Here’s What You Need to File Your 2022 Income Tax Return It’s time to file your income tax return for 2022 and the deadline to pay is coming up. Advanced Tax is here to not only file your taxes, but to make sure you get every credit and deduction possible. Here’s a list of most relevant receipts, slips and income records that may apply to you. Keep in mind that because of COVID-19, you may still be able to claim home office expenses for previous tax years. This does not require a filled T2200 tax form. If you are missing any tax slips, you may be able to access them through the My Account section on the CRA website. Common Tax Slips Needed to File an Income Tax Return Receipts Used in Filing Your Income Tax Return Other Documentation that Your Accountant May Need Employment Expenses that Can Be Claimed If you have a filled T2200 form, there are many expenses related to your employment that you can claim. Here is a list of the most common expenses that you can claim, provided you have the receipts: Regular Expenses *Commission Employees Only Home Office Expenses *Commission Employees Only Make sure to also provide the area used for business in the home and the total area. Vehicle Expenses Make sure to also bring info on: If your vehicle is owned, provide the purchase price, date of purchase and current value. For leased vehicles, bring information on when the lease started, ends, and the list price. Rental Income & Expenses If you are renting out a property and collecting income, you need to claim it on your income tax return. Make sure you have information on the property, co-owners, the total rental income, and any percentage used for personal use. Claimable expenses include advertising, insurance, interest, office expenses, legal, accounting, and other professional fees. You may have also had to incur management & administration fees, maintenance and repair costs, property taxes, travel expenses, and utility costs. Having documentation for these items reduces the amount of tax you will owe when filing your return. Our accounting firm Richmond BC employs the best tax accountants to make sure you get the most value out of your income tax return. Contact us by email through the form on this page or give us a call at +1 (604) 227-1120 to let us take care of your tax filing process.
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Guide to Using an RESP in Canada The RESP is a registered savings account for people who want to save for a child’s education after high school. Anyone can open an RESP account for a child, including parents, guardians, grandparents, other relatives or friends. The Registered Education Savings Plan earns interest that is tax-free. It also gets government grants called CESGs. Time Limits on the RESP Contributions can be made to an RESP for up to 31 years after it is first opened. At this point, it needs to be transferred into another plan. The funds need to be used before the end of the 35th year to prevent it from expiring. If an RESP closes or expires before the funds are used, all money received from either the CESG or CLB will be returned to the government of Canada. The CESG is the Canada Education Savings Grant and the CLB is the Canada Learning Bond. All personal contributions and savings in the account would then be returned to the individual who opened the plan. To keep the interest earned on personal savings, government grants, and bonds, all items in the following criteria must apply: This withdrawn money is labeled as an Accumulated Income Payment. It is also taxed at your regular income tax rate with another 20 percent on top. Alternatively, it can be transferred into your or your spouse’s RRSP (Registered Retirement Savings Plan). How Much Does the Government Provide in an RRSP? The government matches contributions to an RESP at a rate of 20% per year. This caps out at $2,500 in contributions which means that the maximum CESG grant is $500 per year. If a child comes from a middle or low-income family, they could be eligible for the Additional amount of CESG. This adds an extra 10% or 20% to the first $500 contributed per year. If the family’s adjusted income for 2022 is ,197 or less, the additional amount is up to 0. For those with an adjusted income that is between $50,197 and $100,392 – the additional amount is up to $50. Adjusted Income for 2022 CESG Rate Maximum CESG Additional CESG Rate Maximum Additional CESG $0 – $50,197 20% $500 20% $100 $50,197 – $100,392 20% $500 10% $50 $100,392 + 20% $500 0% $0 The CESG amounts carry forward if unused in a year but the maximum CESG that can be received in a year including the carry forward room is $1000. Over-Contributing to an RESP If the total contributions made to a single beneficiary exceeds the lifetime limit of $50,000, tax will be owed. This tax is calculated at the rate of one percent per month on your share of the over-contribution until it is withdrawn. Withdrawals made to eliminate over-contributions do not need a repayment of the CESG unless the total over-contribution is over $4,000. Learn more about how to manage your RESP accounts by contacting us or visiting the CRA’s guide to RESPs here.
