How to Fill Out the Tax Form for a New Job

When starting a new job, navigating the tax landscape correctly is crucial to fulfilling your obligations as a taxpayer. Filling out tax forms accurately is a legal requirement and ensures you take advantage of applicable deductions and benefits. By understanding the process and following the instructions carefully, you can ensure compliance with tax regulations while maximizing your financial well-being. Let's demystify the process of filling out tax forms for your new job in Ontario.

Common Tax Forms for a New Job

When starting a new job in Ontario, there are several common tax forms that you may encounter which will help determine your tax obligations, deductions, and credits. The following are some of the most common tax forms used for a new job in Ontario:

T1 General - The T1 General is Canada’s primary federal income tax form. It includes sections to report your personal information, employment income, deductions, and credits.

TD1 Federal and TD1 Provincial - The TD1 forms determine the federal and provincial income tax your employer should deduct from your pay. These forms allow you to claim tax credits and deductions that may reduce the amount of tax withheld.

T4 - A T4 form is provided by your employer and summarizes your employment income, deductions, and tax withheld during the year. It is used to report your income on your tax return accurately.

T4A - A T4A form is similar to a T4 and is issued for income that is not employment income, such as pension, self-employment, or other types of income.

T2200 - If you are eligible to claim employment expenses, your employer may provide you with a T2200 form. This form certifies that you must pay for certain expenses related to your employment.

Gather the Required Information

To ensure accuracy when filling out your tax form, you must have specific information readily available. This can include:

• Social Insurance (SIN) Number

• Personal information

• Employment-related details

• Financial information

Organizing and having this information readily available will streamline the tax form filling process and ensure accurate reporting.

The Personal Information Section

In the personal information section, you will provide essential details that help identify you as a taxpayer. The personal information section will include the following information:

• Your full legal name, ensuring it matches your official identification documents

• Your current residential address, including street, city, province, and postal code

• Date of birth

• Marital status

These details help determine eligibility for certain tax credits or deductions, ensure your tax forms are processed correctly, and help the Canada Revenue Agency (CRA) communicate with you effectively.

The Income Section

In the income section, you will report your employment income and any other sources of income you may receive. This could include:

• Salary or wages

• Bonuses

• Tips

• Taxable benefits such as allowances or reimbursements

Reporting your income accurately is essential for calculating your tax liability and determining any applicable deductions or credits.

The Deductibles Section

The deductibles section allows you to claim eligible deductions, reducing your taxable income and potentially lowering your tax liability. Common deductible expenses may include:

• RRSP contributions 

• Eligible employment expenses 

• Education expenses

• Childcare expenses 

• Medical expenses

Health and dental benefits provided through a job are generally not tax-deductible for employees in Canada. These benefits are considered non-taxable employee benefits, which means they are not subject to income tax when provided. However, any premiums the employee pays towards health and dental benefits are usually deducted from the employee's salary before income tax is calculated. This means that the employee receives the benefits on a pre-tax basis, effectively reducing their taxable income.

Review and Submit

Before submitting your forms, carefully review all the information you have entered. Double-check for accuracy and ensure that you haven't missed any critical details. Taking the time to review your forms helps to minimize errors and ensures that you have accurately reported your tax information. Once you are satisfied with the information, sign and date the forms before submitting them to your employer for processing.

Don't let the complexities of tax forms deter you from starting your new job on the right foot. Remember, accurate tax filing is a legal obligation and an opportunity to optimize your financial situation. Take charge of your tax responsibilities with confidence and leverage the expertise of Blackspark to ensure a successful tax filing experience.

Navigating Taxes for Self-Employed Individuals in Canada

Self-employment offers individuals in Canada the freedom and flexibility to pursue their entrepreneurial dreams. However, along with the benefits come important tax obligations. By understanding your tax obligations and implementing effective strategies, you can optimize deductions, minimize tax liabilities, and ensure smooth interactions with the Canada Revenue Agency (CRA). Explore the ins and outs of self-employment taxes in Canada, empowering you to confidently navigate the tax landscape and make informed decisions to support your self-employed journey.

Income Reporting and Deductions for Self-Employed Individuals

Self-employment in Canada comes with specific tax obligations that differ from those of traditional employment. Detailed income and expense information must be reported for self-employed individuals in Canada. Here's an overview of income reporting and deductions for self-employed individuals:

Income Reporting - Self-employed individuals must report their income on the Statement of Business or Professional Activities (Form T2125). This form captures revenue from all sources, including sales, services rendered, and any other income the business generates.

Business Expenses - Self-employed individuals can deduct eligible business expenses from their income to reduce the taxable amount. Standard deductible expenses include office rent, utilities, insurance, advertising, professional fees, supplies, and business-related travel expenses.

Home Office Expenses - Self-employed individuals who operate their business from a dedicated workspace at home may claim deductions for a portion of rent or mortgage interest, property taxes, utilities, and maintenance expenses related to the home office.

Vehicle Expenses - If a vehicle is used for business purposes, self-employed individuals can claim deductions for vehicle expenses such as fuel, insurance, maintenance, and depreciation. Proper documentation of business-related mileage is essential.

Professional Fees and Memberships - Fees paid to professional organizations, licenses, and memberships directly related to the business can be deducted as eligible expenses.

Capital Cost Allowance (CCA) - For eligible assets used in the business, self-employed individuals can claim depreciation deductions using the Capital Cost Allowance (CCA) method.

Tax Credits and Benefits for Self-Employed Individuals

Self-employed individuals in Canada may be eligible for various tax credits and benefits, providing valuable opportunities to reduce tax liabilities and optimize their financial situation. Here are some key tax credits and benefits available to self-employed individuals:

Canada Workers Benefit (CWB) - The CWB is a refundable tax credit that provides financial assistance to low-income self-employed individuals. It supplements income and helps reduce income tax payable, allowing for greater financial stability.

Home Office Expenses Deduction - Self-employed individuals who use a portion of their home exclusively for business purposes may claim deductions for home office expenses. This includes a portion of rent or mortgage interest, property taxes, utilities, and maintenance costs.

Canada Pension Plan (CPP) Contributions - Self-employed individuals are responsible for CPP contributions' employer and employee portions. While this increases the tax burden, it also ensures eligibility for CPP benefits upon retirement.

Employment Insurance (EI) Special Benefits - Self-employed individuals can voluntarily opt into the EI program and access special benefits such as maternity, parental, sickness, and compassionate care benefits. Contributions are required, but these benefits provide income support during periods of leave or incapacity.

Registered Retirement Savings Plan (RRSP) Contributions - Self-employed individuals can contribute to an RRSP, which offers tax-deferred growth and potential tax savings. Contributions can be deducted from income, reducing taxable income for the year.

Apprenticeship Job Creation Tax Credit - If you hire an apprentice in a designated trade, you may be eligible for a non-refundable tax credit. This credit encourages apprenticeship programs and supports job creation.

Managing and Planning for Self-Employment Taxes

Managing and planning self-employment taxes is crucial to ensure smooth tax compliance and optimize your financial situation. Here are vital considerations for effectively managing and planning your self-employment taxes:

Organizational Tips - Establish a system for record-keeping and documentation. Keep track of income, expenses, and receipts related to your business. Maintaining organized records will simplify tax preparation and ensure accurate reporting.

Estimated Tax Payments - As a self-employed individual, you are responsible for making estimated tax payments throughout the year to cover your income tax and Canada Pension Plan (CPP) contributions. Estimate your tax liability and set aside funds to avoid penalties and surprises at tax time.

Seek Professional Guidance - Consulting a Blackspark tax professional experienced in self-employment taxes can provide valuable advice tailored to your situation. They can help you navigate complex tax rules, maximize deductions, and optimize your tax strategy.

Stay Informed - Keep updated on changes in tax laws and regulations. The tax landscape may evolve, and staying informed ensures you remain compliant and take advantage of new opportunities or benefits.

Understanding and managing self-employment taxes is essential for individuals pursuing entrepreneurial endeavours in Canada. Each step is vital in optimizing your financial success as a self-employed individual, from registering for self-employment taxes and reporting income to maximizing deductions and meeting filing deadlines. Self-employment offers tremendous opportunities but also requires understanding and managing the tax obligations that come with it. With the right tools and insights, you can confidently navigate the world of self-employment taxes and pave the way for a prosperous and fulfilling entrepreneurial journey in Canada.

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a qualified accountant before making any decisions regarding your tax situation.

Taxes Too Complex For TurboTax?

If you usually use TurboTax to file your taxes but your financial situation is becoming more complicated, you’re not alone. Let’s explore the reasons why you might be considering other options.

Your Taxes Have Become Too Complex For TurboTax

This is the number one reason we hear from new customers that have used Do-It-Yourself (DIY) tax software in the past to prepare their own tax returns. Don’t worry - it’s completely normal! As each year passes, most individuals find that their financial lives become more and more complex. For example, you may have become married (or living common-law) in the past year. Perhaps you bought your first home, or had income and expenses from a rental property. Also, during the pandemic, many Canadians started a side business, meaning they now need to report self-employed or business income to the Canada Revenue Agency. And let’s not forget investing! The average Canadian now has multiple bank and investment accounts, whether they are self-directed or with a brokerage.

