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When the Canada Pension Plan was introduced in 1965, it was a relatively simple retirement savings model. Working Canadians started making contributions to the CPP when they turned 18 years of age and continued making those contributions throughout their working life. Those who had contributed could start receiving the CPP retirement benefit at any time between the ages of 60 and 65. Once an individual was receiving retirement benefits, he or she was not required (or allowed) to make further contributions to the CPP, even if that individual continued to work. The CPP retirement benefit for which that individual was eligible therefore could not increase (except for inflationary increases) after that point.

Retirement looks a lot different now than it did it 1965, and the Canada Pension Plan has evolved and changed to recognize those differences. What that means for the average Canadian is much more flexibility in determining how to structure both their contributions to the CPP and the receipt of CPP retirement benefits.

While greater flexibility in retirement income planning is always a good thing, having more choices brings with it the need to determine which choices are the right ones in one’s particular circumstances. And, when it comes to CPP, many Canadians must decide on when it makes sense to stop making CPP contributions.

The need to make that choice arises where a decision is made to continue to stay in the work force, whether part-time or full-time, even after beginning to receive CPP retirement benefits. While it has always been possible to work while receiving such benefits, it was, until 2012, not possible to make CPP contributions related to that work. A change made in that year, however, allowed individuals who continued to work while receiving the CPP retirement benefit to also continue to contribute to the Canada Pension Plan and, as a result, increase the amount of CPP retirement benefit they received each month. That benefit is the CPP Post-Retirement Benefit or PRB.

The rules governing the PRB differ, depending on the age of the taxpayer. In a nutshell, an individual who has chosen to begin receiving the CPP retirement benefit but who continues to work will be subject to the following rules:

Individuals who are 60 to 65 years of age and continue to work are required to continue making CPP contributions.
Individuals who are 65 to 70 years of age and continue to work can choose not to make CPP contributions. To stop contributing, such an individual must fill out form https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html. A copy of that form must be given to the individual’s employer and the original sent to the Canada Revenue Agency (CRA). An individual who has more than one employer must make the same choice (to continue to contribute or to cease contributions) for all employers and must provide a copy of Form CPT30 to each.

A decision to stop contributing can be changed, and contributions resumed, but only one change can be made per calendar year. To make that change, the individual must complete section D of CPT30 (found at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html), give one copy of the form to his or her employer, and send the original to the CRA.

Individuals who are over the age of 70 and are still working cannot contribute to the CPP.

Overall, the effect of these new rules is that CPP retirement benefit recipients who are still working and who are under age 65, as well as those who are between 65 and 70 and choose not to opt out, will continue to make contributions to the CPP system and will continue therefore to earn new credits under that system. As a result, the amount of retirement benefits which they are entitled to will increase with each year’s contributions.

Where an individual makes CPP contributions while working and receiving CPP retirement benefits, the amount of any CPP post-retirement benefit earned will automatically be calculated by the federal government, and the individual will be advised of any increase in that monthly CPP retirement benefit each year. The PRB will be paid to that individual automatically the year after the contributions are made, effective January 1 of every year. Since the federal government needs information about employer contributions made, the first annual payment of the PRB is usually issued in early April and includes a lump sum amount representing benefits back to January of that year. Thereafter, the PRB is paid monthly and the PRB amount is added to the individual’s CPP retirement benefit amount and issued as a single payment.

While the rules governing the PRB can seem complex (and certainly the actuarial calculations are), the individual doesn’t have to concern himself or herself with those technical details. For CPP retirement benefit recipients who are under age 65 or over 70, there is no decision to be made. For the former, CPP contributions will be automatically deducted from their paycheques and for the latter, no such contributions are allowed.

Individuals in the middle group — aged 65 to 70 — will need to make a decision about whether it makes sense, in their individual circumstances, to continue making contributions to the CPP. Some assistance in making that decision is provided on the federal government website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement/benefit-amount.html, which shows the calculations which would apply for individuals of different ages and income levels.

More information on the PRB generally is also available on that website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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Between mid-February and mid-August of this year, the Canada Revenue Agency (CRA) received and processed just over 29 million individual income tax returns filed for the 2019 tax year. The sheer volume of returns and the processing turnaround timelines mean that the CRA does not (and cannot possibly) do a manual review of the information provided in a return prior to issuing the Notice of Assessment. Rather, all returns are scanned by the Agency’s computer system and a Notice of Assessment is then issued.

In addition, the CRA has for many years been encouraging taxpayers to fulfill their filing obligations online, through one of the Agency’s electronic filing services. This year, just over 26 million (or 90%) of the returns were filed by electronic means. While e-filing means that the turnaround for processing of returns is much quicker, there is, by definition, no paper involved. The Canadian tax system has always been what is termed a “self-assessing” system, in which taxpayers report income earned and claim deductions and credits to which they believe they are entitled. Prior to the advent of e-filing there were means by which the CRA could easily verify claims made by taxpayers. Where returns were paper-filed, taxpayers were usually required to include receipts or other documentation to prove their claims, whatever those claims were for. For the 90% of returns which were filed this year by electronic means, no such paper trail exists. Consequently, the potential exists for misrepresentation of such claims (or simple reporting errors) on a large scale.

The CRA’s response to that risk is to carry out a number of review programs, in which they seek to verify claims made by taxpayers on their returns. While the CRA conducts a variety of such review programs, the ones most likely to affect individual taxpayers are the Processing Review Program and the Matching Program, both of which are carried out in the fall of each year. The Processing Review Program, as the name implies, is a review of various deductions or credits claimed on returns, while the Matching Program compares information reported on the taxpayer’s return with information provided to the CRA by third-party sources (like T4s filed by employers or T5s filed by banks or other financial institutions).

Being selected for review under either program means, for the individual taxpayer, the possibility of receiving unexpected correspondence from the CRA. Receiving such correspondence from the tax authorities is almost guaranteed to unsettle the recipient taxpayer, even where there’s no reason to believe that anything is wrong. It is an experience which is shared by each of about 3 million Canadian taxpayers.

A taxpayer whose return is selected as part of the Processing Review Program will be asked to provide verification or proof of deductions or credits claimed on the return —usually by way of receipts or such documentation. The Matching Program, on the other hand, involves comparison by the CRA of information received from different sources (i.e., matching up the amount of employment income reported by a taxpayer with the amount showing on the T4 slip issued by that taxpayer’s employer). Where the figures match up, there is no need for the further action by the CRA. Where they don’t, the taxpayer will likely be contacted with a request for an explanation of the discrepancy.

Of course, most taxpayers are not concerned so much with the kind or program or programs under which they are contacted as they are with why their return was singled out for review. Many taxpayers assume that it’s because there is something wrong on their return, or that the letter is the start of an audit, but that’s not necessarily the case. Returns are selected by the CRA for post-assessment review for a number of reasons. Under the Matching Program, where a taxpayer has filed a return containing information which does not agree with the corresponding information filed by, for instance, his or her employer, it is likely that the CRA will want to follow up to find out the reason for the discrepancy. As well, Canada’s tax laws are complex and, over the years, there are areas in which the CRA has determined that taxpayers are more likely to make errors on their return. Consequently, a return which includes claims in those areas (like medical expenses, support payments and legal fees) may have an increased chance of being reviewed. Where there are deductions or credits claimed by the taxpayer which are significantly different or greater than those claimed in previous returns that may attract the CRA’s attention. And, if the taxpayer’s return has been reviewed in previous years and, especially, if an adjustment was made following that review, subsequent reviews may be more likely. Finally, many returns are picked for post-assessment review simply by random selection.

Regardless of the reason for the follow-up, the process is the same. Taxpayers whose returns are selected for review will be contacted by the CRA, usually by letter, identifying the deduction or credit for which the CRA wants documentation or the income or deduction amount about which a discrepancy seems to exist. The taxpayer will be given a reasonable period of time — usually a few weeks from the date of the letter — in which to respond to the CRA’s request. That response should be in writing, attaching, if needed, the receipts or other documentation which the CRA has requested. All correspondence from the CRA under its review programs will include a reference number, which is usually found in the top right-hand corner of the CRA’s letter. That number is the means by which the CRA tracks the particular inquiry and should be included in the response sent to the Agency. It is important to remember, as well, that it’s the taxpayer’s responsibility to provide proof, where requested, of any claims made on a return. Where a taxpayer does not respond to a CRA request and does not provide such proof, the CRA will proceed on the basis that the requested verification or proof does not exist, and will reassess accordingly.

Taxpayers who have registered for the CRA’s online tax program My Account (or whose representative is similarly registered for the CRA’s Represent a Client online service) can submit required documentation electronically. More information on how to do so can be found on the CRA website at www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rvws/sbmttng-eng.html.

Whatever the reason a particular return was selected for post-assessment review by the CRA, one thing is certain. A prompt response to the CRA’s enquiry, providing them with the information or documentation requested will, in the vast majority of cases, bring the matter to a speedy conclusion, to the satisfaction of both the CRA and the taxpayer. The CRA website also includes more detailed information on the return review process, which is available at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/review-your-tax-return-cra.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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When the state of emergency was declared in March of this year, the federal government extended the usual deadlines for both the filing of individual tax returns and payment of taxes owed, for both 2019 and 2020. Sometimes those deadlines (like the deadline for filing of individual income tax returns for 2019) were put off until June, but most such deadlines were deferred until September 30. A summary of the federal individual income tax deadlines which will fall this year on September 30 is set out below.

