Jane E Adams, CPA

The Federal Government is tightening its reporting requirements for individuals that own real property. Whether you renovate, sell or rent your principal residence, a secondary or a vacation property, you will need to consider your tax reporting and compliance obligations.

In addition to the income tax reporting, also consider whether you must file an Underused Housing Tax return, register for GST/HST or whether the property is held in a bare trust or personal trust that requires the filing of a trust return.

If in doubt, speak to your professional advisor.

Report your real estate income - Canada.ca If you sell or rent property, you have an obligation to report all of the income you earn from these transactions. How you report the income depends on many factors, therefore it is important to understand your tax obligations and the relevant tax laws. You will also want to know what deductions to....

Only 12 days to go until the April 30 deadline. Those who have a business statement to include with their personal tax return only need to have their taxes paid by April 30 but have until June 15 to file their return.

HOT OFF THE PRESS FROM THE CRA

NEW – Bare trusts are exempt from trust reporting requirements for 2023

To support ongoing efforts to ensure the effectiveness and integrity of Canada’s tax system, the Government of Canada introduced new reporting requirements for trusts.

In recognition that the new reporting requirements for bare trusts have had an unintended impact on Canadians, the Canada Revenue Agency (CRA) will not require bare trusts to file a T3 Income Tax and Information Return (T3 return), including Schedule 15 (Beneficial Ownership Information of a Trust), for the 2023 tax year, unless the CRA makes a direct request for these filings.

Over the coming months, the CRA will work with the Department of Finance to further clarify its guidance on this filing requirement. The CRA will communicate with Canadians as further information becomes available.

Everyone loves getting a tax refund but do you really know why you are receiving a refund? Tax preparers that are approved filers with CRA have a fiduciary duty to declare complete and accurate information on your behalf. If your professional advisor is a CPA, they are held to an even higher standard. If something doesn't seem right with your return, ask your advisor to provide you with an explanation you can understand. Even if your advisor provides inaccurate information, you will still be liable for any consequential penalties and interest.

Brampton man charged in charitable tax fraud case involving $34 million BRAMPTON, Ont. — An Ontario man has been given a three-year prison sentence for his role in a fraud case involving more than $34 million in false charitable donations. The Canada Revenue Agency says Festus Bayden, of Brampton, Ont., was a partner in a tax preparation business known as E & F Tax As...

Are you up to speed on the new reporting rules for trusts? In particular, have you checked to see if you are a bare trustee in any capacity? If you have your name on property "in trust" for another person, be prepared to comply with the new trust reporting requirements. The article below explains more details of the challenges of these new rules.

Opinion: New CRA reporting rules for trusts are a disaster Intended to catch trust cheats, CRA's rules create the offence of failing to file, which thousands of innocent trustees will likely do. Read on.

This is a good article explaining the new trust reporting requirements that impact many. If you have your name on property, whether real estate or a bank account and the property is beneficially used by another person, then discuss with your professional advisor whether you must file a T3 this year.

Opinion: Seniors and their families caught up in botched CRA attempt to crack down on tax evasion

Some tax humour. How do you maintain your books and records for the Canada Revenue Agency?

Do you or someone in your home have a disability or are 65 years of age or older? If you have completed any renovations in 2023 that allow the individual to gain access to, or to be mobile or functional within the home or reduce the risk of harm to the individual, you may be able to claim the Home Accessibility Tax Credit (HATC). Renovation costs of up to $20,000 can be claimed which will net up to $3,000 in tax savings.

The CRA does not provide a listing of qualifying renovations but provides guidance for the nature of renovations that will be accepted. If you have installed grab bars in bathing areas, accessible toilets, cabinets that make it easier to reach, widened doorways, etc. you may be able to claim the HATC. Be sure to discuss with your professional advisor if the credit is available to you.

Home Accessibility Tax Credit (HATC) - Canada.ca For the 2022 and subsequent taxation years, the Budget proposes to increase the annual expense limit of the HATC to $20,000, which would provide a tax credit of up to $3,000.

