For more information visit the CRA website to view their T2200 helpful information kit.

(1) The sales tax is applied to the total of the selling price plus the GST.  The 9.5% QST rate is effective January 1, 2012.
(2) The sales tax in PE is applied to the total of the selling price plus the GST.
(3) BC still has some sales taxes, such as the tax on designated property (vehicles, boats and aircraft).  See the link above to BC Consumer Taxes for more information.  The HST in BC was overturned by a referendum, so BC will return to a PST plus GST system some time in 2013.
(4) Ontario still has retail sales tax on insurance and on private sales of used motor vehicles.  See the link to Ontario Retail Sales Tax for more information.

Businesses which sell taxable goods and/or services in each province are required to register as a vendor to collect the provincial retail sales tax where applicable.

Dividends eligible for the enhanced dividend tax credit

In the following table, the Federal column for eligible dividends shows the amount of actual dividends that can be earned before federal tax or federal AMT kicks in, if there is no income other than the dividends.  The provincial columns show the amount of actual dividends that can be earned in each province before any regular provincial income tax (net of any low income tax reduction) is payable.  However, if this amount exceeds the amount of dividends in the Federal column, AMT will be payable for all provinces except Québec, which does not base its AMT on the federal AMT.  The provincial columns also show the total amount of regular federal income tax, plus federal and provincial AMT payable at the indicated amount of dividends, for 2012 and 2011.

In 2012, because of the higher federal marginal tax rate for eligible dividends than 2011, regular federal taxes start to be payable when actual eligible dividends reach the amount of $47,892.  AMT starts when the dividends reach $56,097, and at this point there is $791 of federal tax payable.  The federal AMT is applicable for dividends above this amount, until the amount of the dividends reaches $101,970, when the regular federal tax exceeds the minimum amount.

In 2011, federal AMT starts at $50,530 of actual eligible dividends, and is phased out at $212,563, when the regular federal tax exceeds the minimum amount.

Both tables are based on income tax rates as known on December 16, 2011.

(1) BC excludes Medical Services Plan Premiums
(2) ON excludes Ontario Health Premium
(3) QC excludes contribution to the health services fund, health contribution, and prescription drug insurance plan premiums.
(4) The BC, NL and ON AMT rates are calculated as lowest provincial tax rate / lowest federal tax rate.

The Income Tax Act sets the deadline as “on or before the day that is 60 days after the end of the year”, which is March 1st except in a leap year, when it will be February 29th.

Contributions to RRSP’s are tax deductible and the income earned within the plan grows tax deferred until retirement. You can claim a contribution of up to 18% of 2010 earned income to a maximum of $22,450. Earned income is defined as income from employment, from business, net rental income from real estate, CPP disability pension, certain types of royalty, and spousal or child support payments that are included in your income.

The contribution limit may be subject to the year 2010 pension adjustment reversals. Pension adjustments reflect, in most cases, your employer’s contributions to a pension plan or actuarial commitments to such plans in the year 2010. The age limit for contributing to an RRSP is 71. The age limit for converting an RRSP to an annuity or RRIF is also 71. Don’t over contribute!

“Canada’s retirement income system is recognized around the world by expert groups such as the Organization for Economic Co-operation and Development as a model that succeeds in reducing poverty among Canadian seniors and in providing high levels of income replacement to retired workers,” said Minister Menzies. “Our work with the provinces found, however, that some modest- and middle-income households may be at risk of under saving for retirement.”

“We opted to prioritize the PRPP framework because it was considered the most effective and appropriate way to target those individuals who may not be saving enough for retirement—in particular, the millions of Canadians who do not currently have access to a workplace pension plan,” said Minister Menzies.

“PRPPs will allow small business owners and their employees to have access to an accessible, large-scale, low-cost defined contribution pension plan for the very first time—with professional administrators working to ensure that funds are invested in the best interests of plan members,” said Minister Menzies. “And by pooling pension savings, we will allow Canadians greater purchasing power. Basically, Canadians will be able to buy in bulk so that more money is left in their pocket when they retire.”