Final payment of income taxes due for 2019

While the return for 2019 had to have been filed by June 1 (or June 15 for self-employed individuals and their spouses), payment of any income tax balance owed for 2019 is due on or before September 30. Where that payment deadline is not met, interest and penalty charges will be imposed.

As well, although the filing deadline for returns was in June, the Canada Revenue Agency (CRA) has indicated that late-filing penalties will not be imposed, as long as the required individual income tax return for 2019 is filed on or before September 30.

The payment deadline extension also applies to amounts owed with respect to final returns filed for individuals who died between January 1 and October 31, 2019. Where an individual died after October 2019 and before June 16, 2020, final payment is due by September 30, 2020, or six months after the date of death, whichever is later.

Finally, income tax balances and instalments due by trusts or corporations on or after March 18, 2020 and before September 30, 2020 are due on or before September 30.

Payment of income tax instalments for 2020

Canadian taxpayers who pay tax by quarterly instalments usually make those payments by the 15^th day of March, June, September, and December.

Earlier this year, the CRA announced that the June 15 and September 15 instalment due dates would be postponed, and that both such instalment payments would be due and payable by September 30. Interest charges will not be levied where that September 30 payment deadline is met.

End of interest-free period

As part of its pandemic response, the CRA also announced that it was suspending the accumulation of interest charges on existing income tax debts effective as of April 1, 2020. That interest-free grace period ends on September 30 and the usual interest charges will once again be imposed (and begin to accumulate) as of October 1, 2020.

It is worth noting that interest on debts owed to the CRA is levied at higher than commercial rates, and that such interest charges are compounded daily, meaning that each day interest is levied on interest charges imposed on the previous day.

A full listing of the filing and payment deadlines for 2020 is provided on the CRA website at https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-filing-payment-dates.html#extend.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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Of all the many financial relief programs introduced by the federal government to address the economic impact of the pandemic, probably none has had a bigger impact than the Canada Emergency Relief Benefit (CERB). As of August 16, nearly 9 million Canadians had applied for and received payments under the CERB program, and the program had paid out just over $70 billion.

As the country emerges from the near complete economic lockdown which was in effect in the spring, the current financial situation of those who received CERB benefits will vary widely. Some may be back at work and earning the same income as they did pre-pandemic. Others may be back at work with reduced hours and, consequently, reduced income. Still others may still be waiting for their employer to call them back to work and some, unfortunately, may have worked for businesses which will never re-open.

Given the sheer number of CERB recipients, the economic impact of the termination of the CERB program on October 3, 2020 will be significant. In recognition of that fact, the federal government has announced three new programs intended to allow Canadians to transition from CERB. In addition, changes will be made to the Employment Insurance (EI) program which will make it easier for individuals to receive EI benefits.

The three new programs will allow Canadians whose income loss resulting from the pandemic continues to claim benefits, within prescribed limits, up until September 27, 2021. The particular program under which an individual may qualify depends on his or her particular circumstances — the programs and the qualifying criteria, as outlined on the federal government website, are summarized below.

Canada Recovery Benefit (CRB)

The CRB will provide $400 per week for up to 26 weeks to individuals who are self-employed or who are otherwise not eligible for EI and who still require income support, if they are available for and looking for work.

The CRB benefit would be available to Canadian residents who:

are at least 15 years old and have a valid Social Insurance Number (SIN);
have stopped working due to the pandemic and are available and looking for work, or are working but have had a reduction in their employment or self-employment income for pandemic-related reasons;
are not eligible for Employment Insurance;
had employment and/or self-employment income of at least $5,000 in 2019 or in 2020; and,
have not quit their job voluntarily.

There is provision for a clawback of CRB benefits received where the income of a recipient (excluding CRB payments) is greater than $38,000. In such circumstances, the recipient will be required to repay 50 cents of the benefit for each dollar of their annual net income above $38,000 in the calendar year, to a maximum of the amount of benefit they received.

The CRB would be payable (subject to the weekly maximum claim period of 26 weeks) until September 27, 2021.

Canada Recovery Sickness Benefit (CRSB)

As the name implies, the CRSB will be paid to individuals who must quarantine or self-isolate for two weeks for pandemic-related reasons. The benefit will be $500 per week for that two-week period.

To qualify for the benefit, an individual must:

be a Canadian resident who is at least 15 years of age and has a valid SIN;
be employed or self-employed at the time of the application; and
have earned at least $5,000 in 2019 or in 2020.

Like the CRB, the CRSB will be paid (for a maximum two-week period) anytime before September 27, 2021.

Canada Recovery Caregiving Benefit (CRCB)

Once again, the name is self-explanatory. The CRCB will provide $500 per week, for up to 26 weeks, per household to eligible Canadians whose work availability has been reduced by at least 60% resulting from the need to provide caregiving services to their children or to disabled family members. The CRCB recognizes that the upcoming school year will look very different and that grade school children who would normally attend school on a full day, every day basis may well have a different schedule for pandemic-related reasons.

In order to be eligible for the CRCB, an individual must:

reside in Canada;
be at least 15 years of age on the first day of the benefit period for which they are applying;
have a valid Social Insurance Number;
be employed or self-employed on the day before the start of the benefit period;
have earned at least $5,000 in 2019 or in 2020;
have been unable to work for at least 60% of their normally scheduled work within a given week because they must take care of a child who is under 12 years of age on the first day of the benefit period because that child’s school or daycare is closed or operates under an alternative schedule for reasons related to the pandemic, or where that child cannot attend school or day care due to medical risks, or because the child’s usual caregiver is not available for pandemic related reasons;
have been unable to work for at least 60% of their normally scheduled work within a given week because they are providing care to a family member with a disability or dependent because the dependent’s day program or care facility is closed or operates under an alternative schedule for reasons related to COVID-19, or the dependent cannot attend their day program or care facility due to medical risks, or because the dependant’s usual caregiver is not available for pandemic-related reasons;
not be in receipt of paid leave from an employer in respect of the same week; and
not be in receipt of the CERB, the EI Emergency Response Benefit, the CRB, the CRSB, short-term disability benefits, workers’ compensation benefits, or any EI benefits or Quebec Parental Insurance Plan benefits in respect of the same week.

In some cases, individuals who have lost jobs or had their income reduced as the result of the pandemic can qualify for Employment Insurance benefits. However, the EI system has very specific requirements and those requirements have the potential to exclude large numbers of workers, including those who were working part-time or on a short-term contract, or who live in areas of low unemployment. The changes which will be made to the EI system will provide greater flexibility and consequently allow more individuals to qualify for EI benefits.

Generally speaking, in order to qualify for EI benefits, an individual must have worked for a specified number of hours within a prescribed time frame (the qualifying period). The number of hours required depends on the unemployment rate in the location where the individual lives and, where the local unemployment rate is lower, the number of work hours required to qualify for EI increases. Finally, the amount of EI benefit which may be received is calculated as a percentage of weekly earnings received during the qualifying period. In order to ensure that EI benefits can be claimed by more Canadians, and that greater benefits can be received, the following changes will be made.

The minimum unemployment rate for purposes of the EI program will be set at 13.1% in all locations, effective as of August 9, 2020; and
Canadians who have at least 120 hours of insurable work will be able to qualify for EI benefits, as they will be provided with a temporary, one-time credit of:
- 300 insurable hours for those claiming EI regular benefits
- 480 insurable hours for those claiming EI special benefits (maternity, parental, sickness, compassionate care, and family).

Under the new rules, individuals who qualify for EI benefits will receive a minimum benefit of $400 per week in regular benefits and $240 per week for extended parental benefits.

The federal government’s intention is that individuals who need financial support as the result of a pandemic-related loss of income should turn first to the Employment Insurance program. Where EI benefits are not available to them, they may be eligible for one of the three new programs — the CRB, the CRSB, and the CCRB — which can provide a comparable level of financial support. It is important as well for recipients of any of these benefits, or of EI, to recognize that all such income received is taxable income, which must be reported as income on the tax return filed for the year in which it is received.

More detailed information on each of these programs, and the changes to the EI system is available on the federal government website at https://www.canada.ca/en/department-finance/economic-response-plan.html#individuals.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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Most Canadians who participate in the paid work force do so as employees. Consequently, they receive a regular paycheque from their employer and they pay income taxes by means of amounts deducted from that paycheque and remitted to the federal government on their behalf.

There are, however, a significant number of Canadians who fall outside that group — like retirees, or the self-employed — who must pay their taxes by some other method. That method is the payment of income tax through the instalment payment system.

The rule is that an individual is subject to the instalment payment requirement where his or her tax owed on filing for the current year and either of the two previous years is more than $3,000. In other words, the amount of tax collected from that individual throughout the year was at least $3,000 less than the actual tax owed for that year.

Canadian taxpayers who thus fall into the tax instalment payment system remit an amount to the federal government four times a year, by the 15^th of March, June, September, and December. Where the amount remitted ends up being more than their actual tax liability for the year, the excess is returned to them in the form of a tax refund when they file their income tax return for the year. Where instalment amounts remitted are less than the taxpayer’s tax liability for the year, the balance owing must be paid when the return is filed.

Where a taxpayer is subject to the instalment requirement, the Canada Revenue Agency (CRA) sends them two “Instalment Reminders” each year (one in February, the second in August), setting out the amounts to be paid on each upcoming due date. Regardless of the type or amount of his or her income for the year, or the amount of any instalment payments, the options available to the recipient of an Instalment Reminder are the same. On its website, the CRA describes the three different payment options open to taxpayers, and outlines the benefits and risks of each option in different circumstances, as follows:

No-calculation option

This option is best for you if your income, deductions, and credits stay about the same from year to year.

