
More than $50,197 to $100,392 (20.5%)
More than $100,392 to $155,625 (26%)
More than $155,625 to $221,708 (29%)
$221,708.01 and higher (33%)
The adjustment upwards means that Canadians on the edge of a tax bracket might find themselves shifted into a lower bracket this year and pay less taxes because of it.

5. The TFSA limit has been increased

The TFSA contribution limit has increased to $6,500 for the year. This means that if you’ve had an account since 2009, were 18 years of age and have been a resident of Canada throughout that period, the cumulative total you can have in your TFSA is now $81,500.

6. New OAS limit amounts

The OAS is designed to provide retirees with a source of income to support their retirement. However, if your income is over certain limit amounts, you might find your OAS amount reduced, and even canceled entirely.

For the 2022 tax year, if your taxable income was over $81,761, you would need to repay some of your OAS. Similarly, if your taxable income was over $134,626, you would not have received any OAS payments. Thanks to the CRA’s new Affordability Plan, seniors aged 75 and over received an automatic 10% increase of their Old Age Security pension, as of July 2022.

7. Canada Pension Plan maximum contributions have been increased

The Canada Pension Plan (CPP) and Québec Pension Plan (QPP) have been increased by 2.7%, the maximum pensionable earnings are $64,900, with a basic exemption of $3,500 for 2022. For CPP, the Employee and employer maximum contribution is $3,039.30; for QPP it is $3,315.60.

Québecers also have the option to increase their Québec Pension Plan premiums, by making extra contributions, to the enhanced plan. The enhancement of the QPP will provide future retirees with an increase in their pension premiums from 25% to 33.33%.

Note that any self-employed individuals must account for both the employer and the employee sides of the contribution. For 2022, their maximum contribution amount for the CPP is $6,078.60 and for the QPP it is $6,999.60.

8. RRSP dollar limit is increased

The RRSP annual dollar limit for tax year 2022 is $29,210. Remember that your RRSP contribution limit is capped at 18% of your earned income in the previous year. This means the dollar limit is the maximum amount you can contribute regardless of your income.

9. Changes to tax credits you need to know

Some credits have been added, changed, reinstated, or expanded for the 2022 tax year.

Below are some of the Federal changes to tax credits:

Air Quality Improvement Tax Credit: Eligible businesses including sole proprietorships, can claim 25% of their qualifying ventilation upgrades to a maximum of $10,000, creating a $2,500 tax credit.
Automobile Income Tax Deduction Limits: The changes include an Increase in Capital Cost Allowance (CCA) ceiling limits for zero emission and passenger vehicles, deductible monthly leasing costs also increased by $100, and the per kilometer rate paid by employers to employees who use their personal vehicle for work has increased by 2 cents per km from last year.
Home Accessibility Tax Credit (HATC): If you’re 65 or older, are eligible for the disability tax credit, and have remodeled your home for safer access, you can claim up to $20,000 of your related HATC expenses.
Labour Mobility Deduction (LMD): This new deduction allows tradespeople, apprentices, and employees working in construction to claim meals and lodging expenses paid to earn income at a temporary work location.

Tax time is approaching and planning is the best defence

CHANGES THAT MAY AFFECT YOUR 2022 PERSONAL INCOME TAXES

January 04, 2023

A new year often brings with it tax changes. To help you understand and prepare for any upcoming changes, we compiled a summary of the most significant federal tax changes that may affect your 2022 personal income tax return, as well as changes that may help you save taxes in 2023 and beyond.

Taxable COVID-19 support
Many COVID-19 benefits offered by the federal government are taxable. This includes the Canada Recovery Caregiving Benefit (CRCB), Canada Recovery Sickness Benefit (CRSB), and the Canada Worker Lockdown Benefit (CWLB) that were available in 2022. If you've received these benefits, the Canada Revenue Agency (CRA) will issue a T4A slip to report amounts paid to you under these programs, which you will need to include in your income on the 2022 tax return.

The T4A slip will also report the 10% income tax withheld on the CRCB, CRSB, and CWLB. You should know that depending on your total income, deduction, and credits for the year, you may end up owing income tax when your return is due. It would be prudent to set aside sufficient funds to cover this tax liability and ensure you pay any owed taxes by May 1, 2023 (as April 30 falls on a Sunday) to avoid interest and penalties.

Some COVID-19 benefits offered by the provincial governments are also taxable. You should check to make sure that you have the relevant slips from your provincial government and include the taxable amounts in income on your 2022 tax return.

Repayment of federal COVID-19 benefits
If you repaid an amount in 2022 related to the federal COVID-19 benefits that you previously received, the CRA has indicated that the amount repaid will be included in your T4A slip.

You can choose to claim a deduction for the repaid amount in the year that the benefit was received or in the year that the benefit was repaid. You also have the option of splitting the deduction between these two years, provided you don't deduct more than your repayment.

This choice in the timing of your deduction can affect your taxes depending on your income, deductions, and credits available in each of the two years. Where it is beneficial for you to deduct the repayment in your 2020 or 2021 return but it has already been assessed, the CRA announced that a new Form T1B, Request to Deduct Federal COVID-19 Benefit Repayment in a Prior Year, can be filed with your 2022 tax return to simplify the process. This means that you will not need to request a T1 adjustment for a prior year’s tax return related to COVID-19 benefit repayments.

Note that if you repay a benefit amount after 2022, you can only claim a deduction in the year of repayment.