This time of year I am often asked about the types of medical expenses that can be claimed on a tax return. For the average taxpayer, the expenses can include prescription drugs, dental visits, eyeglasses and therapy such as chiropractor and physio. However, if you have a medical condition that requires a special device or services, the expense may also qualify. The CRA provides an extensive listing of what items they typically allow and the conditions that must be met for the claim to be accepted.

The link below will bring you to the CRA website where you can check if your expense qualifies. If in doubt, ask your professional advisor and they can help review the circumstances.

Lines 33099 and 33199 – Eligible medical expenses you can claim on your tax return - Canada.ca Information for individuals about the medical expenses for self, spouse or common-law partner, and your dependants, which reduces your federal tax.

Have you been challenged finding a new accountant these days? While many people are pursuing their CPA as a career, I’m hearing that more are heading into industry and we don’t see as many choose public practice for a career.

CPAs in public practice are an important piece of maintaining a strong business community in Canada. I know we can be boring and focus on minutiae but this is the standard we are required to uphold. ❤️

CPA Canada cuts staff in advance of Ontario, Quebec exit Learn more.

The Canadian Dental Care Plan is expanding applications! As of February, potentially eligible seniors aged 72 to 76 will start receiving letters inviting them to apply, with instructions on how to validate their eligibility and apply to the plan by phone.

So far, more than 400,000 Canadian seniors have been approved for dental care under the CDCP.

Learn more: https://ow.ly/OYgs50Qwvsi

Do you have an outstanding tax return or a tax adjustment to file?

Each year, the CRA shuts down certain e-File services while they update their systems for the upcoming tax filing season. This year, the system will shut down for T1s (personal tax returns) at midnight on January 26, 2024 and will not reopen until February 19, 2024. This shut-down also affects any T1 adjustments that need to be filed during this time.

If your tax advisor is waiting for information from you before they can transmit your return, you will want to be mindful of these timelines where the service will be unavailable.

Happy New Year! As we enter into 2024 with all it promises, we also begin the process of preparing for our annual ‘voluntary’ personal tax reporting obligations for 2023.

Over the next two months we’ll be receiving information slips that declare our income from employment, investments, EI benefits, retirement pensions and other sources. Be sure to check these closely as they come in and immediately report errors to the issuer of the form. CRA will assess your tax return based on the information reported on these documents.

Also watch for important documents you’ll need to support claims for tax credits and tax deductions such as tuition receipts, donation receipts, child care, medical expenses, professional and union dues.

Review your personal financial plan and discuss with your professional advisor whether to make an RRSP contribution or top up within the first 60 days (by end of February).

Also look at your 2024 TFSA contribution. This year you can contribute $7,000. The TFSA is a very good option for putting money aside for retirement or big purchase and not paying tax on the investment growth.

Lastly, if you own residential real property or have your name only on title for financing or estate purposes, talk to your professional advisor about any reporting obligation you may have to file an Underused Housing Tax return. The penalties for failure to file are substantial even if no taxes are owing.

If you've been following the Underused Housing Tax saga with the Federal Government or having to comply with the complexities of the reporting, the Federal Economic Update has proposed certain relieving measures for property owners.

In particular, “specified Canadian corporations”, partners of “specified Canadian partnerships” and trustees of “specified Canadian trusts” will no longer have a UHT reporting
obligation and will be considered “excluded owners” for UHT
purposes. This will particularly help incorporated non-profit entities that own residential housing.

This will also benefit certain individuals who have their name on title for a child or parent's home for estate purposes. Having your name on title generally creates a bare trust if there is no beneficial use of the home. Trusts are not excluded owners. To the extent that the trust will be a "specified Canadian trust', there will no longer be a reporting obligation.

These changes are proposed to apply for 2023 and subsequent calendar years.

Other UHT measures include Introducing a new UHT exemption for residential properties in certain lower population areas that are held as a place of residence or lodging for employees (effective for 2023 and subsequent calendar years) and providing unitized apartment buildings (i.e. “condominiumized”) are not “residential
property” for UHT purposes (effective for 2022 and subsequent calendar years).