We will give the no-calculation option amount on the instalment reminders that we will send you. We determine the amount of your instalment payments based on the information in your latest assessed tax return.

Prior-year option

This option is best for you if your 2020 income, deductions, and credits will be similar to your 2019 amount but significantly different from those in 2018.

You determine the amount of your instalment payments based on the information from your tax return for the 2019 tax year. Use the calculation chart found at https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/tx/ndvdls/tpcs/ncm-tx/pymnts/nstlmnts/Instalment-chart-fill-20e.pdf to help you calculate your total instalment amount due.

If you use the prior-year option and make the payments in full by their 2020 due dates, we will not charge instalment interest or a penalty unless the total instalment amount due you have calculated is too low. For more information, see Instalment interest and penalty charges.

Current-year option

This option is best for you if your 2020 income, deductions, and credits will be significantly different from those in 2019 and 2018.

You determine the amount of your instalment payments based on your estimated current-year (2020) net tax owing, any CPP contributions payable, and any voluntary EI premiums. Use the calculation chart (https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/tx/ndvdls/tpcs/ncm-tx/pymnts/nstlmnts/Instalment-chart-fill-20e.pdf) to help you calculate your total instalment amount due.

If you use the current-year option and make the payments in full by their 2020 due dates, we will not charge instalment interest or a penalty unless the amounts you estimated when calculating your total instalment amount due were too low. For more information, see Instalment interest and penalty charges.”

The first option — paying the amounts identified on the Instalment Reminder by the identified deadlines — is the easiest and simplest choice. If the total instalment amounts paid during the year represent an overpayment of taxes for 2020, the taxpayer will receive a refund of that overpayment on filing in the spring of 2021. If the amounts identified turn out be an underpayment of tax (in that they are insufficient to cover total tax owed for the year), the taxpayer will have a balance owing on filing. In no case, however, will the taxpayer be charged any interest on insufficient instalment payments.

Taxpayers who don’t wish to pay the amounts specified in the Instalment Reminder (perhaps because they believe that such amounts don’t accurately reflect their tax payable for the year) can use options 2 or 3. The only risk to doing so is that, should the instalments paid be insufficient to cover tax liability for the year, interest will be levied on the underpayments.

While the instalment payment system works well in most instances, this year it has been altered by the circumstances of the pandemic. In many ways those changes have been beneficial for the taxpayer, since they push payment deadlines off to a later date. However, the changes can make it difficult to determine just what amount needs to be remitted, and when.

Initially, the usual June 15 due date for the June instalment remittance was deferred until September 1. More recently, the CRA announced that that deadline would be pushed back again, to September 30, 2020 and that the instalment remittance normally due on September 15 would also not be due until September 30.

Owing to the postponement of payment dates, the instalment payment amount for June 15 (found on the instalment reminder sent out in February) and the amount for September 15 (found on the second instalment reminder sent in August) are both due and payable by September 30, 2020.

The CRA recently posted a notice on its website alerting taxpayers to the fact that some second instalment reminder notices for 2020 (that is, those sent out in August) identify the September payment due date as September 15. That is now incorrect, and the actual deadline for payment is September 30.

While all of this can seem somewhat confusing, the steps to be taken by a taxpayer who receives an Instalment Reminder haven’t really changed. He or she must first determine whether to make an instalment payment, and in what amount, based on the considerations outlined above in the three available options. Second, he or she must pay the June and September instalment amounts on or before Wednesday, September 30. Barring any further announcements, the December instalment will be due on the usual instalment due date of December 15, 2020.

More detailed information on the instalment payment system, including the payment methods available to taxpayers who receive an Instalment Reminder, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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It’s an acknowledged reality that times of crisis bring out both the best and the worst in people. While most Canadians would never consider using the current pandemic as a means of defrauding others, this is not, unfortunately, true of everyone.

This is a time when Canadians are particularly vulnerable to scammers and fraud artists, for a number of reasons. First, of course, is the financial dislocation which has resulted from the pandemic — many Canadians have lost income and may be in real financial difficulty, making them especially vulnerable to fraudulent communications indicating that there is money available to them. Second, the federal government has instituted a great number of programs to provide financial assistance to those hit hard by the pandemic. The sheer number of those programs, however, and the fact that they have had to be revised frequently to take account of changing conditions has resulted in an inevitable degree of confusion about just what is available, who is eligible for the different benefits, and how to claim them. That confusion makes it easier for fraud artists to convince their victims of the validity of what they are “offering”. It also makes taxpayers vulnerable to phone calls or voice mails in which they are, in effect, accused of receiving benefits to which they were not entitled and demanding that they send funds in repayment.

It’s an acknowledged reality that times of crisis bring out both the best and the worst in people. While most Canadians would never consider using the current pandemic as a means of defrauding others, this is not, unfortunately, true of everyone.

This is a time when Canadians are particularly vulnerable to scammers and fraud artists, for a number of reasons. First, of course, is the financial dislocation which has resulted from the pandemic — many Canadians have lost income and may be in real financial difficulty, making them especially vulnerable to fraudulent communications indicating that there is money available to them. Second, the federal government has instituted a great number of programs to provide financial assistance to those hit hard by the pandemic. The sheer number of those programs, however, and the fact that they have had to be revised frequently to take account of changing conditions has resulted in an inevitable degree of confusion about just what is available, who is eligible for the different benefits, and how to claim them. That confusion makes it easier for fraud artists to convince their victims of the validity of what they are “offering”. It also makes taxpayers vulnerable to phone calls or voice mails in which they are, in effect, accused of receiving benefits to which they were not entitled and demanding that they send funds in repayment.

In addition, the pandemic has made it necessary for Canadians to manage just about everything online or by phone, opening up opportunities for fraudsters to misrepresent themselves as government officials through e-mail or telephone, or to create fake “government” websites. Individuals who are not accustomed to managing their financial affairs in the online world are especially vulnerable right now to these approaches. Finally, since the filing deadlines for income tax return for the 2019 tax returns have passed, the Canada Revenue Agency (CRA) will, as happens each year, be contacting some taxpayers seeking clarification of income amounts reported or documentation of deductions or credits claimed on the annual return. Consequently, it wouldn’t necessarily strike taxpayers as unusual to receive, at this time of the year, a communication purporting to be from the CRA, with a message regarding that person’s taxes. All in all, 2020 represents a “perfect storm” of opportunity for scammers and fraudsters.

The federal government has already identified at least one specific scam which has arisen in relation to pandemic benefits. Canadians have received a text message indicating that a deposit has been made to their bank account, representing benefits under the Canada Emergency Response Benefit (CERB) program. The message is invariably fraudulent, as the federal government does not, under any circumstances, contact taxpayers by text. Recipients should not click on the link provided and should delete the text entirely.

When receiving a communication of any kind from someone purporting to be from the federal government, a taxpayer should ask themselves the following questions.

Is the federal government likely to be contacting me in this way? In most cases, the federal government communicates with taxpayers by regular mail or, if the taxpayer has signed up for online communication, through the taxpayer’s online account with Service Canada (for pandemic-related benefits, Canada Pension Plan, Old Age Security, or Employment Insurance) or the CRA (for all income tax related matters). The federal government does not and has never communicated with taxpayers by text. While the CRA and Service Canada will communicate with taxpayers by telephone, there are ways in which a taxpayer can ensure that the call, and the caller, are legitimate.

Anyone calling from a government department or agency should be able to identify themselves, if not by name, then by employee or agent number. Second, they should be able to provide a telephone number at which they can be called back.(It’s important to note that call display cannot be relied on to accurately identify the source of the call, as scammers have been able to manipulate call display to show actual government phone numbers.) Finally, if the caller really is from the federal government, then they should already have certain information about the taxpayer they are calling — at a minimum the taxpayer’s social insurance number. If they don’t, and they request that information from the taxpayer, it’s a sure sign that caller is not who they claim to be. If the taxpayer has any doubt about the legitimacy of the call or the caller, and especially if a demand for money is made, the best course of action is to hang up and place a call to the particular government department or agency to verify the legitimacy of the initial call. For that purpose, the CRA’s individual income tax help line number is 1-800-959-8281. If the suspect call received was about the Canada Emergency Response Benefit, and the taxpayer has questions about his or her current or past eligibility for the benefit, he or she should call the CERB at 1-833-966-2099. If the call or e-mail was clearly fraudulent, it should be reported to the Canada Anti-Fraud Centre at 1-888-495 8501.

The Service Canada numbers (both of which are toll-free) to call are as follows:

Canada Pension Plan and Old Age Security: 1-800-277 9914
Employment Insurance: 1-833-966-2099

Generally, there are two ways in which financial fraud artists prey on Canadians. In the first, the taxpayer is contacted, by phone, text, or e-mail and advised that he or she is owed money by the federal government. In order to receive the money owed, the taxpayer must click on a link in the e-mail or text, or to provide financial information (like a bank account number) over the phone. The e-mail or text link leads to a “dummy” site closely resembling the actual CRA or Service Canada website. The taxpayer must then, in order to have his or her “refund” processed, provide personal and financial information which can then be used by the scammer to gain access to their bank accounts.

