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Tag: tax return

  • Preparing taxes for someone who died – MoneySense

    Contacting the CRA

    You should contact the government as soon as possible. This includes steps like cancelling a provincial health card, driver’s license, and applying for Canada Pension Plan (CPP) death and survivor benefits. 

    From a tax perspective, you should contact the CRA by phone or by mail. If you call CRA Individual Tax Enquiries at 1-800-959-8281, you should make sure you have on hand the person’s:

    • Date of death
    • Social Insurance Number (SIN)
    • Mailing address
    • Last tax return or notice of assessment

    You should report their date of death and stop any ongoing benefits that may need to be repaid. 

    There are several other government agencies you should also notify.

    Executors and next of kin

    To formally represent someone who has died with CRA, you can do so as a legal representative or name an authorized representative. A legal representative is generally the executor of the deceased’s estate named in their will. In Québec, this representative is called a liquidator.

    If you want to have online access to the CRA account of the deceased, you have to register for CRA’s Represent a Client service. You can do so with your CRA user ID and password, or with the Interac sign-in service to select a sign-in partner using your online banking.

    On the welcome page, select Add Account → Representative Account → Register with Represent a Client → Register Yourself.

    Once registered, you can submit documents using the Submit Documents service in Represent a Client. You need to provide a copy of the death certificate and a copy of the will, grant of probate, or letters of administration listing you as executor.

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    If the deceased had no will, you can fill out and submit Form RC552, Register as Representative for a Deceased Person.

    If you would prefer the old-fashioned way, you can also mail or fax these documents to the CRA without registering for Represent a Client. You should send them to the tax centre that serviced the deceased based on their mailing address.

    Income Tax Guide for Canadians

    Deadlines, tax tips and more

    Once you are authorized as the legal representative, you can appoint an authorized representative, like an accountant or lawyer. You do this from your own Represent a Client portal by entering the social insurance number of the deceased to access their online tax account. 

    Under the Related Services Section, select Authorized Representative(s), Authorize a New Representative, and follow the instructions. You must provide the representative’s RepID, CRA Business Number, or GroupID to appoint them.

    Tax returns

    You must file a final tax return up to the date of death reporting income for that year. There is also a deemed disposition of assets at death that may trigger tax on registered accounts like registered retirement savings plan (RRSPs) or registered retirement income funds (RRIFs). 

    Capital assets like non-registered investments, cottages, and rental properties may also be subject to capital gains tax. 

    Assets in other countries are also relevant, as Canadian residents are taxed on their worldwide income. 

    Certain elections may be available to defer tax on death, most notably a spousal rollover that allows assets to pass tax deferred to a surviving spouse or common law partner. 

    Jason Heath, CFP

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  • Ontario Trillium Benefit payment dates in 2026, and more about the OTB – MoneySense

    What is the Ontario Trillium Benefit? 

    The OTB is the combined payment of three provincial benefits for Ontario residents. You need to be eligible for at least one of these three credits to receive the benefit.

    • Ontario Energy and Property Tax Credit (OEPTC): This tax-free credit applies to a portion of eligible Ontario residents’ property tax and sales tax on energy. Your OEPTC amount depends on several factors, including your age and marital status, as well as your energy costs, property tax or rent paid during the year. The maximum OEPTC is $1,461 for seniors aged 64 and older and $1,283 for other Canadians. 
    • The Northern Ontario Energy Credit (NOEC): This tax credit is available to eligible Northern Ontario residents and offsets the higher energy costs paid by those living in that part of the province. The NOEC amount you receive depends on many factors, including your adjusted family net income, your marital status and whether you have children. The maximum NOEC entitlement is $185 for single individuals with no children and $285 for couples and single parents. If you are a single individual with no children, the credit is reduced by 1% of your adjusted net income over $49,885. And if you are a family, the credit is reduced by 1% of your adjusted family net income over $64,138.
    • The Ontario Sales Tax Credit (OSTC): This is a tax-free payment to eligible Ontarians to offset sales tax. The OSTC provides a maximum annual credit of $371 for each adult and each child in a family. The amount received depends on your age and marital status. 

    Although the OTB is funded by the province of Ontario, the Canada Revenue Agency (CRA) administers the program on behalf of the province. 

    OTB payment dates for 2026

    The OTB is issued on the 10th day of the month, every month. If that date falls on a weekend or statutory holiday, it will be issued for the last “working day” before the 10th. The OTB payment schedule (known as the benefit year) runs from July to June of the following calendar year, because payments are based on your previous year’s tax returns. 

    The next 2025 OTB payments, based on your 2024 income tax return and issued in 2026, will be paid: 

    • January 9, 2026
    • February 10, 2026
    • March 10, 2026
    • April 10, 2026
    • May 8, 2026
    • June 10, 2026

    The 2026 OTB payments, based on your 2025 tax return and issued in 2026, will be paid: 

    • July 10, 2026
    • August 10, 2026
    • September 10, 2026
    • October 9, 2026
    • November 10, 2026
    • December 10, 2026

    Income Tax Guide for Canadians

    Deadlines, tax tips and more

    How much is the Ontario Trillium Benefit?

    The OTB you receive is equal to the combined amount for each of the Ontario energy and property tax credit, Northern Ontario energy credit and Ontario sales tax credit. 

    The amount received depends on your:

    • Age
    • Income
    • Residence
    • Number of family members within the household
    • Amount paid in rent or property tax

    You can estimate your OTB entitlement by using the Government of Canada’s and CRA’s child and family benefits calculator. 

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    If your payment amount is more than $2 but less than $10, the amount is increased to $10. You will not receive a payment if the amount is for $2 or less. 

    In most cases, your annual OTB amount is divided by 12 and issued once per month. However, there are a few exceptions.

    How to receive a single OTB payment

    Ontarians with an OTB of $360 or less automatically receive their payment in a single lump sum. And if your OTB is $360 or more, you can choose to receive it in a single payment. Instead of receiving monthly payments from July 2026 to June 2027, those who opt for this option will receive a single payment at the end of the benefit year, in June 2027. 

    You can choose to receive a single OTB payment when filling out your 2025 tax return. Tick box 61060 in the area called “Choice for delayed single OTB payment” on Form ON‑BEN, Application for the Ontario Trillium Benefit and Ontario Senior Homeowners’ Property Tax Grant.

