The deadline to file your taxes is quickly approaching. Nicole Ewing, Director of Tax and Estate Planning at TD Wealth, speaks with MoneyTalk’s Greg Bonnell about some of the key considerations to keep in mind when filing.
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[AUDIO LOGO] * We are heading into the thick of tax season. Joining us now with some things you may want to be keeping in mind before you file is Nicole Ewing, director of tax and estate planning at TD Wealth. Nicole, always a pleasure to have you on the show. * My pleasure. Great to be here. * So here we are with-- we still got a couple of weeks, but this is a good conversation to have with a couple of weeks and not in the panic situation of the last couple of days. What do we need to be keeping in mind? * Well, so firstly, make sure that you're filing on time. And it sounds fairly straightforward, but there's a lot of things that can happen. And we might not prioritize it. And if we're not filing on time, we're going to find ourselves facing late filing penalties, potentially having interest, the amounts that-- 10% on overdue taxes would need to be factored into your decision of whether or not it's in your interest to be filing quickly. So make sure that you're filing on time. * Also, make sure that you can defend the positions that you're taking. And there's been a lot of discussion recently, particularly around the bare trust rules and the joint accounts and what to file and how to do it. At the end of the day, I just encourage people to think that ultimately what you are reporting is the truth of what happened and the evidence that you have in order to prove the position that you've taken with respect to something. * So when it comes to your taxes, look and see, what is the position that you're taking, and what evidence do you need in order to support that? So now might be the right time to be going through old emails, perhaps looking at your statements, getting all of your information together so that you're in a position, should CRA question whether or not the information you've provided is accurate or complete, that you're able to support that position. * And think about things-- it can be a little bit questionable. So mileage, for example-- if you're claiming your mileage expenses or other sorts of expenses, you need to be able to defend that and make sure that you're actually saying the things that-- being able to prove that the position that you're taking is actually accurate. * I mean, one of the-- I like that. Here's the paper trail to say, this is what happened, and this is how I can prove what happened. * Also, the sense, too, that perhaps as things get more complicated for filers, maybe even like a checklist-- for an example, say you're part of a company's deferred profit sharing plan or a share-buying plan. There's forms that go along with that kind of stuff, and it's easy to overlook. And perhaps I've missed some of those in recent years. * Yeah, I feel like I may have told you before about the fact that when we underreport-- so if we're not reporting income that we have earned, there's penalties for that. And if you do it, if you're a repeat offender, essentially, those are doubled. * I have found myself in that situation before. I got my form this year. It's like $7. But because I had underreported in previous years, I want to make sure that I'm not going to be hit with a penalty or interest for not reporting income of a few dollars. * So yes, make that list. Look at what you earned or what you were declaring last year, whether your circumstances have changed, and you should know what to expect. So we should have our forms in hand by now so that we're able to report our income. * But if you're missing anything, ask yourself why. Maybe you're just not invested the same way that you were previously. Maybe you're no longer a part of that pension fund. But you should be able to look at the documents that you were required to present in the past, see if you have them now, and if you don't have them yet, now is the time to take action. People should have those forms in hand now from either their investors or their employers. But now's go time. * Yeah, exactly. Get it together. When I think about filing, too, people think of it-- oh, perhaps they think about it as a headache. But if you don't file as well, there's certain tax credits, climate action incentives-- if you're not on the books, you're not going to get those payments. * Well, and this often comes up with-- people say, well, I didn't earn that much, or I'm below the basic personal amount. Or my kids earned-- they had their first job. It is worthwhile filing because, firstly, there are refundable tax credits, not just the nonrefundable. There's refundable tax credits. * There are also things like ensuring that you are accumulating your room for RRSP contributions, for CPP, making sure that that is being reflected in the documentation ultimately that the government will be looking in the future to know what your positions were with respect to certain things. So yes, we do want to be completing the forms, doing the self-reporting, and filing your taxes even if you're not expecting to get a return. * Maybe you're thinking it's not that important. If you are not filing that return, ultimately, you're not going to be on the list for some of those other credits. So GST, for example-- lower income earners, you are not going to receive your GST rebate if you have not filed your taxes. So go through, as you say, the list of potential income earnings that you would have had as well as the potential benefits and credits and deductions you might-- you might be able to be utilizing some from another family member as well. * So we always encourage-- spouses should be filing at the same time so that they can take the most beneficial filing position with respect to things, but also, if you have family members, for example, that you are funding their medical care-- they are dependent on you for support, and you are paying for some of their medical expenses-- you have the opportunity to be claiming those on your taxes as well. * You may want to transfer those to the lower-income-earning spouse because we have that 3% threshold. Anything over 3% is the amount that you're able to claim. So the lower the income, the lower that threshold. So there's some planning that should be done not just for yourself but for your broader family unit, just making sure that you're not missing out on some of the great incentives, credits, deductions that might be available not just for you but more broadly as a family unit. * Yeah, my household is like, boys, I need your tuition statements from your university. Why? Do we get some money back from that? It's like, no, I pay your tuition. * Yes, in the form of next year's tuition. * Yeah, exactly. That's how they're going to get it back, sort of a convoluted-- you talked about looking at your situation from last year as a guide for this year, trying to figure out where you are. One thing that may have changed that some people might be wondering about is that work-from-home tax credit. There's still people working from home. We know that, but things have changed on that. * Right. And it's interesting to me the way that this is really being framed and talked about because, pre-COVID, there were rules in place about working from home and the expenses that you can claim. Those are the same rules, so those have not changed. * What changed is the elimination of that temporary flat tax that we were able to basically check a box and get your amounts back. Now we are required to prove our position. So we need that T2200 completed by our employer saying that we were required to work from home or that we had an agreement. So it's not required necessarily, but there has to be a formal agreement between you and your employer that you will be working from home and incurring expenses because of that. * Also, when we're looking at how much you can claim, the timing is going to be important here. The requirement is that you were required, or are, under a formal agreement working from home at least 50% of the time for four consecutive weeks. Now, that can be repeated at different times throughout the year, and the amount that you're claiming for your deduction is going to be based on that period. * And there's a little bit of math involved, so the CRA has very helpfully included online their guide that you can go through to look at the math. What was the space that you were occupying? How much is that space relative to the larger space that you live in? Are you using it exclusively, or are you using it for other purposes? And you have to do the math around that. * But at the end of the day, we're looking at employees who are able to deduct some of their employment income because they have incurred expenses from using their personal property, using their home to fulfill their employment duties. But the temporary measures are gone. We are now fully back into the detailed method. And there's guides out there, but it is a little bit trickier for folks than it was. * One more thing I want to ask you about tax-filing season this year is, with the launch of those spot Bitcoin ETFs in the United States, there was a lot of spotlight back onto cryptocurrencies. But there are tax considerations. * Yes, there are tax considerations. Firstly, you do have to pay tax. When you dispose of or sell or trade a cryptocurrency, it is not a currency for the purposes of taxation. It's a commodity. And so when you dispose of that, that is a taxable event, and you need to report that on your taxes. * The question is whether or not you're reporting it as a capital gain or you're reporting it as business income. Depending on how you're engaging with the crypto, whether or not you are engaging it with a business mind on, it could be fully taxable as business income in your hands. And so that's something that people need to be aware of. * Recording, when you're selling, how much you're selling, how often you're engaging with it, things like, Are you essentially holding yourself out as a trader of the currency? that is going to define what your position needs to be with respect to it. But absolutely, we need to pay taxes on our on our crypto gains. There's no hiding it. There is excellent software out there to help you track what the costs may be, but at the end of the day, the tax is due. [AUDIO LOGO]
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