Newsletters

Please email us if you would us to send you a PDF copy of this newsletter.

February 16, 2021 - UPDATED March 31, 2021

Dear Valued Client/Tax Professional:

We hope this finds you well after a challenging year for all. The IRS opened their filing season as of February 12, 2021 and we will begin processing US returns near the end of February. Please note that the filing deadline has not changed from prior years – US taxes are due MAY 17, 2021.

For 2020, the IRS has made many changes primarily due to Covid-19 relief measures with the majority applicable to those living in the US, except for Stimulus checks. Please note this letter only relates to the U.S. tax returns and all amounts are in US dollars. Please refer to our separate letter regarding information for Canadian tax filings. Thank you to everyone for your patience this last year and wishing you a healthy year.

U.S. Taxes and Filing Dates

TAXES ARE DUE - MAY 17, 2021 (note estimated payments and other payments are still due April 15

Penalties/interest are based on amounts owing. If you regularly owe – please ensure an estimated payment has been made or provide your information early.

MAY 17, 2021 Changed from April 15, 2021 for 2021 due to Covid
Filing deadline for extension or return if you are considered resident of the US.
Payment for instalment for 965 transition tax is also due April 15th, if applicable
June 15, 2021 Filing deadline for individuals outside of the US at time of filing
October 15, 2021 Filing deadline on extension

We will automatically file an extension if you are a current client. If you are new to Paterson Henn CPA, please ensure we have received your prior year tax return and we will file an extension, if applicable. We will continue to complete the returns by the original due dates, whenever possible.

Foreign Bank Account Reporting Deadline/Exemption

Filing deadline is April 15th with an automatic extension to October 15th each year.

Exchange Rates 2020
• US Treasury end of December 2020 rate: 1.275 (Used for FBAR/8938)
• US Treasury Annual 2020 rate: 1.341
• Bank of Canada Annual 2020 rate: 1.3415
Other rates may be used, depending on circumstances.

 
Non-Resident Alien 1040NR
As a non-US citizen or green card holder, you are generally filing a 1040NR for US source income such as rental, business or wages earned in the U.S., pension, or other sources such as to recover US taxes withheld above the tax treaty amount. You may not need to file if you have pension if they issue a 1042S with the correct withholding tax (generally 15%). We require the dates you were in the US when filing a 1040NR only.

If you have sold a property but did not file US returns previously, you may require an ITIN. The W-7 is completed, and a copy of your passport certified by the Passport office needs to be provided. We can discuss further.

If you sold a property during 2020, please discuss and ensure we have the sale documentation, costs, and any withholding tax information.

RENTAL DURING COVID
Many people have rental properties in the US and often they visit these during the year though this may not be the case for 2020. Rental deductions may be limited by the # of days of use. Covid-19 restrictions likely resulted in a change in your use and some rentals that could not be rented due to restrictions. The expenses for the full amount may still be applicable if the unit were available for use or could have been rented and these were not used personally. Please provide full details and we can discuss. While the IRS (and CRA) do not like continued losses, the pandemic is a different scenario. Losses may be limited to other income, but they still should be reported as they may help offset future rental income or sale of your property.

(The following section until General Information applies to persons filing as a US citizen/green card holder)

NEW FOR 2020/2021
Note that the standard deduction for 2020 is $12,400 (single) and $24,800 (married filing jointly) and $18,650 head of household. Generally, we do not require itemized deductions, such as interest, property taxes, medicals or donations, unless above the standard deduction amount as the IRS has limited many of the itemized deductions.
For 2020 and 2021 Charitable donations to US Charities up to $300 cash donations to US charities made in 2020 and $600 in 2021 can be claimed as an after standard deduction line item even if not using itemized deductions. Please provide any US charity donation slips.

STIMULUS CHECKS
The US provided a $1,200 check in 2020 and $600 in January 2021. These are applicable to US citizens/green card holders but NOT to non-resident aliens. The 2021 changes provided these will be available to US citizens married to non-resident aliens and are available even though you live outside of the US.

If you DID NOT receive the stimulus check in 2020, you will receive the amount as a refundable amount on your 2020 tax return. Please note that this is income based and we will provide a reconciliation on your 2020 return but the amount is non-taxable in both the US and in Canada.

We require the amount and date you received the check and any US/IRS slips received.

CHILD TAX BENEFITS/DEPENDENTS
As a preparer, we must ensure any dependents meet the criteria. Please provide information if your situation has changed for 2020, otherwise we will assume that you meet the criteria if children were claimed in 2019.
 
SALE OF PRIMARY RESIDENCE/US PROPERTY
The exemption as a US citizen selling their home is $250,000/single or $500,000/Married filing jointly if you sell your primary residence. This is the calculated capital gain (proceeds less cost less selling expenses) converted to US dollars, if in Canada. You must have owned it and lived in it two out of the last five years and you can only exclude one house every two years. Other exemptions and rules are extensive.

CRYPTOCURRENCY
There is a new question now on the front page of the 1040 US return. We will assume NO – please let us know if this is not correct!
At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? Yes _____No_____

TFSA/RESPs
In March 2020, the IRS provided additional guidelines and if you have a RESP, you no longer must file a 3520/3520A. If you have had a penalty for late-filing or incomplete (usually $10,000), this penalty will be waived retroactively. Please let us know if you are in this situation and we can assist. You still will need to report the income on the US return and may have to pay taxes. We recommend investing in RESPs in a non-US person’s name, if you have a spouse that is not a US citizen.

TFSAs still require filing a 3520/3520 (or a disclosure) and you must include the investment and capital gains/losses on your US return. We recommend not investing in a TFSA. If you do, then you should let the holder know you are US so they can issue the US slips for the changes in the account.

OWNERSHIP OF A CANADIAN CORPORATION
Please discuss any new ownership in a corporation. Penalties for not reporting the activity can be $10,000. There is an easy method if dormant. There are many complications with regards to income in the company or investment income held so we can discuss planning and ways of mitigating taxes on your US return.

The following relates to all Paterson Henn CPA clients:

General Information
Our firm prepares Canadian tax returns and corporate work but also understands you may have another accountant who prepares your Canadian returns. We are happy to work with other accountants but ask you to let us know of any changes you may have to your tax situation.

Timing of your US return will be based on when we have all information, when prepared in the past and more importantly if you have owed taxes in the past. We may also have to finalize your return in May to June 15th to ensure we meet all our April 15 deadlines (for taxes owing) and to meet our Canadian tax deadlines. Our firm does our best to file your return by the appropriate deadline but will submit extensions, if necessary. Taxes are due April 15th so if you have not paid in an estimated tax payment, we recommend you do so by this deadline!

 
FILING AND DELIVERY PROCEDURES
Due to Covid, we are not meeting in person and we encourage you to provide your information to us electronically if it is securely sent through our ecourier account and is legible. You may also drop off a paper copy using our secure mail slot or during office hours. Please be mindful of other people and please wear your mask and use the sanitizer available.

We will be sending you the full copy (generally labelled CLIENT COPY) and will provide a GOVT copy with instructions on what we need signed. We can accept electronic signatures in 2020 or you can print, sign and return as you did last year. We generally efile all returns unless there is an exclusion (such as Hawaii state returns with a foreign address). Please note this CLIENT COPY is the exact copy we would be printing but the printed copy may not be available until a later date.

Please advise us if the Client copy received electronically is sufficient to save administration, paper and to reduce contact during Covid.

Payment: We appreciate prompt payment by etransfer to finance@patersonhenn.com or visa/mastercard. Please call our office and speak to admin 250-656-7284 (Press 1 for admin) to pay by visa/mastercard (we do not store credit card numbers on file).

We have prepared a checklist/questions on the following page and we look forward to assisting you. Please contact Sheila Henn, CPA, CA at 250-656-7284 (Press 3) or sheila@patersonhenn.com if you have any questions relating to US returns. Our administrative staff are available to set up appointments or set up a guest e-courier account to securely send documents to us. You can log into to https://e-courier.ca/ with the same credentials as last year or through our website.

We look forward to assisting you this tax season and throughout the year.

Yours truly,
PATERSON HENN CPA
Chartered Professional Accountants

Sheila C Henn, CPA, CA
Partner

This information and checklist have been prepared for use for clients of Paterson Henn CPA as a guidance and should not be used as tax advice for personal situations. Please refer to source material from the IRS for certainty.
Errors & Omissions Excepted.

 
PATERSON HENN CPA 2020 U.S. Checklist

The following is the general information required, but may not be all inclusive:

Non-Resident 1040NR (not applicable if US citizen/greencard holder)

o Please check your contact information
o Dates/# days in the U.S. (not including travel days)
o U.S. Estimated Tax payments and any State payments for 2020
o Rental income and expenses including details of property taxes, insurance and repairs, etc (additional information may be required if a new rental)
o Personal use, if any, of rental
o US pension slips, business income, W-2 or other applicable US income
o Sale documents: Disbursement or legal document and information for cost adjustments

1040 – US Return – US Citizen/Greencard holder
o Has your contact information changed?
o Have any life circumstances changed? Married, separated, new children, etc.
o Child tax credits – if applicable, confirmation there are no changes to circumstances
o Stimulus checks – Provide slip, date and amount received. If you did not receive, please indicate this.
o U.S. Estimated Tax payments and any State payments for 2020. Please provide backup!
o US Tax Slips. This includes your US Social Security, although this may be excluded from your return.
o Canadian tax return – full return with Business Statement, Rental Statement and slip summary
o All other slips. (If we do not prepare your Canadian return, we may require this information to complete your US return.)
o Realized gains and losses: for US investments, investment slips will likely be received, and we require all pages of these (including all pages of 1099-INT/DIV/1099-C). For Canadian investments, we can use your Realized Gain/Loss report but do require the Purchase dates to appropriately convert to US. (Note – your broker may be able to assist to save time and fees for the US preparation).
o Tax Free Savings Account (TFSA)/Registered Education Savings Plan (RESP) statements (Year-to-date/December statements) and any slips. (Please discuss further if you have a RESP as the rules have changed and you no longer need to file a 3520/3520A for RESPs).
o Have you sold your house or other assets that should be reported? This includes your primary residence. The US has different rules than in Canada. If so, we require year of purchase, cost of purchase, proceeds and any cost of sales.
o Canadian Corporate tax filing and financial statements, if applicable
o Foreign bank account reporting and additional reporting Form 8938 if over thresholds
FBAR/8938 Filing:

o a copy of your prior year FBAR reporting (if we did not prepare this filing for you).
o The maximum value of each account, in Canadian dollars (if a US account, please let us know this).
o A copy of the bank statement, if a new account or if this is the first filing, will assist as we will need the name of the bank, branch address and account number as well as if it is a joint account. Please note that this filing can be complicated so please ask if you have any questions.
o Please provide a copy of your FBAR if you filed and amounts are greater than $200,000 USD

________________________________________

2020 US RETURN: Name:

1. Did you receive a Stimulus Check? Amount $1,200 or Date:

Are you a US citizen or green card holder? Yes No

2. Did you sell your personal residence or rental property in 2020? Y N

3. Have you provided your email address and updated contact information?

Email:

4. Do you require a paper copy of your US return (the Client Copy provided as a PDF is the full copy)?

YES PLEASE
(If mailed, a $15 charge will apply)

NO THANK YOU The PDF full copy is sufficient

Please provide any change in circumstances, comments or other information:

This information and checklist have been prepared for use for clients of Paterson Henn CPA as a guidance and should not be used as tax advice for personal situations. Further information may be requested.
Please refer to source material from the IRS for certainty.Errors & Omissions Excepted.

Please contact us if you would us to email you a PDF of this newsletter.

Dear Valued Client:

Our partners Caroline Paterson, CPA, CGA and Sheila Henn, CPA, CA would like to take this opportunity to provide information for this 2020 tax return season as we begin another challenging year. You will find more information on our website www.patersonhenn.com. Our website is updated often with our hours, newsletters, services and more. Due to the many changes this past year, this information is based on the best of our knowledge to February 11, 2021. Currently, the filing deadline has not been extended. We recommend that you file your personal tax return by April 30th (or making an instalment by April 30, 2021 for individuals with self-employment income with a filing deadline of June 15, 2021).

 Important information for the 2020 tax season - Deadline to file is Friday, April 30, 2021

If you cannot pay your tax balance, it is better to file and set up a payment plan with CRA. The government recently announced there will be automatic interest relief on taxes owing until April 30, 2022 for individuals who file their 2020 return, have taxable income of $75,000 or less and received specific COVID-19 income. Also, any CRA credits and benefits will NOT be applied to reduce 2020 debt (such as GST tax credits and Canada Child Benefits).

PATERSON HENN CPA – TAX RETURN DROP-OFF/DELIVERY INSTRUCTIONS
(Please ensure completed questionnaire is included with your information - see second attachment on email)

Due to Covid we will not be meeting with clients in person but if you have significant changes to your tax situation, please call to set up a phone call, Zoom or MS Teams appointment. Alternatively, please feel free to get in touch by email. Please refer to the attached 2020 Personal Income Tax Return Checklist and drop off your tax information at our office (we require everyone to wear a mask if they enter our office). We also accept this electronically through Ecourier (our secure web service) but ask you to ensure it is legible and provide details for any missing information. We kindly request that you have at least most of your information, rather than sending one slip at a time as you receive it. This will help us to ensure we do not miss anything, and limit time spent.

We require signatures and payment prior to efiling your tax returns. We encourage everyone to only come to the office to drop off information which can’t be emailed. We will be emailing your return electronically to you in a secure manner, whenever possible. We are implementing a new system that will making signing even easier. We will be printing and assembling all returns and will contact you in May or early June for pick up at our office. We are trying to limit the number of people in our office at any one time in order to safely protect everyone.

We will again be able to provide signatures electronically and we will continue to try to make this as efficient as possible. New for this season, we will be obtaining esignatures through TaxFolder – a system through TaxCycle, our tax software. This will require you to log in and verify specific information and then you will be able to sign using your phone, tablet or computer. More info will be provided at time of delivery.

Payment to CRA should be made online or through their website:
https://www.canada.ca/en/revenue-agency/services/make-a-payment-canada-revenue-agency.html

Payment for our fees: We appreciate prompt payment by etransfer to finance@patersonhenn.com or visa/mastercard. Please call our office and speak to Kathy or Deb at 250-656-7284 (Press 1 for admin) to pay by visa/mastercard (we do not store credit card numbers on file).

The 2020 tax season will see other changes with additional slips such as the T4A/T4E for COVID benefits and we continue to thank you for your patience as we continue to assist our businesses, not-for-profit and other clients through this challenging time. We hope the following information assists you with an overview of areas that may apply to your situation.

GOVERNMENT COVID RELIEF PROGRAMS

The Federal government implemented many programs and the provincial governments also have relief programs. You may receive an additional T4A or T4E slip for 2020 which will be available online. Many of these relief payments are taxable, although some one-time payments are non-taxable. Look for additional slips and provide these with your information.

We suggest the following website to find out more about Covid-19 benefits:
https://www.canada.ca/en/services/benefits/covid19-emergency-benefits.html

BC Recovery Benefit

Apply now for the one-time tax-free payment of up to $1,000 for eligible families/single parents and $500 for eligible individuals. Apply until June 30, 2021. The eligibility is based on your 2019 tax return so you will need your 2019 Notice of Assessment. If you did not receive your Notice of Assessment, you can obtain through CRA’s My Account.
https://www2.gov.bc.ca/gov/content/economic-recovery/recovery-benefit

BC has many support programs available. Visit: https://www2.gov.bc.ca/gov/content/safety/emergency-preparedness-response-recovery/covid-19-provincial-support/financial-benefits

NEW HOME OFFICE EXPENSE - 2020 TAX SEASON

CRA has provided a simple method for claiming a home office deduction due to the Covid-19 pandemic. There is a detailed summary on CRA’s site if you search for “home office expenses for employees”.

Please note there may be many questions about the percent of home office to use, type of expenses, what happens when you share a space, etc. Often, it may be simplest to claim the temporary flat rate. The calculation for the more detailed method is based on square footage and actual utilities, repairs and maintenance (not property tax/insurance unless commissioned employee). Internet and cell phone, if reasonable and based on actual.

There are still many unanswered questions, so it is likely simplest and most cost effective if the flat rate method is used.

