2019 Tax Tips and Highlights from the CRA

Here is a compilation of the latest news from Canadian Revenue Agency (CRA) as well as some changes to 2019 tax laws:

• Self employment reminders
• Health Spending Account misuse
• Tips when filing annual tax returns
• What is the sharing economy?
• Claiming service animals in your taxes
• TFSA contribution amount increase
• Extended parental leave coverage for employment insurance

Self Employed?

Self employed individuals and their partners (spouse or common law) have until midnight on June 15, 2019 to file their 2018 income tax and benefits returns.

If you are owing a balance, then it must have been paid by April 30, 2019.

Reminders

Report your income from any business you run.

Keep complete and detailed records supported by original documents. These documents should be able to prove any deduction or credit claim as well as tax owed. In general, you should keep all these records for at least 6 years in the case of an audit. Always have duplicates even if you send in files with your return to safeguard yourself.

Misuse of Health Spending Accounts

Health Spending Accounts (HSAs) are self insured health plans which allows a small business to offer tax-free health and dental benefits to their employees. As a result, the HSA is a very affordable and sought out alternative to health insurance. However, the plan can be improperly implemented due to its heavy ties to tax.

Incorporated businesses are eligible for a Health Spending Account. Even corporations with just one employee can be eligible. However, the HSA cannot be solely used by a shareholder. In order to be an employee, owners of the business should also be earning T4 income.

The rules around unincorporated businesses or sole proprietors can get messy. These businesses are only eligible if the owner has at least one arm’s length employee.

The bottom line is that an unincorporated business with no arm’s length employees (only the owner) is not eligible for an HSA.

Speak to a tax professional or inquire with Olympia Benefits to see if you are eligible.

Tips when filing your annual tax return

Pay online – there are several payment methods available for online payment; online banking, My Payment, and pre authorized debit from your financial institution. Paying online allows for easier and secure transactions.

Register for CRA’s My Account – This is CRA’s free and secure portal which allows you to view your tax information online. Once you register, you are able to auto fill your return for next year by using a certified tax preparation software. It allows you to automatically fill in parts that are already received by the CRA such as a T4.

Sharing Economy

What is the sharing economy?

You must report any income received through services offered in a sharing economy. This includes:

• Renting out your property (accommodation or transportation)
• Making and selling goods (food, clothes, etc.)
• Providing services (animal care, freelance work, etc.)

If you earn over $30,000 through these services, than you must register for a GST/HST account

If you earn money from a ride sharing platform, than you must register for a GST/HST account regardless of your earnings amount

Claiming Service Animals in your taxes

A recent change to the Medical Expense Tax Credit (METC) now allows for Canadians to claim service animals as a medical expense. This extends to any animal who is specially trained to perform tasks which cope with a health related difficulty or impairment. For example, dogs trained to help PTSD patients can now be claimed. As always, any expenses claimed for an METC is also eligible for a Health Spending Account.

TFSA Increase in 2019

Eligible TFSA contributors may now contribute up to $6,000 annually. In 2018, we could only contribute $5,500.

For most people, the typical order of financial priorities is to max out your TFSA followed by your RRSP but not before paying any outstanding debts. However, complex situations require number crunching to determine your best order of action.

Employment Insurance Changes for Parents

In 2018, the federal budget made changes to the Employment Insurance (EI), allowing parents to take more time off.  Parents of children born or adopted after March 17, 2019 are eligible. Standard parental leave has gone up allowing for 40 weeks instead of the previous 35. The same for extended parental leave, increasing from 61 to 69 weeks.

On parental leave, you typically receive 55% of your weekly salary as a result of the EI benefit. However, if you return early, you will have to remove 50 cents (from the EI benefit) from every dollar earned.

Formula:

Earnings from being back at work * 0.5 = X

EI amount – X = Y

Y + Earnings from being back at work = Total earnings

Learn more about a Health Spending Account: