Canada | Tax

It’s tax season. Here are 10 things to know when filing your return this year

Changes rolling out in 2019 and 2020 include a new tax form and more flexible credits and transfers. Now is the time to understand how they will impact your returns

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Man working on laptop at homeGet up to speed on the latest federal tax measures, and remember that that April 30 is the filing deadline for most Canadian taxpayers (Getty Images/shapecharge)

With changes rolling out this tax season (2019) and next (2020)—including a revised tax form, more flexible credits and transfers, and new ways of communicating with the Canada Revenue Agency—now is the time to prepare and understand how your returns will be impacted. 

“People are becoming more knowledgeable and claiming more and more credits,” says CPA Annick Breton, tax partner at Raymond Chabot Grant Thornton. “They want to understand the measures and get back every dollar they’re entitled to.”

Here are 10 things to be aware of when filing your taxes this year and next.

TOP T1 CHANGES AND CRA SERVICE IMPROVEMENTS

1) Revised tax form. The tax return has a new format. Now eight pages, instead of four, calculations—typically included on the T1 schedule 1 form—appear here. “The new form will be more convenient for people who didn’t know whether the information they were looking for was directly on the tax return or on a schedule. It will contain the same information as before, but in a consolidated format," explains Breton.

Also, line numbers that used to contain three or four digits now have five. For example, line 101, employment income, has become line 10100; line 150, gross income, has become line 15000; and line 236, net income, has become 23600. 

2) T2202 Tuition and Enrolment Certificate. You are now allowed to import the T2202 data portal to your income tax return, but be cautious if doing so. “Although educational institutions are required to file the new T2202 annual information return with the CRA, this initiative is new for 2019 returns, so there may be problems during this transition,” explains Bruce Ball, vice-president, taxation, at CPA Canada. “We therefore don’t recommend that you rely completely on this new feature. You should confirm that any information you import is complete and accurate.”

3) Basic personal amount. The basic personal amount is the amount you can earn without paying income tax. Although there is no change other than regular indexing for 2019, it is expected to increase to $13,229 in 2020, then $13,808 in 2021, $14,398 in 2022 and $15,000 in 2023.  The enhanced amount will be phased out for individuals whose income exceeds the threshold for the bottom of the fourth tax bracket ($150,473 in 2020) and will not be available to individuals in the top tax bracket. 

4) Authorizing a representative. “A major change came into effect on February 10 of this year for any individual looking to be represented by a tax preparer from an accounting firm,” says André Boulais, CPA auditor and senior partner and founder of Boulais CPA.. Forms T1013, RC59 and NR95 have been replaced by a new form (AUT-01) for authorizing phone and mail access to a representative. Note that a representative who is already authorized remains authorized; the new form is for new authorizations only.”  A new electronic authorization system for online access to personal tax accounts has also been introduced. “This new approach, which is similar to a service available to businesses, will speed up the authorization process for individuals. This online service must be used for electronic access as form AUT-01 is for offline access only. 

5) The CRA also introduced a few practical innovations, including:

  • Online chat. Have any questions? In March, the CRA launched Charlie the Chatbot, which can answer simple tax filing questions.
  • Process times. Taxpayers can now see the targeted processing time for their tax return with a new tool.
  • Payment. Balances owing can now be paid through PayPal, as well as credit card or Interac e-Transfer.

INCENTIVES YOU CAN’T AFFORD TO OVERLOOK

6) Home Buyers’ Plan (HBP). “Since March 19, 2019, you can withdraw a maximum of $35,000 from your RRSP to buy a home,” says Breton. “The amount was increased to reflect rising property costs nationwide.” But be careful, she warns, as the amounts withdrawn must still be paid back within a 15-year period or they’ll be added to your income, with potential tax implications.

Another change to the HBP came into force in 2020, adds Breton. “Starting this year, the access criteria have been relaxed for individuals who’ve experienced a marital (or common-law partnership) breakdown. Under certain conditions, an individual may still be considered a first-time homebuyer and access the HBP to buy out their partner’s share of the couple’s former home.”

7) Medical expenses. The medical expense tax credit now covers various cannabis (or marijuana) products. “But it only applies to products that are authorized by the government for medical purposes and purchased from a licensed distributor,” says Breton.

8) Advanced life deferred annuities. “Some may be unaware, but since 2020, it’s possible to buy an advanced life deferred annuity,” says Boulais. In a nutshell: “When people turn 71, most convert their RRSPs into RRIFs and make their required annual withdrawals. With this new annuity (capped at $150,000), they’re not required to receive annuity payments until age 85. This may be attractive for taxpayers who, for example, draw a pension from a former employer and have no need to withdraw from their RRSPs. Because a portion of their Old Age Security pension will be clawed back if their net income exceeds $79,054 (for 2020), this makes for an attractive tax deferral.” However, one will also consider factors such as expected life expectancy and death benefit amounts when making a decision.

9) Canada training credit. “Intended for all workers aged 26 to 64 who earn between $10,000 and $147,667 annually (in 2019, before indexing, and including maternity and parental leave benefits), this new refundable credit is cumulative. So, any Canadian looking to acquire or develop new skills will be entitled to accumulate $250 each year, up to a lifetime limit of $5,000,” explains Breton.

“The Canada Revenue Agency will determine—based on your income for the year—the amount you’ll be entitled to for 2020. The information will appear on your 2019 notice of assessment, much like RRSPs,” Breton adds. Then, for 2020 and subsequent years, you can claim a credit equal to the lesser than either half of your eligible tuition and fees paid during the year, or the training benefit limit for the taxation year. If you claim the tuition tax credit and the Canada training credit in the same year, the latter will be deducted from your eligible tuition and other fees paid during the year.

“For one-time training courses, workers may also collect four weeks of employment insurance benefits and receive up to 55 per cent of their salary,” adds Boulais. “When we talk about going back to school, we’re not just talking about college or university, despite what people think. These measures can also be complemented by the Lifelong Learning Plan, or LLP, which allows you to withdraw funds from your RRSPs.” 

10) Digital news subscription tax credit. “Starting for 2020 returns and until 2024 inclusively, anyone who paid for a digital news subscription with a qualified Canadian journalism organization will be entitled to a non-refundable tax credit equal to 15 per cent of the fees paid,” says Breton. The maximum annual eligible subscription amount is $500, for a maximum credit of $75.

Now that you’re up to speed on the latest federal tax measures, remember to check out what provincial/territorial changes might affect you, bearing in mind that June 1, 2020* is the filing deadline for most Canadian taxpayers. Regardless of your circumstances, you can find tax deadlines here.

WHERE TO START

Wondering where to begin? Consider doing these four things to make filing your taxes easier. Also, learn how to get organized, especially if you are self-employed.

*This article has been updated to correct information about the CRA’s revised tax-filing deadline.