You’ve Lost Confidence In Filing Your Taxes

Any of these changes in your financial situation will make filing your taxes more complicated, especially if you were used to being a single person with just T4 employment income in previous years. If two or three of the above changes happen in your life, it quickly becomes overwhelming at tax time to make sure you’ve got everything covered properly.

The Canadian Tax Code Changes Too Often

The Canadian government is not shy when it comes to changing the tax code. Since the income tax system is used to provide many benefits directly to Canadians, it changes frequently to accommodate new legislation, sometimes right before or even during tax season! Unless you are a professional accountant, you probably don’t have the time to keep track of all the changes, which means you can miss out on important updates if you do things by yourself with software like TurboTax.

TurboTax Is Becoming Too Expensive

This may seem counterintuitive at first. After all, there is usually a free version of TurboTax available for very basic tax return filing. But, as your filing complexity increases, so does the price of the software. Furthermore, starting in 2023, TurboTax customers started noticing significant price increases for all versions of the software. In some cases, having a simple requirement such as filing donations increased the price they had to pay. At a certain point, it no longer makes sense to pay higher prices just to do your own taxes. For a similar cost, you can have a professional accountant prepare your taxes for you, saving you time and the anxiety of wondering if you are making mistakes on your tax return.

Conclusion

TurboTax is a suitable option if you have a simple tax return and a high level of confidence in doing your own taxes. But if your financial life is becoming more complex and you are having trouble keeping up with the Canadian tax code, it makes sense to look for professional help. Having a licensed tax accountant prepare your tax return will make sure you take advantage of every available deduction and credit, while reducing your stress level during tax season. If that sums up your situation, definitely check out our 5-star tax preparation service by a professional CPA.

Use This Free Business Expense Tracker Spreadsheet

Looking for the easiest way to record your business or self-employed income and expenses? We’ve got your back! Here is a FREE spreadsheet template that you can use with some nifty features:

• Two different versions - GST/HST Registered Business, or NON-GST/HST Registered Business

• Visual progress tracker bar - so you and your accountant both know when you are done!

• Client notes column - perfect for reminders and keeping track of other important details

Links to Business Expense Tracker

Version for GST/HST Registered Business
Open spreadsheet. Sign-in to Google. IMPORTANT: Choose File > Make a copy.

Version for NON-GST/HST Registered Business
Open spreadsheet. Sign-in to Google. IMPORTANT: Choose File > Make a copy.

How to Use the Expense Tracker Spreadsheet

You’ll need a Google account to make a copy of the spreadsheet template.

1. Open the version applicable for your business (GST/HST Registered, or NON-GST/HST Registered).

2. The templates are View-Only; you’ll need to make a copy that you can edit. From the “File” menu at the top, click “Make a copy”.

3. Name your copy. Tip - if you will be sharing it with your tax preparer, put your name and the tax year in the title to make it easy for them to find.

4. Start filling in your business info in your copy. To see the visual progress bar, change the Status of any section to “Done” or “Not applicable”.

5. When you have completed all sections, the visual progress bar at the top will turn green. Feels good, eh?

How to Share With Your Accountant

1. From within YOUR COPY of the spreadsheet, click the Share button in the top-right corner.

2. Now they can check the spreadsheet and the visual progress bar to see if you are done. Cool beans. (accountant pun, get it?!)

Need Help Filing Your Business or Self-Employed Taxes?

If you live in Ontario, we can help you out. One of our highly experienced CPAs will make sure you get all the business write-offs available to you. We’ll provide you with a fixed price, too!

Learn more here.

H&R Block Alternatives Canada

Are you looking for alternatives to H&R Block Canada? If filing taxes has been a source of stress and frustration, then look no further than this blog. Here we'll unpack some of the best options available to Canadian residents when it comes to tax preparation services - so that you can get your taxes done efficiently and seamlessly. Whether you're self-employed, married, or own rental property - there are solutions out there tailored just for you! Read on as we detail how different types of taxpayers can find their perfect H&R Block alternative in Canada.

Introducing H&R Block Alternatives for Canadian Tax Filers

The tax season can be stressful for many Canadians, but fret not as there are now alternative options to H&R Block for tax filing. Gone are the days of feeling obligated to go with the traditional tax filing route. With a variety of new tax software and online services on the market, Canadians can now choose a service that better suits their needs and budgets. These alternatives are user-friendly and provide step-by-step guidance to ensure accuracy in tax filing. Plus, some even offer support from certified tax professionals to answer any questions or concerns. Say goodbye to the headache of tax season with these H&R Block alternatives.

Exploring the Benefits of Using an Online Tax Filing Platform

Utilizing an online tax filing platform can provide a number of benefits. Popular products include TurboTax Canada or Wealthsimple Tax. One of the most significant advantages is the convenience factor. With an online platform, taxpayers can file their taxes from the comfort of their own home, saving both time and money. However, it's important to approach these platforms with caution. Proper research and verification of the platform's security measures should be taken before inputting any personal or financial information. Also, many do-it-yourself (DIY) tax software products promise free tax filing, only to upsell you once you have already input all of your information. Make sure to research the experience of others and find out the true cost of any online or DIY tax filing software. Furthermore, using an online or DIY software presumes that you have at least a basic understanding of the Canadian tax code, as you are the one responsible for preparing your return. You’ll need to know which numbers go where and how to interpret the various T-slips and other forms that you have collected over the year. That’s a much different responsibility than simply dumping your box of papers and receipts off at your accountant’s office. DIY software is most beneficial if you are single and have a very simple tax return - for example employment income only - and you are certain that you don’t qualify for the multitude of deductions and benefits available to taxpayers.

Using A Professional Accountant (CPA) to Get the Best Tax Return Result

Tax season can be an overwhelming and stressful time for many individuals, especially if their marital status has recently changed, or they bought a new home or rental property. Throw in capital gains and losses, or employee stock option plans, and it's now wonder you may be looking for expert advice that goes beyond the help available at the traditional tax stores. That is where a professional accountant comes in; with their expertise in tax laws and smart tax planning, they can guide you through the paperwork and help you get the most out of your tax return. They can also assist in identifying potential deductions and credits that you may have missed on your own. A professional accountant can not only save you time but also save you money by ensuring you receive the maximum refund possible. Keep in mind that many online tax services will call their preparer staff "pros" or "experts", but that does not mean they are licensed chartered accountants. For the most qualified professional help, look for a company that uses experienced CPAs to prepare your return. You’ll want a partner that doesn’t just prepare your return as quickly as possible without making sure to optimize the result, especially if you are married. In addition, a CPA will use their expertise to explain the result of your return in layman’s terms and most importantly, let you know how to minimize your tax owing for the following years.

Filing Your Taxes With a Reliable H&R Block Alternative

Filing taxes can be a daunting task, especially if you aren't familiar with tax laws or unsure how to maximize your deductions and credits. If you're in search of a reliable H&R Block alternative, look no further than Blackspark. Customers love our streamlined process that super-responsive accountants that give you the peace of mind that your return is being prepared by a professional. We also provide a fixed fee up front, so you know exactly how much your tax return service will cost before we start.

CRA Strike Update

Are CRA Employees On Strike?

No, CRA employees are not currently on strike. More than 35,000 Canada Revenue Agency (CRA) employees went on strike on April 19, 2023, as part of broader strike by 155,000 public service workers. On May 4, 2023, the strike ended.

What Happens If The CRA Goes On Strike?

Many CRA services are expected to be delayed, or even unavailable. Some types of income tax and benefit returns - in particular, returns that are filed by paper - will experience delays in processing. There are also likely to be longer than normal wait times in the CRA’s contact centres.

How Long Is Strike Expected To Last?

There is no determined end date to the strike. Both parties will need to negotiate an agreement to end the strike. While talks broke down after April 19, it has been reported that the parties have resumed discussions as of April 22 in hopes of finding common ground for a deal to end the strike. UPDATE: The strike has ended, as of May 4, 2023.

Will The CRA Strike Affect Tax Refund?

The CRA has said that it will continue to accept all tax returns, even during the strike. Most tax returns are file electronically through the EFILE and NETFILE programs; the CRA expects that such returns will continue to be processed normally, without delay.

Is The CRA Filing Deadline Extended?

No. As of now, the CRA has not extended the deadlines for filing 2022 personal tax returns. Although certain industry groups (and an online petition) have made public statements that the deadlines should be extended, the CRA has not given any indication that they will do so. The deadline for non-self-employed income tax returns is still May 1, 2023. The deadline for self-employed income tax returns is still June 15, 2023.

What happens if I file my tax return after the deadline?

If you file your return late and you owe taxes (i.e. you have a balance owing), you will be subject to a late filing penalty, which is calculated as 5% of your 2022 balance owing, plus an additional 1% for each full month that passes after the deadline (up to a maximum of 12 months).

