Tax Documents and Changes
We normally look forward to meeting with many of you at this time of the year, as we enter the “tax season”. Times are not normal, and situations are changing very rapidly.
In this aNote… we deal with two matters:
- Getting your Tax Documentation to us, and
- Tax Changes announced on March 18 2020
Getting your Tax Documentation to us
In order to ensure that there are no delays due to safety concerns or discomfort in meetings, we are also providing the following additional options for you to send your documents to us.
- You can email all your documents (in .pdf format) to our Secure email address at: mmcpa@pm.me
The documents you submit are encrypted on the above server. We will download the documents and delete the email.
If you prefer, you can use the regular email address: cpicons@telus.net
- You can drop off (currently) your documents with the concierge at the front desk at our offices at:
- 1100 8 Avenue SW Calgary, AB T2P 3T9
- in a package clearly marked “For Mohib Madhany – Suite 250”
The drop-off service is currently available but could change at short notice.
The above methods can be used for corporate documentation as well.
Tax Changes announced on March 18 2020
On March 18, 2020, the Prime Minister announced a new set of economic measures being taken by the Government of Canada to help stabilize the economy during this challenging period.
The tax measures included in the announcement are:
- Personal Tax Returns – for individuals, the Return filing due date is deferred until June 1 2020.
However, the Canada Revenue Agency (CRA) encourages individuals who expect to receive benefits under the GSTC or the Canada Child Benefit not to delay the filing of their return to ensure their entitlements for the 2020-21 benefit year are properly determined.
- Trust Returns – for Trusts having a December 31 2019 year end, the Return filing due date is deferred until May 1 2020.
- Payment of Income Tax – CRA will allow all taxpayers to defer the payment of income tax amounts (that become owing between Mar 18 2020 and August 31 2020) until after August 31 2020
- This relief would apply to tax balances due, as well as instalments, (under Part I of the Income Tax Act)
- No interest or penalties will accumulate on these amounts during this period (March 18 2020 to August 31 2020)
Note: Our reading of the above suggests that all taxes owing and instalment obligations established prior to March 18 2020 would therefore be subject to normal interest and penalties provisions
- Businesses Filing Taxes – the Payment of Income Tax measures noted above apply to all businesses
- Business Audits – CRA will not contact any small or medium (SME) businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks (until April 16 2020). For the vast majority of businesses, the CRA will temporarily suspend audit interaction with taxpayers and representatives
NOTE – Decrease and Increase in federal tax rates!
Effective January 1 2018, the federal small business corporate tax rate will be reduced from 10.5% to 10%. In turn, the personal tax rate on dividends (non-eligible variety) will INCREASE to maintain the tax integration system.
Provinces have not announced any changes to provincial tax rates.
What should I do...
- Evaluate your personal and family situation first. Remember for instance, you can still pay reasonable salaries to family members for services provided. The rules have not changed.
- Pay additional dividends in 2017 to spouse and adult children who are in lower tax brackets. While this may result in a prepayment of tax, the lower tax rate benefits may more than offset the cost of tax prepaid. Such payments in 2018 may be subject to the highest marginal tax rates, under the new income splitting rules.
- Consider investment loans – individuals can borrow money (at a fixed prescribed rate of 1% currently) to invest in marketable securities. Income and gains arising from the securities are taxed in the hands of the borrower, regardless of age.
- Ensure each shareholder of your corporation owns a different class of shares, to provide maximum flexibility in payment of dividends.
- Planning around the passive investments spectrum currently, may be premature.
- Use available opportunities – for instance, family trusts remain a powerful vehicle, particularly for transfer of assets to family members, on a tax-deferred basis.
Finally
Let’s discuss your specific situation.
The “simplified” rules are quite complex in certain areas, and subject to interpretation.