    Who can apply for the Ontario Trillium Benefit? 

    Ontario residents do not have to apply for the OTB. You are automatically eligible for 2026 OTB payments once you file your 2025 tax return. However, if your tax return is assessed on June 20, 2026, or later, the payment may be delayed, with your first payment issued within four to eight weeks of your assessment.

    FAQs

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    More payment dates to watch for:



    About Thomas Kent


    About Thomas Kent

    Thomas Kent is a reporter and author, specializing in personal finance and insurance. With nearly a decade of experience in digital media and financial writing, Thomas has produced high-quality content for leading Canadian finance brands and reported on complex insurance topics with clarity.

    Thomas Kent

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  • Late filers: Get your back taxes sorted before year-end – MoneySense

    Consider the following: 

    The backdrop. Under the Income Tax Act, the normal reassessment period is three years from the date the notice of assessment or reassessment is mailed or received. However, under the taxpayer relief provisions, it is possible to request adjustments for errors or omissions for personal returns for 10 years. 

    Tax year 2015 in focus. Tax year 2015 will become statute-barred under the 10-year taxpayer relief provisions after December 31, 2025. That means, for the 2015 tax year, the following opportunities to save tax dollars now and in the future will be lost:

    1. Tax refunds owed to you for the 2015 tax year.
    2. The opportunity to build RRSP contribution room for tax year 2015, which reduces the potential for retirement income security in the future.
    3. Deductions and non-refundable tax credits that have “carry over” legs attached to them, such as moving expenses, medical expenses, charitable donations and political contributions.
    4. Refundable tax credits owed such as Canada Child Benefit, GST/HST Credit, Canada Workers Benefit, and refundable medical expense supplement.
    5. Unreported losses including capital and non-capital losses will not be available to offset their respective income sources for 2015 or for carry-over purposes. This can significantly increase future taxes payable in some cases.
    6. The opportunity to use the lifetime capital gains exemption for dispositions that occurred in 2015. 
    7. AMT (Alternative Minimum Tax) carry-forwards from prior years can no longer be applied to 2015.

    Spousal returns could be affected. When one spouse fails to file, it means that household income is not properly reported for income-tested provisions. If the spouse who filed on time didn’t estimate their missing spouse’s net income properly, it is possible some of the tax preferences received by spouse who filed on time will have to be repaid in the event of a CRA audit, and/or taxes payable will be increased. In some situations, for example when certain properties are transferred or there are joint financial transactions, spouses may also liable for each other’s tax debts. 

    Income Tax Guide for Canadians

    Deadlines, tax tips and more

    Provincial tax credits have different rules. Not all provisions on the federal T1 return qualify for a 10-year adjustment for errors or omissions. The normal reassessment period for federal returns— three years from the date of the original notice of assessment—is all that is available for these purposes in most provinces. In Quebec that reassessment period is four years.  

    Pension income splitting with spouse. Certain elections that can reduce your taxes have different filing rules as well. For example, optimization of pension income splitting or joint elections to do the income splitting on Form T1032 have a three-year window only—that is, three calendar years after the filing due date. In the 2023 tax year for example, which had a filing deadline of April 30, 2024, adjustments can only be made for tax years 2024, 2025 and 2026. Taken another way, by April 30, 2026, adjustments for this provision can only be made for calendar year 2025, 2024, and 2023. 

    Beware the loss of social benefits. It is only possible to go back 11 months to claim missed Old Age Security (OAS) benefits that were not deferred, unless there was a severe incapacity that kept the senior from applying for the benefits. OAS is income-tested; that is, a clawback of the benefits you are entitled to may occur when net income exceeds certain thresholds for the year. So, filing a tax return is necessary.

    Other social benefits include the new Canada Dental Care Plan (CDCP) and the Canada Disability Benefit (CDB).  

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    • Under the CDCP, the CRA may reconsider an entitlement if you apply within 24 months after the benefit period ends. However, if a false or misleading statement was made, the government has 72 months (six years) to recover this tax debt from you. 
    • The CDB, available since July 2025, allows for retroactive payments for up to 24 months if you were eligible during that time, starting in July 2025. Again, the government has a six-year limitation period to recover any overpayments from beneficiaries.

    Why late filing is generally a bad idea

    It always pays to file a tax return on time for the reasons above. The missed deadlines can cost even more when timelines for other provisions come into play. Overdue taxes owing attract big penalties and interest. There are a number of expensive penalties that can pile up—with compounding interest charges and of course the taxes themselves due—for people who owe money to the CRA and miss filing their returns. These may be deemed one or more of:

    • Gross negligence. This is a civil penalty CRA can levy for turning a blind eye to tax filing obligations. It is calculated at 50% of the taxes due. Interest compounded at the prescribed rate plus 4% more can turn the tax balance due into a rapidly snowballing problem. Late filing penalties are of course added on as well.
    • Tax evasion. Other punitive penalties that may be possible in the case of deceit include tax evasion, which results in a penalty worth 200% of the taxes owing plus compounding interest plus civil penalties and up to five years in jail.
    • Tax fraud. Under Section 380 of the Criminal Code, delinquent tax filers may receive a sentence of up to 14 years in prison. Other consequences include fingerprinting and foreign-travel restrictions.

    To pay the least possible when you owe CRA, first have a tax specialist confirm the taxes were assessed correctly by the agency (sometimes they aren’t, due to missing information or certain gray areas in the law). Then pay quickly. 

    Bottom line

    Always bear in mind that access to any tax preferences and benefits starts with filing a tax return. Plan well before the end of 2025 to catch up. File missed tax returns or request adjustments for errors or omissions. There might even be a little financial freedom coming your way compliments of CRA in 2026. 

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about how to minimize taxes:



    About Evelyn Jacks, RWM, MFA, MFA-P, FDFS


    About Evelyn Jacks, RWM, MFA, MFA-P, FDFS

    Evelyn Jacks is President of Knowledge Bureau, a world-class financial education institute where readers can take micro-credentials in Financial Literacy, the Fundamentals of Income Tax Preparation, and earn career-enhancing Specialized Credentials, all online.