How the Underused Housing Tax Can Affect You As of January 1, 2022, the Canadian government implemented the Underused Housing Tax. This is an annual 1% tax on the ownership of vacant or underused housing. It primarily applies to non-resident, non-Canadian owners, but can apply to residents as well. Who Has to Pay the Underused Housing Tax Excluded owners of residential properties in Canada do not have to pay the Underused Housing Tax. They have no obligations or liabilities and include: Those who are not excluded are labeled as affected owner and have obligations to pay the tax. These affected owners include: Obligations of Affected Owners Affected owners must file an Underused Housing Tax return for every residential property that they own in Canada on December 31. The Underused Housing Tax must be paid, unless you have an exemption. Even if you have an exemption, an Underused Housing Tax return must still be filed. For the affected owners of this tax, not filing when it’s due can cause you to owe a minimum penalty of $5,000 as an individual. If the affected owner is a corporation, the minimum penalty is $10,000. Exemptions to the Underused Housing Tax Exemptions Based on the Type of Owner Exemptions Based on the Availability of the Residential Property Exemptions Based on the Occupant of the Residential Property Exemptions Based on the Location and Use of the Residential Property What is a Qualifying Occupancy Period? This is when at least one month in a calender year has one of the qualifying occupants with continuous occupancy of the residential property. The qualifying occupants include: Calculating How Much Underused Housing Tax You Owe The tax rate of the Underused Housing Tax is 1% and is based on the value of the residential property. If you qualify for an exemption as an affected owner, you still need to file but won’t pay the tax. Here’s how to calculate the taxes owed: Fair market value can be used as the value of the residential property instead of its taxable value, but an election must be filed. This election would require an appraisal by an accredited, professional real estate appraiser who works at an arm’s length from the owner. For more information on this subject and more details on filing the your return for the Underused Housing Tax, check out the CRA’s page here.
Taxable Benefits and Allowances for Employees Cash and gifts that are paid or provided to employees could be considered to be taxable benefits or allowances. These can include meal allowances, gifts, or even parking spaces so it is very important to know when to include it in an employees income. Whether it will be taxable or not depends on the type of benefit or allowance and the reason for providing it. Identifying Taxable Benefits, Allowances and Reimbursements Benefits If you pay or give something that is personal in nature to an employee, they’ve received a benefit. It must be either directly to your employee or to someone who does not deal at arm’s length with the employee. This includes their spouse, child or sibling and is a good or service given by the employer to the employee. A third party can provide it as well and could even involve access for free use of property owned by the employer or third party. Allowances or reimbursements of an employee’s personal expense are a benefit as well. Allowances These are any periodic or lump-sum amounts that are paid to employees on top of salary or wages. The allowance or advance helps them pay for upcoming expenses without having them support it. Some of the criteria could be the following: The calculation can be done through distance, time, or other methods. This includes a motor vehicle allowance using the distance driven or a meal allowance based on the type and number of meals per day. Reimbursements An amount that is paid to your employee in order to repay expenses incurred while carrying out duties of employment is a reimbursement. They must keep detailed receipts or any other proper records to suppor the expenses and provide them to the employer. Employer Responsibilities for Taxable Benefits When determining what to do with a taxable benefit, there are a few standard steps as follows: Determining if it’s a Taxable Benefit To find out if a benefit is taxable depends on whether they receive an economic advantage that can be measured in money. Additionally, it depends on whether they are the primary beneficiary of the benefit. Calculating the Value of the Taxable Benefit If the benefit is taxable, the value is usually its fair market value. This is the amount the employee would have paid for the benefit in the same circumstance if there was no employment. A cost of this property, good, or service can also be used if it accurately represents the fair market value. Calculating the Payroll Deductions After the value of the benefit is calculated along with any taxes that could apply (GST, PST, or HST), add it to the employee’s income for each pay period they received the benefit. The result is the total amount of income that the payroll deductions have to be made from. The deductions are then withheld from the employee’s total pay in the pay period. Depending on whether the benefit is cash, non-cash, or near cash, it will affect the EI premiums that need to be paid. Learn more about this topic in the CRA’s Employers’ Guide to Taxable Benefits and Allowances here. At Advanced Tax, we take care of this for you along with managing the entire payroll process. We set out the deductions and ensure that your business is compliant with the CRA’s rules on payroll deductions. Contact us today to start making your payroll process accurate and easier.
Here’s Are the Tax Updates You Need to Know! We’re at that time where documents are being gather, receipts are being collected, and everyone is preparing for their personal tax return. Knowing the tax updates will make sure you get the most out of your filing and preparation. Read about some of the key changes this year to keep in mind. Tax Updates to Watch Out For Air Quality Improvement Credit For those that are self-employed, or in partnerships during 2022, they are eligible for a refundable tax credit. Claiming it will give a credit that equals 25% of your total ventilation costs used to improve ventilation or air quality at your business. This includes any qualifying expenditures made or incurred during the qualifying period of September 1, 2021 to December 31, 2022. There is a maximum of $10,000 for each qualified location and a maximum of $50,000 for total ventilation expenses across all locations. First-Time Home Buyer’s Tax Credit For qualifying homes purchased after December 31, 2021, the first-time home buyers’ tax credit has increased to ,000. You, your spouse or commmon-law partner must not live in another home that you or they owned in the year of the purchase or in any of the four years before. To be considered a qualifying home, it must be registered in your, your spouse’s or common law partner’s name as per its applicable land registration system. It must be in Canada and includes home that either exist or are under construction. Here is a list of qualifying homes: Keep in mind that you, or someone related to you with a disability, will live in the home as a principle place of residence. This must be done before 1 year from acquiring it. For more information on what’s new in this tax season, check out the CRA’s page on tax updates here.