Also proposed is an exemption for an individual or spousal unit for a UHT “vacation property” but only for one residential property per calendar year (effective for 2024 and subsequent calendar years).

In addition, the extremely punitive minimum non-compliance penalties are proposed to be reduced to $1,000 for individuals (from $5,000) and $2,000 for corporations (from $10,000) per failure, for 2022 and subsequent calendar years.

If you own residential property of any kind, be sure to discuss your reporting obligations with your professional tax advisor. Having a non-resident owner, whether it is your principal residence or vacation property or having your name on title but not using or occupying the property can expose you to a reporting obligation and possible penalties for failure to comply, even if no tax is owing.

If you didn't watch the Federal Government Economic Update and own short term rental accommodation (e.g. Airbnb), you should be aware of a proposed change to how they will be taxed.

The Federal Government has proposed that taxpayers will no longer be able to claim certain income tax deductions related to expenses for short-term rental income. Specifically, taxpayers will not be able to claim deductions for expenses incurred to earn that income (including interest expenses) in provinces and municipalities that have prohibited short-term rentals or where short-term rental operators are not compliant with the applicable provincial or municipal licensing, permitting, or registration requirements.

The proposed limitation on expenses will take effect on or after January 1, 2024.

It’s the little things that add up to make big changes when reaching your goals.

Why “Make Your Coffee at Home” is About More Than Just Saving a... Discover why brewing your coffee at home is about more than just saving dollars—it's about embracing a financial mindset for a prosperous future.

Love us or hate us, accountants provide an invaluable role in the world of business. Our work helps individuals and businesses thrive financially, we support the economy, help maintain the integrity of our countries’ tax systems and enable people to navigate the complexities of tax and finance.

November is Women's Abuse Prevention Month, a time dedicated to raising awareness and taking action against domestic violence. This issue affects countless lives, and it is of utmost importance that we stand together to create a safer, more supportive environment for those who need it most.
I am particularly proud to share that the Region of Waterloo has declared domestic violence an epidemic, highlighting the urgency of this matter in our community. This declaration underscores the critical need for increased awareness, resources, and support for survivors.
To further this cause, I invite you to participate in the "Voices Empower Walk to Break The Silence" an event organized by Women’s Crisis Services of Waterloo Region, aimed at bringing together individuals and families to show solidarity and support for those affected by domestic violence. Your presence would mean a lot to me and would make a significant impact on the lives of those we aim to help. Please register here to participate in the walk on November 18.
Additionally, WCSWR launched a crowdfunding campaign to raise funds for programs and initiatives to combat domestic violence in our community. Every contribution, no matter the size, brings us one step closer to creating a safer and more nurturing environment for survivors. To donate towards the cause through our Board of Directors team, please click the link below.
I believe that together, we can make a real difference in the lives of those affected by domestic violence. Your support would mean the world to me, and more importantly, it would mean hope, strength, and safety for so many in need.

https://www.canadahelps.org/en/charities/womens-crisis-services-of-waterloo-region/p2p/voices-empower-2023/team/wcswr-board-of-directors

Do you have your name on title for your parents’ home or child’s home for estate planning or financing purposes? If so, you should be aware of an impending deadline for complying with the Underused Housing Tax (“UHT”).

Last week the CRA released a Q&A about the UHT and filing obligations. For background, the UHT was introduced in June 2022 and took effect on January 1, 2022. Affected owners of residential property in Canada must file a UHT return for each residential property they own. The deadline for filing the UHT return is April 30, 2023 but was extended this year to October 31, 2023 given the challenges for owners to get information and confirm their compliance requirements. Penalties for failing to file by October 31 are $5,000 per individual, per property and $10,000 per corporation, partnership or trust per property.

The Q&A released by CRA addresses their interpretation of ‘trusts’ and when an individual has their name on title of a home solely to assist with estate planning or financing, this creates a trust – often referred to as a ‘bare trust’. The beneficial owner is the person on title residing in the home. If you're not a beneficial owner, then you likely are a trustee of a trust.