Immediate expensing of capital property for self-employed individuals
If you carry on an unincorporated business and acquired a capital property in 2022, you may be eligible to claim a 100% deduction of the expenditure this year. The immediate expensing rules allow eligible individuals and partnerships to take a full deduction of up to $1.5 million of capital property acquired on or after January 1, 2022. The property must become available for use before 2025 and certain capital cost allowance classes are not eligible for the enhanced deduction.

While immediate expensing was available to Canadian-controlled private corporations (CCPCs) since 2021, 2022 will be the first year in which eligible individuals and partnerships can take advantage of the deduction. Note that the $1.5 million annual limit must be shared among members of an associated group of eligible persons (including CCPCs) and partnerships.

To find out more about this change, read our article: Immediate expensing of certain depreciable property.

Air Quality Improvement Tax Credit for small businesses
The new temporary Air Quality Improvement Tax Credit may be claimed by eligible businesses, including a sole proprietor, and provides a refundable credit of 25% of qualifying expenditures made between September 1, 2021, and December 31, 2022.

Generally, qualifying expenditures must be intended to increase outdoor air intake or improve air cleaning and are subject to a maximum of $10,000 per location and $50,000 across all locations. These limits would need to be shared among affiliated businesses. Note that qualifying locations are properties used primarily in the course of ordinary commercial activities in Canada (including rental activities) but do not include a home or an apartment.

If you take advantage of this credit, the amount received is considered government assistance and is generally included in income in the taxation year in which it is received (i.e., in this case, the taxation year in which the credit is claimed). Alternatively, you may elect to reduce the capital cost of the depreciable property by the amount that would otherwise be included in income.

For more details on this new credit, read our article: Government proposes a new air quality improvement tax credit for small businesses.

Home office expense deduction
Similar to 2020 and 2021, if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2022 due to COVID-19, you may be eligible to claim a home office expense deduction on your tax return. Eligible employees have the option of choosing between two methods for claiming a home office expense deduction for 2022. The two methods are as follows:

Temporary flat rate method ─ provides a deduction of $2 per day for each day the eligible employee worked from home, up to a maximum of $500, with no need to track expenses or obtain forms from your employer.
Detailed method ─ allows an eligible employee to claim the employment portion of actual home office expenses paid, which would require itemizing expenses and obtaining a signed form T2200S or T2200 from your employer.
For more information on the employee home office expense deduction, refer to CRA’s webpage, which includes a calculator and FAQs.

If you are self-employed, you have much more flexibility and can generally deduct reasonable expenses incurred to earn business income, such as stationery supplies used in the business. Self-employed individuals can also deduct workspace in the home expenses if the workspace is either:

The individual’s principal place of business; or
Used exclusively to earn business income and is used on a regular and continuous basis for meeting clients, customers, or patients of the individual in respect of the business.
Where one of these conditions is met, deductible amounts include the business use portion of a reasonable allocation of expenses related to your home office, including capital cost allowance, mortgage interest, and property taxes.

Enhanced Canada Pension Plan
As you are likely aware, your Canada Pension Plan (CPP) contributions have been increasing annually since 2019 and will continue to increase every year until 2023 (or 2024 if your income exceeds a new earnings ceiling). Similar enhancements were made to the Quebec Pension Plan (QPP).

When you file your personal income tax return for the 2022 tax year, remember that your CPP/QPP contributions consist of a base amount and an enhanced amount, which are consistent with the previous two years. While a non-refundable tax credit on the CPP/QPP base amount continues to be available, a tax deduction can also be claimed on the enhanced portion of the CPP/QPP.

Tax-free savings account contribution limit
For 2023, the tax-free savings account (TFSA) annual contribution limit increases to $6,500 and any unused contribution room will carry forward. Contributions to a TFSA aren't tax deductible and when money is withdrawn, the accumulated contributions and income received are not taxable.

LATEST NEWS

January 4, 2023
Year-end Finance Canada and CRA announcements – in case you missed it
Finance Canada and the Canada Revenue Agency (CRA) announced several updates as 2022 came to a close, including the following:
2023 Automobile Deduction Limits and Benefit Rates – Due to inflation and higher interest rates, the automobile limits were increased for all amounts other than the $300 deduction limit for new automobile loans.
UHT guidance – The CRA released guidance on the Underused Housing Tax (UHT), which applies a 1 per cent tax on the ownership of vacant or underused housing in Canada that took effect on January 1, 2022. The tax usually applies to non-resident, non-Canadian owners. But, in some situations, it also applies to Canadian owners. We understand that the CRA will issue further guidance and we have provided suggestions on areas where more information will be needed. CPA Canada will also release a tax blog on the UHT later in January or early February.
New filing options for special elections and returns – The CRA has released information on new filing options for “special elections and returns”, such as the T2054 election for capital dividends. At present, the CRA page only refers to filing these elections and returns electronically using My Account, My Business Account, or Represent a Client. We understand that efiling using tax preparation software will also become available at a later date. We have sent a number of suggestions and queries to the CRA and we will provide more information as it becomes available.
EFILE / RepID update – On December 19, the CRA posted an update to its EFILE news and program updates page with more information on a new CRA initiative involving the transmission of RepIDs with returns where the EFILE system is used. In particular, the CRA stated that “starting February 20, 2023, as an additional level of security, you will be asked to enter a valid RepID when you file a return of income through EFILE software. This field will be optional during the upcoming filing season and it should be left blank if you do not have a valid RepID within the list of EFILE applicants.”

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