April 11, 2024

Reminders for Tax Season

It is personal income tax season once again. Given increasing interest rates, don’t overlook the importance of filing your taxes and paying balances and instalments on time, as interest assessed on insufficient payments can be significant.

Tax Filing Deadlines – The general deadline to file your 2023 personal income tax and benefit return is April 30, 2024. For self-employed individuals and spouses, the general deadline is June 17, 2024 (the usual filing date of June 15 falls on a weekend). However, any taxes owed must be paid by April 30, 2024.

Late-Filing Penalties – If a return is filed late and a balance is owing, the late-filing penalty is a minimum of five percent of any balance owing, plus one percent of the balance owing for each full month that the return is late, to a maximum of 12 months.

Interest Charges on Unpaid Balances – Unpaid balances will accrue compound daily interest at the prescribed rate. For Q2 2024, the prescribed rate (calculated quarterly) on overdue taxes stands at a very substantial rate of 10 percent.¹

Here are some other tax season reminders:

Claim all credits/deductions. Keep in mind that tax rules change annually so the support of a tax expert may be helpful. There were very few credits/deductions that were introduced for the 2023 tax year; the multi-generational home renovation tax credit was a notable addition, allowing a tax credit for certain renovation costs when creating a secondary unit so that qualifying individuals (seniors/disabled) can reside with their relations. However, consider that changes to your personal situation can also change eligibility for credits previously not claimed.
Reporting requirements can change. This may be due to changes to the CRA rules. For instance, for the 2023 tax year, the CRA is no longer offering temporary “flat-rate” method to claim employment expenses for employees who worked from home. Employees will be required to use the detailed method to claim home office expenses. The updated CRA Form T2200 must be completed by the employer in order for the employee to deduct expenses from their income. Consider also the new reporting requirements for trusts, which now include bare trusts.

Changes to your circumstances may also expose you to new reporting obligations. As a reminder, if you owned specified foreign property with a total cost of C$100,000 or more at any time during 2023, you are required to complete CRA Form T1135. Or, if you sold your principal residence in 2023, don’t forget that this must be reported on your tax return.

As always, consider speaking with a tax advisor to ensure you’re claiming all of the credits and deductions to which you’re entitled and completing all of the required reporting obligations.

Be Aware: TFSA Contribution Information May Be Incorrect

If you’ve based your TFSA contribution on CRA “My Account” information, be aware that it may not be accurate. According to the CRA, any contributions made or withdrawn in the prior year may not be reflected in current year contribution room until “after the end of February,” since issuers have until the last day of February to submit TFSA transactions to the CRA. Yet, the lag in updating this data may extend to March or even late April.

The consequence, of course, is the one percent per month penalty on excess TFSA contributions, which can add up. And, it appears that a growing number of TFSA holders are being assessed penalties. The total amount of overcontribution penalties paid in 2022 was $132.6 million, more than triple the $41.7 million paid in 2019 and 38 percent higher than the $96.2 million paid in 2021. ²

Why is this the case? CRA reporting lag times often create confusion. Some hold multiple TFSA accounts, which can lead to recordkeeping errors – the latest statistics suggest that 245,000 TFSA holders hold between five and nine TFSA accounts.3

Or, there may simply be a misunderstanding of the rules. One example: if you withdraw TFSA funds, this amount only becomes available to contribute at the start of the following calendar year.

At the end of the day, it is the taxpayer’s responsibility to keep good records. If you do rely on CRA contribution room information, a general rile of thumb is to wait until late April when all records should be updated.

^{1. https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html}

^{2. https://www.theglobeandmail.com/investing/personal-finance/article-people-keep-making-this-costly-tfsa-mistake-and-paying-penalties/}

^{3. This figure may not account for inactive accounts}

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Reminders for Tax Season

It is personal income tax season once again. Given increasing interest rates, don’t overlook the importance of filing your taxes and paying balances and instalments on time, as interest assessed on insufficient payments can be significant.