The following is a general overview:

Temporary Flat Rate Method - $2/day max $400

A claim of $2/day up to a max of $400 can be included for 2020. No employer certification or receipts are required.

Employee Criteria (all conditions must be met):

• Worked from home during 2020 due the Covid-19 pandemic;
• Worked more than 50% of the time from home for a period of four (4) consecutive weeks;
• The employee is not claiming any other employment expenses; and
• The employer did not reimburse all of the employee’s home office expenses. You can still make a claim if some of the home office expenses were reimbursed.

If you meet the above, please ensure you provide the # of day and details but if you believe the amounts are significantly more, then we can use the Simplified Detailed Method – see below.

Simplified Detailed Method – T2200S Form Required from Employer

Traditionally, an employee can claim home office expenses when they have received a T2200 Declaration of Conditions of Employment. CRA has updated this form for 2020 and it is onerous for employers to complete but it is applicable in some cases, in particular commission employees. If you usually receive a T2200 for vehicle expenses, you can receive a T2200 and T2200S, though you may have to request these from your employer. We do require these forms with your tax information before claiming the employment expenses on your return. A copy will be kept on file to provide to CRA, if requested. To claim using this new simplified method, Form T2200S should be completed by your employer and you must meet the following conditions:

• You worked from home during 2020 due the Covid-19 pandemic;
• Worked more than 50% of the time from home for a period of four (4) consecutive weeks;
• Have a completed T2200S Declaration of Conditions of Employment for Working at Home Due to COVID-19 and;
• The expenses were used directly in the work during the period.

The form asks the employer to certify that you worked from home during COVID-19, whether they reimbursed you for any of the home office expenses claimed, and whether this amount was included on your T4 slip. You can claim any amounts that you were not reimbursed for.

CANADA TRAINING CREDIT

Starting in 2020, eligible workers aged 25 to 65 will accumulate a credit balance of $250 per year, up to a lifetime maximum limit of $5,000. Your credit balance can be claimed for up to one-half of the costs of taking courses or enrolling in a training program. The maximum credit for 2020 is $250. Please provide tuition fees (or other fees that have not been reimbursed by your employer) to claim on your tax return. https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/budget-2019-investing-middle-class/canada-training-credit.html

DIGITAL SUBSCRIPTIONS – FOR 2020, if you pay for a digital subscription with a qualified Canadian journalism organization, you will be entitled to a non-refundable tax credit of 15% of your subscription cost UP TO $500. Make sure to check with your specific organization to ensure that they are "qualified". Your receipt will have a QCJO designation number on it. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/deductions-credits-expenses/digital-news-subscription.html

HOME ACCESSIBILITY EXPENSE CREDIT: While not new to 2020, it is often missed. If you are 65 years or older or qualify for the disability tax credit and have made eligible renovations in your home which improve mobility and/or reduce the risk of harm, you may qualify for a federal and provincial tax credit. Note that you may be eligible to use these expenses for the federal, BC and a medical expense! CRA’s website: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-398-home-accessibility-expenses.html

THE SALE OF YOUR PRINCIPAL RESIDENCE MUST BE REPORTED ON YOUR PERSONAL TAX RETURN
In most cases the sale is not taxable but please discuss with us if you rented the property, or there are other circumstances. FORM T2091 (or T1255 for Estates) must be completed, signed, and kept on file. This form will be efiled with your return. Our office requires additional information if you have sold your residence – please visit CRA’s website for more information: See Income Tax Folio S1-F3-C2, Principal Residence

B.C.s SPECULATION AND VACANCY TAX/HOME OWNER GRANT
(Note: this is for information purposes and as a reminder. We do not need to be informed of these applications and please keep copies in your records – we do not require these for your personal tax returns.)

You should receive your speculation tax notice. DECLARE BY MARCH 31st each year.
If you own residential property in a designated taxable region of B.C. you should have received a speculation and vacancy tax declaration letter from the Province of B.C. Exemptions are available to reduce the tax to nil, such as if the residential property is your principal residence. Please visit the Province of B.C’s website for more information –
https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy-tax/how-to-declare
You can also call 1-833-554-2323.

HOME OWNER GRANT – you must apply for this each year and new for 2021, this will be online through the BC Government and not through your municipality. More information will be on your property tax notice.

•
Instalments: If your tax is greater than $3,000 you may need to pay in advance for the next year, or instalment interest may apply. For a tax year, your payments are due March 15, June 15, September 15 and December 15. Sometimes our software may calculate by a different method than what is reported on your notice. We recommend you follow the CRA Notices or call us to discuss.

US TAX RETURNS: Please refer to our separate letter and checklist.
Are you a U.S. citizen, Green Card Holder, or were you, or your parents born in the United States? You may have U.S. filing obligations. We can assist with personal US filings, including 1040, 1040NR and preparing Offshore Streamlined Disclosures (outside of tax season). Please note that we ensure all foreign tax credits are applied to reduce/eliminate double taxation.

Note that any US taxes are due April 15th, with filing either April 15th, June 15th or October 15th (on extension.) Foreign Bank Account Reporting is due April 15th with an automatic extension to October 15th.
Please phone Sheila to discuss further.

MyAccount: Please bring to our attention any unexpected notices or differences with your Notice of Assessment or if you receive a Notice of Reassessment. You will not be sent emails from CRA unless you sign up for online mail and this will require you to go into your MyAccount - sign up at: https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html
Do not click on links from CRA emails as these are scams!

MyPayment: Payments for taxes or instalments can be made online at MyPayment or online or at your local financial institution with the appropriate forms. If mailed, certain payments may be processed as per the date received.

T1135 Foreign Reporting Forms: CRA has simplified reporting if your foreign investments qualify and are between $100,000 and $250,000 (cost in Canadian dollars). This form must be filed with CRA by your tax filing deadline each year. It is important that you discuss with us any foreign owned assets and whether this form applies to avoid penalties. This is applicable if you owned specified foreign assets any time during the year with a cost of $100,000 or more Canadian. Real property such as a condo in the U.S. does not apply unless there is rental income. Remember that you also need to report worldwide income including rental or pension income. While this form is not applicable in the year you immigrate, it is important to file the following year, if applicable.

Repeated Failure to Report Income – penalty by CRA: It is important to ensure all slips and income are included. If any slips are received late or missed, please bring these in and we will amend your return!
CRA will now charge this penalty for amounts on income $500 or more. If you fail to report in 2020 and also failed to report in 2017, 2018, or 2019, then the penalty is:
Lesser of: 10% of the amount you failed to report for 2020; and 50% of the difference between the understated tax (and/or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report.

Note that CRA reviews slips for matching, usually in November of each year. If you receive a Notice of Reassessment, please provide or discuss as they may have included a slip in error.

Bottom line: report all income or be the one to adjust and do not wait for CRA to make the adjustment for you!

We look forward to assisting you this tax season.

PHONE 250-656-7284 or email admin@patersonhenn.com (general email), etransfers: finance@patersonhenn.com or email directly:

Caroline M Paterson, CPA, CGA Sheila C Henn, CPA, CA
caroline@patersonhenn.com                           sheila@patersonhenn.com

Paterson Henn, CPA Chartered Professional Accountants
2020 Personal Income Tax Return Checklist

Please notify us if any of the following applies:
- You have moved or any contact information has changed.
- Your marital status has changed.
- Your dependent information has changed.
- You have sold your principal residence or other real estate. (Important as penalties for not filing forms may apply)
- Changes to your health that may result in you qualifying for a Disability Tax Credit Certificate. We can provide a Form T2201 for your doctor to complete.
- You received a Notice of Assessment or Reassessment that you do not agree with.
- You have changed investment advisors or had significant changes in your income, such as retirement, etc.
- Foreign Reporting changes – this must be assessed each and every year! Have you purchased or sold a foreign rental property, or do you have a US stock portfolio that is over $100,000 Canadian (cost)?

Please note that this listing may not be complete. Please call or email if you have any questions!

1. All information slips, such as: T3, T4, T4A(OAS), T4A(P), T4E, T4PS, T4RIF, T4RSP, T5, T2200, T2202, T101, T1163, T1164, T5007, T5008, T5013, T5018(Subcontractors), RC62 and corresponding provincial slips.