The second approach, and one which has been used with great success over the past few years, is to falsely inform the taxpayer (this time, usually by telephone) that he or she has received benefits or a tax refund to which they are not entitled and that the money must be repaid immediately to the federal government. Since literally millions of Canadians have received pandemic-related benefits over the past four months, Canadians are particularly vulnerable to a scam like this right now. A failure to pay, the taxpayer is told, will mean seizure of his or her assets, cancellation of his or her passport and/or social insurance card or other government-issued identification, deportation or imprisonment. Further, such payment must be made only by wire transfer or pre-paid credit card. This type of fraud has become so ubiquitous, in fact, that many businesses which provide money transfer services post warnings on their premises to would-be users of the need to be aware of the fraud risk.

There are, in fact, several things about such a phone call that should alert the recipient to the fact that it’s not legitimate. First of all, if a taxpayer does owe money to any department or agency of the federal government, he or she will be first advised of that fact by mail and never by telephone. Second, there is no agency or department of the federal government that would suggest or require that a taxpayer send funds to that agency by wire transfer or by using a prepaid credit card. Any payment of money owed to the federal government is made online, through a legitimate government website, through the taxpayer’s financial institution (in person or online), or by mailing a cheque. Finally, any suggestion that the federal government would (or could) cancel a taxpayer’s passport or other government issued ID for failure to make payment is simply ludicrous.

There is almost no limit to the number and variety of scams, frauds, and phishing attempts that are carried out using the name of the CRA or Service Canada and new ones, which appear frequently, are usually identified on the CRA website at http://www.cra-arc.gc.ca/scrty/frdprvntn/menu-eng.html and on the Service Canada website at https://www.canada.ca/en/employment-social-development/corporate/portfolio/service-canada/fraud.html. Unfortunately, many such scams originate outside Canada, limiting the ability of law enforcement authorities to monitor or stop them. For the most part, therefore, the onus will fall on individual taxpayers to protect themselves, through a healthy degree of caution and skepticism.

The CRA suggests that, in order to avoid becoming a victim of such scams, taxpayers should keep the following general guidelines in mind.

The CRA and Service Canada will never:

ask for personal information of any kind by email or text message;
send an e-mail or text with a link to be used;
request payment by prepaid credit cards;
ask for a taxpayer’s credit card information;
give taxpayer information to another person, unless formal authorization is provided by the taxpayer; or
leave personal information on an answering machine.

When in doubt, a taxpayer should ask him or herself the following:

Did I sign up to receive online mail through My Account or My Service Canada Account?
Did I provide my email address on my income tax and benefit return to receive mail online?
Am I expecting more money from the CRA or Service Canada?
Does this sound too good to be true?
Is the requester asking for information I would not be asked for in my tax return (like a credit card number)?
Is the requester asking for information I know the CRA or Service Canada already has on file for me (e.g., my social Insurance number)?

As ever, the best defence against becoming a victim of such fraud artists is by refusing to provide personal or financial information, and especially never to make any kind of payment, whether by phone, e-mail, or online, without first contacting the particular government department to verify the legitimacy of the request.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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When states of emergency were being declared across the country in March of this year, thousands of businesses were forced to close their doors and, as a result, were faced with the necessity of laying off some or all of their employees.

The question of when, or even whether, those employees could and would be recalled to work was essentially unknown at that time. To address that reality the federal government established the Canada Emergency Wage Subsidy (CEWS) program. As the name implies, the program involved the payment of a subsidy to the employer, who would use those funds to keep employees on the payroll pending the re-opening of the business and the return to work.

When states of emergency were being declared across the country in March of this year, thousands of businesses were forced to close their doors and, as a result, were faced with the necessity of laying off some or all of their employees.

The question of when, or even whether, those employees could and would be recalled to work was essentially unknown at that time. To address that reality the federal government established the Canada Emergency Wage Subsidy (CEWS) program. As the name implies, the program involved the payment of a subsidy to the employer, who would use those funds to keep employees on the payroll pending the re-opening of the business and the return to work.

The initial launch of the CEWS is probably best described as a partial success. While some employers did avail themselves of the subsidy, there were criticisms that the eligibility criteria were too rigid or too narrow and that the time frame for providing support was too short. As well, employees whose income had been curtailed for pandemic-related reasons could often claim benefits under the Canada Emergency Response Benefit (CERB) program, which in some cases provided them with a better financial result.

Following consultations with interested groups, the federal government addressed the identified deficiencies of the CEWS and, on July 17, announced both that changes would be made to the program’s eligibility criteria to improve flexibility and that the program would be extended to provide support until December 19, 2020 (the original program end date had been August 29, 2020).

Inevitably, greater flexibility means greater complexity, but the basic structure of the CEWS program beginning July 5, 2020 is that the amount of subsidy payable will be calculated based on the percentage of revenue loss experienced by the employer over a specified time period, with different amounts payable depending on whether the employee in respect of whom the subsidy is paid has returned to work, or is still “furloughed”.

For “active” employees (those who have returned to work) the CEWS would consist of two parts;

abase subsidy available to all eligible employers that are experiencing a decline in revenues, with the subsidy amount varying depending on the scale of revenue decline and the time period involved; and

a “top-up” subsidy of up to an additional 25% for those employers that have been most adversely affected by the pandemic crisis.

For purposes of the base subsidy, employers will be assigned to one of two groups, depending on whether their revenue loss is more or less than 50% over a particular period. The calculation of the available subsidy will then differ for each group, in each time period, as shown on the Finance Canada website at https://www.canada.ca/en/department-finance/news/2020/07/adapting-the-canada-emergency-wage-subsidy-to-protect-jobs-and-promote-growth.html.

The amount of the top-up subsidy benefit, for employers who have been particularly hard-hit, will be based on the employer’s three-month average revenue drop, as measured on a year-over-year basis, where that drop exceeds 50%.

For employees who are still furloughed, a subsidy benefit will still be provided, with the amount of such benefit dependent on the time period for which the subsidy is paid. Generally, for the July 5 to August 29 period, the available subsidy for a furloughed employee would be the greater of the following two amounts:

for arm’s-length (generally meaning non-related) employees, 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
75% of the employee’s pre-crisis weekly remuneration up to a maximum benefit of $847 per week or the amount of remuneration paid, whichever is less.

After August 29th, the CEWS subsidy for furloughed employees would be adjusted to align with the benefits provided through the Canada Emergency Response Benefit (CERB) and/or Employment Insurance (EI).

The changes to the CEWS program, while addressing many of the concerns expressed by stakeholders, have undoubtedly increased the complexity of the program. However, Finance Canada has prepared and posted on its website a backgrounder and guide showing how the subsidy amount is actually calculated for each category of business and employee, over several different time periods. That guide can be found on the Finance Canada website at https://www.canada.ca/en/department-finance/news/2020/07/adapting-the-canada-emergency-wage-subsidy-to-protect-jobs-and-promote-growth.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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For post-secondary students the upcoming academic year is going to be unlike anything they have previously experienced. Post-secondary institutions across the country are now determining whether, and to what extent, students should return to in-class learning or whether, at least for the fall semester of the 2020-21 academic year, programs should be delivered entirely through online or remote learning. While some institutions have already indicated that they will be only providing online learning, and a smaller group intends to continue entirely with the traditional in-class model, most universities and colleges have taken a “wait and see” approach, choosing to employ a “hybrid” model which combines in-class learning with online courses.

While the current situation leaves post-secondary students in something of a quandry when it comes to planning their living arrangements in September, there are some aspects of post-secondary education which haven’t changed. Regardless of where and how classes are held, students will have to pay tuition. As well, many will be taking out or extending government student loans to finance their studies. And, fortunately for those students, the tax breaks and credits which were available to them in previous years to help offset the costs of their education will also be claimable for the upcoming academic year, regardless of the form that education takes.

Those tax credits, deductions and benefits which can be claimed by post-secondary students (or their spouses, parents, or grandparents) in relation to the 2020-21 academic year are summarized below.

Tuition fees

The good news is that a tax credit continues to be available for the single largest cost associated with post-secondary education — the cost of tuition. Any student who incurs more than $100 in tuition costs at an eligible post-secondary institution (which would include most Canadian universities and colleges) can still claim a non-refundable federal tax credit of 15% of such tuition costs. The provinces and territories also provide students with an equivalent provincial or territorial credit, with the rate of such credit differing by jurisdiction.

The charges imposed on post-secondary students under the heading of “tuition” include myriad costs which may differ, depending on the particular program, and not all of those costs will qualify as “tuition” for purposes of the tuition tax credit. The following specific amounts do, however, constitute eligible tuition fees for purposes of that credit:

admission fees;
charges for use of library or laboratory facilities;
exemption fees;
examination fees (including re-reading charges) that are integral to a program of study;
application fees (but only if the student subsequently enrolls in the institution);
confirmation fees;
charges for a certificate, diploma, or degree;
membership or seminar fees that are specifically related to an academic program and its administration;
mandatory computer service fees; and
academic fees.

The following charges do not, however, constitute tuition fees for purposes of the credit:

extracurricular student social activities;
medical expenses;
transportation and parking;
board and lodging;
goods of enduring value that are to be retained by students (such as a microscope, uniform, gown, or computer);
initiation fees or entrance fees to professional organizations including examination fees or other fees (such as evaluation fees) that are not integral to a program of study at an eligible educational institution;
administrative penalties incurred when a student withdraws from a program or an institution;
the cost of books (other than books, compact disks, or similar material included in the cost of a correspondence course when the student is enrolled in such a course given by an eligible educational institution in Canada); and
courses taken for purposes of academic upgrading to allow entry into a university or college program — these courses would usually not qualify for the tuition tax credit as they are not considered to be at the post-secondary school level.

