Personal Tax Season Tips

Personal Tax Season Tips

Disclaimer: all information provided is meant for discussion, education or opinion purposes only and is not intended as professional advice. 

It's that time of year again, good old personal tax season. In honor of the season I wanted to draft up a number of tips, pointers and issues around personal taxes to help. One quick note: because the Canadian system is so complex, with so many different rules, this is by necessity a long post. Here is a quick table of contents in case you want to skip ahead:

1. Do I Need to Hire an Accountant?
2. Our Tax System: Calculations, Overtime and Refunds
3. Tax Credits vs. Tax Deductions: What's the Difference?
4. Medical Expenses
5. Donation Tax Credit
6. Disability Tax Credit
7. Other Employment and Commission Expenses
8. Becoming Self Employed
1. GST/HST and RST/PST issues
9. Rental Properties
10. Foreign Property Disclosures
11. What is the Voluntary Disclosure Program?

Do I Need to Hire an Accountant?

In my clearly unbiased opinion: maybe. There's a number of considerations as to whether your life and your situation needs the assistance of a professional, and even what level of professional you need.

First off, let's discuss the purpose of using a professional tax preparer or accountant and eliminate one misconception: their job is not to generate you a bigger refund. If you are comparing the size of your refund (presuming you get one) and comparing it to the preparation bill, you've missed the point. What you get by hiring a professional are:

• Saving time, and frustration, by not having to do it yourself;
• Having some assurance that your return has been prepared correctly and (hopefully) all available tax savings have been found and any possible penalties avoided; and,
• Access to tax and possibly business knowledge that can help you with planning and other areas of your financial life.

For a lot of people with very simple returns you can get away with Ufile or filing yourself. I define simple as the sort of return that has 1 or 2 T4 slips from employment and maybe an RRSP contribution receipt. Frankly, even if you miscalculate your taxes CRA will fix it for you so long as you file on a return like this. For this type of return there's very little value someone like myself can provide other than saving you the time of preparation.

If your income is largely made up of T-Slips including dividends and interest and you start to have some simple tax credits like donations and medical expenses you may want to consider hiring a tax preparer to help you organize and file this information. You may be tempted to pay the cheapest price but bear in mind that the cheapest people probably know the least and are the least efficient. A lot of the non-public practice tax preparation offices often use staff that have a couple weeks of training on tax preparation. This doesn't mean they will do a bad job but it does mean that if there is any complexity or other issues they may not be dealt with correctly as this is a non-regulated industry with no education requirements. 

If you are self-employed, have significant investments, rental property, are disabled or have a disabled spouse or dependent, own foreign property, have child care costs, employment expenses or any other complexities you should strongly consider hiring a designated accountant with significant tax experience (we aren't all trained equally and the education program is surprisingly light on tax training, ask for their background). It may cost a little more but you will likely be able to deduct the fees against your business/property income which nets you approximately a 30-50% discount on the price in tax savings (note: tax preparation itself isn't tax deductible, but assistance with your business or investments are). In addition, a competent and interested accountant will query your life and make sure that every stone is turned over to make sure your return is complete.

Our Tax System: Calculations, Overtime and Refunds

Now that we've gone over some considerations for hiring a tax preparer, let's talk about a few errors and misunderstandings I still run into. I don't see these myths as much recently as I did in prior years, which is great, but it still happens:

Myth #1: Being in a higher tax bracket is bad

I occasionally run into this misconception. The Canadian tax system is progressive, meaning that the more money you make the higher rate you pay in taxes. Where the myth comes in is where people believe that it's better to be in the high end of a lower tax bracket than the low end of a higher tax bracket because they think going into a higher tax bracket means you pay more tax on all your money, so therefore you would have more money at a lower rate.

This is 100% wrong. Our system applies the higher rate on the next dollar you make, it doesn't go back and apply the rate to the earlier amounts, these are still taxed at the lower bracket rates. Therefore, there is no mathematical way that you can make more money and somehow have less in your pocket at the end of the day. It's true that you will keep a smaller and smaller percentage of every additional dollar you make, but you will still be better off than if you had never made that dollar.

