2020 Tax Updates

It is very important that all income earned during the year must be accurately and fully reported as this will help establish the correct tax liability.

TAX SLIPS

Deadline for businesses and investment companies for filing tax slips such as T4s, T4As and T5s is February 28, 2021
Individuals who have received taxable COVID-19 benefits from the CRA should receive T4A or T4E. The T4A slip will show the 10% income tax that was withheld on the CRB, CRCB, and CRSB but no taxes were withheld on the CERB and CESB.  Canada Recovery Benefit (CRB), Canada Recovery Caregiving Benefit (CRCB), Canada Recovery Sickness Benefit (CRSB), and Canada Emergency Student Benefit (CESB).

No tax was withheld on the CERB.

It is very important that all income earned during the year must be accurately and fully reported as this will help establish the correct tax liability. Any tax outstanding must be paid not later than April 30, 2021. Any under payment of tax due to failure to report the full income may result in interest and late payment charges being levied.

Benefits repaid after before December. 31, 2020, will be reflected on the T4A. For benefits repaid after December 31, 2020, the individual concerned you will have to pay tax on the full benefit amount received in 2020. The adjustments for the repayment/s will be made in the tax return for the year 2021 after you file your 2021 taxes.

HOME OFFICE EXPENSE DEDUCTION

Employees who worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to COVID-19 may be eligible to claim a home office expense deduction on their personal T1 tax return. These employees may elect one of the two following methods to claim a home office expense deduction for 2020:

1) Temporary flat rate method under this method a deduction of $2 per day for every day the eligible employee worked from home, up to a maximum of $400, may be claimed.  
2) Detailed method here the existing rules apply. The eligible employee may claim the employment portion of actual home office expenses incurred. All the expenses have to be itemized and the employee must obtain from the employer a signed form T2200S or T2200.

Taxpayers might want to check out which option will be more favorable to use..

CANADA TRAINING CREDIT

Based on information from your 2019 T1 tax return, the CRA will determine your Canada Training Credit Limit for the 2020. For 2020 and future years, taxpayers may be able to claim a refundable Canada Training Credit equal to your Canada Training Credit Limit for the year or 50% of your eligible tuition and fees paid to an educational institution in Canada, whichever is less.

Eligible tuition and fees for CTC are generally the same as tuition that would qualify for the tuition tax credit. However, it should be noted that if a taxpayer qualifies for both the CTC and the tuition tax credit, the CTC will reduce eligible tuition for purposes of the tuition tax credit. Unused amounts will continue to accumulate in the taxpayers notional CTC account, up to a lifetime maximum of $5,000.

Taxpayers under the age of 26 or over the age of 65 at the end of the year are not eligible to claim the CTC for that year.

DIGITAL SUBSCRIPTIONS TAX CREDIT

This 15% non-refundable tax credit will be given on amounts paid, maximum of $500.00, by taxpayers to a qualified Canadian journalism organization (QCJO) for qualifying subscription expenses for the years 2020 to 2024. Please note that only the cost of a stand-alone digital subscription to the content of the QCJO will be allowed as an expense.

HOME BUYERS’ PLAN

From 2020 onwards individuals can re-qualify for the Home Buyers’ Plan (HBP) following the breakdown of their marriage or common-law partnership in certain circumstances. To be eligible the following criteria must be met:

The individual must have been living separate and apart from the spouse or common-law partner for at least 90 days (which began in the calendar year in which the withdrawal is made or any time in the previous four years) as a result of the breakdown in the marriage or common-law partnership, when the withdrawal of the funds from the RRSP is made.
For the purchase of the home, the individual must sell their previous principal residence no later than the end of the second year after the year of withdrawal of funds from the RRSP;
If buying an interest or right in a home from their former spouse or common-law partner, they must do so no earlier than 30 days before the withdrawal from the RRSP and no later than Sept. 30 of the year following the withdrawal; and
At the time of the RRSP withdrawal, the new spouse or common-law partner must not own or occupy a home which is the individual’s principal residence.

After March 19, 2019, the Home Buyer’s Payment limit was increased to $35,000 for withdrawals made and repayments to the RRSP begin in the second taxation year following the year of withdrawal.

ENHANCED CANADA PENSION PLAN

Contributions to increase until 2023 (or 2024 if your income exceeds a new earnings ceiling). Quebec Pension Plan (QPP)has made similar changes. When you file your personal income tax return for the 2020 tax year, remember that your CPP/QPP contributions consist of a base amount and an enhanced amount, which is consistent with 2019. While a non-refundable tax credit on the CPP/QPP base amount continues to be available, a tax deduction can also be claimed on the enhanced portion of the CPP/QPP since 2019. The maximum amount of the new tax deduction for 2020 is $165.60.

Tax Services for Individuals

I will review your financial situation and advise you on the course of action that will help you maximize your tax savings

I will help you to decide how to pass over your wealth to your family members with minimum tax consequences

RRSPs Or TFSA’s

Many Canadian tax payers face a dilemma when it comes to choosing between investing in the Tax Free Savings Account(TFSA) or the Registered Retirement Savings Plan(RRSP).

While both offer tax shelters to investment income, care should be exercised when deciding which option to settle for to in order to safeguard both your current situation as well as your long-term financial goals.