Certain ancillary fees and charges, such as health services fees and athletic fees, may also be eligible tuition fees. However, such fees and charges are limited to $250 unless the fees are required to be paid by all full-time students or by all part-time students.

At both the federal and provincial levels, the tuition tax credit is a non-refundable credit, which means it reduces income tax which would otherwise be payable by the student for the tax year in which the tuition fees are paid. Where, as is often the case, a student doesn’t have tax payable for the year (or insufficient tax to use up the full tuition tax credit), credits earned can be carried forward and claimed by the student in any future tax year, or transferred (within limits) in the current year to be claimed by a spouse, parent, or grandparent.

Personal and living expenses

This year, it’s possible that students will not have to move to the city in which their post-secondary institution is located, where that institution chooses to deliver courses using an online learning model only. However, the fact that residence fees or rent for an off-campus apartment won’t have to be paid won’t change anything with respect to the student’s tax position. As has always been the case, living costs incurred by a post-secondary student (whether on campus or off) are characterized as personal and living expenses, for which no tax deduction or credit is allowed.

Student debt

Most post-secondary students in Canada must incur some amount of debt in order to complete their education, and repayment of that debt is typically not required until after graduation. Once repayment starts, a tax credit can be claimed for the amount of interest being paid on such debt, in some circumstances.

Students who are still in school and arranging for loans to finance their education should be mindful of the rules which govern that student loan interest tax credit, since decisions made while still in school with respect to how post-secondary education will be financed can have tax repercussions down the road, after graduation. That’s because while all interest paid on a qualifying student loan is eligible, without limit, for that tax credit, only some types of student borrowing will qualify. Specifically, only interest paid on government-sponsored (federal or provincial) student loans will be eligible for the credit. Interest paid on loans of any kind from any financial institution will not.

It’s not uncommon (especially for students in professional programs, like law or medicine) to be offered lines of credit by a financial institution, often at advantageous or preferential interest rates. As well, once a student has graduated and begun to repay a government-sponsored student loan, financial institutions will offer to consolidate that student loan with other kinds of debt, also at advantageous interest rates. However, it should be kept in mind that interest paid on that line of credit (or any other kind of borrowing from a financial institution to finance education costs) will never be eligible for the student loan interest tax credit.

As explained in the Canada Revenue Agency (CRA) publication on the subject: “ [I]f you renegotiated your student loan with a bank or another financial institution, or included it in an arrangement to consolidate your loans, you cannot claim this interest amount”. In other words, where a government student loan is combined with other debt and consolidated into a borrowing of any kind from a financial institution, the interest on that government student loan is no longer eligible for the student loan interest tax credit.

Students who are contemplating borrowing from a financial institution rather than getting a government student loan (or considering a consolidation loan which incorporates that student loan amount) must remember, in evaluating the benefit of any preferential interest rate offered by a financial institution, to take into account the loss of the student loan interest tax credit on that borrowing in future years.

Credits withdrawn but available for carryforward

Formerly, post-secondary students were able to claim an education tax credit and the textbook tax credit. Both credits were, unfortunately, eliminated as of the end of 2016. It’s important to remember, however, that where education and textbook credits were earned but not claimed in years before 2017 they are still available to be claimed by the student as carryover credits in any subsequent tax year, including after graduation.

Other credits and deductions

There are, as well, a number of credits and deductions which, while not specifically education-related, are frequently claimed by post-secondary students (for instance, deductions for moving costs). The CRA publishes a very useful guide which summarizes most of the rules around income and deductions which may apply to post-secondary students. The current version of that guide, entitled Students and Income Tax, is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p105.html.

Finally, most post-secondary students count on summer earnings to help offset the cost of their education, or to minimize the amount of debt they must take on to complete that education. This year, of course, it has been nearly impossible for such students to earn summer earnings as they did in previous years. There is, however, a federal government grant, provided as part of the pandemic response plan, which students can claim to help make up that shortfall. That grant program is the Canada Emergency Student Benefit (CESB), which will, generally, provide students who are unable to find work due to the pandemic with $1,250 in taxable income for each four-week period between May and August 2020. There are, of course, eligibility requirements for the CESB and those requirements, along with other program details, can be found on the federal government website at https://www.canada.ca/en/revenue-agency/services/benefits/emergency-student-benefit.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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When the Canada Pension Plan was put in place on January 1,1966, it was a relatively simple retirement savings model. Working Canadians started making contributions to the CPP when they turned 18 years of age and continued making those contributions throughout their working life. Those who had contributed could start receiving CPP on retirement, usually at the age of 65. Once an individual was receiving retirement benefits, he or she was not required (or allowed) to make further contributions to the CPP. The CPP retirement benefit for which that individual was eligible therefore could not increase (except for inflationary increases) after that point.

Retirement looks a lot different now than it did it 1966, and the Canada Pension Plan has evolved and changed to recognize those differences. What that means for the average Canadian is much more flexibility in determining how to structure both their contributions to the CPP and their receipt of CPP retirement benefits.

While greater flexibility in retirement income planning is always a good thing, having that flexibility comes at a price of greater complexity when it comes to determining which choices are the right ones in one’s particular circumstances. And one of the decisions which must be made, when it comes to CPP, is whether and when it might made sense to stop making CPP contributions.

The need to make that choice arises where a decision is made to continue to stay in the work force, whether on a part-time or full-time basis, even after beginning to receive CPP retirement benefits. While it has always been possible to work while receiving such benefits, it was, until 2012, not possible to make CPP contributions related to that work. A change made in that year, however, allowed individuals who continued to work while receiving the CPP retirement benefit to also continue to contribute to the Canada Pension Plan and, as a result, increase the amount of CPP retirement benefit they received each month. That benefit is the CPP Post-Retirement Benefit or PRB.

The rules governing the PRB differ, depending on the age of the taxpayer. In a nutshell, an individual who has chosen to begin receiving the CPP retirement benefit but who continues to work will be subject to the following rules:

Individuals who are 60 to 65 years of age and continue to work are required to continue making CPP contributions.
Individuals who are 65 to 70 years of age and continue to work can choose not to make CPP contributions. To stop contributing, such an individual must fill out Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election, which can be found at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html.
A copy of that form must be given to the individual’s employer and the original sent to the Canada Revenue Agency (CRA). An individual who has more than one employer must make the same choice (to continue to contribute or to cease contributions) for all employers and must provide a copy of Form CPT30 to each.
A decision to stop contributing can be changed, and contributions resumed. To make that change, the individual must complete section D of Form CPT30, give one copy of the form to his or her employer, and send the original to the CRA
Individuals who are over the age of 70 and are still working cannot contribute to the CPP.

Overall, the effect of these new rules is that CPP retirement benefit recipients who are still working and who are under age 65, as well as those who are between 65 and 70 and choose not to opt out, will continue to make contributions to the CPP system and will continue therefore to earn new credits under that system. As a result, the amount of retirement benefits which they are entitled to will increase with each year’s additional contributions.

Where an individual makes CPP contributions while working and receiving CPP retirement benefits, the amount of any CPP PRB earned will automatically be calculated by the federal government, and the individual will be advised of any increase in that monthly CPP retirement benefit each year. The PRB will be paid to that individual automatically the year after the contributions are made, effective January 1 of every year. Since the federal government needs information about employer contributions made, the first annual payment of the PRB is usually issued in early April and includes a lump sum amount representing benefits back to January of that year. Thereafter, the PRB is paid monthly and the PRB amount is added to the individual’s CPP retirement benefit amount and issued as a single payment.

While the rules governing the PRB can seem complex (and certainly the actuarial calculations are), the individual doesn’t have to concern him or herself with those technical details. For CPP retirement benefit recipients who are under age 65 or over 70, there is no decision to be made. For the former, CPP contributions will be automatically deducted from their paycheques and for the latter, no such contributions are allowed.

Individuals in the middle group — aged 65 to 70 — will need to make a decision about whether it makes sense, in their individual circumstances, to continue making contributions to the CPP. Some assistance in making that decision is provided on the federal government website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement/benefit-amount.html, which shows the calculations which would apply for individuals of different ages and income levels.

More information on the PRB generally is also available on that website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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While the standard (and accurate) advice is that tax and financial planning are best approached as activities to be carried on throughout the year, it’s also the case that a mid-year tax and financial checkup makes good sense, and that’s especially the case this year.

For most Canadians, 2020 has been a year of financial uncertainty and, in many cases, significant financial stress. Millions of Canadians became suddenly unemployed when pandemic-related states of emergency were declared in mid-March and businesses closed. Many others lost income when schools closed and they needed to stay home to care for their children. By June 21, 2020, the federal government had processed over 18 million applications for the Canada Emergency Response Benefit (CERB), the $500 per week benefit which was paid (and in some cases continues to be paid) to those who suffered a pandemic-related loss of income. Of those who received CERB benefits, some may be returning to work in the near future, while others may have no idea when (or whether) their former positions will become available to them again.

All of this makes for significant financial uncertainly. And while much of the near financial future for most Canadians may still be uncertain, it’s nonetheless both possible and advisable to take stock of one’s financial and tax position to date, especially in relation to the financial and tax changes resulting from the pandemic. The first step this year should be an assessment of how the financial consequences of the pandemic have affected one’s tax position for 2020.

Tax considerations for CERB recipients

Most of the millions of Canadians who received CERB benefits are likely unaware that such benefits represent taxable income for 2020 and that no income tax was deducted from benefits paid. That tax will have to be paid when the return for 2020 is filed in the spring of 2021.