Example: Let's say that the first tax bracket is 25% up to $30,000, and 35% for income over $30,000. If you ask some people if they make more money at a salary of $30,000 or $31,000, some may pick $30,000. This is because they believe that if they are at $30,000 the tax rate would be $30,000 x 25% = $7,500, keeping $22,500 in their pocket; whereas at $31,000 the calculation would be $31,000 x 35% = $10,850, keeping $20,150. This is a costly error. The true calculation at the $31,000 income level is ($30,000 x 25%) + ($1,000 x 35%) = $7,850, keeping $23,150 in their pocket.

The takeaway? Always try and make as much income as possible! Don't overthink the system or believe that you have figured out how to "game" it. If you think you have, or have a friend that brags that they have, you haven't.

If you want to know more about the marginal rates, taxtips.ca has some nice province by province comparison tables.

Myth #2: Being paid bonuses or overtime is bad

This myth is a little funny, because there is a grain of truth to it. Most of us who have been employees and paid large chunks of income, such as vacation payouts, bonuses, overtime, etc. have experienced the sinking feeling of looking at our paycheque and seeing a much larger amount going to taxes, and sometimes this can lead to a lower paycheque (or just a minimal increase). This is disheartening and I often hear people talk about how it wasn't worth working all this extra time or getting the bonus as they would have been better off not getting it. Nurses and health care workers seem to experience this a lot.

Again, this is 100% wrong in the long-term. There's no disputing that this may have had a bad effect on the cash flow from that particular paycheque, but what is usually overlooked is that you will get a bigger tax refund.

The problem lies with CRA's payroll calculation tables. CRA has gamed them so that pretty much no matter what you make, they will collect more tax than necessary so they can give you some of the excess back as a refund. This is smart on their end because it's much easier to police payroll on the employer side than to try and collect taxes from individual taxpayers. 

Where the tables go off the rails is that whatever you are paid on a single paycheque is presumed to be what you make on every paycheque, there's no built in context for one-time payouts, although some employers may provide the option to their employees to withhold less tax. 

As an example, if you make $6,000 per month on a $72,000 annual salary, the government may require you to withhold 30% and send in $1,800. Let's say you receive a $4,000 bonus one month, your pay will be $10,000. CRA tables will see that and assume that your annual salary is $120,000 ($10,000 x 12 months) and will withhold more, let's say 45%. As a result, on a $6,000 paycheque you would have $4,200, whereas on a $10,000 paycheque you would have $5,500. You're still better off, but it seems like you only received an extra $1,300 on income of $4,000, which looks like a 67.5% tax rate on the bonus.

Here's the thing though, when you file your tax return all your income tax is recalculated and if the extra $4,000 you earned is meant to be taxed at 30% you will get the extra $1,500 that was kept off your paycheque back as an increased refund.

It still stings in the moment, but it helps to think of it like a forced savings account with the government. At the end of the day, this extra $4,000 results in an extra $1,300 on your paycheque and an extra $1,500 in your tax refund, so you wind up making $2,800 on the $4,000 bonus at the end of the day, you just have to wait until March or April of the next year to get it.

Myth #3: You will always get a tax refund

This myth is again linked to the tax tables. If you are an employee and don't have a lot of non-registered investments you get used to spending whatever hits you bank account and getting a tax refund later, this is because CRA withholds more than they need and give you back some of it. You've been paying this all throughout the year so, in reality, they're just giving you back your own money interest-free.

I've seen a number of people get in trouble when they become self-employed and/or start to accrue a lot of other sources of income that don't withhold taxes (e.g. interest, dividends, capital gains, rental properties). With these items, nobody is sending tax in on your behalf and since the lowest tax rates are normally around 25% (not counting the 9.9% of CPP on self-employed earnings) it's very important to hold back enough in taxes to cover the tax bill.

Going back to my very first point: don't hold it against your accountant if you owe taxes. In this situation we are only delivering the reality of your situation, we can't create money out of thin air. If you are in one of these more complex situations, expect to pay, and check in with your accountant (if you have one) to provide you with tax estimates during the year so there's no surprise. A competent accountant who understands their software should be able to give you a rough estimate very rapidly, possibly over the phone.

Tax Credits vs. Tax Deductions: What's the Difference?

A lot of terms get thrown around with tax returns, some get used interchangeably, like credits and deductions, but they actually mean very different things.