A trust must file a UHT return since it is not an ‘excluded owner’. As long as you are a Canadian citizen or permanent resident, you should be exempt of any tax on the property. It is important to understand that being exempt does not remove the reporting obligation. You can still be penalized even if the property is exempt but you haven’t filed. If you have you name on title with any residential property and are not the person occupying the property, you should confirm with your professional advisor whether you are required to file a UHT return. If in doubt whether you are excluded or not, the penalty for getting it wrong far exceeds the investment in submitting the form and claiming exemption.

Questions and Answers on the Underused Housing Tax - Canada.ca This page will be updated with additional questions and answers as they become available. Please check for updates periodically.

This time of year is popular for buying and selling a home. If you sold or planning to sell your home and counting on the principal residence exemption for tax on the capital gain, be sure to know your reporting obligations.

Effective 2016 and subsequent taxation years, the CRA only allows the principal residence exemption if you report the disposition and designation of your principal residence on your income tax and benefit return. If you forget to make this designation in the year of the disposition, you must amend your income tax and benefit return for that year. The CRA will accept a late designation in certain circumstances, but a penalty may apply.

The principal residence is reported on Schedule 3 and on form T2091. Use page 2 of Schedule 3 to report the sale of your principal residence and be sure to tick the correct boxes designating whether full or partial capital gain exemption is being claimed. Details of the sale are reported on the T2091.

If you omit making a designation of a principal residence in the year of the sale, there may be a penalty of $100 for each complete month late in reporting to a maximum of $8,000. In addition, a late filed T2091 may increase your risk of being subject to a CRA audit.

If you need to amend your personal tax return to report your home sale and claim exemption, contact your professional tax advisor to assist with making the right voluntary disclosure and help possibly reduce your risk of penalty.

Did you know that 17% of Canadians expect to win the lottery as a form of funding retirement? Statistically, this is not sound planning.

Retirement income comes from only 2 or 3 sources:
- Government pensions (typically CPP / OAS)
- Personal savings (TFSAs, savings accounts, RRSPs)
- Employer pensions (defined contribution or defined benefit) which are not as abundant as in the past.

If these three options are limited, many look at downsizing their home to access equity.

What is your plan for retirement?

This is more common than most imagine. I’ve met with many 60-somethings that don’t understand what they can expect for retirement income. It’s an unexpected shock when they find out that the CPP and OAS only provide an average of $15,000 a year combined. If they don’t own their home or haven’t paid off their mortgage, they’ll easily need about $45 - $55k income in todays dollars. Then with escalating healthcare costs, another $4000 a year on average to cover prescriptions, physiotherapy, dental and other unexpected needs unless they have an employer paid medical/dental group insurance plan.

How common is it for adult kids to help parents financially? With Canada’s population aging, and life expectancy rising, there is some demographic urgency to the issue of adults supporting their parents, Rob Carrick says

Are you wondering if you are retirement ready? CPA Canada has made available a series of podcasts that will help you with planning for this time. Do you know if you'll have enough saved? What do you need to really retire comfortably? The link below will take you to the 6 episodes.

Season 6: Get retirement ready Season 6 of the Mastering Money podcast will help prepare you for retirement and give you the tools to get there, no matter your age.

Today I read a new Tax Court of Canada ("TCC") judgement involving a gross negligence penalty. The Canada Revenue Agency ("CRA") can assess a penalty for gross negligence, willful neglect or misrepresentation if the taxpayer falsely declares or reports financial information on their return. The penalty is separate and apart from late filing penalties and interest applies on top of these. So the amounts can add up quickly when this is the case.

Over the years, I have often had to deal with clients facing a gross negligence or similar penalty. It is always a question of fact and understanding the conditions on which the penalty can be levied. For the penalty to 'stick', CRA must prove that the person "knowingly, or under circumstances amounting to gross negligence, has made...a false statement or omission..." on their return. A taxpayer's defence is usually that they didn't knowingly make the error (false statement or omission) or that they may have been 'negligent' but not 'grossly negligent'.

