Tax Topics with Fin: BC Budget Update

BC Budget Update

By Fin MacDonald, Fin Tax Service

Fin MacDonald has over 20 years’ experience providing retirement and Income tax planning advise. Readers are however cautioned that responsibility falls on the taxpayer to ensure that all information is adequate and correct.

Victoria Beacon Hill MLA, and Finance Minister, Carole James delivered the 2019 BC Budget on February 19. Among the highlights were:

  • $50 per month increase in BC Benefits and Disability payments, starting this month

  • Cancellation of interest on BC Student Loans

  • “Affordable Child Care Benefit” to be rolled out over next three years, and

  • “BC Child Opportunity Benefit”, to commence in October 2020. Filing a 2019 Tax Return will be a prerequisite for this program.

The Federal Budget is scheduled to be presented on March 19 (one week after I write this for The Beacon).

The following is adapted from my annual tax presentation @ James Bay New Horizons.

1) Why File a Tax Return?

There are many reasons to file a tax return:

  • You have a refund 😊

  • To earn Registered Retirement Savings Plan (RRSP) contribution room

  • To continue your credits such as Good and Services Tax Credit (GST), Canada Child Benefit (CCB), Working Income Tax Benefit (WITB)

  • To qualify for means-tested programs such as Shelter Aid For Elderly Residents (SAFER), Social Housing, Long Term Care, BC Bus Pass, Guaranteed Income Supplement (GIS) and BC Seniors Supplement

  • Many benefits/programs are based on family income; so, even if you have no income, file so that your spouse (and children) have access to the programs.

  • The Canada Revenue Agency (CRA) tells you that you have to.

2) Why File Your Return Early?

  • ·With E-file and Direct Deposit, refunds come in 8 to 10 days

  • To insure uninterrupted GST and other benefits

  • If you owe money, knowing ahead how much helps you to plan and budget for it (I E-filed mine in February but won’t be paying until April 30)

  • To make sure scammers don’t file your return – this is more of a problem in the States.

3) What Happens When You File Your Return?

Most returns that are E-filed are processed within eight to ten days; paper-filed returns take six to eight weeks. Some returns, such as for non-residents or people who are in bankruptcy, have to be paper-filed.

When the CRA receives a return, it may be subject to further scrutiny. Before E-filing, people would attach their income slips, receipts and other documents to their returns. Now, with most returns sent in electronically, there are two common reviews, known as the Pre-Assessment and the Post-Assessment Review.

A Pre-Assessment Review is usually triggered by large expenses that haven’t been claimed by the taxpayer before. Examples are Moving Expenses, Medical Expenses, Employment Expenses and Charitable Donations. Usually the Pre-Assessment Review is in cases that would have large refunds, but not always. A client of mine, who is not claiming a refund, has very large medical expenses. At the moment his return shows up on-line as In Process.

A Post-Assessment Review is usually done on a specific deduction basis, or on an occupational basis. Deduction examples are Medical Expenses or Charitable Donations. Occupational examples are taxi drivers and hospitality employees. However, there is not 100% consistency as to whom the CRA choses. A client of mine who is a Registered Nurse was asked to produce her union dues receipts; even though the CRA had accepted her claim the previous five years.

If you are chosen for either the Pre- or Post-Assessment Review it is important to Respond to the CRA. If you don’t respond, the deductions you are claiming will be disallowed.

4) Matching Programs

After tax season is over the CRA embarks on what is called the Matching Program. This is when they attempt to match all the T4s, T3s, T5s, T4As that were sent in by payers, to each individual who received them. This often leads to Unreported Income. This can be BIG Trouble. Repeated cases of Unreported Income will lead to penalties and interest that can be up to 300% of the unreported amount.

This year the CRA has launched a new “Pre-Assessment Matching Program”. When a person may have a large refund, the CRA is sometimes asking for the T slips (T4, T3, T5 etc.) that they do not have, to determine the veracity of claims for tax deducted. This affects retirees who receive the T4A RCA (Retirement Compensation Arrangement) for income and taxes deducted from their special retirement accounts. The CRA receives the T4A RCA slips, but for unknown reasons, does not make them available on-line to their staff or to taxpayers (and their representatives).

5) I Forget to Report Some Income or Deduction

If you receive a slip after you have filed your tax return or discover that you hadn’t claimed all your medical expenses (for example), either go online or send a letter to the CRA outlining the issue. By acting when this comes to your attention, rather than waiting for the CRA to become aware through Matching Programs or other means, you can avoid penalties and a strained relationship with the CRA 😊

Next time I will be looking at tax planning and lessons learned from this tax season. As always, dear readers, I look at taxes through my lens of Helping You To Keep More of YOUR Money.

MS: Multiple Sclerosis

JBNA: Climate Change

JBNA: Climate Change