A tax credit means that the amount is applied directly to a tax balance owing. In simple terms, if you have a tax bill of $12,000, and you apply a $3,000 tax credit to it, you now have a $9,000 tax bill. Tax credits are not affected by marginal tax rates, types of income, etc. Examples of tax credits include:

• Disability tax credits
• Manufacturing and processing tax credits (for corporations)
• Personal and Spousal credits
• Donation and medical expense credits
• Dividend tax credit
• First time home buyer's credit
• Tuition and education tax credits
• Age amount
• and so many more. Most of the federal credits are listed on Schedule 1 of the tax return, which you can see here.

A tax deduction is a direct reduction of the income on which your tax is then calculated. For example, if you have $90,000 of income and you receive a $3,000 tax deduction, your income is now $87,000. Since this has come off the top, the tax effect of the deduction will be whatever marginal tax bracket the top of your income happens to be in. Using Manitoba as an example, this income falls in the 37.9% bracket between approximately $68,000-$93,000 of income, which means this $3,000 deduction has reduced your taxes by $1,137 ($3,000 x 37.9%). Some examples of tax deductions include:

• RRSP contributions
• Child care expenses
• Spousal support (NOT child support, and only if supported by an agreement)
• Rental and business expenses
• Other employment or commission expenses
• Professional dues
• Carrying charges such as interest paid on loans for business or investment purposes
• Moving expenses

You may be tempted to conclude that credits are better than deductions, that's not the case and it's really an apples v. oranges situation; they do different things for different purposes.

The government has managed to muddy the water when it comes to tax credits as well. If you examine Schedule 1 from earlier, you may notice that the Basic Personal Amount tax credit states that it is $11,635. This is a bit misleading because you don't actually get an $11,635 tax credit in the manner I just described. on line 32 of the same schedule it says the "Federal non-refundable tax credit rate" is 15%, which you may notice is the lowest tax bracket. This means the $11,635 tax credit provides you with a saving of $1,742.25 regardless of how much income you've paid, because it comes off the bottom of your income at the lowest rate, not off the top rate like a deduction does. Be wary that you aren't overestimating the value of certain credits or deductions.

Certain other credits have special rules such as donations (described later) which provides a tax credit at the low rate for the first couple hundred dollars and a tax credit at the highest rate on amounts above that threshold. Again, this is irrespective of your actual income level.

Each province has equivalent credits to the Schedule 1 federal credits, they don't necessarily follow everything but certain amounts like basic, spousal and disability credits are practically universal. In fact, certain provinces, like Manitoba, have been sneaky and not increased their basic credit to keep up with inflation and the Federal credit, which effectively creates a tax increase without increasing the rates directly. This is in contrast to BC which has done a pretty good job of keeping up with the Federal credit amounts. Some tax credits are also specific to certain provinces.

Medical Expenses

For the record, as an accountant, I hate medical expenses on personal tax returns. It's not that it's a bad credit, it's that it is time consuming to go through and over half the time there is no benefit at all for a client, but it's a lot of work to figure out there's no payout.

What is eligible?

CRA has a pretty comprehensive list of what's eligible here. You have to be careful though, eligibility varies by province depending on how certain professions are licensed. For example, Massage Therapy isn't eligible if you live in Manitoba but is in some other provinces; CRA also provides a handy provincial comparison table here.


There are a number of items that you may not expect to qualify as medical expenses but they do. Here's some non-exhaustive examples:

• Cost of renovations to remain in a home due to mobility or disability issues (the non-cosmetic parts). You may need a contractor to provide a detailed summary of what was for accessibility and what was for vanity and allocate costs accordingly.
• Nursing homes. Special rules apply depending on level of care and whether disability credit is in place, talk to a professional.
• Health insurance premiums paid to a private plan.
• Travel and accommodations to a hospital if over certain distances (minimum 40 km, there's a boost over 80 km, all one-way distance).
• Service animals (for severe diabetes applies after 2013).
• Furnace and/or air conditioner with prescription for chronic breathing issues.
• Scooter, also a Van in certain circumstances.

What is the eligibility threshold?

This is where medical expense claims fall apart, there is a minimal level of cost that has to be reached before you get anything as a tax credit. The threshold is the lesser of:

• 3% of net income (line 236 of your personal tax return); and,
• Approximately $2,250 (indexes and increases each year).

As an example, someone earning $30,000 in a year is expected to absorb up to $900 ($30,000 x 3%) of medical expenses before they will get a tax credit from the government. These expenses also have to take into account any reimbursements from private medical plans. If you have $1,200 of expenses, take away the $900 threshold and you have $300 that you will get a tax credit on. The lowest tax rate (25.8% in Manitoba) will be applied to the $300, which means your $1,200 of medical expenses is only worth $77.40 of possible tax savings. 

