Episode 30: Getting Ready for Tax Season - 2020 update
Welcome back to another episode of Chat with Brandy, a weekly show where we talk personal & business finance, taxes, and how to make money while doing what you love! I’m your host, bookkeeper and tax preparer Brandy Miron, and this is episode 30.
It’s that time of the year again – tax season is coming! This video and related blog post is an update to episode 18, which gives lots of good general advice on tax checklists and deductions. This video will concentrate on the updates for this year as we file our 2019 tax returns.
The first step towards a successful tax season is to prepare early by organizing your documentation well in advance of the tax deadlines. The last day to file as an individual is April 30th, 2020, and that is also the deadline to pay any tax owing.
If there is a chance you’ll owe taxes, you should file several weeks in advance of the deadline so the Canada Revenue Agency (CRA) can assess your return before payment is due. If you file late and end up owing taxes, you’ll pay interest and penalties on your outstanding tax balance until you submit your payment to the CRA.
If you have self-employment or rental income to report, your return isn’t technically due until June 15, 2020, but any taxes owing are still due April 30, so I typically recommend sticking with the earlier deadline.
CRA is currently closed for e-filing of any tax year, and will likely re-open around February 25th– this will be the earliest you can file your 2019 tax return, and I would only recommend filing that early if you are 200% sure you have all of your T-slips. T-slips, such as T4’s, T5’s, T3’s, etc, are not due to be filed your payors until February 28th, so it’s often a good idea to hold off and make sure you have everything.
Other slips that may come a little later are RRSP contribution slips (because the contribution deadline is March 1), and T5018 slips if you have done any construction contracting type of work are not due until 6 month’s after the payers year-end, so that could be as late as June 30 – if you do construction contract work, it’s a good practice to track your own income so you do not have to wait on the slip.
In Episode 18, I listed all the Alberta deductions, so check that out first – here are the updates!
RATES & LIMITS
The percentage of tax you pay depends on how much your taxable income is – that is ALL of your income minus deductions and credits. When you pay tax, you are paying both federal and provincial tax. Each of the provinces has a different progressive tax bracket structure, and so does the federal government.
The tax brackets increase a little each year, based on inflation – this means that you can make more money and stay in a lower tax bracket. Here are the 2019 numbers:
Corporations claiming the small business tax deduction (Canadian-controlled private corporations with active business income under $500,000) will enjoy a 1% federal tax rate decrease, bringing their federal rate down from 10% to 9%. The Alberta corporate tax rate for small businesses remains at 2% for 2019.
Credits & Benefits
1. The Alberta Carbon Tax Rebate that’s been around for a few years is now gone, but there’s a new federal rebate program in place called the Climate Action Incentive for adult residents of Alberta, Saskatchewan, Manitoba, and Ontario. Minors may also qualify if they are married or have their own child(ren).
This new credit is NOT based on income.
Eligible individuals could receive an extra $444 on their tax refunds this year, with an extra $222 for your eligible spouse, and $111 per qualified dependant.
There is also a 10% supplement for residents of small and rural communities.
2. 2019 is the last year Albertan students can claim the education & tuition tax credits. Federally, this tax credit has been gone since 2017, and Alberta will be following suit in 2020.
3. The Working Income Tax Benefit (WITB) is now called the Canada Workers Benefit, and is now a little more generous than the old WITB credit – individuals can now get up to $1,355 compared to the old $1,059, and families can now get $2,335 as compared to the old $1,922, and you can make slightly more money and still qualify for the full benefit.
HOW CAN I BE PREPARED FOR THE TAX SEASON?
Lucky for you, I have prepared TAX CHECKLISTS for almost every personal tax situation possible!
Start with the Personal Tax Checklist
Then, if applicable:
Rental Property Tax Checklist Employment Expenses Checklist
Foreign Income Reporting Checklist
And as always, if you have any questions at all about what is required, reach out to me and I’d be happy to chat!