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Why make RRSP contributions?

RRSP Contributions; What’s in it for You?

RRSP contributions are an important part of everyone’s financial plan. RRSPs carry some very advantageous benefits.

What is an RRSP.

A Registered Retirement Savings Plan, or RRSP, is a retirement savings plan created by the Canadian government to encourage taxpayers to save for their future. The idea being that your contributions are deducted from your current income, and then taxed once withdrawn (preferably when you retire and your income is lower).

Your RRSP contributions are tax deductible.

Whatever you put in your RRSP for a tax year is deducted from your taxable income for that year. This is assuming you have the room to do so! That deduction typically generates a tax refund!

The first 60-day rule.

You have the first 60-days of the next year to make contributions that will/can apply to the prior tax year’s return. For 2020 that date is March 2.

RRSP Contribution Room.

Earned income is used to determine the following year’s allowed contribution amount. You generate room using 18% of your earned income. The maximum for 2019 was $26,500.

Tax-Free Earnings.

Your earnings within the RRSP plan are tax deferred. This means you will pay tax on the RRSP plan earnings once you withdraw from the plan.

Loans from RRSPs.

You could take a loan out on your RRSP plan to buy a home or for post-secondary education.

Home Buyers’ Plan (HBP)

The HBP is designed to help you to withdraw up to $35,000 from your RRSP tax-free to pay for a home (subject to certain conditions). You will have to repay this loan by making RRSP contributions. The repayment period is over 15 years.

Lifelong Learning Plan (LLP)

The LLP was designed to help Canadians pay for their post-secondary education. This provision allows you to withdraw up to $20,000 (or $10,000 per calendar year) from your RRSP tax-free subject to certain conditions. For this benefit you also have to repay this loan by making RRSP contributions. The repayment period is over 10 years.

As you can see there are several benefits to making RRSP contributions both immediate and in the future. It is important to start this savings plan early to avail yourself from the tax-free earnings within the plan.

Check Out Our New Logo!

Check Out Our New Logo!

At Gautron Management Services Inc. we’ve been serving the taxpayer since the early 90’s. We may have operated under various names over the years, but we always strive to provide a great customer experience.

After after almost thirty (30) years, we’ve finally decided to commission a new logo.

Why a goat in the new logo?!?

Besides the fact that baby goats are super cute?

via GIPHY

The use of the goat is also a play on the pronunciation of Gautron; as in “Gaut” or goat! We thought we’d add a little personality and humour to an industry which is traditionally not all that exciting!

Tax season is coming quickly.

Revenue Canada is scheduled to complete its major systems upgrade near the end of February (Feb. 24). Once complete they will open their Efile systems for normal tax return processing.

A quick reminder

You have until March 2 to contribute to your RRSP and be able to apply this to your 2019 tax return. Check you Canada Revenue Agency Notice of Assessment for 2018 prior to contributing to make sure you don’t exceed your maximum contribution room. The tax, penalties and interest associated with over contributions are onerous.

Your Individual Return T1 filing deadline is April 30. That deadline is extended to June 15 where either the taxpayer or their spouse have earned income from a self-employed business at any time during the calendar year.

One little trick

We share with our clients about medical expenses. If you consistently buy your prescriptions at the same pharmacy you can request a print out of all your purchases for the year. This simplifies the sorting of totalling relating to these expenses.

 

We look forward to serving you again this year or for the first time this year. Be sure to bring us your documents as soon as you can to avoid the end of season rush.

U.S. and Cdn tax return preparation

Need to know items before filing your 2019 Canadian tax return.

The following are few of the items you should be aware of when it comes time to file your Canadian tax return.

The RRSP contribution deadline

2020 is a leap year. This year’s RRSP contribution deadline is March 2. You should make sure to double check your 2018 Notice of Assessment for your current RRSP maximum contribution limit.
It is important to be mindful of this maximum amount. This is because there are a significant tax rates (1% per month that remains over contributed) imposed on over-contributions.

The filing deadline

This year that deadline falls on April 30th. As such, most taxpayers must file and pay their taxes owing before this date to avoid late filing penalties and interest.
Furthermore, those who are self-employed (and their spouses) have until June 15th to file their tax returns. If you owe taxes interest is charged as of April 30th, but the late-filing penalty is waived up to June 15th.

Revenue Canada’s e-filing system

The federal agency closed its system for updating. The E-file system is scheduled to open for 2019 Tax Returns on February 24, 2020. This is not a big issue considering the filing deadline for T4 slips is March 2. In addition, you’ll likely have to wait for T5 and T3 slips from various financial institutions before filing as well.

