Thought Leadership

Welcome to the 2016 Personal Tax Filing Season!

It’s time again to file your personal tax returns. The deadline keeps changing – this year, those returns must be filed with the Canada Revenue Agency by no later than Monday May 2, 2016.

We’d like to deliver the finished product as quickly and efficiently as possible – and we’re sure that many clients will, as of today, already possess all the information that’s needed (much of the most relevant data may already be on our system – we usually just need the ‘small stuff’, and other items, to tie everything together). So, we’d like to encourage everyone to consider the “practical” deadline as really being early April – there’s little reason for any later than that!

To help us help you, organization is the key! This newsletter contains a few items to help you accomplish your annual filing obligation with as little trouble and expense as possible.

Personal Tax Season Checklists:

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If you are a non-resident with a Canadian rental property here is a guide of your tax filing obligations, important due dates and other issues you should be aware of.

Tax Filing Obligations

• The tenant or property manager has an obligation to withhold non-resident tax at a rate of 25% on the gross rental income paid to a non-resident;
• The tax should be sent to the Canada Revenue Agency (CRA) on or before the 15^th day of the month following the month the rental income is paid;
• The payer would have to prepare a NR4 slip to provide you the gross amount of the rental income and the amount that was remitted to the CRA, annually.

You could then elect under Section 216 of the Income Tax Act to pay tax on only your net rental income instead of the gross amount. Please note that you only have a two year period to make this election.
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Global warming is still a theory to many Canadians, stuck as they are for many months in the snow and cold. So, the attractions of much warmer weather in the Southern United States remains a major draw for those “snowbirds”. Immigration and visa requirements are fairly relaxed for snowbirds, but there are tax issues that could cause problems for the unwary.

U.S. residents, like Canadian residents, are subject to tax on their worldwide income. But did you know that if you, as a Canadian resident, spend 183 days or more in the U.S. in any twelve month period (and not just in a calendar year) you would be considered a U.S. resident for tax purposes too? This would make you subject to tax on your worldwide income in both Canada and the U.S., and although there is a tax treaty between Canada and the U.S. to eliminate double-taxation, the result would lead to problems. And not just tax: extended residence in the U.S. can jeopardize or complicate your medical insurance coverage, immigration status, and estate tax exposure.

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Readers will recall that in January we announced a new “cloud”-based service, which allows clients to submit their bookkeeping data to a secure site on the Internet. That facilitates the transfer of large electronic data files very easily. Already many clients have used this system, and we’re receiving very positive feedback about it.

Thus encouraged, we now plan to expand the cloud program to the personal tax season.

It’s become a fact of life that many information slips ‘trickle’ in over the months of February and March, making it a nuisance for clients to accumulate everything in an envelope, and submit information only when it’s fully complete.

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We have noted that more and more of our clients are working well past what would normally be considered “retirement age”.

Of course, economic need is often the motivation. But we know, in most cases, that’s not the reason – most of these individuals can afford to retire, now. They simply don’t want to.

Without exploring the sociological issues that may be relevant in this decision, we are left with the fact that many persons age 60 or over have chosen to remain working, even though they may have decided to draw on their CPP early (which remains their privilege, although they must suffer a discount for doing so).

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The term “cloud” is used these days to refer to places on the Internet where data relevant to you or your business is stored. As computerization has spread throughout our lives, and become much more portable, much of our important information can be vulnerable to accident or theft.

As the capacity of the Internet increases, the cloud offers a solution to the problem of data security, so long as it can be made safe and secure.

Lohn Caulder now provides a free and secure portal for clients that makes it easy to upload electronic data to us, via the Internet.

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We at Lohn Caulder are very excited about our newest corporate addition: LC Bookkeeping Inc.

Check out its website at www.lcbookkeeping.com

LC exists because we’ve been listening to our clients – and know that there’s a big demand out there for quality bookkeeping services. Until recently, our standard service delivery model hasn’t completely fit the needs of monthly or quarterly bookkeeping clients, but no longer.

With LC Bookkeeping, bookkeeping is all they do. So, you get a person on the line who is completely facile with the ‘ins and outs’ of all of the major software accounting packages, and comfortable with the maintenance and reconciliation of accounts receivable and accounts payable subledgers, posting of regular journal entries, and all manner of recurring accounting functions.
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The TFSA may turn out to be the greatest gift ever given to the Canadian taxpayer. All it needed to do was grow up. And that, it’s rapidly doing.

The program began humbly enough in 2009, allowing all Canadians age 18 or over the opportunity to contribute $5,000 per year (non-deductible). Now, recognizing the inflation protection built into the TFSA rules originally, the Federal Government has announced that 2013’s contribution limit (and all future years) will be 10% higher, or$5,500.

As of January 1, 2013, that means individuals could have put in as much as $25,500(4 years 2009 thru 2012 at $5,000/year, plus $5,500 for 2013). Of course, with some luck in the markets and re-investment of the dividends, the actual value of TFSA accounts should be significantly higher at this time. A married couple could have over $51,000 in these accounts, by next January. How is yours doing?

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During the summer of 2011 there was a significant amount of media attention directed towards the IRS’ Offshore Voluntary Disclosure Initiative (OVDI). This brought to light the fact that there is a staggering number of U.S. citizens, living in Canada, that are not up to date with their U.S. filing obligations (all U.S. citizens must file annual returns to the U.S.). The media attention focused on the potential penalties for failure to become compliant, with a focus on the “FBAR” (Form TD F 90-22.1 Report on Foreign Bank and Financial Accounts) penalties.

Many of these individuals chose to enter into the 2011 OVDI program by the September 7, 2011 deadline, which granted reduced penalties for late filed FBAR forms.

Another option that many others chose (where they had no U.S. tax liability) was to simply file past due U.S. individual income tax returns and FBAR forms (normally 3 to 6 years of overdue tax returns) and “hope for the best”.
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As readers will be well aware, the HST is being scrapped, and we are bringing back the provincial sales tax on April Fool’s Day, 2013. We thought it might be entertaining, and hopefully even useful, to review the history of this whole escapade, and its players . . .

First, Some Sales Tax History: BC’s former provincial sales tax had its origins in the 19th century. In those days, BC’s economy was far more dependent on the production of tangible goods. In those days, it was far easier to administer a tax that was based on tangible things, such as barrels of whiskey or piles of lumber, because they could be seen, and counted.

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