WHAT IS AN RRSP?

A registered retirement savings plan meant to encourage Canadians to save for their future. Any gains through interest earned or growth in the amount invested is sheltered from tax as long as the money sits in the account. Any withdrawals are subject to tax.

  • Anyone who has earned income and files a tax return can open and contribute to an RRSP up until the end of the year they turn 71. You can contribute a maximum of 18 per cent of your earned annual income, up to a dollar ceiling that’s set at $27,230 for the 2020 tax year. Any unused contribution room builds up year over year.
  • Contributing to an RRSP by not later than March 01, 2021 may enable Canadians to reduce their taxable income for the year 2020 and consequently help trim their tax bill.
  • RRSPs allow a first time home buyer to make withdrawals to help pay towards the down payment with no tax consequences provided certain conditions are met.
  • However, caution must be applied before investing in an RRSP account. You must look at your overall current financial position and your long-term financial goals. Make sure that your short-term needs are covered and there is cash available for an  emergency.

 Tax Free Savings Account

ThTFSA is a tax-free account that allows you to contribute with your after tax income. The basic contributions together with any income earned and growth made may be withdrawn any time without any tax consequences. The only disadvantage this account has when compared to a RRSP is that the annual contributions have a ceiling.

I assist my clients to file their tax returns as required by the law. This ensures a faster tax refund where due.

Services for Businesses

Optimizing a tax structure for your Business and making them more profitable

BUSINESS START UP – BUSINESS STRUCTURES AFFECT TAXES AND LIABILITIES

Organizations usually have three forms of business structures from which to choose: proprietorship, partnership and corporation. The business structure you choose will determine the taxes that you pay as well as your legal liability. The right business structure will optimize the potential of your business and help you avoid surprises at tax time. I have the expertise to help you to identify the most appropriate structure for your business and translate your business dreams into reality. I can help you set up the appropriate form of organization, help with the preparation of a business plan and offer seamless business start-up advice.

ACCOUNTING SERVICES

STOP FLYING BLIND – GOOD RECORD KEEPING MAKES GOOD BUSINESS SENSE

Good record keeping is the law, and yes, it makes good business sense to maintain good record keeping. By law any business is required to maintain books of original entry, sufficient to determine that all taxes are duly accounted for. Further, your business needs to keep records to enable you assess its viability and progress and identify opportunities for further growth. However profitable your business may be, if the record keeping system is not sufficient and or reliable then you are flying blind!

I can help you set up an appropriate record-keeping system, a well-designed and efficient system that will save you time and money, and provide quick access to the information necessary for your day-to-day decision making.

I offer a wide range of accounting services including payroll administration, commodity tax compliance and management reports. I can compile your financial statements on an interim or year-end basis. I can discuss the numbers and help you look beyond them to make informed decisions about your business.

INTERNAL CONTROLS AND SYSTEMS

I can help you choose a system which based on your needs and requirements will best serve your purpose, and assist you seamlessly with operations, monitoring and review. A system that will minimize revenue leakages and reduce costs and provide you with accurate, meaningful and timely management information to enable you make informed decisions about your business.

Remember effective implementation of internal control systems for record keeping, information control, asset protection and document retention is the key to wiping out chaos and bringing order to make a business sound and successful.

REMIT YOUR TAX AND PAYROLL DEDUCTIONS ON TIME – IT’S THE LAW!

Harmonized sales tax (HST) and payroll deductions are held in trust for government agencies. Regardless of how constrained your business cash flow, these liabilities must be remitted on time and in full. Failure to remit on time can result in very stiff penalties and fines. I assist my clients to submit accurate filings and remittances on a timely basis.

I can also assist you with your cash flow projections to ensure that all your financial obligations are honoured as and when they fall due.

ESTATE PLANNING – WANT TO QUIT?

A day may dawn when you decide to retire or move on to other challenges. Whatever your reasons for quitting, making the right decisions today will help ensure that you can exit your business knowing that both your needs, and the needs of your business, will be well taken care of. I will help you to formulate and develop an exit strategy that will ensure that your beneficiaries reap the maximum benefits from your estate.

TAX PLANNING AND PREPARATION

Tax planning and preparation goes well beyond the mere filing of tax returns on time. It’s the core to a successful financial planning process. Whether you’re an employee or an employer, whether you’re planning for your future or the future needs of your family, I can help you keep more of your hard earned money with the various effective tax strategies. Whatever your circumstances, whatever your tax planning and preparation needs, I am confident I can help you.

If you need any assistance in filing your tax returns, then please contact me and I will be very happy to provide you with my value-added professional services.

Be it for a business’ corporate tax and sales tax (HST) compliance or for a sound business tax planning, accounting and payroll requirements I have over ten years of phenomenal experience and have helped many clients to save money through effective tax planning strategies, and in the process enabled them to grow.  

Please come and see me or feel free to contact me if you have any questions regarding your taxes. I am located on Gable Drive in Clearview.  My hours of operation are very flexible.

Shabbir Bagha, CPA, CGA,

Chartered Professional Accountant

1114 Gable Drive

Oakville, ON L6J 7R3

Tel; 416-258-8263/905-582-5471