The standard CERB benefit is $500 per week and such benefits may be received for a maximum of 24 weeks. Canadians who collect CERB for the maximum allowable 24-week period will therefore be paid $12,000. For those with incomes up to about $50,000 the federal tax rate levied on CERB amounts received will be 15%. Where a taxpayer’s income for this year is between $50,000 and $100,000 the applicable federal tax rate is 20.5%. Each province will also impose tax on CERB amounts, with the rate varying by province. A listing of federal, provincial, and territorial tax rates for 2020 can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html#provincial.

While no one likes to find out that a tax amount is owed when the annual tax return is filed, that will be especially unwelcome news to those who are already dealing with income loss from unemployment. The best course of action to avoid that scenario is to start now to make provision for the taxes which will be owed on CERB amounts received.

The simplest way to do so, of course, is to begin to set aside funds which will be needed to pay the tax bill next spring. However, as with most savings goals, it’s easier to make such a commitment than to fulfill it.

Taxpayers who have returned to work and are once again receiving a paycheque have another option — they can have the amount of tax withheld from that paycheque increased to cover the tax which will be payable on CERB amounts received. Usually, the employee can simply request that his or her employer increase the amount of tax withheld from each paycheque and remitted to the federal government on the employee’s behalf.

In some cases, taxpayers won’t be able to fulfill their tax obligations from current income sources and will have to dip into savings. Generally speaking, where there is a choice, it is best to use funds that are held in non-registered savings plans, like a savings account. Where such funds aren’t available, a withdrawal from a Tax-Free Savings Account is the next best option. Amounts withdrawn from a TFSA will not be included in taxable income and, where the withdrawal is made before the end of 2020, the amount withdrawn can be replaced, where finances allow, in 2021. Taking funds out of a registered retirement savings plan should be a last resort, as any amount withdrawn will be added to income and will itself increase the tax bill for the year and, unlike a TFSA, amounts withdrawn from an RRSP cannot be replaced. Borrowing to pay taxes owed is an option, but taxpayers should be aware that interest paid on money borrowed for that purpose is not deductible.

Considerations for retirees

For those who are already retired, or those close to retirement, watching the value of their retirement savings take a sharp drop during the month of March was more than a little stressful. Recognizing the disproportionate effect that the market downturn had on such taxpayers, the federal government made some changes, for this year only, to help cushion the blow.

The changes announced affect those taxpayers over the age of 71 who have a Registered Retirement Income Fund (RRIF). The usual rules governing such RRIFs require that holders withdraw a specified percentage of the balance in the RRIF each year, with the required percentage based on the taxpayer’s age.

The difficulty which arose was that the rules require that the RRIF balance used to calculate the required withdrawal is the balance as of the beginning of the calendar year. For nearly every RRIF holder in Canada, that balance was much higher at the beginning of 2020 than it is now, so that the required withdrawal would represent a disproportionate share of RRIF. As well, where it was necessary to sell investments in order to make the withdrawal, those investments would have to be sold at a diminished, post-downturn value.

In recognition of all of these circumstances, the federal government announced that the required RRIF withdrawal would be reduced, for 2020 only, to 75% of the usual amount. For example, where a taxpayer would normally be required to withdraw $2,000 from his or her RRIF in 2020, the required withdrawal will now be $1,500.

There is no particular rule for when a taxpayer must make the required annual withdrawal from his or her RRIF. While some RRIF holders make that withdrawal at the beginning of the calendar year, others opt for monthly withdrawals throughout the year and still others wait until the last minute and make the required withdrawal at year end.

The rule change will have different impacts depending on how a particular taxpayer’s withdrawal is structured for this year. Perhaps most important, for those who made their full required 2020 withdrawal before the rule change was announced in March, it’s not possible to recontribute the “excess” 25%. Those who withdraw in equal monthly amounts throughout the year and who wish to reduce their 2020 withdrawal by the allowable 25% can take steps to adjust that monthly withdrawal to reflect the reduced amount and, of course, those who withdraw at the end of year can similarly change their planned withdrawal.

It’s important to remember two points: first, there is no requirement that RRIF holders alter their withdrawal amounts for 2020. The option to reduce the usual required withdrawal by 25% is just that — an option. Those whose cash flow requirements can accommodate a reduced withdrawal can take advantage of the available option while others who may need the funds to meet living expenses can make the full withdrawal as originally planned. Second, in all cases any withdrawals made from a RRIF are taxable income to the RRIF holder. Examples of how the change will apply can be found on the federal government website at https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/registered-retirement-savings-plans-registered-retirement-income-funds-rrsps-rrifs/economic-statement-measure-annuitants-rrsp-rrif.html.

Finally, there is another bit of good tax news for retirees this year. In July, all Canadians who currently receive Old Age Security benefits will receive an additional one-time payment of $300 to help offset additional costs they may have incurred as the result of the pandemic. Those OAS recipients who also qualify for the Guaranteed Income Supplement will receive a one-time payment of $500. While OAS amounts received are usually included in taxable income, this one-time supplement of $300 or $500 will be tax-free.

Although we’re just halfway through the calendar year, 2020 has already been a very stressful year for many Canadians from a financial perspective. Planning now to take account of changed financial and tax circumstances arising from the current situation will help ensure that those stresses don’t included an unexpected tax headache.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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Two quarterly newsletters have been added—one dealing with personal issues, and one dealing with corporate issues.

They can be accessed below.

Corporate:

Issue #52 Corporate

Personal:

Issue #52 Personal

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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Although the filing deadline for individual income tax returns for the 2019 tax year has been extended to June 1, 2020, millions of Canadians have nonetheless already filed those returns. Specifically, by May 19, 2020, the Canada Revenue Agency (CRA) had processed just over 20 million individual income tax returns filed for the 2019 tax year. Just over 13 million of those returns resulted in a refund to the taxpayer, while just over 3 million resulted in a tax balance owed by the taxpayer.

No matter when or how a return is filed, or the outcome of the filing, all returns filed with and processed by the CRA have one thing in common — they result in the issuance of a Notice of Assessment (NOA) by the Agency, outlining the taxpayer’s income, deductions, credits, and tax payable for the 2019 tax year.

In most cases, the information contained in the NOA is the same as that provided by the taxpayer in his or her return, perhaps with a few arithmetical corrections made by the CRA. In a minority of cases, the information presented in the NOA will differ from that provided by the taxpayer in the return. Where that difference means an unanticipated refund, or a larger refund than expected, it’s a happy day for the taxpayer. In some cases, however, the NOA will inform the taxpayer that additional amounts are owed to the CRA.

When that happens, the taxpayer must figure out why, and to decide whether or not to dispute the CRA’s conclusions. Many such discrepancies are the result of an error made by the taxpayer in completing the return. A lot of information from a variety of sources is reported on even the most straightforward of returns and it’s easy to overlook, for instance, a T5 slip reporting a small amount of interest income earned. Even where tax software is used to prepare the return, errors can still occur. Such tax software relies, in the first instance, on information input by the user with respect to amounts found on T4, T5 and other information slips. No matter how good the software, it can’t account for income information which the taxpayer hasn’t provided. In other cases, the taxpayer might transpose figures when entering them, such that an income amount of $26,353 on the T4 becomes $23,653 on the tax return. Once again, the tax software has no way of knowing that the information input was incorrect, and calculates tax owing on the basis of the figures provided.

Where there is additional tax owing because of an error or omission made by the taxpayer in completing the return, and the CRA’s figures are correct, disputing the assessment doesn’t really make sense. There is, as well, a persistent tax “myth” that if a taxpayer doesn’t receive an information slip (T4 or T5, as the case might be) for income received during the year, that income doesn’t have to be reported and therefore isn’t taxable. The myth, however, is just that. All taxpayers are responsible for reporting all income received and paying tax on that income, and the fact that an information slip was lost, mislaid, or never received doesn’t change anything. The CRA receives a copy of all information slips issued to Canadian taxpayers, and its systems will cross-check to ensure that all income is accurately reported.

There are, however, instances in which the CRA and the taxpayer are in disagreement over substantive issues, and those issues most often involve claims for deductions or credits. For instance, the CRA may have disallowed an individual’s claim for a medical expense, or for a deduction claimed for a business expenditure, which the taxpayer believes to be legitimate.

Whatever the nature of the dispute, the first step is always to contact the CRA for an explanation of the reasons why the change was made. While the information provided in the NOA is a good summary of the taxpayer’s tax situation for the year, it may not provide the detail to show precisely how and why the taxpayer and the CRA disagree on the actual amount of income tax which the taxpayer must pay for the year. The first step to be taken would be a call to the Individual Income Tax Enquiries line at 1-800-959-8281, where agents have access to the taxpayer’s return and can explain any changes which were made during the assessment process. If that call doesn’t resolve the taxpayer’s questions, or there is still a disagreement, the taxpayer has to decide whether to take the next step of filing a formal objection to the Notice of Assessment.

Doing so formally advises the CRA that the taxpayer is disputing his or her tax liability for the taxation year in question. Not incidentally, the filing of an Objection also brings to a halt most efforts undertaken by the CRA to collect taxes which it considers owing for the taxation year under dispute (although, if the taxpayer is eventually found to owe the amount in dispute, interest will have accumulated in the interim). Where the taxpayer files an Objection, the CRA’s collection efforts are suspended until 90 days after the date the CRA’s decision on that Objection is sent to the taxpayer. In some cases, however, those collection efforts will not be brought to a halt, in whole or in part. Tax collection efforts by the CRA are not deferred where the amounts in dispute are those which the taxpayer was required to withhold and remit to the CRA, such as employee income tax deductions at source. As well, the CRA is required to postpone collection action on only 50% of the amount in dispute where that dispute involves a charitable donation tax credit or deduction claimed in connection with a tax shelter arrangement. As a practical matter, however, the CRA has currently suspended all of its regular collection activities as a result of the pandemic. Nonetheless, the rules outlined above still apply and will be enforced when those collection activities resume.

