What to keep in mind as the tax deadline approaches

* The deadline to file your taxes is fast approaching. And joining us now with some things to keep in mind if you still haven't filed is Nicole Ewing, Director of Tax and Estate Planning with TD Wealth. Nicole, thanks very much for joining us * Oh, my pleasure, Anthony. * OK. So walk us through the importance of filing before the tax deadline even if the filing isn't perfect. * Well, gosh, I mean, we are-- this is a self-reporting system, as you know. And we are obligated to file our taxes. And to the extent we owe, it's very, very important that we pay on time. So I think of this sort of as the carrot and the stick approach to ensuring that you're doing your filings on time and paying what you need to pay. * So if we think about it like this-- if we are late, if we do not file on time, and we owe taxes, we firstly have a 5% late-filing penalty, in addition a 1%, compounded daily, monthly up to 12 months of additional 1% interest on that. If you are a repeat offender in any of the last three years, so '21, '22, or '20, '21, '22, that jumps to 10% and a 2% compounding interest extending into 20 months. * So this can get quite significant. In addition, you will have a 10% amount owing on taxes due. So any overdue amounts are going to be really hitting the pocketbook quite significantly. * And I say, now, there is a carrot. So there is the opportunity to get some things from filing that you otherwise would not be entitled to. So for example, if you are receiving any sort of government benefits, you want to make sure that you are filing on time. Otherwise, those might be stopped or delayed. Think here about the GST or the Canadian Child Benefit, for example. Those might be impacted if you don't file on time. * And then we think about longer term, the carrot, making sure that you get credit for those CPP years and for your RRSP contributions that you're making. All of that really does require you to be filing your return, so a few sort of really significant expensive consequences if you don't pay on time but also some potential benefits of ensuring that you do get that in on time. * Yeah, that certainly-- you want to make sure you get that done in time before the deadline. Let's say we've filed, and we've received a tax refund. What should people be considering before spending it? * I want to say here, a question why you have that refund. So for many people, it's frankly-- it's intentional. It's forced savings, and they know, you guess the math doesn't work out, and I should perhaps not be doing that interest-free loan to the government and paying too much in advance. But for some people, it works. So if that's intentional, it's all right. * If it's not intentional, reflect back. Maybe there's a form you can file with your employer to have different amounts withheld so that you're not making that interest-free loan. And when I say that, because when you pay your-- when you have your taxes withheld, essentially, the government has access to that money until you get your refund back. Now, if you are receiving your refund and it's quite substantial, ask yourself why. * But to utilize that most impactfully, think about your goals, think about what you're trying to achieve. Look at, perhaps, you have some high-interest debt that you can really make a big impact on-- that's going to be a top consideration-- but then maximizing that value, as well. So if you do have the opportunity to put that into investments, let's look at our registered plans-- your TFSA, your first home savings account, your RRSP, and really ensure that money is making the biggest impact that it can for you in those tax-preferred accounts. * If you've already maxed out all of those, as well, perhaps you're looking at a holiday, perhaps you're looking at additional savings for your non-registered accounts, as well. But we want to look at debt-- really important-- and we want to look at maximizing our registered accounts. * OK, now staying with taxes, the recent Canadian federal budget included some changes to the capital gains tax. Walk us through what's changed. * Oh, gosh, well, it feels like everything changed overnight. And we had been talking about these changes for a very long time. But what we have seen-- so these are proposed changes at this point. We still need to see the legislation, which is making it a little bit challenging to really know specifically how certain individuals are going to be impacted or how those certain scenarios are going to play out. * But making some reasonable assumptions here, what we know is that as of June 25, the inclusion rate for capital gains is going to change. And for individuals, it will change on the amount in excess of $250,000 of realized gains. So we'll have our 50% inclusion rate for individuals up to $250,000. Over that amount it increases to 2/3. * But for corporations and trusts, that's going to be an immediate June 25 increase of the inclusion rate from 50% to 66.67%, so 2/3 will be included. And that could mean, really, an immediate increase in the tax that would be payable in certain situations. * So there's a lot to be thinking about here, a lot of different factors that we're looking at, what are reasonable assumptions to make, and when we're comparing what we would want to be doing perhaps before June 25, but also making sure that we're not just letting panic kick in and that we're making those informed decisions. * I've seen some calculations online, Anthony, and different people saying that the math works out a certain way. It's really important to look into those assumptions and to do that deep dive into, what variables are they considering? Are they reasonable, and have they missed an important part of the analysis? [THEME MUSIC]