Now imagine the accountant is handed a stack of receipts without any order or summarizing. We then have to take the time to categorize, eliminate and summarize all the receipts. It's very disheartening when this comes to less than the 3% threshold because we basically have to bill our time to organize your information to determine that you get nothing.

What's the takeaway here? It's worth it to organize your data and add it up yourself to determine whether you possibly have a claim. If you are way under the threshold you can save your tax preparer a headache and yourself some extra billing. I would still discuss this with your accountant in case you missed anything.

Eligible time period

Medical expenses do have one more quirk that can sometimes help: in each tax year, you are allowed to claim expenses that were incurred during any 12 month period that ends during the tax year. You're can't use the same period for multiple years though, no double dipping.

For example, let's say you are diagnosed with ALS in September, 2017 and you buy a scooter and a van immediately and start arranging for renovations to your home for accessibility, but the renovations don't happen until February, 2018. Using this rule you could claim all the expenses from September 1, 2017 to August 31, 2018 in your 2018 tax year, whereas if you let them split into two years you would have two thresholds to contend with, if your threshold is $2,000 that might mean another $500 in your pocket during a particularly terrible situation.

Donation Tax Credit

Unlike medical expenses there is no minimum threshold for donations, however the tax credit is calculated a little differently:

• The first $200 of donations, in aggregate, is calculated at the lowest marginal rate (approximately 25%); and,
• The balance of your donations above $200, in aggregate, calculates a tax credit at the highest marginal tax rate (approximately 50%).

Spouses are allowed to claim all donation made by the couple on one return which means only one $200 threshold is taken into account, presuming they have enough taxes to fully claim the credits. There is also a cap on donating set at 75% of your net income in a single year. Unused donation tax credits can be carried forward up to 5 years if unused.

Gifts of capital property

If you are in a generous mood and have some capital property (e.g. publicly traded shares) you may want to consider donating the property directly. There are a couple advantages compared to selling the shares and donating cash:

• Any accrued capital gains on the property are now tax-free on the disposal to the charity;
• You will get a donation receipt for the fair market value of the property, assuming you didn't get any "advantage" for the contribution; and,
• The net income threshold is raised from 75% to 100% in that year.

There's quite a bit more nuance, click here to see CRA's gifting pamphlet, but this could be really advantageous for an estate to set some property aside to donate in the will as all your property would be otherwise taxable on death. This is advanced planning though so please talk to a professional.

Required information

In order to claim a charitable donation tax credit you need to have receipts for the donations. The receipt needs to disclose the amount of the contribution, the year of the contribution and the charity's registered account number, which is in the following format: ##### #### RR 000#. If the receipt is lacking this information then it isn't eligible for the tax credit.

Foreign donations

I sometimes have clients give me donations made to American charities. Due to the tax treaty there is a way to claim them, but they can only be claimed against U.S. source income, such as foreign employment income, so in most cases they aren't claimable.

Political donations

Political donations are separate from charitable donations and have special limits and calculations. Rather than type all the specific rules I think taxtips.ca does a good job summarizing it.

First-Time Donor's Super Credit

You may have heard about the First-Time Donor's Super Credit that started in 2013. My opinion of this credit is that it is garbage, I haven't once seen a client benefit from this in any meaningful way but it provides a nice political talking point. 

The credit allows for an additional 25% tax credit on up to $1,000 of charitable donations. This sounds great and one would think it would encourage additional giving which I am a fan of. The problem is how they defined first-time donor. From CRA's website:

"For the purposes of the FDSC, you will be considered a "first-time donor" if neither you nor your spouse or common-law partner (if you have one) has claimed and been allowed a charitable donations tax credit for any year after 2007."

So if either of you have made any amount of donations, even $10, in the last decade and received a tax credit for it, you don't qualify. As you can imagine, most people have donated something, even if it was a United Way contribution off a paycheque, so practically the entire population seems to be ineligible.

The credit was only for years 2013-2017 anyway, so not a worry going forward. I just wanted to bring it up to highlight how some credits and programs are put into place for political purposes and not because they actually help anyone. 