    Evelyn Jacks, RWM, MFA, MFA-P, FDFS

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  • The IRS Is Facing a Huge Backlog After the Government Shutdown. What It Means for Businesses

    The U.S. government is getting back up to speed after the longest government shutdown in history. Airports have resumed their full schedules, which is a relief to anyone who’s planning to fly this holiday season. At the Internal Revenue Service, however, things are taking a bit longer to ramp back up, which could cause tax headaches for business owners and individual taxpayers over the next few months.

    A tremendous backlog of correspondence, appeals and filings built up during the 44 days workers were furloughed. Operations have resumed, but the IRS was short-staffed long before the shutdown, after massive DOGE layoffs earlier this year and funding cuts. That means cutting through that accumulation of work is slow-going.

    “The system is simply overwhelmed,” says Sharon Goldstein-Shapiro, a spokesperson for Legal Tax Defense, which provides legal representation to individuals and businesses facing tax problems. “Taxpayers waiting for refunds, installment approvals, or audit resolutions are seeing long delays.”

    That backlog is going to cause a host of problems. Communications are likely to be delayed, which could give the impression to some people that timeliness isn’t as high a priority as it normally is for the IRS. That would be incorrect.

    There’s not a lot you can do when it comes to getting a response in a faster period of time, but it’s critical for business owners to take steps to protect themselves and their businesses from being financially impacted by the backlog.

    That’s especially true if you’re in the midst of a dispute with the IRS. It could be weeks before submitted requests for penalty abatements or compromise offers are seen. Penalties and interest continue to accrue in that period, however.

    The best way to minimize that is through careful record keeping. Keep copies of all of the letters, notices and payment confirmations you receive and send. And any correspondence should be sent through a certified tracking system, so you can confirm when it was accepted.

    Most importantly, Goldstein-Shapiro says, don’t assume a lack of response means your case has been closed. And if you are facing a lien or levy, she suggests securing legal representation to ensure you are protected as case processing gets back underway.

    “For small businesses, a two-month delay can disrupt cash flow and planning,” she says. “Having professional representation ensures your case is documented and prioritized once review resumes.”

    It’s not just existing cases that experts are worried about. With the 2026 filing season just around the corner, the backlog could cause delays with new filings as well.

    “It’s too early to say definitively, but any sustained shutdown has a ripple effect that can carry well beyond the immediate timeline,” says Garrett Wagner, founder of accounting firm consultancy C3 Evolution Group. “The IRS was already facing delays and a growing backlog. Even a short pause in IRS operations will expand the issues we are already seeing.”

    Meanwhile, changes to the tax law as part of the 2025 budget bill that was passed earlier this year, are extensive, requiring the IRS to create new forms and instructions, which need to be sent out to tax professionals and reworking of software systems. The shutdown put that on pause, which could create a crunch as the 2026 tax season gets underway – and could delay the start of the season.

    Will that mean the filing deadline is extended? That’s possible, but it’s much too early to say with any certainty.

    The IRS does seem to grasp just how overwhelming the situation could be on its end. Over the first half of 2025, the IRS reduced its workforce from 100,000 to 60,000 employees, but later realized that created serious gaps in expertise and key areas, including IT and tax processing. In August, officials halted planned layoffs and began reaching out to employees who had been let go, encouraging them to rejoin the agency. There’s also been volatility when it comes to leadership at the agency. Since the start of 2025, the IRS has had seven directors or acting directors (and, as of October, one CEO). 

    The final deadline for the 2026 Inc. Regionals Awards is Friday, December 12, at 11:59 p.m. PT. Apply now.

    Chris Morris

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  • How to report foreign income in Canada – MoneySense

    How to report foreign income in Canada – MoneySense

    This form is typically used for foreign bank accounts, foreign investment accounts or foreign rental properties, but it can include other foreign assets. Foreign investments, including U.S. stocks, must be reported even if they are held in Canadian investment accounts. Foreign personal-use properties, like a snowbird’s condo that is not earning rental income, may be exempt.

    Foreign asset disclosure applies to taxable investments, so assets held in tax-sheltered accounts like registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs), pensions and other non-taxable accounts are generally exempt.

    U.S. persons in Canada

    U.S. citizens or green card holders must generally file U.S. tax returns despite living in Canada. The United States is one of the few countries in the world that has this requirement for non-residents. As a result, you may have to report both Canadian and U.S. income, deductions, credits and foreign tax payable.

    Adding to the complexity is that certain types of income are taxable in one country but not the other, and some deductions or credits may only apply on one tax return.

    Voluntary disclosure for previous years

    If you have not reported foreign income or declared foreign assets in the past and you should have done so, you may be able to file a voluntary disclosure with the CRA. This program may allow relief on a case-by-case basis for taxpayers who contact the CRA to fix errors or omissions for past tax returns.

    There are five conditions to apply:

    1. You must submit your application voluntarily and before the CRA takes any enforcement action against you or a third party related to you.
    2. You must include all relevant information and documentation (including all returns, forms and schedules needed to correct the error or omission).
    3. Your information involves an application or potential application of a penalty.
    4. Your information is at least one year or one reporting period past due.
    5. You must include payment of the estimated tax owing, or request a payment arrangement (subject to CRA approval).

    Before pursuing a voluntary disclosure, you should seek professional advice. The CRA also offers a pre-disclosure discussion service that is informal and non-binding, and it does not require the disclosure of your identity.

    Bottom line

    When you are a Canadian tax resident, whether you are a citizen or not, you have worldwide income and asset disclosure requirements on your tax return. Some Canadian residents, despite living abroad, may still be considered factual residents or deemed residents of Canada with ongoing tax-filing requirements.

    Jason Heath, CFP

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  • Capital gains tax when renting out your former principal residence – MoneySense

    Capital gains tax when renting out your former principal residence – MoneySense

    According to the Canada Revenue Agency (CRA): “To make this election, attach a letter signed by you to your income tax and benefit return of the year in which the change of use occurs. Describe the property and state that you want subsection 45(2) of the Income Tax Act to apply.”

    So, there isn’t a specific form to file to claim this election.

    A taxpayer in Canada may be able to extend the four-year limit indefinitely, but this requires your employer or your spouse’s employer to ask you to relocate. It sounds like you relocated in order to look for work, Hugh, so this extension will not apply.