Keep in mind that if the CRA charged you a late filing penalty for 2019, 2020 or 2021 and has also issued you a formal demand to file a tax return, the late filing penalty for 2022 will be doubled to 10% of your balance owing, plus an additional 2% for each full month that passes after the deadline (up to a maximum of 20 months).

Therefore, even if you can’t pay the balance owing on time, you should still file your tax return before the deadline to avoid late filing penalties.

Canada Revenue Agency also charges non-deductible interest for overdue taxes, compounded daily at 9%.

Can I Still Find An Accountant To File My Return Before The Deadline?

At this point, because the May 1 deadline is so close, it may be difficult to prepare and EFILE your return before then. However, you should contact us as soon as possible if you expect to owe taxes to the CRA, in order to minimize your penalties and interest from filing late.

What Documents Are Needed to File Taxes in Canada?

Filing taxes is an essential aspect of financial management in Canada. Whether you're an individual or a business, it's crucial to understand the documents needed to file taxes accurately and on time. Gathering and organizing these documents can be daunting, but it's vital to ensuring a stress-free tax season. By understanding the necessary documents and keeping accurate records, individuals and businesses can make the tax filing process smoother and less overwhelming.

Personal Information Documents

Personal information documents are an essential part of filing taxes in Canada. These documents provide information about the taxpayer and help to identify them for tax purposes. Some of the personal information documents required for tax filing in Canada include the following:

Social Insurance Number - The SIN is a unique nine-digit number assigned to Canadian residents by the government. It is required for various government programs, including tax filing. 

Date of Birth - The date of birth is used to confirm the taxpayer's identity and age, which can impact their eligibility for certain tax credits and benefits. 

Marital Status – Marital status is relevant because it can affect the amount of tax owed or the benefits received.

Residency Status - Canadian residency status is important because taxes are based on income earned in Canada, and non-residents are only taxed on income earned in Canada. Therefore, providing accurate information about residency status is crucial to ensure proper tax treatment.

Proof of Identity – This could include a driver's license or passport. 

Ensuring that personal information documents are up-to-date and accurate is essential for tax filing in Canada. Providing inaccurate information can result in delays in processing the tax return or even penalties. 

Income Documents

Income documents provide information about the taxpayer's sources of income, which are used to calculate the amount of tax owed. The most common income documents required for tax filing in Canada include the following:

T4s - T4 slips provide information about employment income, including salary, wages, tips, and deductions such as taxes and contributions to pension plans. 

T5s - T5 slips provide information about investment income, including interest, dividends, and capital gains. 

T3s - T3 slips provide information about income from trusts, including income earned by beneficiaries of a trust. 

EI Statement - The statement of Employment Insurance and other benefits received provides information about income received from government programs such as Employment Insurance, Canada Pension Plan, or Old Age Security.

For self-employed individuals, income documents may include business income and expense records and any income received from rental properties.

It is crucial to gather and organize income documents accurately to ensure that all income is reported correctly and that all income is accounted for. Failing to report income accurately can result in penalties, interest, and even legal action.

Deduction and Credit Documents

Deduction and credit documents are an essential part of filing taxes in Canada. These documents help to reduce the amount of tax owed by deducting eligible expenses or claiming tax credits. Some of the most common deductions and credits documents required for tax filing in Canada include the following receipts:

RRSP Contribution - RRSP contribution receipts provide information about the amount of money contributed to a Registered Retirement Savings Plan (RRSP), which can be deducted from taxable income. 

Charitable Donation - Charitable donation receipts provide information about donations made to registered charities, which can be claimed as tax credits. 

Medical and Dental Expenses - Medical and dental expense receipts provide information about eligible medical and dental expenses, which can be deducted.

Childcare - Childcare expense receipts provide information about eligible childcare expenses, which can be claimed as deductions.

Student Loan - Student loan interest paid and tuition fees paid provide information about eligible educational expenses, which can be claimed as tax credits.

Other Documents

In addition to personal information, income, deductions and credit documents, other documents may be required for tax filing in Canada. These documents can vary depending on the taxpayer's specific circumstances, and it is essential to understand the requirements to avoid errors or omissions. Other documents that may be required for tax filing in Canada include business income and expense records, capital gains and losses records, foreign income and taxes paid, and records of any other income or expenses.

Filing taxes in Canada can be complicated, but having the necessary documents can make it easier. With the correct documents, individuals and businesses can file their taxes accurately and on time, avoiding penalties and unnecessary stress. Seeking advice from a tax professional or financial advisor can also help to ensure a better understanding of the tax implications of different financial decisions. By staying organized and informed, individuals and businesses can manage their finances more effectively and plan for a more secure financial future. The professional tax accountants at Blackspark can help. Contact us today to get started!

What Happens If You Miss the Tax Deadline in Canada?

Missing the tax deadline in Canada can be a stressful and costly experience. Every year, Canadians have a filing deadline of April 30th (or the following weekday if April 30th falls on a weekend) to submit their tax return. If the tax deadline is not met, some consequences can come with failing to file your taxes on time. Whether you've missed the deadline due to unforeseen circumstances or forgot, it's crucial to understand what happens if you miss the tax deadline and what you can do to mitigate the consequences.

Late-Filing Penalty

If you miss the tax deadline in Canada and fail to file your taxes on time, you may be subject to a late-filing penalty. This penalty is 5% of the balance owing plus 1% of the balance due for each full month your return is late, for a maximum of 12 months. For example, if you owe $1000 in taxes, you’ll be charged an initial penalty of $50 (5% of the balance due). If your return is still outstanding after one month, you’ll be charged an additional 1% (or $10) for each month it is late, up to a maximum of 12 months. That’s an extra $120 in penalties. The late-filing penalty cannot be more than the amount of the balance owing.

Interest Charges

If you miss the Canadian tax deadline, you will not only be subject to a late-filing penalty but also interest on any balance owing. Interest charges will begin to accumulate the day after the filing due date and continue to accrue until the balance is paid in full.

The current interest rate on overdue balances is 5% per year. Interest is compounded daily, and it is calculated monthly. For example, if you owe the Canada Revenue Agency (CRA) $1,000, the total interest charge at the end of the month would be about $4.17 ($1,000 x 0.05 x 30/365).

Interest charges can add up and significantly increase your debt. It is important to remember that you are responsible for paying any interest that accumulates, even if it was caused by a CRA error or delay in processing your return.

Reassessment

If you miss the tax filing deadline, you may be reassessed. This means the CRA may review your taxes again and change what you've already filed. These changes can include things like changing deductions or credits or increasing the amount of taxes you owe.

If you are reassessed, you will receive a notice of assessment that explains why the changes have been made. It is important to note that this isn’t necessarily bad – the CRA may reduce your taxes, depending on the information they found.

The CRA can reassess your return up to three years after the filing deadline for that year, so it’s essential to keep track of your returns and any changes the CRA makes. The CRA may also reassess your taxes if they receive information from another source (such as your employer).

Legal Action

Missing the tax filing deadline can lead to severe consequences. Depending on the specific circumstances, failure to file on time can result in a criminal conviction, with penalties that include up to two years in jail and/or fines of up to $25,000. Even if the amount owed is low, the CRA can still pursue legal action if a taxpayer fails to submit their taxes on time.

The CRA will first attempt to contact taxpayers who fail to meet the filing deadline. The CRA will inform them of the consequences of not filing and may demand immediate payment of any taxes owed. If a taxpayer still does not file, the CRA can take steps toward prosecution and have the person charged with a criminal offence.

Filing Your Taxes Past the Deadline

Yes, you can still file your taxes after the April 30th deadline. However, you will be subject to specific penalties and interest charges for filing late. The Canada Revenue Agency (CRA) encourages everyone to file their taxes on time, but they understand that sometimes things happen. They also understand that extenuating circumstances can lead to late filing or late payment of taxes.

Under the Taxpayer Relief Program, the CRA may waive or cancel all or part of interest and/or penalties if you cannot pay your taxes due to circumstances beyond your control. These circumstances may include the following:

•         Death, serious illness, disability or mental impairment of yourself, your spouse or common-law partner, or your dependents

•         Unusual circumstances such as a natural disaster or theft

•         Financial hardship due to job loss, bankruptcy, or inability to pay for medical expenses

•         Long delays caused by the CRA that could affect your ability to meet your tax obligations

If you believe you qualify for assistance from the Taxpayer Relief Program, you can apply online or call the CRA directly. The CRA will review your situation and decide based on their discretion. You may also be able to negotiate with the CRA on an alternate payment plan if you cannot pay the total amount due.

Missing the tax deadline in Canada can result in severe consequences that can affect your financial well-being and access to government programs and services. By staying informed and taking proactive measures to file your taxes on time, you can avoid the adverse outcomes of missing the tax deadline and ensure that you remain in good standing with the CRA. Contact Blackspark today to get started!

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a qualified accountant before making any decisions regarding your tax situation.