The TCC case today dealt with a penalty of $25,286 levied against an individual who was self-employed and working hard to make ends meet. He had engaged an accounting firm to prepare his business statement and tax return but was encouraged by a friend to engage a second party to 'look it over'. The second party (DSC) was an unscrupulous business promoting tax refunds. DSC prepared a return with false expenses and had the taxpayer sign documents that they said they didn't understand. DSC then had these losses carried back to prior periods generating substantial refunds for the taxpayer.

Sadly, the taxpayer was unsuccessful in their appeal to the Court. The Court found that the taxpayer had sufficient business knowledge that he should have read what he was signing. In particular, he signed the section that certifies that the information given on the return is correct, complete and fully discloses all income.

How often have you blindly signed your tax return or the T183 form that your tax preparer asks you to sign before your return is submitted? When dealing with a professional tax advisor, it should be expected that the return is completed correctly and you can rely on their work. However, it is still the individual taxpayer's responsibility to do a reasonableness check of the amounts reported.

When you file your tax return, if the refund or balance owing is significantly different from what you expected or normally report, it is only fair to ask the preparer to help explain the amount and the reasons for it. You should get a response identifying what amounts on the return contributed to the larger than normal refund or balance owing. This will give you the opportunity to determine whether an error has been made (i.e. did you have those amounts as income or did you actually have that expense) and request it be corrected in the case of an error. Be sure to document that communication and keep it with your tax file. It demonstrates due diligence and should you be challenged by the CRA, you can at least refer to the due diligence taken to help defend a proposed penalty.

Now that phase I of tax season is over, it is often a time to reflect on your fiscal plans for the remainder of the year and how to help reduce the tax pain for 2023. It isn't unusual to hear how things could be much better if there was more money. I certainly don't dispute that cash is king. However, cash only represents options available to us. We trade 'cash' for the opportunity to have a good - whether that is food or a roof over our head, or to enjoy a service. The mere existence of cash does not in itself bring happiness - it only represents what we can acquire with it.

Throughout my career, I've had opportunities to shake hands with billionaires, millionaires and the most destitute. I've met people that are gloriously happy despite having no 'cash' and people who can't get enough and still feel poor despite the vast quantities in their accounts. It comes down to understanding ourselves and what gives us fulfilment.

The government will always find ways to tax our incomes. So how do we achieve goals or find enjoyment in life that is easier on the budget? And I'm not suggesting tax evasion here.

If your desire is to travel and experience culture in another part of the world, perhaps look at an option to work in a foreign location. You may still have tax obligations but you would be gaining the experience without having to necessarily save a large amount you would otherwise need to travel. Plus you gain incredible experience that can boost your career.

If you enjoy the arts or theatre, look at ways of volunteering in your local group where being able to watch their productions is a perk as a volunteer. As a volunteer you will connect with others with similar interests and expand your social network.

Are you looking to gain more knowledge or education? Libraries and community organizations often have low-cost or no-cost access to training and development programs. Certain employers will offer educational assistance or tuition support to help you advance your skills. It may not get you a university or college degree but you will build skills that benefit you in the workplace and possibly help get you that raise or next promotion. Many entrepreneurs have achieved great success without the formal education by learning how to develop skills and use them to their greatest advantage.

When I lead sessions on financial literacy, one exercise we do is to convert the price of an object or goal into hours sacrificed. Say you earn $25 an hour and your tax rate is 20%, this means you only keep $20 an hour to spend. If you make an impulsive purchase of $100, you've given up 5 hours of your life for that impulse. Often impulse purchases don't have a lasting benefit and end up in the trash. Does that impulse bring you the level of fulfilment or satisfaction equal to spending 5 hours on something more enjoyable?

Given that taxes take on average, 30% of our earnings, applying cost (and tax) effective ways to to live a fulfilling life can make big impacts on your sense of satisfaction and your budget.