    Filing an election late

    The 45(2) election is supposed to be filed in the year you move out of the home. The deadline is the tax filing deadline for your tax return that year. This would be April 30 for most taxpayers, and June 15 for those who are self-employed or whose spouse is self-employed.

    The CRA can accept a late-filed subsection 45(2) election, if your situation matches one from a list of extraordinary circumstances.

    There is jurisprudence to support late-filed election. In Irene Gjernes v. Canada Revenue Agency, the CRA was ordered to reconsider a disallowed 45(2) election that was filed late by the taxpayer despite no extraordinary circumstances.

    For the late-filed election, the CRA can levy a penalty of the lower of $8,000 or $100 per month past the due date. If the tax savings are more than the penalty, a late-filed election may be worth the penalty risk.

    Capital gains tax when changing the use of a property

    Since a home that is converted into a rental property is subject to a deemed disposition at the time of conversion, the fair market value at the time the rental began is the adjusted cost base (ACB) for capital gains tax purposes. A subsection 45(2) election could defer this conversion date.

    Jason Heath, CFP

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  • Report: Mass. taxpayer exodus continues

    Report: Mass. taxpayer exodus continues

    BOSTON — Massachusetts lost more than $3.8 billion in state-adjusted gross income between 2021 and 2022 as residents fled to New Hampshire, Florida and other low-tax states, according to new Internal Revenue Service data.

    The IRS data, based on income tax returns, shows the Bay State lost a net of more than 45,000 residents in the 2021 and 2022 calendar years – taking with them more than $3.9 billion in taxable income. That’s the fifth highest rate of domestic outmigration in the nation following New York, Illinois, New Jersey and California.

    New Hampshire and Florida were the biggest beneficiaries of Massachusetts’ transplants, the IRS data shows. More than 18,189 people moved from New York to Florida, taking $1.4 billion. An additional 23,596 Bay Staters moved to Florida, bringing more than $2.8 billion in income with them, according to the IRS.

    The Pioneer Institute, a Boston-based think tank, says the data shows the largest cohort to flee Massachusetts were 26- to 35 year-olds, with 9,500 more tax filers leaving than coming into Massachusetts in 2022, more than five times the number a decade earlier.

    “This loss of young talent hinders the state’s future innovation and economic growth, which will compound over decades,” said Mary Connaughton, Pioneer’s director of government transparency. “The cost of housing is a leading factor and the recent housing bill is not enough to address this critical challenge.”

    “We need more innovative solutions at the local level to adequately boost the state’s housing supply,” she added.

    The report is the latest in the series that highlights how Massachusetts’ population is shrinking despite a continuing influx of new arrivals, many through immigration.

    Still, the state’s outmigration appears to be slowing, with about 18,000 fewer residents leaving the state in 2023 than in 2022 – a 31% drop, according to the latest census data, released in May.

    Experts say the outmigration has less to do with politics than it does with a lack of housing, prevailing wages and access to employment.

    But federal data shows the population decline has major implications for the states, revenue and tax collections. The state has seen its revenue benchmarks from tax collections fall short over the past year.

    Massachusetts lost an estimated $4.3 billion in state-adjusted gross income in 2020-21 tax year as residents fled to other low-tax states, according to the latest IRS figures.

    On Beacon Hill, state leaders have approved proposals to cut taxes and reduce the state’s high cost of living as part of a broader effort to stop outward migration and make the state more attractive to new families and businesses.

    Gov. Maura Healey, a first-term Democrat, has expressed concerns about the exodus of residents and businesses in the wake of the COVID-19 pandemic.

    Healey has pointed to a lack of housing as a primary reason people are leaving the state, making the case for expanding stock and making homes more affordable. She acknowledged the impact of the housing crunch on outmigration at an event in Lowell, where she and other officials announced $27 million in tax credits for new housing developments in Salem, Lawrence and Haverhill and other “Gateway” cities.

    “I love New Hampshire, but I want people to stay here in Massachusetts,” Healey said in remarks Tuesday. “I don’t want them going north of the border.”

    But critics point to the state’s high tax burden, including the voter-approved “millionaires tax” that set a new 4% surtax for people with incomes above $1 million a year. They say despite a tax reform package signed by Healey last year, the state needs to do more to ease the burden on residents and businesses.

    Others say concerns about outmigration are overblown and point out that people leave the state for new jobs, college and other reasons other than consternation over high taxes, the cost of living or the lack of affordable homes.

    A 2023 report by the left-leaning policy group Massachusetts Budget and Policy Center says IRS data from 2020 to 2021 shows that Massachusetts has a lower rate of outmigration among high-income households earning $200,000 or more a year than that of low- and middle-income households.

    The report’s authors say that data suggests state tax levels have had “little impact” on the decisions of high-income households.

    Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com.

    By Christian M. Wade | Statehouse Reporter

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  • When are costs for a U.S. property tax-deductible in Canada? – MoneySense

    When are costs for a U.S. property tax-deductible in Canada? – MoneySense

    It sounds like you sold or are planning to sell a property in the U.S., Bob. To cut to the chase, selling costs, like a realtor commission, would be deductible on your Canadian tax return.

    This assumes the property is taxable, which is typically the case for a foreign property. Interestingly, a property outside Canada can qualify as your principal residence. But this would be unusual for a Canadian resident, whose Canadian home would typically be more valuable than a foreign one, and therefore, more appealing to claim as your principal residence.

    Do you have to report the sale in Canada?

    Assuming the property in question is a vacation or rental property, the sale would be reported on your Canadian tax return. In addition to your selling costs, Bob, your acquisition costs, including legal fees, renovations or improvements, can reduce your capital gain.

    Your capital gain would be calculated based on your net sale proceeds minus the acquisition cost, including renovations. You have to convert these amounts from U.S. dollars to Canadian dollars based on the applicable exchange rates.

    The Canada Revenue Agency (CRA) says you should report foreign income or expenses based on the Bank of Canada exchange rate on the date of the transaction. It will accept a different rate for the transaction date if the source is:

    • Widely available
    • Verifiable
    • Published by an independent provider on an ongoing basis
    • Recognized by the market
    • Used in accordance with well-accepted business principles
    • Used to prepare financial statements (if any)
    • Used regularly from year to year 

    Bloomberg L.P., Thomson Reuters Corporation, and OANDA Corporation meet these criteria and are “generally acceptable” to use, according to the CRA.

