There are a number of new tax measures and reporting requirements that Canadians should keep in mind when filing their 2023 returns this spring.
Here’s a list of important tax changes and dates, along with insights from tax experts.
CPP, EI changes
Starting Jan. 1, many Canadian earners will have a large portion of their paychecks earmarked for Canada Pension Plan contributions after the federal government added a second income cap.
There are currently two limits for CPP.
Previously, everyone who earned more than the $3,500 threshold contributed a set portion of their income up to a maximum amount that increased slightly each year.
As before, the first phase will see workers contribute a certain portion of their income to the CPP, up to a threshold set by the government.
In 2024, there will be no change to current contribution rates for people with incomes of $68,500 or less.
Those with annual incomes above $68,500 fall into the second contribution level with a maximum amount of $73,200.
People in this group pay an additional 4% on incomes between $68,500 and $73,200, with a maximum additional contribution of $2,928.
John Oakey, vice-president of tax at CPA Canada, told BNNBloomberg.ca that this change, coupled with EI contributions, will result in a significant tax burden for middle-income employees and their employers. He said it could lead to.
“What this means for an employer is if you hire someone in 2024 and pay them $73,200, you’ll end up paying 7.5% in employment taxes,” Oakey said.
“And since the employee is paying 7%, that 14.5% funds CPP and EI between the employee and the employer…That’s a lot of taxes to pay and a lot of administrative burden. ”
In addition to the changes to CPP contributions, the EI insurance earnings cap was increased to $63,200 from $61,500 in 2023 and $60,300 in 2022, but the increase is “normal business.” said Oakey.
Starting this spring, Canadians will be required to disclose beneficial ownership information for trusts, including so-called “bare trusts,” when filing their previous year’s taxes.
Mr Oakey said this could be a “huge problem” for some taxpayers who are unaware that they are in trust.
According to the federal definition, a bare fiduciary merely has legal title to the property and “has no other duties, obligations, or responsibilities with respect to the property,” and is effectively the owner of the beneficiary. Under control.
Mr Oakey said that while bare trusts can be used for illegal purposes, which is the main reason why governments have chosen to impose reporting requirements, they can also arise from perfectly legal arrangements. I explained that there is.
“A bear trust is someone who holds property on behalf of a gang because they don’t want it in their name. That’s clearly illegal,” Oakey said.
“But a bare trust could also be a perfectly simple situation where my children inherited money from their deceased grandfather, but because they are minors I am holding the money on their behalf. Yes, that too is naked trust.”
Mr Oakey said the new reporting rules could cause confusion as some taxpayers may not know they are involved in a bare trust.
He added that Chartered Accountants of Canada is calling on the Canada Revenue Agency (CRA) to better define the new rules, and penalties for late filings in this area will be waived this year.
“In response, the CRA is waiving the automatic filing penalty entirely,” Oakey said, adding that penalties are typically $25 per day for late return of trusts, up to a maximum of $2,500. He pointed out that the punishment would be automatic.
“They said that for the 2023 tax year only, for bare trusts, they would waive the automatic filing penalty for so-called innocent situations where people realize they have a bare trust and end up filing it. Ta.”
short term rental
Starting in 2024, the federal government plans to deny tax payments to certain short-term rental businesses that don’t follow existing state and city rules.
As of January 1, any person operating a short-term rental property in a jurisdiction where short-term rentals are prohibited, or whose short-term rentals do not comply with local requirements, may charge fees for that property. I can’t.
“There is a disincentive for people to use residential properties as short-term rentals rather than long-term rentals,” Mr Oakey explained.
He said the change was well-intentioned but could create other problems by sending some short-term rental operations “underground.”
February 29th is the deadline for RRSP contributions for the 2023 tax year.
For employers, T4, T4A, and T5 slips must be submitted by February 29, and those with more than five slips must be submitted electronically to avoid penalties.
The deadline to file a T3 trust return with Schedule 15 beneficial ownership information is April 2nd.
The deadline for filing income tax returns for individuals is April 30th, but for self-employed individuals it is until June 17th.
Oakey said his universal advice for Canadian taxpayers in 2024 is to file and pay any outstanding taxes on time.
“You don’t want to get penalized,” he said. “Make sure you file your tax return on time and pay your taxes on time.”
With files from The Canadian Press