While Canada’s retirement income system has received increased international attention as a model to emulate, Minister Menzies noted that a healthy system is one that is regularly reviewed to ensure that it serves Canadians as effectively as possible. “That is why we will be tabling PRPP legislation in the near future.”

For a long term loan used to purchase a house, for example, it is quite possible that the loan will not be re-paid during the parent’s lifetime. The parent could provide in her or his will that any remaining balance of the loan will be forgiven or instead become part of the child’s inheritance. Such an arrangement does not cause any adverse tax consequences because the “debt forgiveness” rules in the Income Tax Act do not apply to the settlement of loans by inheritance or bequest.

Giving your child this type of “soft” loan is similar to giving them a part of their inheritance early, during your lifetime.

Canadians who filed their income tax and benefit return electronically or who have not enclosed their information slips and receipts with their paper-filed return should keep their tax and benefit records on hand in case they are contacted by the Canada Revenue Agency (CRA).

After returns are filed, the CRA begins work to verify reported income, as well as credits and deductions claimed. These reviews are an important method for the CRA to ensure Canadians are paying their fair share of taxes.

Some of the reviews of deductions and credits are done when returns are filed and before taxpayers receive their notice of assessment. However, most reviews take place later in the year, as the CRA works to verify the information on an individual’s return and compare it with information provided by other parties, such as an employer, a spouse, or a common-law partner.

During this review process, the CRA may contact taxpayers, usually by mail, to ask for more information on income sources or dependents. The CRA may ask for copies of receipts or information slips to support a number of different claims, for example:

• medical expenses
• charitable donations
• child care expenses
• spouse or child support payments
• moving expenses

Once the CRA is in contact, you have 30 calendar days to respond. Keeping your records on hand makes it easier to respond to these requests and will help you explain your tax and benefit situation to the CRA if you do not agree with your reassessment.

Receiving a request for receipts or documentation to support certain deductions and credits does not mean you are being audited by the CRA. When an individual is selected for an audit, the CRA tells them that their tax and benefit situation is being reviewed and calls to arrange a meeting to begin the audit.

For more information about reviews of returns by the CRA, go to www.cra.gc.ca/reviews.

“Canadians gave us a strong mandate to continue our low-tax plan. We built on our aggressive tax relief by reducing taxes on savings with the landmark TFSA, the most important personal savings vehicle since the RRSP,” said Minister Shea.

“We are thrilled to see that Canadians continue to take advantage of this important savings vehicle,” said Minister Shea. “The CRA will ensure the Ombudsman’s recommendations continue to be implemented to further increase awareness of TFSA rules among Canadians so they may continue to enjoy the benefits of this increasingly popular investment vehicle.”

Over 98 percent of Canadians who have contributed to their TFSAs have managed their accounts within the rules associated with contributing to and withdrawing from TFSAs. As Canadians continue to invest their hard-earned money in TFSAs, and in order to benefit from the savings offered by the TFSA, the Canada Revenue Agency (CRA) wants to make sure that these rules are understood. The Agency continues to work with financial institutions and with individual Canadians to address information needs.

The CRA welcomes the Ombudsman’s report as an opportunity to improve services to Canadians and has developed an action plan to address the recommendations identified in the report. The plan includes: updated TFSA web pages, the issuance of relevant Tax Tips, community newspaper articles, and Webinars to financial institutions. These products will highlight the important information that Canadians should have about how the TFSA works, including how:

• the maximum TFSA contribution for a year is calculated;
• unused contribution room can be carried forward into future years;
• funds withdrawn from the account in a given year are not calculated in the contribution room until the following year;
• important it is to not make excess contributions
• contributions are not tax-deductible; and
• funds can be given to a spouse or common-law partner for them to invest in their TFSA.

If you have questions about your TFSA, you are encouraged to contact the CRA at 1-800-959-8281 or visit the CRA Web site at http://www.cra.gc.ca/tfsa