Important charges for the 2019 tax return:

    1. Climate Action Incentive (CIA); Manitoba is increasing the amount of incentive being paid out to its residents. Incidentally, for 2019’s tax return Albertan are also be eligible for the CAI just as Saskatchewan, Ontario and Manitoba residents continue to be eligible.
      This is a per household credit. Meaning only one person per family household can claim this credit.
    2. Larger Withdrawal limits for the RRSP Home Buyer’s Plan. The tax-free withdrawal of RRSP vested funds for the purchase of a home has been increased. As a result, the maximum withdrawal is now raised to $35,000 (up from 25,000) for amount taken after March 19, 2019.
      Any withdrawn amount must be paid back over a 15-year period. Furthermore, should you miss a repayment for a particular tax year, then the required repayment amount will be added into your taxable income for that year.
    3. Medically prescribed Cannabis qualifies for the medical expense tax credit

The above items are by far an exhaustive list of new provisions, or items that may impact your specific return. Contact you tax professional for more information.

2020 Federal Tax Changes Promise a Modest Benefit to Canadians

the following article from the CBC delves into the changes to the  basic personal amount. The article also looks at the reduced EI premiums which are countered by the increase in CPP premiums.
All and all we can expect to not really notice the “tax saving” changes brought about by this government’s second term.

For those is Manitoba, we will see an increase in the Climate Action Incentive. At least that one will be obvious!

 

More expiring ITINs are coming!

W-7 Application, ITIN

Are expiring ITINs on your radar!

Do you have an ITIN?

Are the middle digits of your ITINs 83, 84, 85, 86, or 87?

Have you not used your ITIN in the last 3 years on a Federal tax return?

 

If these conditions apply you may have to renew your ITINs before December 31, 2019 to avoid it expiring. Or, to avoid processing delays when it comes time to file your 2019 tax return.

The IRS would like to remind you that ITINs with middle digits 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81 or 82 that expired in 2016, 2017, or 2018 respectively can also be renewed at this time.

What the heck is an ITIN? This abbreviation stands for Taxpayer Tax Identification Number! An ITIN is only issued by the IRS, and is issued to applicants (or their third-party provider) who need the number for tax reporting reasons. You can only get an ITIN if you do not qualify for a Social Security Number. The ITIN does not allow you to work in the US or enable you to get Social Security benefits.

Give us a call should you think you need to renew your ITIN. We can complete your W-& Application for Taxpayer Identification Number as well as certify your identifying documents for this purpose. When certifying your passport (or other ids) we simply copy it a certify it’s authenticity for the IRS. You keep your documents and DO NOT have to mail them to the IRS in Austin, Texas.

For taxpayers living, working outside the U.S., file a return by June 17

WASHINGTON, D.C. — The Internal Revenue Service reminds taxpayers that are living and working outside of the United States that they need to file their 2018 federal income tax return by Monday, June 17th.

Typically, the filing deadline is June 15th for “Offshore” taxpayers. But since the deadline lands on a Saturday this year, the deadline is extended to the 17th.

The June 17 deadline applies to both U.S. citizens and resident aliens abroad (green card holders), including those with dual citizenship. An extension of time to file is available for those who cannot meet this filing deadline. You need to file form 4868 to get an automatic extension before June 17th. This extension gets you additional time to file your return up to October 15th. This only gives you extra time to file the return and avoid late filing penalties. Interest starts accumulating on a balance owing as of the original due date.

More Tax Reform South of the Border???

Last December, Congressman George Holding (R-North Carolina), introduced a bill that would change the way the United States taxes ex-patriots. This new bill could potentially eliminate citizenship-based taxation for Americans residing outside the U.S.

This bill is a work in progress. It is making it’s way through congress and still must pass through senate. After which, it may finally see a presidential signature.

For more on this follow this link to the article from Advisor.ca

Tax Relief Could Be Coming For Americans in Canada

 

CRA spills the beans to the IRS!!!

Did you know that the Canada Revenu Agency is sharing information with the IRS? As part of the U.S. Treasury Department’s FATCA regulation, the government of Canada agreed to allow the sharing of bank account data with the IRS.

U.S. persons who have accounts at some Canadian financial institutions are likely to have their information shared with the IRS.

This raises a few questions:

What is a U.S. person?

A U.S. person is either a U.S. citizens, a Green Card holders, and/or an accidental Americans.
And, what the heck is an Accidental American? A person born in the nearest U.S. border town hospital. Or someone who was born to an American parent (with some conditions).

What types of accounts are being disclosed?

Revenue Canada discloses most financial account types to the IRS. These include savings, chequing, and business accounts. Thankfully RRSP, RRIF, RESP and TFSA accounts are exempt from this reporting. This does however include joint accounts, where information is shared about accounts held between a U.S. person and a non-U.S. person.

What kind of data is being shared?

Names & addresses of account holders (including non-U.S. persons), account numbers, account balances or values, and data about payments such as interest, dividends, other income and proceeds of disposition.

Are you a U.S. person?
Still think you can hide form the IRS?
Unsure how to proceed?

As a U.S. person you must file a U.S. tax return, regardless of U.S. source income, where you live or whether you have tax due. You must also file an Financial Bank Account Return (FBAR) if you exceed the filing threshold. The FBAR itemizes your financial assets which should match what Revenue Canada is sharing with the IRS.