Taxes in Canada and Cryptocurrency

As we head into tax season, you might wonder how you factor your cryptocurrency earnings into your tax filing and ensure that you are paying the necessary income taxes. Cryptocurrency trading and investment are now regular line items in your taxes and are treated the same way as earning fiat currency. That means they are subject to Federal and Provincial taxes as outlined by the CRA, and not reporting your crypto income is considered an offence with legal consequences. Here is your guide to paying taxes in Canada when cryptocurrency is a part of your income.

Do I Need to Report Cryptocurrency on My Taxes in Canada?

Cryptocurrency is not recognized by Canadian law as currency. Instead, crypto assets are treated as commodities equivalent to investment property for tax purposes. Any gains or losses arising from a person’s cryptocurrency portfolio are taxed similarly to any other commodity investment in Canada. You will pay income tax on half of any crypto gains from dispositions of crypto and income tax on any additional income from crypto like staking.

The following crypto events are subject to taxes in Canada:

• Trading or exchanging cryptocurrency, including disposing of one cryptocurrency to get another cryptocurrency

• Converting cryptocurrency to government-issued (fiat) currency, such as Canadian dollars

• Selling or gifting cryptocurrency to others

• Using cryptocurrency to buy goods or services

The income you receive from disposing of cryptocurrency may be considered business income or a capital gain and must be reported as either property income or business capital.

How Much Are You Taxed on Crypto in Canada?

The tax you will pay on crypto in Canada will depend on the kind of transaction (income or capital gain) and how much you earn. You will pay income tax at your usual Federal and Provincial tax rates for transactions viewed as income. For transactions considered capital gains, you will pay income tax at your usual Federal and Provincial tax rates on half of any gain.

Crypto transactions considered capital gains refer to investments made on a casual basis as general investments. In contrast, transactions considered business income refer to investments made as a business with profits taxable as business income. When determining whether you are acting in a personal or business capacity, the CRA will consider several factors, including:

• The intention of the taxpayer

• Nature and frequency of the transactions

• The period of ownership

• The taxpayer’s expertise and knowledge of cryptocurrency

• The relation, if any, between the crypto transactions and the taxpayer’s ordinary business

• Time spent engaged in cryptocurrency activities

• The type of financing required to support the taxpayer’s crypto activities

• Whether the taxpayer has made it known that they are engaged in crypto activities

Each cryptocurrency situation is assessed separately. While business activities commonly involve regularity over time, buying cryptocurrency may be treated as a business if there is any intention of selling it for a profit. The CRA has listed some common signs that you may be conducting crypto transactions as a business:

• You carry on activities for commercial reasons and in a commercially viable way.

• You undertake activities in a business-like manner, which might include preparing a business plan and acquiring capital assets or inventory.

• You promote a product or service.

• You show that you intend to make a profit, even if it is unlikely in the short term.

In general, the more active you are in crypto trading and the more profit you make, the more likely your crypto profits will be considered business income instead of capital gains. A tax accountant can ensure that you accurately report your crypto earnings as business income or capital gain.

How Do I Avoid Crypto Taxes in Canada?

If you are active in the cryptocurrency community, then there is no way of getting around the reach of the CRA, and it is not a good idea to try. However, some specific crypto transactions are tax-free in Canada. You won’t pay taxes on cryptocurrency if:

• You are buying crypto with fiat currency

• You are HODLing crypto

• You are moving crypto between your own wallets

• You are gifted with crypto

• You are creating a DAO (Decentralized Autonomous Organization)

A critical omission from tax-free crypto transactions is that of donating crypto. If you donate crypto to a registered charity, the CRA views this as a disposition of an asset with tax consequences. If your crypto has increased in value from acquisition to the time you donate, you will be liable for Capital Gains Tax on that donation. 

Can the CRA Track Cryptocurrency?

If you are thinking about doing anything sneaky to avoid paying taxes on your cryptocurrency, give it a second thought. The CRA can track crypto investments and implement appropriate penalties for crypto tax evasion. Failing to pay your crypto taxes will most likely lead to the CRA requiring you to pay what you owe, along with interest and a filing penalty. You could end up losing all your gains in the process.

The CRA announced they are working with crypto exchanges to share customer information to monitor potential tax evasion on crypto earnings. They use the information to track Canadian crypto investors to ensure they accurately report their crypto investments and pay the appropriate tax. Additionally, all money services businesses in Canada must notify the CRA of transactions greater than $10,000. This means that if you send $10,000 or more to a crypto exchange, it will be reported to the CRA.

The CRA is registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), which regulates financial institutions and investigates money laundering and tax evasion. Reported trades are not limited to those above $10,000. If a crypto exchange is registered with FINTRAC, they must obtain a copy of your government-issued ID and proof of address. This means that your ID is linked to your account and wallet addresses on the exchange.

The best way to remain tax compliant is to report your cryptocurrency earnings accurately. A tax accountant with extensive knowledge of cryptocurrency can ensure that you are reporting your crypto earnings accurately and honestly. Contact the tax accountants at Blackspark for assistance with your cryptocurrency income this tax season.

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a qualified accountant before making any decisions regarding your tax situation.

What is the Best Tax Software in Canada?

It used to be that filing your own taxes was an overwhelming task that took days to complete, and software was not much help. Today there are several tax software options to choose from that are easier to use and can save you time and money. If you have a relatively straightforward tax return, then tax software can be a convenient, cost-effective way of filing it. However, if your financial situation is more complicated, a tax accountant can maximize your return and ensure you receive all tax credits and deductions that you are due.

Advantages of Using Tax Software

Tax software has become much more reliable and user-friendly in recent years. Here are a few advantages of using tax software to file your tax return:

Tax software is a cost-effective way to complete your tax return. Using tax return software is cheaper than hiring a tax accountant. An accountant will charge you for every service according to the time spent on the job. Even if you upgrade to a paid version of your tax software, it is typically cheaper than doing your taxes in person.

You will be more informed about how everything on your return is processed. With the rise of tax software, clients can know how everything on their return is processed. The step-by-step format allows them to have input and be more informed about their finances.

Your tax return can be completed in a matter of hours. Once you have all your tax paperwork, filing your return using tax software is relatively easy and can be done in a matter of a few hours. This is especially true if you have a straightforward tax return to file with few complications.

All your financial information will be kept confidential. Some people have concerns about sharing their financial details and private information with a tax accountant. Tax software allows you to retain your confidentiality.

Features to Look for in Tax Software

When choosing tax return software, you must ensure it has the right features to complete your return. These are the most crucial:

Ease of use – Unless you have some education in accounting, you will want tax software that is easy to use and navigate, allowing you to choose the correct forms without needing to be an expert.

OS compatibility – Your tax software needs to be compatible with your computer’s operating system. Windows is compatible with just about every program, while Macs have slightly less selection. Some tax software has been made available for mobile devices in recent years, but you may find this cumbersome on a small screen.

Availability of a free version – If your tax return is relatively straightforward, you can save money by choosing from free tax return software. However, you want to ensure that it has all the features you need. You may find it worth the extra cost for the convenience of filing a more complicated tax return.

Best Canada Tax Return Software

Here are the top tax return programs in Canada for 2023:

Wealthsimple Tax (Formerly SimpleTax) – Wealthsimple Tax is one of the newer income tax filing programs, but it is a well-rounded program that combines the best features from other tax return software. It can handle a variety of complicated tax situations, including self-employment, investment income, and crypto trading. It offers a web-based version, can be used on a local Windows or Mac desktop and is available on mobile via the Apple Store and Google Play. It features a unique pay-what-you-want structure; while it is technically free, you can opt to donate to support the organization.

TurboTax – TurboTax offers free and paid versions and works with Windows, Mac, Android, and iOS. Unlike competing tax software, it has no income limit, making it a viable option for higher-income individuals. Although you can import your tax information with CRA’s Auto-fill My Return, you will need to purchase the paid version if you want to transfer your tax information from last year. At $19.99, it will also search for over 400 additional tax credits and deductions to check your applicability, so it has great potential to maximize your return.

H&R Block – H&R Block does in-person tax returns, but you can also file your taxes online with NETFILE using Windows, Mac, Android, or iOS. If your tax situation is more complicated, you can purchase add-ons, including audit protection and pro review. The interface is simple and easy to use, allowing you to move through the software at a manageable pace while monitoring where you are in terms of a tax refund or balance owed.

Advantages of Hiring a Tax Accountant

While tax software can take care of the job of filing your tax return, there are advantages to hiring a tax accountant to complete it instead:

A tax accountant saves you time and energy. Hiring a tax accountant will save you a lot of time compared to doing your taxes yourself. A tax professional can complete your return in a fraction of the time because they have the education and experience to fill it out accurately, especially if you have a complicated return.

Your tax return will be maximized. A tax accountant is acquainted with updated laws and regulations that tax filing software may not have yet incorporated. They understand how to work the system to get the best return without errors.

Human interaction provides reliability and trustworthiness. No technology can replace the comfort of human interaction. It gives clients a strong sense of dependability that tax software cannot offer.

Your Best Tax Return Option

If you don’t want to spend money on a tax accountant, tax software is a viable alternative, especially for people with relatively simple returns to file. However, in most cases, a tax accountant can maximize your return to the extent that it offsets the cost of hiring them.