    U.S. tax implications of selling property in the U.S.

    The U.S. property sale will also have U.S. tax implications, even if you’re not a U.S. citizen. When a Canadian sells real estate in the U.S., they must file a U.S. tax return with U.S. capital gains tax potentially payable. This is a common requirement in other countries as well.

    The U.S. tax paid can qualify as a foreign tax credit to reduce your Canadian tax payable, Bob, to avoid double taxation.

    Jason Heath, CFP

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  • How to change a past tax return – MoneySense

    How to change a past tax return – MoneySense

    According to the Canada Revenue Agency (CRA), two types of fees are eligible to deduct:

    1. “fees to manage or take care of your investments,”
    2. and “fees, other than commissions, paid for advice on buying or selling a specific share or security by the taxpayer or for the administration or the management of the shares or securities of the taxpayer.”

    So, the second one would generally include a management fee paid as a percentage of your investment account, but not commissions or mutual fund management expense ratios (MERs).

    In addition, the fees must be paid to a person or a company whose “principal business is advising others whether to buy or sell specific shares or whose principal business includes the administration or management of shares or securities,” according to the CRA.

    Can you claim a past expense on your current year’s tax return?

    You generally cannot claim a receipt from a previous year on a current tax filing, Ian—at least not directly. It should be claimed for the year in which it was incurred.

    There are some deductions and/or credits that can be carried forward after reporting them in the correct year to claim in a future year, like donations or capital losses, but these claims should still be reported for the year they arise.

    How to amend a previous tax return

    There are three ways you can adjust a previous tax return you filed.

    1. Submit a T1-ADJ, T1 Adjustment Request to the CRA. This can be done using commercial tax software, or by mailing the form and supporting documents to the CRA tax centre that serves your area.
    2. Send a letter signed by you to your tax centre requesting the adjustment.
    3. Log into My Account, the CRA’s secure online service, and use the “change my return” option.

    How many years back can you go to change your tax return?

    The CRA will generally accept an adjustment request for any of the previous 10 calendar years, Ian. For example, in 2024, you can request adjustments to your tax returns as far back as 2014.

    The CRA may accept an adjustment to an earlier tax return, but you must submit the request in writing. (Read: Can you file multiple years of income taxes together in Canada?)

    Jason Heath, CFP

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  • “Where do we pay income tax if we retire abroad?” – MoneySense

    “Where do we pay income tax if we retire abroad?” – MoneySense

    In the case of Mexico, Marianna, a taxpayer is considered a resident of Mexico if they have a permanent home available to them in Mexico. If they have homes in both Mexico and Canada, the location of their centre of vital interests—their personal and economic ties—must be considered. This is a condition of the Canada–Mexico Income Tax Convention, a tax treaty that is like many others that Canada has entered into with other countries to establish tax rules between them. 

    The courts typically refer to the residence article of the OECD Model Tax Convention when defining the centre of vital interests:

    “If the individual has a permanent home in both Contracting States, it is necessary to look at the facts in order to ascertain with which of the two States his personal and economic relations are closer. Thus, regard will be had to his family and social relations, his occupations, his political, cultural, or other activities, his place of business, the place from which he administers his property, etc. The circumstances must be examined as a whole, but it is nevertheless obvious that considerations based on the personal acts of the individual must receive special attention. If a person who has a home in one State sets up a second in the other State while retaining the first, the fact that he retains the first in the environment where he has always lived, where he has worked, and where he has his family and possessions, can, together with other elements, go to demonstrate that he has retained his centre of vital interests in the first State.”

    If you sell your home in Canada or rent it out to a tenant, and establish closer ties to Mexico, you will likely become a non-resident of Canada. There may be tax implications for assets you own when you leave or are deemed to depart from Canada, Marianna. Assets like non-registered investments will be subject to a deemed disposition (a notional sale) and this may trigger capital gains tax if the assets have appreciated in value. Other assets, like pensions and investments, will be subject to withholding tax on income after you leave. 

    You ask specifically about monthly pensions, Marianna. Registered pension plan (RPP) periodic payments like a monthly defined benefit (DB) pension are subject to 15% Canadian withholding tax for a Mexican resident. The same 15% rate applies to Canada Pension Plan (CPP), Old Age Security (OAS) and registered retirement savings plan (RRSP) or registered retirement income fund (RRIF) periodic payments. A lump sum withdrawal from an RRSP or RRIF is subject to a higher 25% withholding tax. 

    Tax on non-registered investments is limited to dividends or trust (mutual fund or exchange-traded fund) distributions. The withholding tax rate is 15%. Most Canadian interest earned by a Mexican resident is not subject to withholding tax in Canada.

    Capital gains on non-registered investments earned by a non-resident are not subject to Canadian withholding tax either. 

    If your Canadian income is relatively low, you may benefit from electing under section 217 of the Income Tax Act to file a Canadian tax return voluntarily. The tax would be calculated on your qualifying Canadian income. Qualifying income includes CPP, OAS, pensions, RRSP/RRIF withdrawals, and a few other sources of Canadian income. If you owe less tax than the initial 15% or 25% tax withheld, you can get a refund. 

    Jason Heath, CFP

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  • What new bare trust tax filing rules mean for Canadians – MoneySense

    What new bare trust tax filing rules mean for Canadians – MoneySense

    What is a bare trust?

    The Income Tax Act does not specifically define a bare trust, Chander. The Canada Revenue Agency (CRA) says: “A bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property.”

    Essentially, a bare trust may exist when someone holds legal title to an asset, but some or all of the asset technically belongs—meaning it beneficially belongs—to someone else. Unlike formal trusts that are generally established with a lawyer, a bare trust is informal and can result simply from adding someone’s name to an account or to the ownership of a real estate property.

    Common bare trust situations

    Some common examples of bare trusts are:

    • a parent co-signing a mortgage for their child and going on the title
    • a parent or grandparent who has an account for a minor child or grandchild
    • an adult child with joint ownership of their parent’s bank account, investments or real estate for estate planning purposes

    Who has to file a trust tax return?