Disability Tax Credit

This tax credit is very often overlooked or misunderstood, which is a particular shame as the taxpayers who qualify can usually use the extra money. This is a non-refundable tax credit that is worth approximately $2,000 each year in tax savings after we apply the lowest rate, so it can be very valuable.


This is overlooked because we tend to think of "disabled" as "unable to work". While this is true in the case of disability insurance meant to replace income streams, the disability tax credit is meant to reduce the tax burden on someone who probably has additional costs built into their life. Consequently, the ability to work or not work isn't really taken into account, although there is often a correlation.


The criteria to be used (that can be found here) is that:

• The taxpayer must meet one of the following criteria:
• is blind;
• is markedly restricted in at least one of the basic activities of daily living;
• is significantly restricted in two or more or the basic activities of daily living (can include a vision impairment); or,
• needs life sustaining therapy
• In addition, the person's impairment must meet all of the following:
• is prolonged, which means the impairment has lasted, or is expected to last for a continuous period of at least 12 months; and,
• is present all or substantially all the time (at least 90% of the time) .

As you can see, no mention is made of employment, or looking for work, etc. so you could be blind, have a job, and still qualify for the disability tax credit. Conversely, you could be unable to work your job for some particular reason (say, a back injury) and qualify for income disability and be unable to claim the disability tax credit because it doesn't restrict you enough or is not expected to be prolonged. This criteria also applies to dependents and spouses who fit this criteria, a taxpayer can transfer disability credits to a non-disabled spouse or caregiver in these situations. Please note that if you pay child support you are unable to transfer the disability credit.

You can apply for the credit using form 2201 which needs to be filled out by the medical practitioner, NOT an accountant. The form is then submitted to CRA by the taxpayer, along with a request to amend prior years if eligible (this is automatically handled in Section 3 of the form now). The process is very straightforward and not subject to a lot of gamesmanship, so beware of anyone offering to do this work on a contingency or large fee basis, the reality is that most of the time this doesn't require much involvement from professionals but there has been a bit of a predatory market that developed around this credit, particularly in regards to Seniors.

There are additional caregiver and other credits that may be available, although some of these are provincial. They are beyond the scope of this post but I would be happy to analyze your situation.

Other Employment and Commission Expenses

In certain situations you may be expected to pay for certain business expenses out of your own pocket as part of your job. I'm not speaking to expenses that are reimbursed by your employer, but true permanent costs that come out of your pocket. These may include (and are somewhat limited to):

• Purchasing certain tools or other supplies;
• Parking;
• Meals and entertainment;
• Automotive costs;
• Business space in the home;
• Travel costs; 
• Cell phone;
• Separate office.

While your employer may not reimburse these to you, they can fill out form T2200 - Conditions of Employment which at least allows you to deduct these expenses against your employment income. You aren't required to send in the form but you should keep it on file in case CRA ever asks. As you can imagine, this area is under quite a bit of scrutiny. The actual expenses are disclosed on form T777.


If you earn commission income as part of your employment, you have a bit more flexibility. Almost anything you spend out of pocket to try and earn commission income is deductible and you don't need to fill out form T2200. Your deductible expenses are limited to the total of commissions you have received but you are free to expense nearly any type of expense that relates to the commissions, unlike the limitations of employment expenses.

It's very important to note when you might be in an employment expense situation, as every dollar you apply as a deduction will lower your tax bill by 25-50% of that expense. In addition, a number of allowances, such as monthly automotive allowances, end up as income on your T4. Special rules require that when an allowance is "unreasonable" (whether too high or too low) based on criteria issued by CRA the allowance needs to be included as part of your income. If you pay for costs out of pocket and forget to deduct the expenses you can wind up paying tax on the money meant partially for reimbursement without the corresponding reduction. One way of knowing if you have taxable benefits as part of your income is to see if there is a Box 40 reported on your T4 slip. If there is, the amount in this box was added to your total income in Box 14 as employment income and you will pay tax on this amount.

Becoming Self-Employed

If you are making the jump from being an employee to self-employed and are not incorporating, you will need to report your business or professional activities as part of your personal income tax return. A form T2125 will need to be included as part of your return. In some cases you may be running multiple businesses and it is possible to fill out separate T2125's for each business.

What is deductible?