Filing Taxes

Filing Taxes in Ontario

When filing taxes as a resident of Ontario, Canada, there are a few important things to keep in mind. First, make sure you’re using the correct forms and filing within the deadline for personal income tax returns. Generally, the deadline for filing taxes is April 30th of this year (for last year's tax return). If filing late or owing money to the government on filing day, interest and penalties may apply.

If you are a self-employed individual, the Canadian Revenue Agency (CRA) offers you more time to file your income tax return. You do not need to submit it until June 15 of this year. However, if you owe taxes, remember that payment is still due by April 30th in order to avoid any penalties or interest charges.

The Canada Revenue Agency (CRA) website is a useful resource to use when filing taxes, as it contains all relevant forms and filing requirements. Along with paying federal income tax, you must also consider and pay for provincial or territorial taxes. Additionally, there may be certain provincial or territorial credits available to you in addition to the regular federal credits.

When filing taxes in Ontario there are many deductions that can be claimed; these include deductions for tuition fees paid, income-splitting opportunities for families, RRSP contributions, work-related expenses and more. To ensure you are taking advantage of all available deductions and credits, review all relevant guidelines for deductions carefully before submitting your tax return.

Which Forms Are Required for Filing Taxes

In order to file taxes in Ontario as a resident, you will need to complete a T1 form. This form covers income earned from employment (such as salaries and wages), investment income (including interest, dividends and capital gains), self-employment income, as well as other types of income reported through various information slips such as a T4A and T5.

In addition to filing the T1 form, you may also be required to complete some provincial forms. In Ontario, these include schedules such as the Form ON479 (Ontario Credits) and the Form ON428 (Ontario Tax).

You will need to report all deductions, credits, and other information on your tax return. This includes expenses for employment or business-related purposes, as well as other government programs that provide financial assistance. By filing these documents accurately, you can take full advantage of all available tax deductions and credits.

Finally, if you have a spouse or common-law partner, both individuals must complete their own individual tax return, along with any necessary supporting documents. This helps ensure each person is filing an accurate return and claiming all deductions and credits for which each of you is eligible.

Additional Forms and Schedules

You may also have to complete additional forms or schedules to the T1 form depending on your filing situation. It is important to review all filing requirements, as you could face a penalty if filing information is incomplete or inaccurate.

Below are three examples of additional documents required for filing taxes:

• Form T2201: Disability Tax Credit Certificate – The purpose of this form is to obtain a disability tax credit from the government, for an impairment in physical or mental functions that is severe and prolonged.

• Schedule 3 - Capital Gains (or Losses): This form is used to calculate and report any capital gains or losses realized in the taxation year. It includes information about dispositions of properties such as stocks, bonds, mutual funds, and more.

• Schedule 6 – Canada Workers Benefit: The CWB is a refundable tax credit intended to supplement the earnings of low-income workers.

Please note that the above forms are just a few examples of the many forms that CRA requires to report income and claim deductions. Always make sure that you review all available forms and schedules for the tax year to make sure you meet the reporting requirements.

How to File Your Tax Return (Electronically or by Mail)

When filing taxes yourself in Ontario, you can choose to file electronically using NETFILE or by mail. Filing electronically often yields faster refunds than filing by mail, but will require you to use NETFILE-certified software to input your tax data and other information about yourself, your spouse and/or dependants. It is important to remember when using tax software that you are still ultimately responsible for the accuracy and timeliness of your tax return. If CRA has questions about your tax return, you will be in charge of dealing with them, rather than the software vendor.

When filing by mail, if you filed your return on paper last year, the CRA should send you the package to file on paper this year by February 21. If you have not received it, you may also download the package from the CRA website.

Getting Help with Filing Taxes

If you are not confident to prepare your own tax return, you can hire a professional tax accountant to do it for you. For example, Blackspark is a team of highly experienced accountants that will remove the hassle of doing taxes, while making sure that you receive the maximum available refund or pay the smallest amount of tax for your situation. For most taxpayers, the cost of working with Blackspark is comparable to paying for tax software, but without the anxiety and time commitment required to prepare your own return.

Conclusion

Ultimately, filing taxes in Ontario can be complicated but understanding the filing requirements and using the correct forms will ensure your filing experience is as smooth as possible. Make sure you're taking advantage of any deductions or credits for which you may be eligible so that you get the maximum refund allowed.

If the whole process seems to daunting, consider hiring a tax accountant to file on your behalf. The cost may be similar, but will free you from having to figure out everything yourself.

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a professional accountant for specific advice related to your situation. Thank you.

TOSI Rules: Everything You Need To Know

In this blog, we look at some frequently asked questions about the tax on split income (TOSI) rules, including an overview of the proposed changes from the Federal Government.

What is income sprinkling?

Income sprinkling, sometimes called income splitting, is a tax planning strategy that involves distributing income from a high-income individual to family members who have lower income brackets.  The intent is to reduce the overall taxable income of the family by spreading it out among multiple individuals. The downside is that, depending on how it's done, it can be considered a form of tax avoidance or evasion.

What are the TOSI rules?

The TOSI rules are designed to limit the ability of high-income individuals to split their income with family members in lower tax brackets. The rules apply to certain types of income, including dividends from private corporations and any income from businesses or trusts. The rules are designed to ensure that income-splitting is only used for legitimate business purposes and not as a way to reduce taxes. The rules also limit the amount of income that can be split with family members.

What is the tax rate for TOSI rules?

The tax rate under the TOSI rules is the same as the top marginal tax rate for the individual receiving split income, which is currently 33%. This means that any income that is split with family members subject to the TOSI rules will be taxed at 33% rather than whatever lower tax rate they would normally pay. As such, the TOSI rules can significantly increase the amount of tax paid by some individuals.

Are there any exceptions to the TOSI rules?

Yes, there are some exceptions to the TOSI rules. Generally, these include situations where family members provide significant labour or capital in the business, such as through an active role in the company or by providing a loan to the company. In these cases, income may be split without being subject to the TOSI rules. However, it is important to note that the Canada Revenue Agency (CRA) will review all cases carefully and assess whether an exception is appropriate.

What is the proposed change to the TOSI rules?

The proposed change to the Tax on Split Income (TOSI) rules involves limiting passive income inclusion in a corporation to specific family members. The Federal Government is proposing to limit the ability of high-income individuals to use private corporations as a tax planning strategy by limiting the amount of passive income that can be split with family members. Under the proposed changes, any passive income that is split with a family member would only qualify for inclusion under the TOSI rules if that family member meets certain conditions, such as being over the age of 25 and contributing to the business in some way. The proposed changes are intended to ensure that income-splitting is only used for legitimate business purposes.

Who will be affected by the proposed changes to the TOSI rules?

The proposed changes to the TOSI rules will affect high-income individuals who have used private corporations as a tax planning strategy. Those affected by the proposed changes will no longer be able to split their passive income with family members in lower tax brackets. It is important to note that the proposed changes will only affect income that is split with family members and not other types of income or investments. Additionally, the proposed changes will also affect those who are not directly involved in the business but may benefit from income splits through family members. It is important to note that these proposed changes have not yet been implemented and the details are still being discussed by the government.

Conclusion:

The Tax on Split Income (TOSI) rules are a set of rules designed to limit the ability of high-income individuals to split their income with family members in lower tax brackets. The rules apply to certain types of income and are designed to ensure that income-splitting is only used for legitimate business purposes and not solely to reduce taxes. The Federal Government is proposing to limit the amount of passive income that can be split with family members under the TOSI rules. Those affected by the proposed changes will need to consult with a tax professional to understand how the proposed changes may affect their tax situation.

Looking for a professional accountant to help you make sense of all of the rules and regulations? Let us help. At Blackspark, we specialize in personal tax return preparation. Contact us today to learn how our services can assist you.

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a qualified accountant before making any decisions regarding your tax situation.

How to Get the Best Tax Refund in Canada

As spring approaches each year, Canadians look forward to the warm months ahead but dread the looming tax season. Knowing what you are entitled to early on will make it easier to keep track of the documentation you need to claim expenses later. The deadline to file your return in Canada each year is April 30. The Canada Revenue Agency (CRA) is constantly updating its tax rules, so don’t procrastinate and scramble at the last minute to educate yourself on getting the most out of your tax refund. Let the tax accountants at Blackspark help.

Contribute to Your RRSP

Contributing to your RRSP is one of the best ways to maximize your tax refund each year and get a larger return. The deadline to contribute for each tax year is March 1. Your contribution limit is 18% of your earned income from the last tax year (up to a maximum of $29,210 for 2022) plus any unused amounts from previous years. You can find your RRSP contribution limit in your CRA account.

The more you make annually, the more your RRSP contributions can generate tax savings. However, you must also consider if it makes more sense to contribute to a Tax-Free Savings Account (TFSA), as the long-term tax savings from that choice could be significantly greater than prioritizing the immediate tax benefit of RRSP deductions. The tax accountants at Blackspark can help you optimize that.