2. Details of other income for which no T-slips have been received such as:
 other employment income
 business, rental and partnership income and expenses. If you have internet business activities this must be disclosed to CRA on your tax return – refer to https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/e-commerce/e-commerce.html
 alimony, separation allowances, child maintenance (including divorce agreement)
 pension income (eg, foreign pensions)
 other investment income
 professional fees
 director fees
 scholarships, fellowships, and bursaries
 CEBA LOAN for self-employed individuals – the forgivable portion of the interest-free loan under the CEBA is taxable – please provide details if applicable.

3. Details of other expenses such as:
 employment related expenses – provide Form T2200 and or Form T2200S– Declaration of Conditions of Employment (signed by employer), including working from home expenses as detailed previously in our letter
 tools acquired by tradespersons and eligible apprentice mechanics
 moving expenses – including costs of maintaining a vacant former residence – backup will be required – See T1M
 child care expenses
 adoption expenses
 alimony, separation allowances, child maintenance (including divorce agreement, and support amount that was paid)
 interest paid on qualifying student loans
 Eligible Educator School Supply Tax Credit expenses (up to $1,000)
 business, rental, and employment capital purchases such as vehicles, equipment, and buildings
 home office expenses
 business, property, and employment travel and/or motor vehicle expenses (travel logs may be required)
 interest on money borrowed to purchase investments
 investment counsel fees
 accounting, legal (in specific circumstances) and other professional fees

4. Details and receipts for:
 Registered Retirement Savings Plan (RRSP) contributions
 professional and union dues
 tuition fees for both full-time and part-time courses for you or a dependent – including form T2202 if applicable
 official charitable donation receipts (please note we will keep these and return the following year if greater than $5,000)
 medical expenses for you and dependent person(s) (including travel insurance/ expenses and certain medical related modifications to a new or existing home)
 political contributions

5. Details of capital gains and losses realized during the year. This may be obtained, in some circumstances, by contacting your investment advisor.

6. Name, address, date of birth, S.I.N., and province of residence on December 31st of the year, if changed in the current year.

7. Personal status – single, married, common-law, separated, divorced, widowed. If married or common-law, provide the spouse/partner’s income, S.I.N., and birthdate.

8. List of dependents/children – including their incomes and birth dates.

9. Details regarding RRSP – Home Buyers’ Plan withdrawals and repayments; and RRSP – Lifelong Learning Plan repayments.

10. Details of foreign property owned at any time during the year including cash, stocks, trusts, partnerships, real estate, tangible and intangible property, contingent interests, convertible property, etc. Simplified method may be used for > $100,000 but less than $250,000. If >$250,000 Required details include a description of the property, related country, maximum cost in the year, cost at year-end, income, capital gain/loss for each particular property.

For property held in an account with a Canadian securities dealer or Canadian trust company, please discuss with your financial advisor as they will be able to provide a printout to assist in this area.

11. Foreign income/US income (information not provided on slips). Please provide information for your U.S. returns and US 1040/1040NR returns (if applicable), FINCEN Form 114 (FBAR) information, any other foreign income received, or taxes paid.

This information and checklist have been prepared for use for clients of Paterson Henn CPA as a guidance and should not be used as tax advice for personal situations. Further information may be requested.

Canadians are fortunate to have a publicly funded health care system, in which most major medical expenses are covered by provincial health care plans. Such plans are not, however, comprehensive, and there is consequently a large (and growing) number of medical and para-medical costs — including dental care, prescription drugs, physiotherapy, ambulance trips, and many others — which must be paid for on an out-of-pocket basis by the individual. In some cases, such costs are covered by private insurance, usually provided by an employer, but not everyone benefits from such coverage. Self-employed individuals, those working on contract, or those whose income comes from several part-time jobs do not usually have access to such private insurance coverage. Fortunately for those individuals, our tax system acts to help cushion the blow by providing a medical expense tax credit to help offset out-of-pocket medical and para-medical costs which must be incurred.

Canadians are fortunate to have a publicly funded health care system, in which most major medical expenses are covered by provincial health care plans. Such plans are not, however, comprehensive, and there is consequently a large (and growing) number of medical and para-medical costs — including dental care, prescription drugs, physiotherapy, ambulance trips, and many others — which must be paid for on an out-of-pocket basis by the individual. In some cases, such costs are covered by private insurance, usually provided by an employer, but not everyone benefits from such coverage. Self-employed individuals, those working on contract, or those whose income comes from several part-time jobs do not usually have access to such private insurance coverage. Fortunately for those individuals, our tax system acts to help cushion the blow by providing a medical expense tax credit to help offset out-of-pocket medical and para-medical costs which must be incurred.

The bad news for such individuals is that while a tax credit is available, the computation of eligible expenses and determining when a claim for the credit should be made can be confusing. In addition, the determination of which expenses qualify for the credit and which do not isn’t necessarily intuitive, nor is the determination of when it’s necessary to obtain prior authorization from a medical professional in order to ensure that the contemplated expenditure will qualify for the credit. For instance, in order to claim the medical expense tax credit for the cost of a walker, it is necessary to obtain a prescription for that walker from a doctor. Where costs are incurred to purchase a wheelchair, those costs are eligible for the medical expense credit, with no requirement that a prescription be obtained.

The basic rule is that qualifying medical expenses (a lengthy list of which can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-33099-33199-eligible-medical-expenses-you-claim-on-your-tax-return.html) over 3% of the taxpayer’s net income, or $2,421, whichever is less, can be claimed for purposes of the medical expense tax credit on the taxpayer’s return for 2021.

Put in more practical terms, the rule for 2021 is that any taxpayer whose net income is less than $80,700 will be entitled to claim medical expenses that are greater than 3% of his or her net income for the year. Those having income of $80,700 or more will be limited to claiming qualifying expenses which exceed the $2,421 threshold.

The other aspect of the medical expense tax credit which can cause some confusion is that it’s possible to claim medical expenses that were incurred prior to the current tax year but weren’t claimed on the return for the year that the expenditure was made. The actual rule is that the taxpayer can claim qualifying medical expenses incurred during any 12-month period which ends in the current tax year, meaning that each taxpayer must determine which 12-month period ending in 2021 will produce the greatest amount eligible for the credit. That determination will obviously depend on when medical expenses were incurred so there is, unfortunately, no universal rule of thumb that can be used.

Medical expenses incurred by family members — the taxpayer, his or her spouse, children who were born in 2004 or later, and certain other dependent relatives — can be added together and claimed by one member of the family. In most cases, making that claim on the tax return of the lower income spouse is best, in order to maximize the amount claimable, where that spouse has tax payable for the year.

As the end of the calendar year approaches, it’s a good idea to add up the medical expenses which have been incurred during 2021, as well as those paid during 2020 and not claimed on the 2020 return. Once those totals are known, it will be easier to determine whether to make a claim for 2021 or to wait and claim 2021 expenses on the return for 2022. And, if the decision is to make a claim for 2021, knowing what medical expenses were paid, and when, will enable the taxpayer to determine the optimal 12-month period for that claim.

Finally, it’s a good idea to look into the timing of medical expenses which will have to be paid early in 2022. Where those are significant expenses (for instance, a particularly costly medication which must be taken on an ongoing basis, or some expensive dental work) it may make sense, where possible, to accelerate the payment of those expenses to December 2021, where that means they can be included in 2021 totals and claimed on the 2021 return.

Working from home — and certainly work from home arrangements on the scale experienced over the past 19 months — would not be practically possible without the use of technology. And of all the available technology, cell phones and internet service are the two essentials without which work-from-home arrangements almost literally can’t function.

Working from home — and certainly work from home arrangements on the scale experienced over the past 19 months — would not be practically possible without the use of technology. And of all the available technology, cell phones and internet service are the two essentials without which work-from-home arrangements almost literally can’t function.

Almost everyone, of course, already had a cell phone and at-home access to the internet when work-from-home arrangements became necessary. However, when workplaces closed and employees began working from home on a massive scale early in 2020, it soon became apparent that most employees would need to upgrade their existing services to meet the demand resulting from one (or more) family members working from home or engaged in online schooling.