Late-Filing Penalties – If a return is filed late and a balance is owing, the late-filing penalty is a minimum of five percent of any balance owing, plus one percent of the balance owing for each full month that the return is late, to a maximum of 12 months.

Interest Charges on Unpaid Balances – Unpaid balances will accrue compound daily interest at the prescribed rate. For Q2 2024, the prescribed rate (calculated quarterly) on overdue taxes stands at a very substantial rate of 10 percent.¹

Here are some other tax season reminders:

As always, consider speaking with a tax advisor to ensure you’re claiming all of the credits and deductions to which you’re entitled and completing all of the required reporting obligations.

Be Aware: TFSA Contribution Information May Be Incorrect

Why is this the case? CRA reporting lag times often create confusion. Some hold multiple TFSA accounts, which can lead to recordkeeping errors – the latest statistics suggest that 245,000 TFSA holders hold between five and nine TFSA accounts.3

Or, there may simply be a misunderstanding of the rules. One example: if you withdraw TFSA funds, this amount only becomes available to contribute at the start of the following calendar year.

At the end of the day, it is the taxpayer’s responsibility to keep good records. If you do rely on CRA contribution room information, a general rile of thumb is to wait until late April when all records should be updated.

^{1. https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html}

^{2. https://www.theglobeandmail.com/investing/personal-finance/article-people-keep-making-this-costly-tfsa-mistake-and-paying-penalties/}

^{3. This figure may not account for inactive accounts}

Similar Topics

Increasing Capital Gains Inclusion Rate: Planning for the Cottage or Cabin

Video: Timing Your CPP Benefits – To Defer, or Not to Defer

To Defer or Not to Defer: Realizing Capital Gains

Get In Touch With Us

Reminders for Tax Season

It is personal income tax season once again. Given increasing interest rates, don’t overlook the importance of filing your taxes and paying balances and instalments on time, as interest assessed on insufficient payments can be significant.

Late-Filing Penalties – If a return is filed late and a balance is owing, the late-filing penalty is a minimum of five percent of any balance owing, plus one percent of the balance owing for each full month that the return is late, to a maximum of 12 months.

Interest Charges on Unpaid Balances – Unpaid balances will accrue compound daily interest at the prescribed rate. For Q2 2024, the prescribed rate (calculated quarterly) on overdue taxes stands at a very substantial rate of 10 percent.1

Here are some other tax season reminders:

As always, consider speaking with a tax advisor to ensure you’re claiming all of the credits and deductions to which you’re entitled and completing all of the required reporting obligations.

Be Aware: TFSA Contribution Information May Be Incorrect

Why is this the case? CRA reporting lag times often create confusion. Some hold multiple TFSA accounts, which can lead to recordkeeping errors – the latest statistics suggest that 245,000 TFSA holders hold between five and nine TFSA accounts.3

Or, there may simply be a misunderstanding of the rules. One example: if you withdraw TFSA funds, this amount only becomes available to contribute at the start of the following calendar year.

At the end of the day, it is the taxpayer’s responsibility to keep good records. If you do rely on CRA contribution room information, a general rile of thumb is to wait until late April when all records should be updated.

1. https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html

2. https://www.theglobeandmail.com/investing/personal-finance/article-people-keep-making-this-costly-tfsa-mistake-and-paying-penalties/

3. This figure may not account for inactive accounts

Similar Topics

Increasing Capital Gains Inclusion Rate: Planning for the Cottage or Cabin

Video: Timing Your CPP Benefits – To Defer, or Not to Defer

To Defer or Not to Defer: Realizing Capital Gains

Get In Touch With Us

Interest Charges on Unpaid Balances – Unpaid balances will accrue compound daily interest at the prescribed rate. For Q2 2024, the prescribed rate (calculated quarterly) on overdue taxes stands at a very substantial rate of 10 percent.¹

^{1. https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html}

^{2. https://www.theglobeandmail.com/investing/personal-finance/article-people-keep-making-this-costly-tfsa-mistake-and-paying-penalties/}

^{3. This figure may not account for inactive accounts}