Claim Interest on Student Loans

You cannot claim interest on personal loans, lines of credit, or student loans from foreign banks. However, you can claim interest on student loans received under the Canada Student Financial Assistance Act, the Canada Student Loans Act, and equivalent provincial or territorial programs. The student loan interest claim is a non-refundable tax credit, which can only be used to lower your tax, but any excess credit beyond that will not increase your tax refund. You can carry forward student loan interest for up to five years, so it might be wise to save your claim for a year when you owe more taxes.

Deduct Childcare Expenses

If you have children, you probably already receive family benefits like the GST/HST Credit and the Canada Child Benefit (CCB). However, you can also claim eligible childcare expenses to lower your taxable income. These include:

• Childcare services from caregivers

• Daycare services

• Childcare services from educational institutions

• Day camps and day sports schools

• Boarding schools and overnight camps

Support payments sent to a former spouse and/or children can also impact your tax bill, depending on the type of support you provide.

Write Off Work and Moving Expenses

There are several eligible work-related expenses that you can deduct from your taxes. This list includes things like cell phone bills and office supplies if your employment contract requires you to purchase these items and you did not receive an allowance for them. If you work from home, you can claim expenses for your home office, such as internet bills, stationery, computers, rental payments, and other related services. This can be tricky, so ask your tax accountant for professional guidance here.

You can also deduct expenses related to moving if you meet the following criteria:

• You moved to work, run a business, or attend an educational institution

• You moved at least 40 kilometres closer to your new job or school

Moving expenses that are eligible for deduction include vehicle expenses, accommodation costs for utility hookups and disconnection, and title transfer costs.

Buy a House

The CRA offers tax credits for new homebuyers to help offset the costs of buying a house. The Home Buyers’ Amount allows you to claim a $10,000 tax credit if you purchased your first home and did not live in another home owned by you or your partner in the past four years. You may also qualify for the GST/HST New Housing Rebate if you did substantial renovations or purchased or built a new home. There is a similar provision for landlords under certain conditions.

Donate to Charity

Canada’s tax system is generous for those who donate to charity. The Charitable Donations tax credit can be up to 33 percent of the amount you donated. You may also be entitled to an additional amount reaching up to 24 percent of your donation, depending on your province of residence. Donations and gifts are a non-refundable tax credit, which can only be used to lower your tax bill and not to receive a refund. Like student loan interest, you can carry forward unused donations for up to five years.

Taxes can be complicated to complete, depending on your employment, loans, and other factors. Not every available credit or deduction applies to every circumstance, and you don’t want to err on either side. Eliminate the intimidation by working with a tax accountant, who will ensure you get all the tax deductions and credits you are due each year.

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a professional accountant for specific advice related to your situation. Thank you.

How Income Splitting Works

Income splitting is a great way to reduce your tax bill. It allows you to move income from a higher-income spouse to a lower-income spouse, to take advantage of lower tax rates. But how does it work? Let's take a look.

What does income splitting mean?

Income splitting in Canada is a method by which the higher-income spouse (aka higher-earning spouse) transfers a part of their income to the lower-income spouse (aka lower-earning spouse). An income splitting strategy is used so that both taxpayers end up with similar taxable income.

Ideally, each spouse should end up in the same tax bracket, thereby lowering the household's overall tax bracket and resulting taxes payable. Only eligible pension income is allowed to split using income splitting. You can split eligible pension income with your spouse or common-law partner, up to 50%.

Although income splitting can be implemented before retirement, it is less common.

What can be done relatively easier and early on, however, is making use of a spousal RRSP. Since the higher income spouse will be able to put aside more money into savings, they can contribute some of it to a spousal RRSP.

In this way, you can make sure that the RRSPs of both spouses will be similar in size at the time of retirement. This will result in a lower overall tax burden, as income withdrawals from two smaller RRSPs will result in less taxable income than withdrawals from a single large RRSP.

The more common income splitting scenario takes place during retirement, when spouses will split pension income.

Advantages of income splitting

Income splitting can be beneficial for any couple where one spouse has significantly higher income. But, income splitting is most advantageous for high-income earning couples that are normally in high tax brackets. When you are retired, you will no longer have employment income.

However, your investment accounts will hopefully be supplying you with income. If the investment income earned from your investment accounts is big, your resulting tax bracket will be high. This is when income splitting comes into play.

Simply put, if you are retired and you end up in a different income tax bracket than your souse, you should investigate income splitting to lower your overall tax liability.

An example of income splitting

Jane and John Doe are a retired married couple. Jane's pension income and investments are significantly larger than John's, especially the interest income that she earns on her investments. As a result, John is in a significantly lower income tax bracket.

In this example, Jane is the transferring spouse and John is the receiving spouse. Therefore, splitting pension income will reduce the combined tax obligations of the couple, allowing them to each fall under the same tax bracket and reduce taxes.

Types of income eligible for income splitting

Unfortunately, not all kinds of income are eligible for income splitting. There are also limitations on the type of taxpayer. Specifically, the spouse (or common-law partner) receiving the pension needs to be at least 65 years of age (there are a few exceptions to this rule, see CRA's guide for more details: Line 31400 - Pension income amount).

For this tax reduction strategy, both spouses must also live in Canada and live together during the tax year of the income splitting. Certain exceptions apply, for example if one spouse is separated for medical reasons. But, generally, you must be living together and living in Canada.

Assuming both taxpayers qualify for income splitting, here are the eligible types of income:

1. Income from a RRIF (Registered Retirement Income Fund), except amounts included on line 11500 and transferred to an RRSP, another RRIF or an annuity

2. RRSP (Registered Retirement Savings Plan) annuity payments

3. Life annuity income

The following types of income are NOT eligible for income splitting:

1. Government benefits, such as Old Age Security (OAS) payments

2. Income from the Canada Pension Plan

3. Income from the Quebec Pension Plan

4. Income from a United States individual retirement account (IRA)

Check the following resource for more details about the eligibility of certain types of income: CRA - Eligible pension income.

How to income split

You must opt-in to income splitting every year when you have your tax return prepared. Both spouses will need to file Canada Revenue Agency Form T1032, Joint Election to Split Pension Income. Don't worry if the T1032 form looks complicated; a qualified professional accountant can help you complete it accurately and make sure that you comply with the income tax act.

Frequently Asked Questions

Let's review the questions that often arise when researching financial planning and how to lower the tax burden through pension income splitting:

What is income splitting?

Income splitting is a plan that allows retirees (in different tax brackets) to transfer pension income to the lower income spouse (up to 50%) to take advantage of a lower tax bracket. To use income splitting, certain conditions must be met regarding the type of taxpayers, as well as the types of income.

What is the benefit of income splitting?

All things considered, you would rather pay tax on your income in a lower tax bracket. Using income splitting, you can transfer pension income (such as from a registered retirement income fund) to your lower income spouse and reduce the overall tax liability of your household.

Who is allowed to split income in Canada?

Generally, both spouses must live together and live in Canada during the specified tax year. There are some exceptions, however.

What qualifies for income splitting?

Eligible income types include income derived from registered retirement income funds (RRIF) and registered retirement savings plan income.

If it is time to file your taxes and you are looking for high-quality help, consider using Blackspark. Our professional tax accountants are experienced in all tax matters and will help you realize the maximum benefit from your tax situation.

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a professional accountant for specific advice related to your situation. Thank you.

What is a TD1, Personal Tax Credits Return?

If you're an employee in Canada, chances are you've heard of the TD1, Personal Tax Credits return. It's the form that every Canadian employee must complete so that their employer can deduct the correct amount of taxes from their paycheque each month. But what exactly is it, and why do you need to fill one out when you start a new job? Let's break it down.

What is a TD1 Form?

A TD1 form is used to determine how much tax is deducted from your employment income, or other income, such as pension income. The form takes into account any deductions or credits that may apply to your income for the year, such as tuition and education amounts, medical expenses, and other types of deductions or credits available to Canadians. By accurately completing this form, your employer (or payer) will be able to deduct the right amount of money each time they issue you a cheque.

How Do You Fill Out a TD1 Form?

Filling out a TD1 form isn't difficult, but it can be tedious if you don't know what you're doing. The first step is to read through all of the questions on the form carefully and answer them as accurately as possible. You will need information such as your social insurance number (SIN), marital status, and address in order to complete the form correctly. Once you have answered all of the questions, simply sign and date the form before submitting it back to your employer.

Do I Have To File A TD1 Every Year?

No—once you have filled out and submitted a TD1, Personal Tax Credits Return for a particular job, there’s no need to submit another one until either your situation changes or you start working for another employer. However, if any changes occur throughout the year—such as getting married or divorced—you will need to make sure that these changes are reflected on your TD1 form by submitting an updated version with your new employer (or current employer) so they can adjust their records accordingly.

Conclusion

Filing a TD1, Personal Tax Credits Return may not be fun, but it’s necessary if you want your taxes deducted correctly from each paycheque throughout the year! Make sure to take some time each year (or when needed) to review and update any relevant information before resubmitting it with your employer - otherwise you might find yourself having some unwelcome surprises come tax season!

