Feb
1
By Fin MacDonald
Fin MacDonald has over 20 years’ experience providing retirement and Income tax planning advice. Readers are however cautioned that responsibility falls on the taxpayer to ensure that all information is adequate and correct.
A Happy New Year to all my readers and clients! Using my lens of “Helping You to Keep MORE of Your Money,” in this article I will outline important dates and tax changes for the 2015 Tax Return.
FIRST SOME DATES
February 1, 2015 – Paper copies of 2015 T1 Tax Return and General Guide are available at Canada Post outlets, for example at James Bay Pharmasave, and at Service Canada offices; 1401 Douglas, corner of Johnson.
February 15 to May 2, Canada Revenue Agency phone service (1-800-959-8281, press star key (*) is extended from the regular 9AM to 5PM, Monday to Friday, to 9PM Monday to Friday; and on Saturdays from 9AM to 5PM. No phone service on Good Friday March 25, Saturday March 26 and Easter Monday March 28.
February 29 – Deadline for RRSP contributions to be deducted from 2015 Tax Return; Deadline for over-withdrawls from RRIFs to be repaid to lower 2015 income. (See more below).
March 4, 10AM – 1130AM - Friday Forum, James Bay New Horizons, 234 Menzies. I will be giving a presentation on the 2015 taxes and taking questions from attendees.
May 2 – Deadline to file tax return for 2015 year. Self-employed people have to June 15 to file, but taxes owing, for all Tax Payers, are due May 2.
Registered Retirement Income Fund (RRIF) changes
The year a person turns 71, they have three choices of what to do with any money in their Registered Retirement Savings Plan (RRSP). One is to buy an annuity; with low interest rates this locks in very low returns. If neither the RRSP holder or her/his spouse has eligible income for the Pension Income Amount ($2,000 Federally; $1,000 provincially) this may make sense to create tax free income Two is to take the whole amount into income; if the amount involved is not big, this may make sense.
And, thirdly, transfer the RRSP into a RRIF. Once the money is in the RRIF, a minimum percentage must be withdrawn each year. In 2015 there were major changes made in the amount that the taxpayer is required to withdraw each year. An example: a 75 year old taxpayer had $125,000 in her/his RRIF at the beginning of 2015. Under the old rules they would have to take 7.85% of that ($9,812.50) into income. Under the changes, 5.82% ($7,275) is the new minimum withdrawal required. The difference (2,537.50) may now – before March 1, 2016 – be redeposited into the RRIF. As people age the percentage that needs to be withdrawn increases. At age 76 the before/after required withdrawals: 7.99%/5.98%; at 80: 8.75%/6.82%. At age 95 and up the minimum remains at 20% per year.
Tax Free Savings Accounts (TFSA)
The amount a taxpayer can shelter in a TFSA was, for 2009, 10, 11 and 12 $5,000 per year. That increased to $5,500 per year for 2013 and 14. It then was increased to $10,000 for 2015. The total available room at the end of 2015, if no contributions had been made, was $41,000. The new room for 2016 will revert to $5,500; THE $10,000 IN ROOM FOR 2015 WILL NOT BE CHANGED.
Changes for Families
Families with 2 spouses in 2014 and 2015 had what was called the “Family Tax Cut” (FTC). This enabled income splitting for families, with children younger than 19 at home, who had large differences in income. The tax savings were limited to $2,000 per couple. The FTC will be available for the 2015 returns, but has now been cancelled for future years.
Also cancelled, effective July 1, 2016, is the Universal Child Care Benefit (UCCB). This was a taxable amount, increased before last year’s election, and paid to all parents. This will be replaced with a non-taxable Enhanced Child Care Benefit (ECCB) that will be income tested, with larger amounts going to lower income parents, and none to families with more than $200,000 in income.
The Children’s Fitness Amount remains at a maximum of $1,000 per child but is now refundable. Upto the 2015 return it was a non-refundable tax credit; this meant that it (at its 15% rate) could only be used to reduce federal tax payable to zero. For 2015, if each of the two children in a family have the maximum Fitness Amount of $1,000, then 15% of the $2,000 = $300. For a low income single parent, the $300 REFUND will come in handy. The Children’s Arts Amount was left at $500 per child and left as a non-refundable credit.
The maximum amount claimable for childcare has been raised by $1,000 per child.
The Middle Class Tax Cut
This reduction in the federal tax rate for incomes between $45,000 and $90,000 takes effect for the 2016 tax return. This will see a reduction in the rate from 22% to 20.5%; saving a person earning $90,000 about $670 in federal tax. For those with incomes below the $45,000 threshold there will be no tax savings. Gordon Pape, writing in the Toronto Star, said: “Frank, who earns $2,500 a month from his job in the hospitality industry, took home $2,046.20 in 2015. This year his January cheque will be for $2,048.84. That’s a gain of only $2.64, which is strictly due to inflation. It might be argued that Frank and others like him are the ones that really could have used a tax cut but somehow they got lost in the election hyperbole. Too bad.”
In the March Beacon I will look at what needs to be gathered before you file your 2015 Tax Return. I will also look at new ways to access your tax slips on line if you have not received them by the deadline of February 29.