TAXES: Save Money, Solve Problems
Taxes take a big bite out of most Canadian’s budgets. In fact, they are the largest single expense for many of us. According to The Fraser Institute, the average Canadian family (including single Canadians) earned $85,883 in income and paid $37,058 in total taxes in 2017. That’s 43.1 percent of income going to taxes.
To help Canadians understand how much we pay toward taxes, we “celebrate” Tax Freedom Day. This is the date by which Canadians’ average earnings equal their annual federal, provincial and local tax bills. In 2020, it was celebrated on May 19th.
Congratulations on taking this important step to a brighter financial future. Consolidated Credit Canada has been helping Canadians across the country solve their credit and debt problems for years. Our Educational Team has created over twenty-five publications to help you improve your personal finances. By logging onto www.consolidatedcreditcanada.ca you can access all of our publications free of charge. We have tools to help you become debt free, use your money wisely, plan for the future, and build wealth. The topics Consolidated Credit Canada addresses range from identity theft to building a better credit rating; from how to buy a home to
paying for university. On our website you will also find interactive tools that allow you to calculate your debt and see how much it is costing you.
We are dedicated to personal financial literacy and providing a debt-free life for Canadians. If you are overburdened by high interest rate credit card debt, then I invite you to speak with one of our trained counsellors free of charge by calling (844)-402-3073 for free professional advice.
Sincerely,
Jeffrey Schwartz
Executive Director
Consolidated Credit Counseling Services of Canada, Inc.
Taxes: Save Money, Solve Problems
Taxes take a big bite out of most Canadian’s budgets. In fact, they are the largest single expense for many of us. According to The Fraser Institute, the average Canadian family (including single Canadians) earned $85,883 in income and paid $37,058 in total taxes in 2017. That’s 43.1 percent of income going to taxes.
To help Canadians understand how much we pay toward taxes, we “celebrate” Tax Freedom Day. This is the date by which Canadians’ average earnings equal their annual federal, provincial and local tax bills. In 2020, it was celebrated on May 19th. That means for the first six months of the year, the average Canadian was working solely to pay taxes!
Also, many people probably pay more taxes than they need to. Each year, many Canadians overpay only because they fail to file common deductions and credits that they are entitled to. Most, if not all, of the following deductions, are available to the average Canadian, working taxpayer.
At Consolidated Credit Canada, we often hear questions and concerns about taxes from the consumers we counsel.
Saving Money
Getting organized and keeping good records are the two keys to making tax time less painful and expensive. If you haven’t already done so, start a file and notebook where you can keep track of your income and expenses. If you only receive income through one job and your employer withholds taxes, this will be easier. Still, it’s a good idea to keep copies of your paystubs in case of any problems later on.
Always write down tax deductible expenses immediately, the same day you incur them. Otherwise, you’re likely to quickly forget about them. Keep records and receipts of any items you may be able to deduct.
Scott Estill, former tax attorney and author of Tax Secrets of Millionaires, recommends you include five pieces of information in
your records:
Who?
What?
Where?
When?
Why?
Answering these questions will usually give you the information you need to explain any items that may be questioned by the Canada Revenue Agency, or CRA.
Many people fail to take legitimate deductions because they are afraid it will result in their being audited. In fact, your best defence is to keep good records, check your returns carefully, and make sure you get good advice about legitimate deductions. Remember, overpaying your taxes still won’t protect you against an audit.
Here are some commonly overlooked deductions:
Amount for an eligible dependant – You may be able to claim the amount for an eligible dependant if, at any time in the year, you supported an eligible dependant and met certain conditions:
- You did not have a spouse or common-law partner or, if you did, you were not living with, supporting, or being supported by that person
- You supported the dependant in the previous year
- You lived with the dependant (in most cases in Canada) in a home you maintained. You cannot claim this amount for a person who was only visiting you
The dependant must also have been either:
- Your parent or grandparent by blood, marriage, common-law partnership, or adoption
- your child, grandchild, brother or sister by blood, marriage, common-law partnership, or adoption and was under 18 years of age or had an impairment in physical or mental functions.