If tax forms give you a headache, let us help. At Blackspark, our professional tax accountants specialize in preparing personal tax returns.  We are here to help make tax time easier, so don’t hesitate to reach out! We look forward to hearing from you soon. Thank you.

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Always consult a professional accountant for specific advice related to your situation. Thank you.

Cryptocurrency and Taxes in Canada

It's tax season again, and if you’re a Canadian investor, you might be wondering how cryptocurrency fits into the equation. Are crypto investments taxed? If so, how much? There are many questions that need to be answered when it comes to taxes and cryptocurrency in Canada, so let’s dive in!

What is Crypto?

Let's begin by defining cryptocurrency. Cryptocurrency is a digital asset that can be exchanged for goods or services. Cryptocurrency is not legal tender and operates independently of a central bank, authority, or government. Strong encryption techniques are used to control how units of cryptocurrency are created and verify transactions.

How is Crypto Taxed in Canada?

In general, The Canada Revenue Agency (CRA) treats cryptocurrency like a commodity for purposes of the Income Tax Act. As such, cryptocurrency transactions are subject to taxation. Depending on the circumstances, any income from cryptocurrency transactions is generally treated as business income or capital gains. Similarly, if earnings qualify as business income or capital gains, then losses are treated as business losses or capital losses. Taxpayers must figure out whether any cryptocurrency activity results in income or capital, as this affects how the revenue gained from such activities is taxed under income tax law. Not all taxpayers who engage in buying and selling cryptocurrencies are considered to be carrying on business activity.

What is Crypto Fair Market Value?

You'll need to report the cost basis and fair market value of your cryptocurrencies at the time of transacting. This is important because it will determine whether you have made a profit or loss on the transaction. For example, if you bought one Bitcoin for $10K and then sold it later for $11K - you would have made a $1K profit. On the other hand, if you had bought one Bitcoin for $10K and then sold it later for $9K - you would have incurred a loss. The tax treatment of the profit or loss depends on whether or not your cryptocurrency transactions are considered business income or not. If they are considered business income, then (net) profits are considered taxable income and (net) losses can be used as a deduction against any other taxable income. Alternatively, if your cryptocurrency profits and losses are considered capital gains or losses, then (50%) of your net profits will be taxable income and net losses can be used to offset other capital gains in the current, three prior, and any future tax years.

In order to ascertain the value of a cryptocurrency transaction where a direct value cannot be determined, you must use a reasonable method. Keep detailed records to show how you calculated the value. The CRA's general stance is that the fair market value is the highest price (in dollars) that a willing buyer and a willing seller (that are both informed, knowledgeable and prudent, and acting independently) would agree upon in an open, unrestricted market. Use the same method consistently when ascertaining transaction values.

Keeping Accurate Crypto Records

The CRA also requires investors to keep records of all their trades so they can accurately calculate their gains or losses during tax season. This includes keeping track of the date each trade was made along with the cost basis and fair market value. It's also important to note that there may be other taxes that apply such as GST/HST depending on where you live in Canada and what type of transactions you're making with your cryptocurrency (i.e., buying/selling goods or services).

Conclusion

Cryptocurrency has become increasingly popular over the past few years - especially among Canadian investors looking for alternative investments outside traditional stocks and bonds. However, it's important to understand how taxes work when investing in crypto assets here in Canada as this can affect the accuracy of your tax return. If you need help at tax time, a Blackspark professional accountant can help you properly report your crypto activities.  With their assistance, you can ensure you are compliant with CRA rules and regulations.

Reference:

If you're looking for more information on how the CRA is treating cryptocurrency transactions in Canada, please visit their website for the most up-to-date guidelines and regulations: Guide for cryptocurrency users and tax professionals - Canada.ca

Thank you for reading!

This blog post is intended to provide general information only and should not be construed as tax advice or opinions. Please consult with a professional chartered accountant before making any decisions related to tax reporting of cryptocurrency investments.

How Much Tax is Deducted from a Paycheck in Ontario?

If you look at your pay stub, you will see that taxes and deductions are taken off, and the numbers might seem quite arbitrary. All Canadians indeed pay the same federal tax rates on their paychecks, but provinces set up their own provincial rates. So, where do businesses get the numbers for deducting taxes? Let’s find out.

RRSP Contributions

If you are registered with a group Registered Retirement Savings Plan (RRSP), this will be deducted from your paycheck before any taxes and placed into your RRSP until you take it out of the plan. Some companies allow you to choose a percentage (up to a specified maximum) that will be taken out, and they will match, and you will not have to pay taxes on this amount until you take it out of your RRSP. As a result, your current taxable income will be reduced, and you will get to enjoy immediate tax savings while reaping the benefits of company matching to help grow your RRSP.

Canada Pension Plan (CPP)

Canada Pension Plan (CPP) is a monthly, taxable benefit that replaces part of your income when you retire. Contributions to CPP are compulsory for all working Canadians aged 18-70, and for 2022 the contribution amount is 5.7% for both employees and employers. When you retire, you can apply to receive CPP.

Employment Insurance (EI)

Employment Insurance (EI) provides temporary income support to unemployed Canadians. The EI contribution amount for employees in 2022 is 1.58% on any income up to $60,300. Any income over $60,300 is not subject to EI premiums, so the maximum you will contribute to EI in 2022 is $952.74. Employer EI premiums are 1.4 times the employee contribution, resulting in a maximum of $1,333.84. Self-employed individuals are not subject to EI premiums on their income unless they opt into the program to receive special benefits, such as maternity or sick leave.

Did you know?

Blackspark offers a no-obligation, free call with one of our licensed CPAs - they’ll advise you on your personal taxes and provide an upfront price to prepare your tax return.

Canadian Federal Tax

Federal taxes collected from your Ontario paycheck are used to pay for public facilities, programs, and services Canadians use all over the country. These can include national defence, national parks, and economic development. In Ontario, your taxable income places you in the following federal tax brackets:

• $50,197 or less: 15.00%

• $50,197 - $100,392: 20.50%

• $100,392 - $155,625: 26.00%

• $155,625 - $221,708: 29.00%

• $221,708 or more: 33.00%

It is important to note that these taxes occur beginning in the bottom bracket, not entirely in the highest bracket, as is the common misconception. This means that if you earn $150,000 per year, the first $50,197 will be taxed at 15.00%, then another $50,197 will be taxed at 20.50%, and the last $49,608 will be taxed at 26.00%.

Ontario Provincial Tax

Provincial taxes collected from your Ontario paycheck are used to pay for public facilities, programs, and services used throughout the province by residents and businesses. These include schools, health care, roads, emergency services, libraries, and recreation centers. In Ontario, your taxable income places you in the following provincial tax brackets:

• $46,226 or less: 5.05%

• $46,226 - $92,454: 9.15%

• $92,454 - $150,000: 11.16%

• $150,000 - $220,000: 12.16%

• $220,000 or more: 13.16%

Like federal taxes, provincial taxes are deducted beginning in the bottom bracket and increasing as your pay increases, not entirely in the highest bracket. For example, if you earn $100,000 per year, the first $46,226 will be taxed at 5.05%, the next $46,228 will be taxed at 9.15%, and the last $7,546 will be taxed at 11.16%.

How to Calculate Net Income

Your net income is calculated by taking your total earnings and subtracting all applicable taxes and deductions. To calculate your net income, you first need to know your gross yearly salary. Then do the following:

1. Deduct any RRSP contributions if applicable.

2. Add additional earnings, if applicable, such as bonuses. This is done to avoid tax evasion and overestimation of the benefits that you might get from child support payments or spousal support.

3. Withhold all federal and provincial taxes, CPP, and EI. Deduct all federal and provincial taxes from the remainder after RRSP contributions. You can use the brackets above as a reference point.

4. The result is your net income.

Federal and provincial taxes, and RRSP contributions, if applicable, are deducted from your pay each period, while other tax deductions are only taken annually when doing your taxes. A Blackspark tax accountant can help prepare your annual tax return at a low cost and ensure that you take advantage of every tax credit opportunity.

Recently Separated or Divorced?

There are tax implications you should be aware of before filing your T1 return.

If you separated from or divorced your partner in the last tax year, and are preparing to file your T1 return, here’s what you need to know about reporting your split to the CRA, as well as some key things to consider.

How does the CRA defines ‘marital status’ for income tax purposes?

Definitions

Spouse refers to a person you are legally married to.

Common-law partner refers to a person who is not your spouse but with whom you are in a conjugal relationship and at least one of the following conditions applies:

• This person has been living with you in a conjugal relationship for at least 12 continuous months (including any period of time where you were separated for less than 90 days because of a breakdown in the relationship)

• This person is the parent of your child by birth or adoption

• This person has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on them for support

For tax purposes, you are considered separated when you have been living separately for a period of at least 90 consecutive days. If you reconciled before the end of the 90-day period, you are not considered as having separated at all. Divorce on the other hand, is considered valid upon the legal dissolution of the marriage. 