In some cases, the employer was prepared to subsidize those increased costs, or even to cover cell phone and internet costs entirely. Such an arrangement, however, raises the question of when employer-provided cell phones and internet service are simply the tools needed by an employee to do his or her job — and when they become more than that and constitute benefits to the employee, which must be included in income, and on which tax must be paid.

Not surprisingly, the Canada Revenue Agency (CRA) has formulated and issued an assessing policy on the circumstances in which taxable benefits arise. And, perhaps also not surprisingly, given the wide range of cell phone and internet service plans available, that assessing policy is a bit complicated. And, most important from the employee’s point of view, the way in which an employer pays for (or reimburses) an employee’s cell phone and internet costs can by itself determine whether such assistance has no tax consequences or becomes a taxable benefit and/or income in the hands of the employee.

There are several types of costs involved in acquiring and using a cell phone and using internet service, as follows, and each has its own set of tax consequences.

The first cost is that of acquiring a cell phone. If the employer purchases a cell phone and provides it to the employee to enable them to carry out their employment duties, the cost of that cell phone is not a taxable benefit to the employee. However, if the employee purchases the phone and is then reimbursed by the employer for that cost, the fair market value of that cell phone is a taxable benefit to the employee — and that taxable benefit is assessed even if the employee uses the phone for employment-related purposes.

The next category of cell phone related costs is that of a cell phone service plan, of which there are an almost limitless range of options at different cost levels. Where an employer pays for (or reimburses) the cost of the employee’s cell phone plan, the portion of the cost attributable to employment-related cell phone use does not, reasonably enough, create a taxable benefit to the employee. Where (as would most often be the case) the cell phone is used for both employment and personal purposes, the portion of the cost attributable to personal use is treated as a taxable benefit to the employee, unless the employee reimburses the employer for that personal use portion.

In order to make that allocation, of course, it would be necessary to calculate the number of minutes of cell phone use that was attributable to personal use and that which was used for employment-related purposes. The amount of record keeping required to do so is likely more than most employees and employers would be willing to undertake. In recognition of that reality, the CRA has arrived at a reasonable administrative policy to deal with the issue. Under that policy, an employee’s personal use of an employer-paid cell phone plan will not result in a taxable benefit to the employee if all of the following three criteria are met:

• the cost of the plan is reasonable;
• the plan is a basic plan with a fixed cost; and
• the employee’s personal use of the service does not result in charges that are more than the basic plan cost.

In light of the administrative positions and policies put forward by the CRA, the best way to avoid unwanted tax consequences would seem to be for the employee to use a cell phone provided by the employer, to have the employer buy a fixed-price plan which provides the most generous airtime provision that can be justified by the employee’s employment-related use of the phone, and to keep the total business and personal use minutes under the basic airtime limit. Where that’s the case it won’t matter, in any given month, what the allocation between personal and employment use is.

Unfortunately, the CRA has not formulated a similar administrative policy with respect to employer-paid internet services at home. Where the employer pays for (or reimburses the employee for) the cost of an internet service at home to help the employee carry out employment duties, only the portion of that service used for employment purposes is not a taxable benefit. Put another way, where personal use is made of an employer-provided at-home internet service, the portion of the cost attributable to that personal use will (unless the employee is reimbursed by the employer for such costs) result in a taxable benefit to the employee. How such allocation is to be arrived at, as a practical matter, is a question left up to the employer, who must be prepared to determine both the percentage of employment use and the fair market value of that use and, if asked, to justify the position taken to the CRA.

One final note — where the employer provides an employee with an allowance for cell phone or internet services, that allowance must, in all circumstances, be included in the employee’s income for the year.

Throughout the pandemic, the federal government has provided businesses with a number of support programs, some of which operated to subsidize the wage and rental costs of those businesses. Some of those programs were scheduled to expire on November 20, 2021; however, in its most recent announcement made October 21, 2021, the federal government indicated that one program — the Canada Recovery Hiring Program (CRHP) — would be extended, possibly until July 2, 2022. In addition, two new programs will be implemented to address the needs of businesses in sectors particularly hard hit by the pandemic. The affected programs are as follows.

Throughout the pandemic, the federal government has provided businesses with a number of support programs, some of which operated to subsidize the wage and rental costs of those businesses. Some of those programs were scheduled to expire on November 20, 2021; however, in its most recent announcement made October 21, 2021, the federal government indicated that one program — the Canada Recovery Hiring Program (CRHP) — would be extended, possibly until July 2, 2022. In addition, two new programs will be implemented to address the needs of businesses in sectors particularly hard hit by the pandemic. The affected programs are as follows.

Canada Recovery Hiring Program

The CRHP, which was scheduled to expire on November 20, 2021, provides qualifying employers with a wage subsidy. Generally, qualifying employers are those who have experienced a revenue loss of at least 10%, as measured against a baseline period of March 14 to April 10, 2021. The subsidy rate for the October 24 to November 20, 2021 period was set at 20%.

The latest government announcement proposes some changes to the CRHP. First, the subsidy rate for the October 24 to November 20, 2021 period is to be increased to 50%. Second, the CRHP will be extended (at the new subsidy rate of 50%) until at least May 7, 2022. The federal government may opt to further extend the program until July 2, 2022.

Under the proposed extension, the existing baseline period of March 14 to April 10, 2021, would continue to be used in calculating the benefit. The existing eligibility rules would also continue to apply, including the required revenue decline of more than 10%.

Tourism and Hospitality Recovery Program

Few sectors of the economy have been hit harder by the pandemic than tourism and hospitality. In light of that reality, the federal government will be introducing the Tourism and Hospitality Recovery Program. That program will provide support to hotels, tour operators, travel agencies, and restaurants, by providing wage and rent subsidy programs.

Hardest-Hit Business Recovery Program

The second new program to be introduced is not sector-specific but instead focuses on any business which has experienced and continues to experience significant revenue loss.

In order to be eligible for the Tourism and Hospitality Recovery Program, a business must demonstrate an average monthly 40% revenue reduction between March 2020 and February 2021, as well as a current-month revenue loss of at least 40%. For purposes of the Hardest-Hit Businesses Recovery Program, revenue reductions for the comparable periods must be at least 50%.

The benefit rate which may received under each program is also different. Under the Tourism and Hospitality Recovery Program, the maximum subsidy rate is 75%. That maximum rate under the Hardest-Hit Businesses Recovery Program is 50%.

In addition, businesses which are affected by temporary new local lockdowns may be eligible for support at the same subsidy rates which are available through the Tourism and Hospitality Recovery Program. Those subsidy rates will be provided throughout the period of the lockdown, regardless of whether the business has previously experienced revenue losses during the pandemic.

Businesses which are eligible for either of the Tourism and Hospitality Recovery Program or the Hardest-Hit Businesses Recovery Program will also both be eligible for the Canada Emergency Rent Subsidy at an enhanced rate. Under current rules, there is a monthly cap on eligible expenses that can be claimed under the Canada Emergency Rent Subsidy of $75,000 per business location and $300,000 in total for all locations. As part of the October 21 announcement, the federal government indicated that the monthly cap would (for businesses eligible for benefits under either the Tourism and Hospitality Recovery Program or the Hardest-Hit Businesses Recovery Program) be increased from $300,000 to $1 million, starting on October 24, 2021.

Both the Tourism and Hospitality Recovery Program and the Hardest-Hit Businesses Recovery Program will be available until May 7, 2022, with the proposed 75% and 50% subsidy rates, respectively, available through to March 12, 2022. From March 13, 2022, to May 7, 2022, the subsidy rates will decrease by half.

Details of the two new programs, including benefit periods and applicable subsidy rates,  can be found on the federal government website at https://www.canada.ca/en/department-finance/news/2021/10/targeting-covid-19-support-measures.html. Details of the Canada Recovery Hiring Program are available on the same website at https://www.canada.ca/en/revenue-agency/services/subsidy/recovery-hiring-program.html.

Since the Canada Recovery Benefit (CRB) replaced the Canada Emergency Response Benefit (CERB) just over a year ago, more than 2 million individual Canadians have applied for the CRB, a benefit which paid $900 (pre-tax) per week until July 17 of this year, and $600 (pre-tax) per week thereafter. For the most recent benefit period for which figures are available (September 12-25, 2021), 821,560 Canadians received the CRB. In total, just over $27 billion in CRB amounts have been issued by the federal government since October 2020.