- Charity – The Charitable Donations Tax Credit can be up to 33 percent of the amount you donated at the federal level. You may also be entitled to an additional amount reaching up to 24 percent of your donation depending on your province of residence. Several rules determine whether you qualify. Check out the CRA website for more specific information on how charitable donations can be taxed.
Childcare Expenses – Child care expenses are amounts you or another person paid to have someone look after an eligible child so that you or the other person could do one of the following:
- Earn income from employment
- Carry on a business either alone or as an active partner
- Attend school under the conditions identified under the Educational program
- Carry on research or similar work, for which you or the other person received a grant
The child must also have lived with you or the other person when the expense was incurred for the expense to qualify. Canadian taxpayers can claim up to $8,000 per child for children under the age of 7 years at the end of the year.
- $5,000 per child for children aged 7 to 16 years.
- For disabled, dependent children of any age who qualify for the disability tax credit, the amount to claim for that child is $11,000.
- You can claim $5,000 for a disabled child over the age of 16 who does not qualify for the disability tax credit but was still dependent on you and required care.
For a boarding school or overnight camp, you may only claim up to $200 per week for a child under the age of 7 years, $275 per week for an eligible disabled child, or $125 per week for a child aged 7 to 16 years.
Medical Expenses –
Everything from regular dental visits to prescriptions and doctors’ bills can qualify for the tax credit. These expenses are not often missed entirely, but many expenses could be included that are often not included. To get the most out of your tax return, it’s a good idea to have one spouse claim all the medical expenses for the home.
- If you support a dependant, such as an elderly parent, don’t forget to claim those expenses too.
- If you’ve had to travel more than 40 km one way to seek medical care, you can claim certain travel expenses. For trips over 80 km, meals and accommodations may also be included.
- Don’t forget about any private insurance premiums you pay throughout the year.
- A full list of credits can be found on the CRA website (www.cra-arc.gc.ca).
Disability Credits – The disability tax credit is considered a non-refundable tax credit and is meant to help people with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC. This amount includes a supplement for persons under 18 years of age at the end of the year.
Pension Income Credit – The Pension Income Tax credit is available to you if you are aged 55 or older. The credit enables you to deduct a tax credit equal to the lesser of your pension income or $2,000.00. Depending on which province you live in, this could mean around $440-$720 in tax savings each year.
Eligible expenses may include legal fees for support payments, fees for preparing your income tax return and management fees for your investments if you qualify.
Carrying Charges – These include a variety of expenses associated with finance charges and investment expenses, such as interest on loans for investment purposes, the interest charged on the purchase of Canada Savings Bonds through your employer’s payroll deduction plans, the cost of renting out a safety deposit box, and fees paid to financial planners and investment advisors.
Moving Expenses – If you’ve moved because of a new job, you may be eligible to claim some moving expenses that were incurred. If you moved to a home that’s at least 40 km closer to your new job, you can claim associated moving costs. Commonly overlooked moving expenses are
- Travel expenses for your family including vehicle expenses, accommodations, and meals.
- Fees for changing your address on documents or identification such as your driver’s license, vehicle registration, or other legal documents.
- The cost of utility hookups and disconnections.
The expense of title transfer for your new home
Self-employment Expense – If you are using your house as part of your business, you can claim a deduction for the part of your home that is so used to conduct business activities. This applies if you own or rent your home and should be calculated based on the percentage of your living space utilized for your business.
How To Pay Your Taxes in Canada?
There are many options available to pay your taxes on time.
Paying Online:
Online banking – Call your bank’s client services department or sign in to your online banking service and add the “CRA” as a “new payee”
My Payment is an electronic service that lets you make payments directly to the Canada Revenue Agency (CRA) using your bank access cards (Interact, Visa Debit, or Debit MasterCard).