    The trustees of the trust need to file a tax return for it. The trustees are the people who own the assets on behalf of others. So, in the case of a parent co-signing a mortgage, it is the parent who needs to file. In the case of an account for a minor child or grandchild, it is the parent or grandparent who owns the account. In the case of an adult child who holds assets jointly with their elderly parent, it is the child who needs to file.

    Only trusts with assets of $50,000 or more are required to file.

    Required tax filings

    Bare trusts are required to file T3 Trust Income Tax and Information Returns for the 2023 tax year. A bare trust may not need to submit as much information as other trusts. The CRA has provided this guidance (see section 3.3) to Canadians:

    Step 1: Identification and other information

    • When using our online services, identify the type of trust as Bare Trust by selecting “code 307, Bare Trust” and provide the trust creation date in the appropriate field.
    • If this is the first year of filing a trust return, send us a copy of the trust document, unless such information or document has been previously submitted. See 5.3 for more information on what documents may be required.
    • Where applicable, provide a response and information related to whether the trust is filing its final return (and if so, provide the date on which the trust has been terminated or wound up in the year). Provide a response and information related to applicable questions on page two.

    Step 5: Summary of tax and credits

    • Complete the last page including the parts “Name and address of person or company who prepared this return” and “Certification.”

    For bare trusts, the remaining parts of the T3 Return can be left blank. All income from the trust property for a taxation year should be reported on the beneficial owner’s return of income.

    Complete all parts of Schedule 15.

    Choosing a name for the trust

    A trust must have a name so it can be identified by the CRA. The CRA gives this example: For a bare trust for which “Ms. Andrews” is the beneficiary, a name like “Ms. Andrews trust” may be appropriate. If there are multiple beneficiaries, the CRA suggests putting the names in alphabetical order based on last name, with the word “trust” at the end.

    How to get a CRA trust number

    A trust also needs a trust number. This number is similar to a social insurance number in that it helps the CRA identify the taxpayer—which in this case is the trust.

    Jason Heath, CFP

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  • New IRS Direct File program now available in California

    New IRS Direct File program now available in California

    If you’re a California resident and haven’t done your federal tax return for 2023, you now have another, more user-friendly option online: the free Direct File service from the IRS.

    It’s not for everyone, however. Instead, it’s aimed mainly at people with very simple annual tax returns, which the Treasury Department said amounts to about 1 of every 3 taxpayers.

    The tax agency launched the Direct File service in January on an extremely limited basis to make sure its online systems were up to the task. That changed Monday, when the IRS announced that Direct File was available to all taxpayers in California, Arizona, Nevada and nine other states.

    Think of Direct File as the IRS’ alternative to the free online tax-filing programs from TurboTax and H&R Block. It provides step-by-step guidance for filling out your tax forms, filing them and either paying any amount you might owe or collecting your refund.

    The program’s question-and-answer approach means you won’t have to know which forms to fill out or where on the forms to enter your information. Instead, the program will handle those details for you.

    The IRS already works with several tax-prep companies to offer lower-income taxpayers a free online tax return service called Free File. What makes Direct File different is that there’s no middleman and no income limit for participants — anyone can use it, provided that their tax returns use only the most basic forms.

    Specifically, the program will work only for taxpayers whose income is limited to wages reported on a W-2, retirement benefits from Social Security or the Railroad Retirement Board, unemployment benefits or interest income of $1,500 or less. That means if you’re a self-employed person, a business owner, a contractor or a gig worker, or if you have income from a partnership or trust, Direct File isn’t for you.

    The Treasury Department estimates that 19 million people in the 12 participating states are eligible to use Direct File this year and that several hundred thousand people will do so.

    Direct File also allows you to claim only a truncated list of credits and deductions: the Earned Income Tax Credit for low-income workers, the credits for children and other dependents, the standard deduction and deductions for student loan interest payments and educators’ classroom and professional development expenses. If you’re able to claim other credits and deductions, such as those for foreign taxes paid, child care or retirement savings, or if you cut your tax bill by itemizing deductions (for example, if you have sizable medical expenses), Direct File would not be a good choice for you.

    One other caution: The IRS says Direct File will be available only until April 15, when most Californians’ 2023 returns are due. The agency pushed the deadline for taxpayers in San Diego County back to June 17 in response to the federal disaster declaration in that county.

    Direct File runs online only; you’ll need a smartphone, tablet or computer to access it. And to get started, you’ll need to prove to the IRS that you are who you say you are.

    The only way to do that this year will be to use the identity verification service ID.me, which takes a scan of your government-issued picture ID, such as your driver’s license or passport, then uses facial-recognition software to match your image from a live chat session or a new selfie against the stored photo. ID.me has raised concerns among some critics, who say it poses too great a threat to privacy and security.

    Once you’ve established your identity, the program will check your eligibility, then guide you as you enter information about your income, credits and deductions. You don’t need to download any software, the IRS said; instead, your entries will be saved online, and you’ll be able to pause and resume later without having to start over.

    Direct File has a live chat feature to help taxpayers with questions, but it’s not a source of free tax advice.

    “IRS customer service representatives can provide technical support and provide basic clarification of tax law related to the tax scope of Direct File,” the agency said in a release. “Questions related to issues other than Direct File will be routed to other IRS customer support, as appropriate.”

    The Direct File service hasn’t been integrated into California’s tax filing system yet, so you won’t be able to transfer your federal information seamlessly to your state return. The state Franchise Tax Board offers a free online return filing system called CalFile whose restrictions are similar to those in Direct File, so if you’re eligible for the latter, you’re probably able to use the former.

    If you’re entitled to a refund, tax experts say, you should file your return as soon as possible. Otherwise, you’re just making an interest-free loan to the federal government.

    Jon Healey

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  • Work-from-home tax credit: What Canadians can claim for 2023 – MoneySense

    Work-from-home tax credit: What Canadians can claim for 2023 – MoneySense

    A tax deduction is often better than a tax credit because it reduces your taxable income. When you decrease your taxable income, you may save 15% to 54% tax depending on your income and where you live.

    What can you claim for working from home in 2023?

    The Canada Revenue Agency (CRA) introduced a temporary flat-rate home-office expense deduction for the 2020, 2021 and 2022 tax years. Last year, a taxpayer could claim $2 per day worked from home, up to a maximum of $500, as a deduction.