This is a question I get a lot so let's get it out of the way: CRA doesn't have a list of "acceptable" business expenses, the rule is that if you spent it to try and make money and had an expectation of profit it is a deductible expense, unless there is a rule that says it isn't. Due to widespread abuse or complexities in the past the tax act has been continuously amended to limit or exclude certain items. These include, but are not limited to:

• Meals and entertainment are only deductible at 50% of the expense
• Golf club dues and green fees are not deductible at all (although meals at a club would still be part of Meals and entertainment)
• Certain other private club dues etc. are not allowed
• Haircuts, non-job specific clothing (e.g. a suit would be disallowed for a lawyer but hazardous materials clothing would be allowed), other personal grooming

If you aren't sure if something is allowed then feel if it passes your gut test: if it is more for the business than it's probably at least partially allowed, if it's for personal benefit it's not. Please note that trying to justify large purchases as business expenses will backfire, for example trying to write off a yacht because you "take clients out sometimes" (don't laugh, I was asked that once). In this case you could probably justify the fuel for the day you took the client out, but that's probably it.

Sometimes there may be a mix of business and personal. For example, flying to a 2 day conference and choosing to stay for a week. In this case the airfare would likely be fully deductible (since you would have to have a round trip regardless), along with 2 days of hotel and food (within reason), but the extra 5 days food and lodging would not be deductible as that was for your personal enjoyment.

Capital Assets

If your business has purchased capital assets, meaning assets with value over multiple years, they will need to be recorded as part of your T2125 statement, page 5, Area A. Special rules apply as to how much you are allowed to deduct as Capital Cost Allowance (CCA), which is the tax term for depreciation/amortization. A list of the "classes" of property can be found here. There is also a "half-year rule" that applies to reduce depreciation in your first year to 50% of the allowable depreciation rate, regardless of when during the year you made the purchase. The most common classes are as follows and follow a declining balance method of depreciation, meaning the allowable depreciation is the rate applied to the remaining undepreciated balance for that year:

• Class 1 - 4% - Buildings 
• Class 7 - 15% - Boats, Canoes
• Class 8 - 20% - General equipment, furniture, etc. (note: if an asset isn't explicitly described as being part of another class, it goes to Class 8 by default)
• Class 10 - 30% - Motor vehicles and passenger vehicles purchased for less than $30,000
• Class 10.1 - 30% - Passenger vehicles purchased for mroe than $30,000
• Class 12 - 100% - Small tools (no half year rule), computer software (half year rule)
• Class 50 - 55% - Computer hardware

Please note that land does not have a class as it is not depreciable.

You may have noticed the $30,000 cap on passenger vehicles. This is meant to stop businesses from getting large write-offs for luxury cars, as there is very little business reason to buy a Mercedes when a Toyota can also drive you around. This restriction only applies to "passenger vehicles" as opposed to "motor vehicles", this is because delivery and construction vehicles and semi-trucks are usually more than $30,000 so they should be depreciated based on their full value. Here is a link to a table that you can use to assess the different vehicles.

Automotive expenses

In order to claim automotive expenses on a T2125 you should collect the information listed in Chart A, including:

• Business kms driven
• Total kms driven
• Gas
• Oil
• Insurance
• Driver's license
• Repairs and maintenance
• Parking
• Leasing or interest paid on loan
• Original cost (including tax) and year of purchase

For mileage it is a good idea to keep a log as you will need it if CRA asks for proof. There were some court cases that allowed that a partial or sample log could be extrapolated to a full year if the business activity is consistent. There are several apps, such as MileIQ and Expensify, that can track this for you using your phone's built-in GPS.

Business use of home

It is possible to expense part of your home expenses if you maintain part of your home for use in your business. This area can be subject to a lot of interpretation and grey area so please use discretion. Without getting into the criteria, which can be found here, the following items are necessary to make the claim:

• Total square footage of the home
• Business use square footage of the home
• Mortgage interest (NOT the total payment or principal portion)
• Property insurance
• Rent
• Electricity
• Heat
• Repairs and maintenance (within reason, I wouldn't try to write off part of a landscaping bill for a home office for example)
• Water is generally not allowed unless you run a home based business that uses significant water

GST/HST and RST/PST Issues

As a self-employed person you are subject to the rules of GST/HST and PST/RST. I plan on addressing these in detail in other posts but I want you to be aware of certain thresholds and issues.