There is a time limit by which any Objection must be filed, albeit a reasonably generous one. Individual taxpayers must file an Objection by the later of 90 days from the mailing date of the Notice of Assessment (the date found at the top of page 1) or one year from the due date of the return which is being disputed. So, for tax returns for the 2019 tax year, the one-year deadline (which is usually, but not always, the later of those two dates) would be June 1, 2021 (or June 15, 2021 for self-employed taxpayers and their spouses). As with most things related to taxes, it’s best not to put it off. At the very least, if the taxpayer is ultimately found to owe some or all of the taxes assessed by the CRA, interest will have accrued on those taxes for the entire period since the filing due date. Certainly, if the deadline is imminent, it’s necessary to file a Notice of Objection in order to preserve the taxpayer’s appeal rights, even if discussions with the CRA are still ongoing.

Taxpayers who have registered with the CRA’s online services feature My Account can file their Notice of Objection online at http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/myccnt/menu-eng.html.The taxpayer provides information with respect to the assessment being disputed and the reasons why the assessment is being disputed and submits those reasons by clicking on the Submit button at the bottom of the "Register my formal dispute — review" page. Taxpayers who are disputing their tax assessment can also upload supporting documents relating to that dispute to the CRA's website.

While filing a dispute through My Account is certainly faster than mailing hard copy of the Notice of Objection, not all taxpayers want to use that option. In particular, those who are not already registered with My Account may not wish to undertake the registration process simply in order to file a single Notice of Objection. Taxpayers who choose instead to mail hard copy of a Notice of Objection can find the most current version of the CRA’s standardized T400A Objection on the Agency’s website at https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t400a/t400a-09-18e.pdf.

Taxpayers aren’t obligated to use the CRA’s official Notice of Objection form — any communication which makes it clear that the taxpayer is objecting to his or her Notice of Assessment will do. Nonetheless, there’s no reason not to use the standardized form, and there are benefits to doing so. Using the Form T400A will make it clear to the CRA that a formal objection is being filed, will present the necessary information in a format with which the Agency is familiar, and will also mean that no required information is inadvertently omitted. It is also helpful to include a copy of the Notice of Assessment which is being disputed. Taxpayers should also consider ensuring proof of both delivery and time of delivery by sending the form in a way which provides for tracking and proof of delivery (e.g., registered mail or courier).

Taxpayers whose postal code begins with letters A to P should send their documents to the Eastern Appeals Intake Centre, while objections file by those with postal codes beginning with letters R to Y should be sent to the Western Appeals Intake Centre. The addresses for the two centres are as follows.

Chief of Appeals

Eastern Appeals Intake Centre

North Central Ontario TSO

1050 Notre Dame Avenue,

Sudbury ON P3A 5C1

Chief of Appeals

Western Appeals Intake Centre

Fraser Valley and Northern TSO, 2nd floor,

9755 King George Boulevard,

Surrey BC V3T 5E1

The CRA has posted a notice on its website indicating that, during the current pandemic, taxpayers can fax their Notices of Objection to the Appeals Eastern Intake Centre at 1-866-443-4955 or (705) 670-6649.

It’s also possible to contact either of the Appeals Intake Centres by phone or fax, and those phone and fax numbers for both can be found at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/complexity-level-processing-time.html.

The time required for the CRA to consider the objection and make its decision ranges from several weeks to several months, depending on the number and complexity of the issues involved. Eventually, however, the CRA will respond to the Objection. In the course of making its decision, the Agency may or may not contact the taxpayer for further discussions of the issues in dispute. Should the taxpayer be contacted, he or she may be asked to provide representations outlining his or her position, in writing or at a meeting. Through such representations and meetings, it may be possible for the taxpayer and the CRA to come to an agreement on the taxpayer’s tax liability. In either case, the CRA will either confirm its original assessment or change it. If the original assessment is changed, the CRA will issue a Notice of Reassessment outlining the changes. If the taxpayer continues to disagree with the CRA’s position, the next step is an appeal to the Tax Court of Canada, which must be filed within 90 days after the CRA issues its assessment or reassessment. While in many instances (generally where amounts in dispute are relatively small) taxpayers can represent themselves before the Tax Court, it is generally a good idea, once things reach this point, to consult a tax lawyer before taking that next step.

The CRA also publishes a useful pamphlet entitled Resolving Your Dispute: Objection and Appeal Rights under the Income Tax Act, and the most recent release of that publication can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p148/p148-resolving-your-dispute-objection-appeal-rights-under-income-tax-act.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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Although we’re not even halfway through the calendar, 2020 has already been a year of significant financial upheaval and stress for millions of Canadians. The number of employed Canadians fell by one million during the month of March 2020 — and then by another two million during the month of April.

While the impact of sudden unemployment, or reduced hours, was mitigated somewhat by the availability of a number of federal and provincial benefits, those benefits can, at most, cushion the financial shock for Canadians who may not know when or if they will be returning to work.

Given the circumstances, it’s very likely that the number of Canadians who won’t be able pay their tax bill this year on time and in full will be significantly increased. Where resources are scarce most Canadians will, quite reasonably, allocate those resources first to the necessities of food and shelter. Even those who have the financial resources to pay their taxes in full may be reluctant to use up limited resources on tax payments when their employment and financial future are uncertain.

In most years, the filing and payment deadline for Canadian taxpayers (other than the self-employed and their spouses) is the same day — April 30. This year, a tax balance owed for 2019 doesn’t have to be paid until September 1. However, the filing deadline for individual income tax returns for 2019 is June 1, 2020, so taxpayers who have a balance owing for 2019 will know that by the beginning of June.

While, like most creditors, the Canada Revenue Agency (CRA) would rather get paid on time and in full, its ultimate goal is to collect the full amount of taxes owed. If a tax bill can’t be paid in full out of either current resources or through private borrowing, the CRA is open to making a payment arrangement with the taxpayer, meaning that the amount will be paid over time.

There are two avenues available to taxpayers who want to propose such a payment arrangement. The first is a call to the CRA’s automated TeleArrangement service at 1-866-256-1147. When making such a call, it is necessary for the taxpayer to provide his or her social insurance number, date of birth, and the amount entered on line 15000 of the last tax return for which the taxpayer received a Notice of Assessment. (For taxpayers who are up to date on their tax filings, that will be the Notice of Assessment for the return for the 2018 tax year). The TeleArrangement Service is available Monday to Friday, from 7 a.m. to 10 p.m., Eastern time.

In ordinary times, taxpayers who would rather speak directly to a CRA employee would be able to call the Agency’s Debt Management Call Centre at 1-888-863-8657, but that Centre is currently closed due to the pandemic. Taxpayers can, however, still complete an online form (available at https://apps.cra-arc.gc.ca/ebci/iesl/showClickToTalkForm.action) requesting a callback from a CRA agent.

The CRA also provides an online tool, in the form of a Payment arrangement calculator (available at https://apps.cra-arc.gc.ca/ebci/recc/pac/prot/welcome?request_locale=en_CA), which allows the taxpayer to calculate different payment proposals, depending on his or her circumstances). That calculator includes interest charges since, no matter what payment arrangement is made, the CRA will levy interest charges on any amount of tax owed for the 2019 tax year which is not paid on or before September 1, 2020. Interest charges levied by the CRA tend to add up quickly, for two reasons. First, the interest charged by the CRA on outstanding tax amounts is, by law, higher than current commercial rates. For the second quarter of 2020 (April 1 to June 30), that rate is 6%. Second, interest charges levied by the CRA are compounded daily, meaning that each day interest is levied on the previous day’s interest charges. It is for these reasons that a taxpayer is, where at all possible, likely better off arranging private borrowing in order to pay any taxes owing by the September 1 deadline.

Finally, there is one strategy which is, in all circumstances, a bad one. Taxpayers who can’t pay their tax bill sometimes conclude that there is no point in filing if payment can’t be made. Those taxpayers are wrong. Where an amount of tax is owed and the return isn’t filed on time, there is an immediate tax penalty of 5% imposed on the outstanding tax amount — and interest charges start accruing on that penalty amount (as well as on the outstanding tax balance) immediately. For each month that the return isn’t filed, a further penalty of 1% of the outstanding tax amount is charged, to a maximum of 12 months. Higher penalty amounts are charged, for a longer period, where the taxpayer has incurred a late-filing penalty within the past three years. In a worst-case scenario, the total penalty charges can be 50% of the tax amount owed — and that doesn’t count the compound interest, which is levied on all penalty amounts as well as on all unpaid taxes. Taxpayers are at least catching something of a break this year as the CRA has, in recognition of the unusual circumstances, indicated that although returns are due on or before June 1, late-filing penalties will only be assessed where a return is not filed by the payment deadline of September 1, 2020.

In all cases, regardless of the payment or filing deadline and no matter what the circumstances or amount owed, the right answer is to file one’s tax return on time and, if payment of taxes owed can’t be made, to get in touch with the CRA as soon as possible to make a payment arrangement.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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The Old Age Security program is the only aspect of Canada’s retirement income system which does not require a direct contribution from recipients of program benefits. Rather, the OAS program is funded through general tax revenues, and eligibility to receive OAS is based solely on Canadian residency. Anyone who is 65 years of age or older and has lived in Canada for at least 40 years after the age of 18 is eligible to receive the maximum benefit. For the second quarter of 2020 (April to June 2020), that maximum monthly benefit is $613.53.

