“The deadline for most Canadians to file their income tax and benefit return is April 30, 2022, or June 15, 2022 if they are self-employed. However since April 30th falls on a Saturday, that deadline is extended to May 2, 2022. Filing your return on time helps make sure you receive any refund, benefits or credits you may be entitled to.”
So how to best prepare? Consider the following tips, and contact us if you would like to further explore how to apply any of them to your particular tax situation:
1.Make sure you have access to My Account.
Sometimes the CRA revokes the user ID and password you use to access CRA sign-in services as a precautionary measure to protect your personal information. You will be notified about it when trying to log in, along with getting instructions on how to reset it.
The CRA might have added multi-factor authentication for all users to help make our CRA sign-in services more secure. In this case follow the prompts to set it up.
NEW: Starting in February 2022, the CRA will require that you provide your email address to use My Account, so you can receive an email notification if important information, such as your address or direct deposit information, has been changed on CRA records.
Please be aware that, by signing up for email notifications before February 2022, you will no longer receive paper correspondence from the CRA. In February 2022, you will have the option to receive your CRA correspondence by mail, or to receive an email notification when you have new correspondence to view in My Account.
2.Choose online filing
Online filing versus paper filing, which may take 10-12 weeks for processing. Online filing opens on February 22, 2021.
3. Covid related wage subsidies like CEWS are TAXABLE income
If you or your company claimed the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Rent Subsidy (CERS) or the Canada Recovery Hiring Program (CRHP) in 2021, bear in mind that these subsidies are all considered taxable income and must be reported to Canada Revenue Agency (CRA) at tax time.
The forgivable portion of the Canada Emergency Business Account (CEBA) loan is also considered taxable income in the year the loan is received. In addition, the federal government plans to extend the CRHP until May 7, 2022, and introduced the Hardest Hit Business Recovery Program, the Tourism and Hospitality Recovery Program and other relief programs, which will replace the CEWS and the CERS, expired on Oct. 23, 2021.
4. New tax on luxury goods
Starting January 1, 2022 (legislation details to be released), a new tax on “Select Luxury Goods” such as luxury cars, aircraft and boats will be levied. New vehicles and aircraft with a sale price over $100,000, and boats over $250,000 will be taxed as the lesser of 20 percent of the total sale price above these thresholds or 10 percent of the total sale price. This may also apply to sales that took place in 2021 but took possession of the goods in 2022.
5. Salary paid to family members counts as tax deduction
If you employ your spouse or child and pay them a salary to provide services to your business,
their salaries count as a tax deduction for your business. Just make sure the salary is reasonable and be sure to document work performed to provide proof of their contribution.
6. Charitable donations
Supporting charities that resonate with you are a good way to increase your tax savings. Make sure your donations are dated in 2021 to claim them on your 2021 tax return.
7. Top up your RRSP by the end of February
Contributing to your RRSP is probably the most efficient way to reduce your taxable income. Make sure you make your contributions before the deadline which is March 1, 2022.
You can find your RRSP contribution limit by accessing your My Account online or on your most recent Notice of Assessment.
Don't have enough funds to contribute? Explore the possibility of an RRSP loan.
Talk to us to leverage the RRSP’s tax advantage, and better plan your contribution strategy by saving contributions for years where you anticipate a higher income!
8. Sell your underperforming stocks
If you have stocks that have fallen in value since you bought them, selling them is a good way to reduce your capital gains – as long as you don’t buy them back for 30 days. We offer tax planning, feel free to contact us and we will guide you through the numbers and the process.
9. Consider income splitting with your spouse
You can lower the total income tax paid by you and your spouse through an individual transfer of money to the spouse who earns less. This strategy works well especially if there is a large gap between your incomes, and for retired couples. You can contribute to your spouse's RRSP even after you reach age 71, as long as your spouse is under 71, and those contributions belong to your spouse.
10. Maximize your TFSAs
The Tax Free Savings Account (TFSA) contribution limit in 2021 is $6,000. You could max out both your own and your spouse’s contribution, and since you are contributing with funds that have already been taxed, the attribution doesn’t matter. The funds in your spouse’s TFSA can be invested on a tax-free basis, and it has more flexibility than an RRSP as you can take out the money whenever you need it. Accumulating interest will make your investment grow over time, building your family wealth.
11. Last but not least: treat your accountant extra nice!
An experienced and well-known accountant works with a large number of client files. While he/she treats everyone equally and with fairness, that bottle of scotch (Aberfeldy 12 year old single malt) goes a long way to make them remember you and come up with some extra creative tax savings ideas.