    This simplified method is no longer available for 2023. The detailed method for claiming home-office expenses now applies for all eligible employees, Imtiaz, so you can still claim a deduction if you qualify. In order to be eligible to claim home-office expenses, an employee must:

    Visit the CRA’s website for detailed eligibility criteria.

    How to claim the work-from-home expense deduction for 2023

    Some employers may need a reminder to provide Form T2200s to their employees for 2023. So, if you think you qualify and do not receive the form along with your T4 slip, it may be worth raising this with your employer.

    You can claim a pro-rated percentage of the following expenses:

    • Electricity
    • Heat
    • Water
    • Utilities portion (electricity, heat, and water) of your condominium fees
    • Home internet access fees
    • Maintenance and minor repair costs
    • Rent paid for a house or apartment where you live

    You need to determine your workspace use by calculating the size of your workspace relative to all finished areas of your home. This percentage applied to your eligible expenses becomes your home-office expense deduction, Imtiaz.

    When sharing a workspace

    If the workspace is a shared area used for work and personal use, or if it is shared by more than one person who works from home, you may need to further reduce the eligible percentage of your home-office expenses that can be claimed. Visit the CRA’s website for information on how to determine the type and size of your workspace.

    Jason Heath, CFP

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  • Can you save on taxes by owning an investment account with your child? – MoneySense

    Can you save on taxes by owning an investment account with your child? – MoneySense


    When you give cash or assets to a family member to invest, there may be attribution of that income back to you. Attribution causes income to be taxed on the original taxpayer’s income tax return. Attribution applies:

    • Between spouses. So, if a high-income spouse gives money to their low-income spouse to invest, with the goal of reducing their tax payable, the attribution rules apply.
    • To some income between a parent and a minor child. Interest and dividends are taxable back to the parent, but capital gains are taxable to the child. So, you can accomplish some income splitting with a minor child.

    Attribution does not apply between a parent and an adult child, unless the funds are loaned to the adult child at a low interest rate or at no interest rate. In the case of a low- or no-interest loan, where it seems the intention is not to truly gift the money, but to reduce tax payable on the income for a period of time, there is attribution. As with a minor child, it applies to interest and dividends, but not capital gains.

    Can you avoid capital gains tax by gifting an asset?

    When an asset is outright gifted to a child, there’s a deemed disposition. The asset is considered to be sold to the child at the fair market value, and any accrued capital gains become taxable. So, you cannot avoid tax by gifting an asset, like a cottage, for one dollar, for example.

    It does not appear you have made a gift to your son, Jing. You intend to continue to report the income. So, there is no capital gain and there is no attribution. You should just continue to report the income on your tax return.

    Legal ownership vs beneficial ownership

    This is a case where legal ownership—whose name is on an asset—does not match the beneficial ownership—who technically owns the asset. Legally, the account is joint. Beneficially, the account belongs to you.

    This creates tax consequences for you that may be unintended. Trust rules have changed for 2023 and future tax years. If you have an account, like your brokerage account, Jing, where the legal and beneficial ownership are different, you need to file a special tax return.

    New trust reporting rules for 2023

    A T3 Trust Income Tax and Information Return is used by trusts to report trust income as well as information about the settlor, trustees and beneficiaries of the trust. Although you may not have established a trust with a lawyer, or even consider this joint account to be a trust, the Canada Revenue Agency (CRA) considers it a trust.

    The CRA makes an exception for “trusts that hold less than $50,000 in assets throughout the taxation year (provided that the holdings are confined to deposits, government debt obligations and listed securities).”



    Jason Heath, CFP

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  • New year, new way to file your tax return for free: The IRS launches Direct File pilot program

    New year, new way to file your tax return for free: The IRS launches Direct File pilot program


    It’s back to regular IRS deadlines for California taxpayers this year, but with a new tool for many low- and moderate-income households: a service that will prepare and file their tax returns online for free.

    Starting later this year, taxpayers in California, Arizona, Nevada and nine other states will have access to a new program from the IRS called Direct File. Unlike the free filing options the IRS provides through third parties or the free services from TurboTax and H&R Block, Direct File enables you to send sensitive financial information directly to the IRS — no middleman required.

    It’s also the first service from the agency itself that guides you through the process of filling out your return. And its chat feature can provide answers to basic tax questions in real time from IRS customer service representatives.

    There’s a catch, however. Although Direct File is available to California taxpayers regardless of how much they earn, it can be used only by people who earn income in limited types of ways. For example, Direct File is not for you if you have income from a business you own, subcontracting work or gig-economy jobs.

    Regardless of how you do your taxes, you won’t have an automatic extension of the deadline for filing your 2023 return — at least not yet.

    Because of the damage caused by winter storms last year, most taxpayers in California had until mid-November to complete their 2022 returns and pay what they owed. There have been no federal disaster declarations in California thus far, so the deadline for filing your federal and state returns for 2023 remains April 15.

    If you’re entitled to a refund, tax experts say, you should file your return as soon as possible. Otherwise, you’re just lending interest-free money to the federal government.

    Here’s what you need to know about Direct File.

    Who will have access to Direct File?

    The IRS is rolling out the program slowly to try to work out the kinks before releasing it to the general public. In addition to limiting access to taxpayers in 12 states — California, Arizona, Nevada, Washington, Florida, Massachusetts, New Hampshire, New York, South Dakota, Tennessee, Texas and Wyoming — it will make Direct File available at its Monday launch only to people who’ve been invited to test the system.

    “Using a phased approach like this means that the pilot will not be available to all eligible taxpayers immediately when the IRS begins accepting federal tax returns” on Monday, the agency said on its website. According to the San Francisco Chronicle, the agency expects to open the program to more taxpayers by mid-March.

    You’ll be able to sign up on the IRS’ Direct File site for an alert telling you when the program is available to you.

    Who can use Direct File?

    The program will work only for taxpayers whose income is limited to wages reported on a W-2, retirement benefits from Social Security or the Railroad Retirement Board, unemployment benefits or interest income of $1,500 or less. That means if you’re a self-employed person, a business owner or a contractor, or if you have income from a partnership or trust, Direct File isn’t for you.