For many years, OAS was automatically paid to eligible recipients once they reached the age of 65. However, since July 2013 Canadians who are eligible to receive OAS benefits have been able to defer receipt of those benefits for up to five years, when they turn 70 years of age. For each month that an individual Canadian defers receipt of those benefits, the amount of benefit eventually received would increase by 0.6%. The longer the period of deferral, the greater the amount of monthly benefit eventually received. Where receipt of OAS benefits is deferred for a full 5 years, until age 70, the monthly benefit received is increased by 36%.

It can, however, be difficult to determine, on an individual basis, whether and to what extent it would make sense to defer receipt of OAS benefits. Some of the difficulty in deciding whether to defer — and for how long — lies in the fact there are no hard and fast rules, and the decision is very much an individual one. Fortunately, however, there are a number of factors which each individual can consider when making that decision.

The first such factor is how much total income will be required, at the age of 65, to finance current needs. It is also necessary to determine what other sources of income (employment income from full-time or part-time work, Canada Pension Plan retirement benefits, employer-sponsored pension plan benefits, annuity payments, and withdrawals from registered retirement savings plans (RRSPs) and registered retirement income fund (RRIFs)) are available to meet those needs, both currently and in the future, and when receipt of those income amounts can or will commence or cease. Once income needs and the sources and possible timing of each is clear, it is necessary to consider the income tax implications of the structuring and timing of those sources of income. The ultimate goal, as it is at any age, is to ensure sufficient income to finance a comfortable lifestyle while at the same time minimizing both the tax bite and the potential loss of tax credits.

In making those calculations, the following income tax thresholds and benefit cut-off figures are a starting point.

Income in the first federal tax bracket is taxed at 15%, while income in the second bracket is taxed at 20.5%. For 2020, that second income tax bracket begins when taxable income reaches $48,535.
The Canadian tax system provides (for 2020) a non-refundable tax credit of $7,637 for taxpayers who are over the age of 65 at the end of the tax year. That amount of that credit is reduced once the taxpayer’s net income for the year exceeds $38,508.
Individuals can receive a GST/HST refundable tax credit, which is paid quarterly. For 2020, the full credit is payable to individual taxpayers whose family net income is less than $38,507.
Taxpayers who receive Old Age Security benefits and have income over a specified amount are required to repay a portion of those benefits, through a mechanism known as the “OAS recovery tax”, or clawback. For 2020, taxpayers whose prior year income was more than $79,054 will have a portion of their OAS benefit entitlement “clawed back”.

What other sources of income are currently available?

More and more, Canadians are not automatically leaving the work force at the age of 65. Those who continue to work at paid employment and whose employment income is sufficient to finance their chosen lifestyle may well prefer to defer receipt of OAS. Similarly, a taxpayer who begins receiving benefits from an employer’s pension plan when he or she turns 65, may be able to postpone receipt of OAS benefits.

Is the taxpayer eligible for Canada Pension Plan retirement benefits, and at what age will those benefits commence?

Nearly all Canadians who were employed or self-employed after the age of 18 paid into the Canada Pension Plan and are eligible to receive CPP retirement benefits. While such retirement benefits can be received as early as age 60, receipt can also be deferred and received any time up to the age of 70. As is the case with OAS benefits, CPP retirement benefits increase with each month that receipt of those benefits is deferred. Taxpayers who are eligible for both OAS and CPP will need to consider the impact of accelerating or deferring the receipt of each benefit in structuring retirement income.

Does the taxpayer have private retirement savings through an RRSP?

Taxpayers who were not members of an employer-sponsored pension plan during their working lives generally save for retirement through a registered retirement savings plan (RRSP). While taxpayers can choose to withdraw amounts from such plans at any age, they are required to collapse their RRSPs by the end of the year in which they turn 71, and to begin receiving income from those savings. There are a number of options available for structuring that income, and, whatever the option chosen (usually, converting the RRSP into a registered retirement income fund or RRIF, or purchasing an annuity) will mean that the taxpayer will begin receiving income amounts from those RRSP funds in the following year. Taxpayers who have significant retirement savings in RRSPs should, in determining when to begin receiving OAS benefits, consider that they will have an additional (taxable) income amount for each year after they turn 71.

The ability to defer receipt of OAS benefits does provide Canadians with more flexibility when it comes to structuring retirement income. The price of that flexibility is increased complexity, particularly where, as is the case for most retirees, multiple sources of income and the timing of each of those income sources must be considered, and none can be considered in isolation from the others.

Individuals who are facing that decision-making process will find some assistance on the Service Canada website. That website provides a Retirement Income Calculator, which, based on information input by the user, will calculate the amount of OAS which would be payable at different ages. The calculator will also determine, based on current RRSP savings, the monthly income amount which those RRSP funds will provide during retirement. To use the calculator, it is necessary to know the amount of Canada Pension Plan benefit which will be received, and the taxpayer can obtain that information by calling Service Canada at 1-800-277-9914.The Retirement Income Calculator can be found at https://www.canada.ca/en/services/benefits/publicpensions/cpp/retirement-income-calculator.html.

A final note — during the current pandemic, Service Canada is strongly encouraging anyone who is applying for federal government benefits — including Old Age Security — do so online, through My Service Canada Account. While in normal circumstances, individuals may be required to provide supporting documentation for their OAS application, that requirement is being temporarily waived. Such documentation may be requested at a later date, but processing of the application will now begin without it. Information on My Service Canada Account, and on how to make an online application can be found at https://www.canada.ca/en/employment-social-development/services/my-account.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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A generation ago, retirement was an event. Typically, an individual would leave the work force completely at age 65 and begin collecting Canada Pension Plan and Old Age Security benefits along with, in many cases, a pension from an employer-sponsored registered pension plan.

Much has changed in the intervening decades and one of those changes is that retirement is now more often a process than an event. Many of those who have reached the traditional retirement age of 65 are receiving CPP and OAS benefits while at the same time continuing to participate in the work force. Some stay at an existing full-time job but more commonly, such individuals take up part-time employment, out of financial need or simply from a desire to stay active and engaged in the work force.

At one time, beginning to receive CPP retirement benefits meant that, even for those who chose to remain in the work force, no further CPP contributions were allowed. In 2012 that changed, with the introduction of the CPP Post-Retirement Benefit. The availability of that benefit means that those who are aged 65 to 70 and continue to work while receiving CPP retirement benefits must decide whether or not to continue making CPP contributions. Such individuals who make the choice to continue to contribute to the Canada Pension Plan will see an increase in the amount of CPP retirement benefit they received each month. That increase is the CPP post-retirement benefit or PRB.

The rules governing the PRB differ, depending on the age of the taxpayer. In a nutshell, an individual who has chosen to begin receiving the CPP retirement benefit but who continues to work will be subject to the following rules:

Individuals who are 60 to 65 years of age and continue to work are required to continue making CPP contributions.
Individuals who are 65 to 70 years of age and continue to work can choose not to make CPP contributions. To stop contributing, such an individual must fill out Form CPT30, Election to stop contributing to the Canada Pension Plan, or revocation of a prior election. A copy of that form must be given to the individual’s employer and the original sent to the Canada Revenue Agency. An individual who has more than one employer must make the same choice (to continue to contribute or to cease contributions) for all employers and must provide a copy of the CPT30 form to each. A decision to stop contributing can be changed, and contributions resumed, but only one change can be made per calendar year. To make that change, the individual must complete section D of CRA Form CPT30, give one copy of the form to his or her employer, and send the original to CRA

Individuals who are over the age of 70 and are still working cannot contribute to the CPP.

Overall, the effect of the rules is that CPP retirement benefit recipients who are still working and who are under aged 65, as well as those who are between 65 and 70 and choose not to opt out, will continue to make contributions to the CPP system and will continue therefore to earn new credits under that system. As a result, the amount of CPP retirement benefits which they are entitled to will increase with each year’s contributions.

Where an individual makes CPP contributions while working and receiving CPP retirement benefits, the amount of any CPP post-retirement benefit earned will automatically be calculated by the federal government (no application is required), and the individual will be advised of any increase in that monthly CPP retirement benefit each year. The PRB will be paid to that individual automatically the year after the contributions are made, effective January 1^st of that year. Since the federal government doesn’t have all of the information needed to make such calculations until T4s and T4 summaries are filed by the employer by the end of February, the first PRB payment is usually made in a lump sum amount, in the month of April. That lump sum amount represents the PRB payable from January to April. Thereafter, the PRB is paid monthly and combined with the individual’s usual CPP retirement benefit in a single payment.

While the rules governing the PRB can seem complex (and certainly the actuarial calculations are), the individual doesn’t have to concern him or herself with those technical details. For CPP retirement benefit recipients who are under age 65 or over 70, there is no decision to be made. For the former, CPP contributions will be automatically deducted from their paycheques and for the latter, no such contributions are allowed.

Individuals in the middle group – aged 65 to 70 will need to make a decision about whether it makes sense, in their individual circumstances, to continue making contributions to the CPP. Some assistance in making that decision is provided on the federal government website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement/benefit-amount.html, which shows the calculations which would apply for individuals of different ages and income levels.

More information on the PRB generally is also available on that website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement.html.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

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