Since the Canada Recovery Benefit (CRB) replaced the Canada Emergency Response Benefit (CERB) just over a year ago, more than 2 million individual Canadians have applied for the CRB, a benefit which paid $900 (pre-tax) per week until July 17 of this year, and $600 (pre-tax) per week thereafter. For the most recent benefit period for which figures are available (September 12-25, 2021), 821,560 Canadians received the CRB. In total, just over $27 billion in CRB amounts have been issued by the federal government since October 2020.

It had been previously announced that the CRB program would end on Saturday October 23, 2021. While there was some speculation that the program would be wound down in a gradual way, such is not the case. On October 21, the federal government announced that the CRB would end on October 23, and that there would be no new general pandemic relief program for individuals to replace it. The government did announce that a new Canada Worker Lockdown Benefit (CWLB) would be implemented, but benefits under that program will be provided only on a localized basis, in areas where government authorities order a general lockdown for pandemic-related reasons.

Details of the new benefit are still to be announced; however, the federal government announcement made on October 21 did provide the following information. The CWLB will be

• $300 a week;
• strictly available to workers whose work interruption is a direct result of a government-imposed public health lockdown;
• available until May 7, 2022, with retroactive application to October 24, 2021 should the situation warrant it;
• accessible for the entire duration of a government-imposed public health lockdown (up until May 7, 2022);
• available to workers who are ineligible for Employment Insurance (EI) and those who are eligible for EI, as long as they are not paid benefits through EI for the same period. 

Two other individual pandemic relief programs which were also scheduled to end on October 23 have, however, been extended. The Canada Recovery Sickness Benefit (CRSB) and the Canada Recovery Caregiving Benefit (CRCB) are both extended to be available until May 7, 2022. In addition, the maximum duration of benefits under both plans has been extended.

The Canada Recovery Sickness Benefit of $500 (pre-tax) per week is available to individuals who

• are unable to work for at least 50% of the week because they contracted COVID-19, or have been advised to self-isolate for reasons related to COVID-19; or
• have underlying conditions, are undergoing treatments, or have contracted other sicknesses that, in the opinion of a medical practitioner, nurse practitioner, person in authority, or government or public health authority, would make them more susceptible to COVID-19.

The CRSB is currently available for a maximum of 4 weeks. Effective as of October 24, 2021 and until May 7, 2022, that eligibility is extended by 2 weeks, to be available for a maximum of 6 weeks.

The CRCB is provided to those who must stay home to care for an ill or vulnerable relative. The benefit of $500 (pre-tax) per week per household is applicable where an individual is unable to work for at least 50% of the week because:

• they must care for a child under the age of 12 or family member who needs supervised care, because schools, day-cares, or care facilities are closed due to COVID-19; or

• the child or family member is sick and/or required to quarantine or is at high risk of serious health implications because of COVID-19.

The CRCB was previously available for a maximum of 42 weeks. Effective as of October 23, 2021 and until May 7, 2022, that eligibility period is extended to 44 weeks.

While Canadians who are (or may become) eligible for either the Canada Sickness Recovery Benefit or the Canada Caregiving Recovery Benefit can be assured that such benefits will continue to be available for almost another seven months, current recipients of the Canada Recovery Benefit are faced with the immediate need to replace income received from that program. Those recipients should be aware that, while the program ended on October 23, 2021, applications for CRB amounts for benefit periods up to that date can still be made. Each CRB application is made for a particular two-week period, and applications for a particular period can be made up to 60 days after the end of that period. Consequently, applications for the final CRB period of October 10 to 23, 2021 can be made until December 22, 2021.

Finally, the application period for a number of prior CRB benefit periods still remain open. A listing of the benefit periods for which application can still be made, together with information on the applicable deadlines and the application process can be found on the federal government website at https://www.canada.ca/content/canadasite/en/revenue-agency/services/benefits/recovery-benefit/crb-periods-apply.html#h-2.

Information on the changes to existing individual pandemic benefit programs is available on the same website at https://www.canada.ca/en/department-finance/economic-response-plan.html#individuals.

Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.

The ongoing pandemic has, as one of its many effects, created a boom in the home renovation industry, as Canadians find themselves needing to adapt their homes to more and more varied uses.

The ongoing pandemic has, as one of its many effects, created a boom in the home renovation industry, as Canadians find themselves needing to adapt their homes to more and more varied uses.

One of those uses is multi-generational living, as older Canadians seeks to “age in place” rather than moving to a retirement home or long-term care facility. And, while home renovations for any purpose are undoubtedly expensive, renovations done to allow homeowners (or family members of homeowners) to continue to live in the family home benefit from a federal tax credit for expenses incurred.

That credit — the Home Accessibility Tax Credit, or HATC — has three features that make it particularly useful. First, the credit is available to all taxpayers who incur eligible expenses, regardless of individual or family income. Second, expenses eligible for the credit don’t have to be incurred for the benefit only of the homeowner — taxpayers who incur eligible home renovation expenses can claim the HATC where those expenses are done to increase accessibility or safety for any family member who is over the age of 65 or who is disabled and lives in the home. Finally, the HATC is a rare exception to the general rule that an expense can only be claimed once for tax purposes. Many of the expenses which are eligible for the HATC also qualify for the medical expense tax credit — and the rules permit such eligible expenses to be claimed for purposes of both credits, in the same tax year.

The rules which govern how the credit is claimed are also quite flexible. For purposes of the credit, a “qualifying individual” is a person over the age of 65, or a person of any age who can claim the disability tax credit. An “eligible individual” is a family member on whom the qualifying individual is dependent. Under the HATC any allowable credit can be split between or among eligible and qualifying individuals as they see fit.

The credit is equal to 15% of up to $10,000 in qualifying expenses per year, and that dollar limit applies even if there is more than one qualifying individual living in the home. The credit itself is non-refundable, meaning that it can reduce federal income tax otherwise payable, but cannot create or increase a refund. Consequently, from a tax planning perspective, it makes sense for the credit to be claimed only by eligible or qualifying individuals who have tax payable for the year.

The general rule for purposes of the credit is that an eligible expense is one which is done to increase accessibility of the home or the safety of a qualifying individual living in the home. As well, any renovation done must be of a permanent or “enduring” nature — an item bought that does not become a permanent part of the home is generally not eligible. As an example, a shower seat which is permanently affixed to the wall or floor in a bath or shower would qualify for the credit, while a portable seat that can be taken in and out of the shower as needed would not.

It’s apparent that the kind and number of additions and renovations which would qualify for the credit are almost innumerable, and any of those which meet the criteria outlined above will generally qualify. There are, however, specific categories of goods and services which are not eligible for the HATC. The Canada Revenue Agency (CRA) provides a listing of common expenses which do not qualify on its website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31285-home-accessibility-expenses.html.

Most homeowners, especially where renovations are extensive, would employ professionals to make the changes. Others, however, are committed DIYers, who take on the project themselves, perhaps enlisting the help of family members. In each case, the rules on which expenses (i.e., labour and materials) qualify for the credit will differ, and those rules, as outlined on the CRA website, are as follows.

Work performed by yourself

If you do the work yourself, the eligible expenses include expenses for:

• building materials
• fixtures
• equipment rentals
• building plans
• permits

However, the value of your labour or tools cannot be claimed as eligible expenses.

Work performed by a family member

Expenses are not eligible if the goods or services are provided by a person related to the qualifying or the eligible individual, unless that person is registered for goods and services tax/harmonized sales tax (GST/HST) under the Excise Tax Act. If the particular family member is registered for GST/HST and if all other conditions are met, the expenses will be eligible for the HATC.

Work performed by professionals

Generally, paid work done by professionals such as electricians, plumbers, carpenters, and architects for eligible expenses qualifies as eligible expenses. 

Home renovations done to ensure all family members can access the home easily and live in it safely are generally renovations which must be done in a timely manner, for everyone’s safety and peace of mind. And, while costs for renovations (of any kind, for any purpose) generally end up being higher than planned, in this case, some financial assistance for those costs is provided through our tax system.

In most cases, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences — a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be the ability to claim a tax credit or deduction for the fees paid.

In most cases, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences — a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be the ability to claim a tax credit or deduction for the fees paid.

Unfortunately, while there are some circumstances in which such a deduction can be claimed, those circumstances don’t usually include the routine reasons — purchasing a home, getting a divorce, establishing custody rights, or seeking legal advice about making a will or managing a family estate — for which most Canadians incur legal fees. Generally, personal (as distinct from business-related) legal fees become deductible for most Canadian taxpayers only where they are seeking to recover amounts which they believe are owed to them, particularly where those amounts involved employment or employment-related income or, in some cases, family support obligations.

The first situation in which legal fees paid may be deductible is that of an employee seeking to collect (or to establish a right to collect) salary or wages. In all Canadian provinces and territories, employment standards laws provide that an employee who is about to lose his or her job (for reasons not involving fault on the part of the employee) is entitled to receive a specified amount of notice, or salary or wages equivalent to such notice. In many cases, however, the employee can establish a right to a period of notice (or payment in lieu) greater than the statutory minimum. The amount of notice or payment in lieu of notice which is payable can then become a matter of negotiation between the employer and its former employee, and such negotiations usually involve legal representation and consequently, legal fees. In that situation, legal fees incurred by the employee to establish a right to amounts allegedly owed by the employer are deductible by that former employee. If a court action is necessary and the Court requires the employer to reimburse its former employee for some or all of the legal fees incurred, the amount of that reimbursement must be subtracted from any deduction claimed. In other words, the former employee can claim a deduction only for legal fees which he or she was personally required to pay in order to collect wages or salary owed and for which he or she was not reimbursed.

In some situations, an employee or former employee seeks legal help in order to collect or to establish a right to collect a retiring allowance or pension benefits. In such situations, the legal fees incurred can be deducted, up to the total amount of the retiring allowance or pension income actually received for that year.

The rules covering the deduction of legal fees incurred where an employee claims amounts from an employer or former employer are relatively straightforward. The same, unfortunately, cannot be said for the rules governing the deductibility of legal fees paid in connection with family support obligations. Those rules have evolved over the past number of years in a somewhat piecemeal fashion — the current rules are as follows.

Legal fees incurred by either party in the course of negotiating a separation agreement or obtaining a divorce are not deductible. Such fees paid to establish child custody or visitation rights are similarly not deductible by either parent. As well, no fees are incurred to equalize family assets.

Where, however, one former spouse has the right to receive support payments from the other, there are circumstances in which legal fees paid in connection with that right are deductible. Specifically, legal fees paid for the following purposes will be deductible by the person receiving those support payments:

• establishing the amount of support payments from their current or former spouse or common-law partner;
• establishing the amount of support payments from the legal parent of their child (who is not their current or former spouse or common-law partner) where the support is payable under the terms of a court order;
• seeking an increase in support payments;
• defending against a reduction in support payments;
• collecting late support payments; or
• requesting that child support payments be non-taxable.

On the payment side of the support payment/receipt equation, the situation is not nearly so favourable, as a deduction for legal fees incurred will not generally be allowed to a person paying support. More specifically, as outlined on the Canada Revenue Agency (CRA) website, a payer of support “cannot deduct legal and accounting fees incurred to establish, negotiate, contest, reduce or terminate the amount of support payments”.

Finally, where the CRA reviews or challenges income amounts, deductions, or credits reported or claimed by a taxpayer for a tax year, any fees (which in this case includes accounting fees) paid for advice or assistance in dealing with the CRA’s review, assessment, or reassessment, or in objecting to that assessment or reassessment, can be deducted by the taxpayer. A deduction can similarly be claimed where the taxpayer incurs such fees in relation to a dispute involving employment insurance, the Canada Pension Plan, or the Quebec Pension Plan.

Since March of 2020, tens of millions of Canadians have received pandemic benefits. In some cases, those benefits have been received directly by individuals — typically, through the Canada Emergency Response Benefit (CERB) and, later, the Canada Recovery Benefit (CRB). In other cases, benefits have been provided to businesses, in some cases to assist them with rent payments or, in others, to subsidize employee wages.

Since March of 2020, tens of millions of Canadians have received pandemic benefits. In some cases, those benefits have been received directly by individuals — typically, through the Canada Emergency Response Benefit (CERB) and, later, the Canada Recovery Benefit (CRB). In other cases, benefits have been provided to businesses, in some cases to assist them with rent payments or, in others, to subsidize employee wages.

Each of the pandemic economic assistance programs provided has been tweaked, renewed, and extended several times, and the current status of each such benefit program can be hard to remember. What follows is a summary of the major programs which are currently (as of September 2021) in place, and the dates on which those programs are currently scheduled to come to an end. Barring any changes by the newly elected federal government, most of the following programs are scheduled to end in October 2021.

Benefit programs for individuals

Canada Recovery Benefit

The CRB replaced the initial pandemic relief program, the CERB, in September of 2020.

The CRB is an income replacement benefit paid to those who are not working due to the pandemic or who have experienced a 50% reduction in income when compared to the previous year, again for pandemic-related reasons. To receive the CRB, an individual must have earned at least $5,000 in 2019, 2020, or during the previous 12 months and must not be eligible for Employment Insurance.

The amount which can be received under the CRB program depends on when an application for the benefit is made. Individuals who apply after July 17, 2021 can receive $600 for each two-week period. Those who applied prior to July 18, 2021 can receive $1,000 each subsequent two-week period.

Under current rules, the CRB is scheduled to end on October 23, 2021. However, it is possible to apply for the CRB after that date, as the rules allow applications to be made retroactively for any two-week period up to 60 days after that period has ended.

Canada Recovery Sickness Benefit

The eligibility criteria for the Canada Recovery Sickness Benefit (CRSB) are much narrower than those for the CRB and consequently the rules are much simpler.

The CRSB is paid to those who miss more than 50% of their work week because they are sick with COVID-19, because they have been advised to self-isolate due to COVID-19 or because they have a health condition which puts them at greater risk of contracting COVID-19.

The benefit of $500 per week is paid for a maximum of four weeks, and those weeks do not have to be consecutive.

Like the CRB, the CRSB program is scheduled to end on October 23, 2021, but applications for any one-week benefit period can be made up to 60 days after the end of that benefit period.

Canada Recovery Caregiving Benefit

As the name implies, the Canada Recovery Caregiving Benefit (CRCB) can be claimed by those who are unable to work because they must care for their child under 12 years old or for a family member who needs supervised care. That need for care can arise because the family member is ill, self-isolating, or at risk of serious health complications because of COVID-19, or because their school, regular program, or facility is closed or unavailable to them for pandemic-related reasons.

The CRCB is paid as a $500-per-week benefit, for a maximum of 42 weeks. Those 42 weeks are not required to be consecutive weeks.

The CRCB program is scheduled to end on October 23, 2021, but application for the benefit can be made up to 60 days after the end of a benefit period.

It’s apparent that an individual could, under the eligibility requirements, qualify for more than one of the above benefits during the same time period. However, the rules prevent such “double-dipping”, by providing that only one such pandemic benefit can be received during for a particular time period. In addition, individuals are generally not eligible for any of the above benefits for a time period during which they were receiving Employment Insurance, short-term disability benefits, or (in the province of Quebec) Quebec Parental Insurance Benefits.

More information on each of these individual pandemic benefits can be found on the government of Canada website at https://www.canada.ca/en/services/benefits/covid19-emergency-benefits.html.

Benefits for businesses

Over the past year and a half, the federal government has provided a number of rent subsidy and wage subsidy programs to enable businesses to cover their fixed costs during lockdowns and to bring back employees once it was possible to re-open. The major current programs in those areas are as follows.

Canada Emergency Wage Subsidy

The Canada Emergency Wage Subsidy or CEWS provides a subsidy on eligible salary or wages to help businesses hire and pay workers. Under the program terms, eligible employers can hire new workers, increase workers' hours, or increase wages.

The CEWS program will continue until October 23, 2021.

Canada Recovery Hiring Program

Like the CEWS, the Canada Recovery Hiring Program (CRHP), which was introduced on June 6, 2021, provides a subsidy on eligible salary or wages to help businesses hire and pay workers. Most of the eligibility criteria under the CEWS and the CRHP are the same (although the calculation of benefits differs) and, under both programs, eligible employers can hire new workers, increase workers' hours, or increase wages.