Pre-authorized debit (PAD) is a secure, online payment option for individuals and businesses to pay their taxes. You can set the amount and authorize the Canada Revenue Agency to withdraw it from your chequing account on the date of your choice.
Pay by credit card, PayPal, or Interac e-Transfer – You can use a third-party service provider that offers payment by credit card, PayPal, or Interac e-Transfer. Most third-party service providers charge a fee for their services however.
CRA Approved third-party service providers
- PaySimply accepts Visa, MasterCard, Amex, Union Pay, PayPal, and Interac e-Transfer
- Plastiq accepts all card brands including Visa, MasterCard, and Amex
Paying In Person:
At Your Bank – You can make a payment by visiting your financial institution. A personalized remittance voucher is required so that the payment can be applied to your account by the CRA. Financial institutions don’t accept copies of remittance vouchers. If you do not have a remittance voucher, you can order them, and in some cases even print your own.
At Canada Post Outlets – You can pay in person by cash or debit card at any Canada Post outlet for a fee. To do so you’ll need a quick response (QR) code to credit your CRA account. The CRA includes QR codes on various individual vouchers. If your voucher doesn’t have a QR code, you will need to generate one.
You can create a QR code in two simple steps:
- Visit the CRA PaySimply site below and click on the “Create Payment Code” button and follow the instructions. You’ll need to provide your social insurance number, legal name, the amount you wish to pay, and the type of tax you want to pay (business or individual).
- www.paysimply.ca/payinpersonNext, press ‘Continue’ and select where you want your QR code to be sent: email, mobile, or print at home and bring it to your nearest Canada Post outlet to make a payment
The clerk will scan your QR code and ask for payment. The amount payable is for your reference only and is hidden from the clerk. The clerk also will not see any CRA account information. A service fee is charged based on the amount of the payment and will be displayed when you first create the QR code.
Pay By Cheque – You can make a payment to Canada Revenue Agency by a cheque made out to the Receiver General for Canada. Mail it with your remittance voucher to the address on the back of your voucher. If you want to give additional instructions indicating where you want the payment to be applied, include it on a separate piece of paper in the envelope. The CRA charges a fee for any dishonoured cheque.
If you do not have a remittance voucher, you can mail your cheque to;
Canada Revenue Agency
PO Box 3800 STN A
Sudbury ON P3A 0C3
Payments sent by mail are considered paid when they are received by the CRA. To avoid late fees and interest charges, please make sure you pay on time. For any other tax payment related questions, call the CRA customer service line at 1 (800) 959-8281
Having Problems Paying Taxes?
If you think you are going to have trouble paying your tax obligations to the government, be sure to file your return on time anyway. It is a serious offence to ignore your financial obligations to the government and steps could be taken to garnish wages or worse if you don’t take responsibility. For help and guidance, call Consolidated Credit Canada at (844)-402-3073.
The intention of these tips is to provide you with some general tax-saving strategies. For more specific information we recommend you speak with a professional accountant, lawyer, or Canada Revenue Agency directly, in addition to your Consolidated representative.
Additional Resources:
The Revenue Canada
website is
www.cra-arc.gc.ca
www.tax-news.com
Tax Secrets of Millionaires by former tax attorney Scott Estill
Learn more at www.bizhelpcentral.com
About Consolidated Credit Canada
Consolidated Credit Canada is consumer oriented, non-profit organization. We are an industry leader in providing credit counselling and debt management services. Our mission is to assist individuals and families in ending financial crises and to help them solve money management problems through education, motivation, and professional counselling. Our organization is funded primarily through voluntary contributions from participating creditors. Our programs are designed to save our clients money and liquidate debts at an excellent rate.
We are dedicated to empowering consumers through educational programs that will influence them to refrain from overspending and abusing credit cards,
as well as to encourage them to save and invest. Regardless of whether your financial problems are due to the purchase of a new home, birth of a child, major illness, or any other circumstance, we can help.
* If you are headed for a debt disaster visit www.ConsolidatedCreditCanada.ca or call (844)-402-3073 for free professional advice by a trained counsellor.