The IRS continues the Streamlined Foreign Compliance program designed to help non-compliant individuals become compliant with their citizenship-based tax obligations. This program may wave the onerous penalties as they relate to non-compliance on the FBAR returns.

The CBC has a brief article on this.

Contact us to discuss your situation and how we can help clear up your back taxes.

What new for the 2018 Canadian Tax season!

The 2018 tax season is right around the corner!!!

Revenue Canada will start processing 2018 tax returns on February 26.

What’s new for 2018’s tax returns!

  1. You may be able to claim fertility treatments through the Medical Expenses Tax Credit
    • This is a new retro-active credit. You may be able to adjust prior year returns as far back as 10 years.
  2. Canada Caregiver Credit – Are you helping take care of someone who is physically or mentally impaired?
    • the Canada Caregiver Credit is now a consolidation of the infirm dependant, caregiver, and family caregiver credits.
  3. The Disability Tax Credit – Nurse practitioners are approved health professionals who can certify a person’s disability. This deduction is often overlooked. It has substantial tax saving potential. Talk to your tax professional about this credit.
  4. Educator School Supply tax credit (a carryover from the 2017 tax year)As a school teacher (primary or secondary), or an early childhood educator you are able to claim educational supplies. The credit allows  up to $1000 of supplies for a 15% refundable credit. The type of unreimbursed expenses you can claim include, but not limited to: books, games, puzzles, containers, consumable supplies and educational software.

What’s gone for the 2018 taxation period?!?

  1. Revenue Canada has eliminated the “education and textbook amounts” for 2018 and future years. Although, you can still claim a credit for the tuition you paid.
  2. Manitoba has eliminated the Tuition Fee Tax Rebate (and advance) for tax years ending after December 31, 2017.
  3. Additionally, the Fitness and arts credits for your children’s activities also got the axe!
  4. The Public Transit tax credit is now in the scrap yard!

The filing deadlines remain the same:

  • May 1st for most taxpayers, that is to file and pay your taxes (due to April 31st falling on a Sunday)
  • If you are self-employed, you (and your spouse) get an automatic extension to FILE your return which is June 15th. Interest starts accumulating on May 2nd. Consequently, you could consider making installment payments prior to April 30th if you expect to pay this year.

Do you have questions or concerns relating to your 2018 tax return?

Come on down to our office at 581-B Des Meurons or contact us here.

Sweeping Tax Reform south of the 49th parallel lead to new forms

IRS reworking the 1040 for the 2019 Tax Season

The New 1040

In late December 2017, the president signed into law the Tax Cuts and Jobs Act. This legislation represents the largest U.S. tax reform in 30 years. The Internal Revenue Service is streamlining the Form 1040 (individual tax return) into a smaller and simpler document. This effort to help taxpayers with simpler forms comes in time for the upcoming tax season.

The new postcard-sized 1040 replaces the current 2-page Form. This August, IRS circulated a draft-copy of the new form. The IRS continues to works with the tax community to finalize the streamlined document. You will see the new streamlined version of the Form 1040 when your 2018 individual income tax return is prepared during the 2019 tax filing season.

Need help with your US returns, give us a call at 204.292.1051

The IRS designed the form in hopes that 30% of U.S. filers, roughly 150 million taxpayers, could use the same form. The new form consolidates the three versions the Form (1040, 1040A and 1040EZ) into one simple form. While the form is much shorter and simpler it still allows the IRS to obtain the necessary information from each taxpayer needed to determine their tax liability or refund.

The new Form 1040 uses a “building-block” tactic. Meaning, the tax return is reduced to a simple form which is accompanied with additional schedules if needed. Taxpayers with straightforward tax situations would only need to file the new postcard-sized 1040 with no supplementary schedules.

New Schedules

This new shorter and simpler Form 1040 birthed a few other new schedules. These forms are intended to supplement this new Form 1040. These new schedules take in the lines for other income, adjustments, and credits. As well as other items normally included on the previous longer version of the Form 1040. The IRS chose to designate these new forms by numbers as opposed to the traditional lettering system.

Below is a quick overview of what the information captured by these new schedules:

  • firstly, Schedule 1 is used to report additional sources of income (not from a W-2) or adjustments to income.
  • the new Schedule 2 is a form for people with some additional forms of taxes, such as alternative minimum tax.
  • Schedule 3 is for nonrefundable tax credits such as the foreign tax credit, education credits or residential energy credit.
  • Taxpayers will add up certain taxes, such as self-employment tax, uncollected Social Security and Medicare taxes, and household employment taxes. They will then report them on Schedule 4
  • Schedule 5 is to add up tax payments, such as estimated tax payments or amounts paid with an extension.
  • lastly, Schedule 6 is where you can report a foreign address or appoint a third-party designee to discuss your tax return with the IRS on your

 

Contact us if you have any questions about the new tax forms or any other changes to the tax laws.