For GST/HST, if you are engaged in taxable supplies or services and sell more than $30,000 in a single quarter or over 4 consecutive quarters, you are required to register and collect. I hear a lot of people quote other thresholds that they hear from friends, stop listening to them, they are wrong. Here are the actual requirements. Sometimes registering can be beneficial as it allows you to claim back all the GST and HST that you pay on your expenses, effectively giving you a 5% discount on your costs; these are known as Input Tax Credits (ITCs).

For GST/HST purposes there are 3 classes of supplies and services: Taxable, Zero-Rated and Exempt:

• If you sell taxable supplies you are subject to the registration requirements and must collect GST/HST on your sales. 
• If you sell zero-rated supplies you don't collect GST/HST but you can still register and claim back your ITCs. 
• If you sell exempt supplies you do not collect and cannot register, so you cannot claim your ITCs.

To be clear, GST and HST are the same tax, just with different rates in provinces that chose to allow CRA to collect their provincial portion of tax. For example, the 13% HST in Ontario is made up of the 5% for the Federal government and 8% for the Ontario government, but otherwise follows the exact same rules as GST. This also means a GST/HST registrant that pays HST in Ontario can claim the full amount back as an ITC.

PST/RST varies by province where HST doesn't apply (Alberta doesn't have provincial tax, Manitoba, Saskatchewan and BC do). In Manitoba the threshold is $10,000 to register for RST but is limited to retail sales and certain listed services. You cannot claim RST you pay on purchases but if you purchase items for resale you buy them RST exempt from your vendors by giving them your registration number. If you are buying capital assets for your own use you are required to pay the RST. If you bring in assets or expenses for your own consumption from out of province/country you are required to self-assess the RST and remit it to Manitoba Finance. Here is a link to the vendor bulletin.

In all cases there are special place of supply rules to consider so you know what taxes need to be collected. In general, the rules for place of supply are based on where delivery or pickup takes place, so a Manitoba business shipping goods to Ontario would collect Ontario HST, whereas a Manitoba business selling to an Ontario resident who traveled to Manitoba and picked up the goods in Manitoba would collect GST and Manitoba RST. For services the place of supply is generally where the customer is located, so a programmer providing service to a U.S. company would be providing an exported service which is zero-rated, regardless of where the programmer lives. This is a simplistic discussion though, so please do your research and hire a professional to advise you on your exact situation.

Organizing your information for your Accountant

The only way to minimize your tax preparation bill is to have your data summarized and organized correctly. If you are self-employed, organize your data according to the categories in the T2125 and consider your GST, RST, business use of home and auto details before you meet. This will allow for a more accurate and rapid preparation of your return and the lowest possible charge. Most professionals charge a fair bit for their time so you don't want to pay for them to sort through receipts.

Rental Properties

If you own a rental property, or are a partner or co-owner in one, you need to file the income or loss on form T776. Each rental property should be filed on its own T776.

The form is similar to the business activities statement in that it asks for revenue and expenses by category. In some cases you may need to disclose personal use portion of the expenses (e.g. if you are rental out a basement suite in your personal home).

Capital assets such as building and equipment can be depreciated using the same classes as disclosed in the discussion in self-employed. One twist is that you cannot create a loss on your rental property by applying depreciation. Please note that if you take capital cost allowance on a building and subsequent sell it for more than the original cost, all the CCA you deducted in prior years will come back in as rental income in the year of sale.

You should also be aware of the change of use rules that can apply. These usually come into play where someone moves out of their principal residence and rents it out for a period of time and than subsequently moves back in. Generally the conversion from a personal property to a rental property or vice versa will create a deemed disposal of the property at fair market value which may result in taxes. There is an election that you can file that will maintain your home as a possible principal residence for a few years while you rent it, but you have to file the election on time and you cannot take any capital cost allowance on it for the rental period. Talk to a professional before you make any decisions around rental property conversions.

GST/HST does not apply to residential rentals, but it does apply to commercial rentals so please be aware of this as the $30,000 registration threshold applies.

Foreign Property Disclosures

If at any point in the year you own foreign property with a total aggregate cost of $100,000 Canadian dollars, you are required to report details of this property on form T1135. This can be a complicated disclosure so I highly recommend you hire a professional to prepare this with you. There is a separate level of disclosure for total costs between $100,000-$250,000 and over $250,000 on the form.


Please note, the filing requirement is based on total cost, not value, and in Canadian dollars based on the foreign exchange rate in place at the time of purchase, so the cost of individual properties does not fluctuate. Joint property values are considered on an individual basis so spouses will report the cost of their share of assets on their individual forms without consideration for the other spouse.