According to the Canadian Revenue Agency’s definition, spouses and common-law partners are treated equally.

When should you notify the CRA of your separation or divorce?

The CRA should be notified as soon as possible if a couple is divorcing. However, separating couples should wait until they have been separated at least 90 days before notifying the government.

Why should you notify the CRA of your separation or divorce?

Married or living common law families qualify for a number of refundable and non-refundable tax credits that are based on the size of the ‘family net income’ which means the net income of both spouses. However, when you become separated or divorce, your net income is only based on one income, which results in an increase in refundable tax credits. Notifying the CRA ensures that the calculation of federal or provincial credits can be made without including the estranged spouse or common-law partner’s net income.

Newly separated parents and refundable tax credits

“In Canada, more than 40% of couples will divorce or separate - and, among them, about 25% will have minor children at the time of their split.”

- Canadian Revenue Agency

Working through the financial supports and the sharing of tax benefits and credits, can be daunting. Generally, we assume that the individual eligible for tax credits - like the tax-free monthly Canada Child Benefit (CCB), or the GST/HST credit - is the female parent. However, there are still a number of factors that will need to be considered. For example, if both parents share custody of the child(ren), who live with each parent half of the time, each can receive half of the CCB.

Is child support taxable?

Child support payments are not taxable which means that if you are receiving child support, you do not have to pay tax on that money. On the other hand, if you are the person paying child support, your support payments cannot be deducted on your tax return. It should also be noted that any other support payments detailed in a court order or an agreement are considered as child support if they are not specifically defined as spousal support.

Is spousal support taxable?

When a lump-sum payment is made upon the finalization of a separation or divorce, it is not taxable to the recipient and it is not deductible to the person paying it.

However, spousal support payments are taxable to the person who is receiving the payments and deductible to the person who is making the payments under the following circumstances:

1. The amount is receivable under an order by a court, tribunal or a written agreement, based on provincial laws.

2. The amounts are specific and paid to the recipient (or an agency handling collection) on a periodic basis. The timing of these payments must be outlined in the court order or agreement which can include specific purposes like rent, property taxes, educational costs, etc.,

3. The person receiving payments has the discretion to use the amount received as she or he wishes, although certain specific purpose payments can be made directly to a third party if this is specified in a court order or agreement.

4. The recipient and the payer are living separately and apart. The exception to this rule occurs if the payer is the legal parent of the child(ren) of the recipient.

To the spouse who receives the taxable spousal amount, there may be a large tax balance due at tax filing. If you are eligible, making an RRSP contribution can help reduce the net taxes owing.

What if child support payments have not been paid?

In terms of child support payments, if money is owed but has not yet been paid, it is considered in arrears. For tax purposes, all arrear payments are considered to be non-deductible child support payments until the child support is up-to-date. Once paid, all subsequent payments are then considered spousal support payments that are taxable to the person receiving them and deductible to the payer.

Are legal fees deductible?

The legal fees associated with getting a separation or divorce, or to establish, negotiate or contest the amount of support payments is not deductible. However, any legal fees incurred to enforce the pre-existing payment of support amounts, or to defend against an application for the reduction of support payments, is deductible.

Who gets to claim child care expenses?

As in normal circumstances, child care expenses are claimed by the lower-income spouse. The costs may be claimed by the higher income spouse if there is a separation for a period of at least 90 days and if a reconciliation occurred within the first 60 days after the taxation year. If reconciliation does not occur, then each spouse may claim any child care expenses they paid during the year with no adjustment for the child care expenses claimed by the other parent.

What about other federal non-refundable tax credits?

Aside from the calculations of family net income for the purposes of claiming tax credits, the breakdown of a marriage or common-law relationship will affect numerous other important financial considerations including the division of assets, pension assets and rules relating to spousal or common-law partner RRSPs. 

How Blackspark can help

If you separated or divorced in the last tax year, filing your tax return will be a little more complicated now. We can help. We have the expertise and experience needed to ensure that you maximize the benefits available and get the tax deductions you are entitled to. We’re in your corner.

Sources and Resources: Government of Canada

Support Payments
Support Payments Guide
Legal Fees
Support Payments Received

Thinking about hiring a remote accountant to file your tax return?

What to know.

The COVID-19 pandemic has, seemingly overnight, changed the way we live and work. Every facet of our lives has been affected and to some extent, become more digital and online. This includes the annual requirement to prepare our personal tax returns. With tax season upon us, you may be trying to figure out how to get your return prepared by a remote accountant. Here are some key things to consider:

Can a remote accountant prepare my return without ever meeting me face-to-face?

Yes. Like many professional services, meeting your accountant is not required to prepare your personal income tax return. What is required is that you officially authorize your accountant to interact with CRA on your behalf, including the ability to get your personal tax information directly from the CRA website. There is a specific form to do that, which your accountant should provide for you to sign when you begin your relationship. Your signature can be provided electronically, so that you don’t have to meet in person.

Are e-signatures valid for tax documents?

Yes. Many tax authorities around the world, including CRA, have implemented policies to allow e-signatures because of the pandemic. As a result, the CRA will recognize electronic signatures as having met the signature requirements of the Income Tax Act.

How do I get my slips and other information to a remote accountant?

This process will vary by accountant. Some accountants will have only email, or a basic shared online folder, available for you to provide your information. More modern accountants should have some login-based site that allows you to review information and submit documents securely. This can have a big impact on the amount of work and preparation you have to do, yourself. For example, an accountant that requires you to scan all of your slips and upload them is having you shoulder some of the tax preparation burden. Therefore, their fee should reflect that.

How secure is it to send my information online?

It depends. Sensitive tax information, such as any document with your Social Insurance Number, financial account numbers or other personally identifying details should never be emailed (either in the body of the email or included as an attachment). Email is inherently less secure than transferring documents via a secure, login-based website. Also, the location of email servers means your messages may be stored outside of Canada. For example, if you (or your accountant) use Gmail, Hotmail or some other web-based email provider, your messages are likely being stored on the U.S.-based servers of those companies. Likewise, you should never send such information by text message on your phone. It is tempting to snap a quick picture of your document and text it, but this is not a secure practice. The ideal solution is to find an accountant that gives you a secure login to their web-based system for collecting information and that has an established communication process to make sure that all information is shared back and forth in that system.

How Blackspark does it:

At Blackspark, we provide a 100% remote and secure tax preparation service for Canadians and their families across the country. We have a proprietary system that includes electronic signatures and a convenient online process for collecting your tax information securely, while you never leave the comfort of your home. We weren’t satisfied with existing tax software, so we built our own technology to make things easier for you, and us. That gives us more time to spend where it matters - making sure your tax return is prepared properly and giving you the best service possible.

How to find lost money (and more) in your CRA My Account

Did you know that CRA might owe you some cash, right now?

Not only that, but they may have been holding it for years, while you have been none the wiser? It’s true.

It’s not often in life that we find some lost money. Even rarer is finding out that Canada Revenue Agency owes us cash that we didn’t know about. But, for many Canadians, that is precisely the situation. You see, the average person moves from one residential address to another, at least a few times during their lifetime. Often, despite their best efforts, their new address may not be accurately (or immediately) updated with all of their personal and business accounts. In such cases, it is easy for mail to never reach the intended recipient. Other times, mail can simply go missing, whether it is lost, or perhaps even stolen.

Now, if that mail was a payment sent by CRA, the government agency will keep a record of the uncashed cheque. You just may not know about it. Earlier this year, CRA soft-launched a feature to allow taxpayers to easily find out if they are entitled to any such payments. The key is to log in to CRA My Account and navigate to the right spot.

Here’s how to do it:

Head over to CRA’s My Account for Individuals:

1. Log in with your username and password (or, if you don’t yet have a CRA My Account login, register to create one).

2. Under “Related Services”, look for the menu item labelled “Uncashed cheques”. Click it and cross your fingers.

3. Voila! If CRA is holding any uncashed cheques for you, they will appear in a table, showing the amount, along with instructions for how to get it sent to you.

4. Bonus tip: To make sure you don’t miss out on any future such payments, sign up for direct deposit. That way, CRA will just go ahead and deposit the amounts directly into your bank account.

So, did your author find any long-lost treasure in his CRA My Account? Indeed, I did! I had an uncashed cheque for about $50 from 1998! Likely due to moving my residence that year. Okay, not enough to retire on, but still a nice surprise and worth the two minutes it took to check!

What else is in CRA My Account?

Other than playing the lost cheque lottery, CRA My Account is a useful site for all Canadian taxpayers. I urge you to become familiar with its features. Most importantly, it will tell you the status of your account, including balances and any payments due or owed. Also, you can quickly find your RRSP deduction limit and TFSA contribution room. If you are keen on preparing your own tax return, you’ll also find most (if not all) of your tax information slips, for each tax year.

By the way, if you find the information in CRA My Account a little bit daunting at tax time, let us be your tax preparation partner. We’ll organize all of the important data from CRA on your behalf, and use it to prepare and file your tax return. For a fixed price and with no upfront fee.