The CRHP serves many of the same purposes as the CEWS. There is an overlap period for the two programs between June 6 and October 23, 2021, and eligible employers can in fact choose which program to apply to for any eligibility period during that overlap period. The federal government provides an online calculator to enable businesses to determine which benefit is more advantageous, and that calculator can be found at https://www.canada.ca/en/revenue-agency/services/subsidy/calculate-wage-hiring-subsidies.html.

Employers can apply for the CRHP for a four-week period, and applications for support must be made again for each subsequent four-week period. An application for a specific four-week claim period can be made up to 180 days after the end of that claim period.

Unlike some other business pandemic support programs, the CRHP is scheduled to be available until November 20, 2021.

Canada Emergency Rent Subsidy

The Canada Emergency Rent Subsidy (CERS) provides a rent and mortgage subsidy for eligible expenses to qualifying businesses, charities, and non-profits. Unlike an earlier version of the commercial tenant support program, the CERS is applied for by, and paid directly to, tenants and property owners. There is no requirement for participation by landlords.

An additional 25% in rent support is available under the CERS program for businesses which were “significantly restricted” by mandatory public health orders.

The CERS program will be available until October 23, 2021. However, eligible businesses can apply for any particular claim period up to 180 days after the end of that claim period.

The programs listed above are the main pandemic benefit programs currently available to individuals and businesses. While the purpose of each program and the benefits to be obtained are relatively straightforward, there are myriad details with respect to eligibility, application processes, determination of benefits, and tax treatment of those benefits. As well, there are many other such programs offered by the federal government. Detailed information on all such pandemic relief programs can be found on the federal government website at https://www.canada.ca/en/department-finance/economic-response-plan.html#businesses.

Finally, the information summarized above with respect to pandemic benefits is current as of September 26, 2021. Extensions of such programs, or changes to program terms may be made before the programs expire. Should that occur, information on the changes will be available on the federal government website at https://www.canada.ca/en/department-finance/economic-response-plan.html#businesses.

Most Canadians know that the deadline for making contributions to one’s registered retirement savings plan (RRSP) comes 60 days after the end of the calendar year, around the end of February. There are, however, some circumstances in which an RRSP contribution must be (or should be) made by December 31, in order to achieve the desired tax result.

Most Canadians know that the deadline for making contributions to one’s registered retirement savings plan (RRSP) comes 60 days after the end of the calendar year, around the end of February. There are, however, some circumstances in which an RRSP contribution must be (or should be) made by December 31, in order to achieve the desired tax result.

Similarly, most Canadians who have opened a registered retirement income fund (RRIF) are aware that they are required to make a withdrawal of a specified amount from that RRIF each year, with the percentage withdrawal amount based on the RRIF holder’s age — although few are aware of when and how that required withdrawal is calculated.

The rules around tax-free savings accounts (TFSAs) are more flexible, but it is nonetheless the case that advantages can be obtained (and disadvantages avoided) by carefully timing of TFSA withdrawals and recontributions based on the calendar year end.

In other words, while the basic rules with respect to contributions to and withdrawals from each of these savings plans are relatively straightforward there are, nonetheless, benefits to be received from careful consideration of the detailed rules — and some exceptions to those rules.

What follows is an outline of steps which should be considered, before the end of the 2021 calendar year, by Canadians who have an RRSP, a RRIF, and/or a TFSA.

Timing of RRSP contributions

When you are making a spousal RRSP contribution

Under Canadian tax rules, a taxpayer can make a contribution to an RRSP in his or her spouse’s name and claim the deduction for the contribution on his or her own return. When the funds are withdrawn by the spouse, the amounts are taxed as the spouse’s income, at a (presumably) lower tax rate. However, the benefit of having withdrawals taxed in the hands of the spouse is available only where the withdrawal takes place no sooner than the end of the second calendar year following the year in which the contribution is made. Therefore, where a contribution to a spousal RRSP is made in December of 2021, the contributor can claim a deduction for that contribution on his or her return for 2021. The spouse can then withdraw that amount as early as January 1, 2024 and have it taxed in his or her own hands. If the contribution isn’t made until January or February of 2022, the contributor can still claim a deduction for it on the 2021 tax return, but the amount won’t be eligible to be taxed in the spouse’s hands on withdrawal until January 1, 2025. It’s an especially important consideration for couples who are approaching retirement who may plan on withdrawing funds in the relatively near future. Even where that’s not the situation, making the contribution before the end of the calendar year will ensure maximum flexibility should an unforeseen need to withdraw funds arise.

When you are turning 71 during 2021

Every Canadian who has an RRSP must collapse that plan by the end of the year in which he or she turns 71 years of age — usually by converting the RRSP into a RRIF or by purchasing an annuity. An individual who turns 71 during the year is still entitled to make a final RRSP contribution for that year, assuming that he or she has sufficient contribution room. However, in such cases, the 60-day window for contributions after December 31 is not available. Any RRSP contribution to be made by a person who turns 71 during the year must be made by December 31 of that year. Once that deadline has passed, no further RRSP contributions are possible.

RRIF withdrawals for 2021

Under Canadian law, anyone who has a RRIF is required to make a minimum withdrawal from that RRIF each year. The amount of the withdrawal is calculated as a specified percentage of the balance in the RRIF at the beginning of the calendar year, with that percentage based on the age of the RRIF holder at that time.

Those RRIF holders who elect to withdraw only the required minimum amount each year will likely notice a significant increase in the amount which must be withdrawn (and taxed) in 2021 when compared to the required withdrawal from 2020. That difference is attributable, for the most part, not to increases in the value of the RRIF or the increased age of the RRIF holder, but to a temporary rule which was put in place in 2020 as part of the pandemic relief measures.

In March 2021, the stock market experienced a significant loss in value. Since required RRIF withdrawal amounts are based on the value of the RRIF at the start of the calendar year, many RRIF holders were faced with the prospect of having to make withdrawals from a portfolio whose value had declined precipitously since January 1, 2020. In recognition of that reality, required RRIF withdrawals for RRIF holders of all ages were reduced (for 2020 only) by 25%.

For 2021, the usual RRIF percentage withdrawal requirements have been reinstated. That fact, combined with the market recovery since March 2020, will mean that many RRIF holders may be surprised at the amount which they must withdraw from their RRIFs (and pay tax on) in 2021.

Take, for example, an individual who was 74 years old at the beginning of 2020 and had $500,000 in his or her RRIF on January 1, 2020. The required minimum withdrawal for 2020 (taking into account the 25% reduction) would have been $21,250.

Assume that the balance in the RRIF grew by 5% during 2020 and that the RRIF balance was therefore $525,000 on January 1, 2021. The RRIF holder (aged 75 as of January 1, 2021) will be required to withdraw a minimum of $30,555 from that RRIF for 2021, and to pay tax on that amount.

While there is no way of avoiding the requirement to withdraw a minimum amount from one’s RRIF, and to pay tax on the amount withdrawn, taxpayers who do not have immediate need of such funds can consider contributing those amounts to a TFSA. Where that is done, the funds can be invested and continue to grow, and neither the original contribution nor the investment gains will be taxable when the funds are withdrawn from the TFSA.

Planning for TFSA withdrawals and contributions

Each Canadian aged 18 and over can make an annual contribution to a TFSA — the maximum contribution for 2021 is $6,000. As well, where an amount previously contributed to a TFSA is withdrawn from the plan, that withdrawn amount can be re-contributed, but not until the year following the year of withdrawal.

Consequently, it makes sense, where a TFSA withdrawal is planned (or the need to make such a withdrawal might arise) within the next few months to make that withdrawal before the end of the calendar year. A taxpayer who withdraws funds from his or her TFSA before December 31, 2021 will have the amount which is withdrawn added to his or her TFSA contribution limit for 2022, which means it can be re-contributed, where finances allow, as early as January 1, 2022. If the same taxpayer waits until January of 2022 to make the withdrawal, he or she won’t be eligible to replace the funds withdrawn until 2023.

The approach of the calendar year end doesn’t usually prompt Canadians to consider the details of making contributions to an RRSP or withdrawals from a TFSA or a RRIF. There is, however, no flexibility in the deadlines for taking such actions, and considering what steps may be needed or advisable now means one less thing to remember as the December 31 deadline nears.