This disclosure is meant to capture details of foreign properties with possible income producing possibilities, so if you keep a winter place in Phoenix that is 100% for your personal use it doesn't have to be disclosed, although any rentals or land held for resale would need to be included.

There can be some confusion around what should and should not be included, so here is a non-exhaustive list of common oversights and inclusions, along with some items that don't need to be included:

• DO include:
• Shares of corporations traded on foreign stock exchanges, even if they are held in Canadian brokerage accounts or shown in Canadian dollars
• Foreign issued debt instruments such as bonds or GICs 
• Any debt owed by a non-resident
• Mutual and index funds issued in foreign countries, regardless of what investments the funds hold
• Bank accounts held in foreign banks, regardless of the type of currency (e.g. a U.S. bank that is holding a Canadian dollar account is reportable, whereas a Canadian bank that is holding a U.S. dollar account is not reportable)
• Real estate in a foreign jurisdiction that is not for exclusively personal use
•  DON'T include:
• Foreign currency held in Canadian bank accounts
• Canadian based mutual or index funds that themselves invest in foreign investments
• Shares of corporations traded on Canadian stock exchanges, regardless of whether they were purchased in a foreign currency account

Again, it's important to remember that these rules apply if the cost is over $100,000 at any point in the year. Even if you sold all your investments in the first 5 minutes of the year on January 1, you still need to file the disclosure for that year.

Penalties for missing these forms can be significant and max out at $2,500 per form per year, however CRA tends not to formally request them very often so they can be a prime candidate for a voluntary disclosure to avoid the penalties. It should be noted that CRA has made the argument in the past that a request to file a tax return and all applicable schedules and forms would include this form, which would remove the ability to file a voluntary disclosure.

What is the Voluntary Disclosure Program?

CRA offers taxpayers an option to voluntarily disclose omissions, errors, or missed returns. A successful voluntary disclosure will eliminate any penalties, but any taxes and interest owed will still need to be paid. You can file a voluntary disclosure on pretty much anything owed to CRA that would have a penalty applied.


In order to qualify you must meet the following criteria:

• a penalty would apply
• it is voluntary, which means you make it before you are aware of the CRA taking any compliance action against you
• the information is at least one year overdue
• it includes all the relevant information

A special form needs to be sent in along with the information and any outstanding amounts owing. The "one year overdue" stipulation doesn't apply if part of the information includes information over a year due. This can apply where a series of late tax returns are being filed, but the latest is late but under a year late, since the other returns are over a year late and this is part of a series they will take the under a year overdue return into account. I expect some accountants who read this to disagree with me (I've argues with my peers about this in the past and won) so here is a direct quote from sections 39 and 40 of
IC00-1R5 Voluntary Disclosures Program:

"39. The disclosure must include information that is:

1. at least one year past due, or
2. less than one year past due where the disclosure is to correct a previously filed return or where the disclosure contains information that also meets the condition of subparagraph (i) above.

40. For example, a taxpayer had not filed tax returns for the years 2000 to 2004. On November 10, 2005, the taxpayer submitted all of the tax returns requesting they be considered under the VDP. Although the 2004 tax return is less than one year past due (filing deadline of April 30, 2005) the CRA will consider the 2004 return as part of this disclosure, provided that all other conditions have been met."

If you think you may be in a voluntary disclosure situation, hire a professional. I do not recommend you go at this alone. Also, if you screw up again in the same way you don't get to file a new voluntary disclosure, so don't press your luck.

Let's File Taxes!

This post, though lengthy, is by no means a complete guide to every tax situation you may encounter, but I hope you found it to be a worthwhile primer to clear up some of the confusing areas of our system. If you want to start a conversation please email me at mglazier@glaziercpa.ca or call Glazier CPA at (204) 218-9644. It doesn't matter where you are or what province you live in, we work paperless and remotely to provide you service anywhere.


Author: Michael Glazier is a Chartered Professional Accountant and legacy Chartered Accountant providing a range of accounting and tax services to his local Winnipeg area and remotely to clients across Canada. He has over 12 years of experience in personal income tax, corporate income tax, assurance and various specializations and experience in accounting and tax issues around R & D, investments, projections, valuations and paperless transition. You can find out more by visiting the Glazier CPA website or by emailing at mglazier@glaziercpa.ca.