    Direct File also allows you to claim only a truncated list of credits and deductions: the Earned Income Tax Credit for low-income workers, the credits for children and other dependents, the standard deduction, and the deductions for student loan interest payments and educators’ classroom and professional development expenses. If you’re able to claim other credits and deductions, such as those for foreign taxes paid, child care or retirement savings, or if you cut your tax bill by itemizing deductions (for example, if you have sizable medical expenses), Direct File would not be a good choice.

    The forms and chat help are available in English and Spanish.

    How do you use Direct File?

    The program runs online only; you’ll need a smartphone, tablet or computer to access it. And to get started, you’ll need to prove to the IRS that you are who you say you are.

    The only way to do that this year will be to use the identify verification service ID.me. ID.me takes a scan of your government-issued picture ID, such as your driver’s license or passport, then uses facial-recognition software to match your image from a live chat session or a new selfie against the stored photo. ID.me has raised concerns among some critics, who say it poses too great a threat to privacy and security.

    Once you’ve established your identity, the program will check your eligibility, then guide you as you enter information about your income, credits and deductions. You don’t need to download any software, the IRS said; instead, your entries will be saved online, and you’ll be able to pause and resume later without having to start over.

    The program’s question-and-answer approach means you won’t have to know which forms to fill out or where on the forms to enter your information. Instead, the program will handle those details for you. That sort of virtual hand-holding is similar to what you’d get by using commercial tax preparation software.

    Can you fill out your California tax return through Direct File?

    No, the information you enter through Direct File will not flow automatically onto your state tax forms — California is not one of the handful of states that have enabled it. Instead, the state Franchise Tax Board offers CalFile, as a way for qualified taxpayers to file their returns for free online. The restrictions on participating in CalFile are similar to those in Direct File, so if you’re eligible for the latter, you’re probably able to use the former.

    What are the alternatives for filing your tax return for free?

    The IRS already offers its Free File service to taxpayers whose adjusted gross income — that is, income minus certain deductions, including retirement savings contributions and student loan interest payments — was $79,000 or less in 2023. Unlike Direct File, taxpayers with earnings from self-employment, their own businesses, investments or gig work are eligible, as long as they meet the income limits.

    There is a version of Free File that lets you fill out forms directly online, with no guidance from the IRS. The more accessible version, though, connects you to any of eight online tax-preparation services, which will help you prepare your return for free.

    In addition, the AARP Foundation Tax-Aide and the IRS-sponsored Volunteer Income Tax Assistance program can connect you to a volunteer tax preparer who will do your tax return for you or help you do it yourself, at no charge to you. These services provide tax preparation or guidance only to low- and moderate-income taxpayers who meet the income limits, or who have disabilities or limited English proficiency.

    Intuit’s TurboTax and H&R Block also make free versions of their tax preparation and filing software available online. There’s no income limit, but the services work only with basic returns that demand little more than a 1040 form. That would exclude anyone with income or losses from a small business, for example, or whose investments pay more than $1,500 in dividends.



    Jon Healey

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  • How are bonuses taxed in Canada? – MoneySense

    How are bonuses taxed in Canada? – MoneySense

    Maybe that money is already spoken for. Many Canadians are struggling financially right now, so a bonus or salary increase might simply help cover the rising cost of living or create a bit of breathing room in your budget. But if you’re keeping up with monthly obligations like rent, mortgage payments, household bills and loans, you may have some flexibility in how you allocate those bonus bucks—including saving towards your financial goals.

    “Year-end bonuses are very exciting and tempting,” says Reni Odetoyinbo, a financial influencer in Toronto who shares money tips on her site, Reni, The Resource. “I like to look at all my goals for the year and see if anything needs topping up to decide how I spend the bonus.” (Read her Q&A with MoneySense.)

    Are work bonuses taxed?

    Before you start divvying up your dollars: Know that bonuses are taxed like your other wages, so you may not receive as much as you think. Your employer will also deduct Canada Pension Plan (CPP) contributions and employment insurance (EI) premiums, unless you’ve reached your CPP and EI maximums for the year. 

    If you don’t need that bonus money right away, you could have your employer transfer it directly into your registered retirement savings plan (RRSP), if you have RRSP contribution room. No federal or provincial taxes will be withheld.

    “Of course, the RRSP money is likely going to be stored away for a longer term, so if you have some more immediate needs, these are important to consider,” says Odetoyinbo. On that note, below are five ideas for how to spend a work bonus, plus links to tips and resources for each one.

    Bonuses, RRSPs and taxes

    Most employees get their bonus in February, a detail that matters when it comes to filing your taxes. “Employment income—salary or bonus—is taxable when paid,” says Jason Heath, a Certified Financial Planner and MoneySense columnist. “So, a February 2024 bonus is taxable in 2024, even though it may be tied to 2023 performance by the employee or the company.” 

    This can create an unfortunate mismatch, Heath notes. “Asking your employer to deposit your bonus directly to your RRSP can result in your full pre-tax bonus being invested right away. But watch out. If you do this in the first 60 days of the year, you get to claim the deduction on your previous year’s tax return. But the bonus is taxable in the year that it is received. Unless you do this every year, you could end up with a tax refund one year, but a balance owing the next year.”

    Using this year’s bonus as an example, Heath says that if you direct your February 2024 bonus into your RRSP pre-tax, you’ll get an RRSP receipt for 2023. This could result in a tax refund for 2023; however, the income will be taxable in 2024, with no tax withheld. 

    1. Pay off credit card bills and other high-interest debts

    If you have high-interest debt on credit cards or a line of credit, paying it down with a lump sum could save you hundreds of dollars in interest payments, notes Odetoyinbo. “A payment to your 19.99% credit card debt is one of the best returns you can get.”

    If you’re carrying a balance on one or more cards, use proven strategies to pay it down, such as switching to a low-interest credit card or balance transfer credit card—both can help slow the accumulation of interest. You could also explore consolidating your debt into a single payment plan. 

    2. Pay down your student debt

    Do you still have student debt hanging over your head? If you aren’t carrying any debts that charge higher interest (like credit card debt), consider putting your bonus toward your student loan. For the 2021–2022 academic year, the average Canada Student Loan balance at the time of leaving school was $15,578, according to Employment and Social Development Canada. It also notes that borrowers typically repay the money over nine and a half years—imagine slashing that by a year or two. 

    Jaclyn Law

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