Transcript

Slide 1

Welcome to the Seniors and Income Tax webinar.

I am Patrick, your host for this webinar, and this is Emma, who will assist with answering questions.

Slide 2

The topics that we will cover today are:

1. Common types of income for seniors;
2. Common credits for seniors;
3. Pension income splitting;
4. RRSP options when you turn 71;
5. OAS repayment;
6. Working at 60 and over;
7. Snowbirds;
8. Paying your income tax by instalments; and
9. Payment methods.

You can send in your questions at any time during the webinar. There will be question periods, but you do not have to wait until these times to send in a question. The questions and answers will be posted on the webinar page for 24 hours after the webinar. Please make sure you submit your questions before the webinar is finished.

Over the next 24 hours, we will try to answer as many of the questions that we are not able to answer during the webinar.

Also, all the links, guides and forms mentioned in this webinar are listed for your reference at the bottom of the webinar.

Slide 3

Section 1

Common types of income for seniors

Slide 4

Canadians can earn tax-free investment income from funds they deposit into a tax-free savings account or TFSA. Neither income earned in a TFSA nor withdrawals from it affect eligibility for tax credits or federal benefits.

Keep in mind that if you withdraw from your TFSA and replace that money the same year, you will over-contribute to your TFSA if you have already made a maximum contribution for that year. If you over-contribute to your TFSA, you will have to pay a penalty tax.

Slide 5

The Old Age Security program, or OAS for short, provides you with a pension at age 65 if you have lived in Canada for at least 10 years after turning 18. If you have a low income, you may be eligible for other benefits as early as age 60.

In addition, you may be eligible for the guaranteed income supplement, the allowance, and the allowance for the survivor.

Old age security pension and benefits are taxable.

Slide 6

The Canada Pension Plan or CPP provides you and your family with pensions and benefits in the case of retirement, disability, or death. The CPP operates throughout Canada, except in Quebec, where the Quebec Pension Plan or QPP provides similar benefits.

CPP and QPP pensions and benefits are taxable.

Your CPP retirement pension does not start automatically. You must apply for it. Before you apply, you must:

• be at least a month past your 59th birthday;
• have worked in Canada and made at least one valid contribution to the CPP; and
• want your CPP retirement pension payments to begin within 12 months.

The Québec Pension Plan is a compulsory public insurance plan for workers age 18 and over whose annual employment income is greater than 3 500 $

Slide 7

You may receive other pensions such as:

• general annuity;
• pooled registered pension plan (PRPP);
• registered retirement income fund (RRIF);
• life income fund; and
• pensions from a foreign country.

Most pensions and superannuation are part of your total income and must be reported.

Slide 8

A registered retirement savings plan or RRSP is a plan that the CRA registers and to which you, or your spouse or common-law partner, contribute. RRSP contributions can be used to reduce your tax.

Any income you earn in an RRSP is usually exempt from tax as long as the funds stay in the plan; you generally have to pay tax when you receive payments from the plan.

Slide 9

A retiring allowance, also called severance pay, is an amount paid on or after retirement from an office or employment, in recognition of long service or for the loss of office or employment.

Retiring allowances are taxable.

Slide 10

A lump-sum payment includes a one-time total or partial payment from pensions and deferred profit-sharing plans received when leaving a plan.

Lump-sum payments are taxable.

If, at the time of death, you are the spouse or common-law partner of a deceased annuitant of an RRSP or RRIF, or you are a financially dependent child or grandchild of the annuitant because of an impairment in physical or mental functions, you can transfer, on a tax-deferred basis, certain amounts paid from the annuitant's RRSP or RRIF.

Slide 11

Section 2

Common credits for seniors

Slide 12

You can claim the age amount if you were 65 years of age or older on December 31, 2016, and your net income is less than $83,427 for 2016.

• If your income is $35,927 or less for 2016, enter $7,125 on line 301 of Schedule 1, Federal Tax.
• If your income is more than $35,927 but less than $83,427 for 2016, use the federal worksheet to calculate the amount you can claim on line 301.

Slide 13

You may be able to claim up to $2,000 if you reported eligible pension, superannuation, or annuity payments on your return.

To calculate your claim, complete the chart for line 317 on the federal worksheet.

If you and your spouse or common-law partner elected to split pension income, you will need to calculate the amount to enter on your and your spouse's or common-law partner's Schedule 1, Federal Tax. You will find the instructions on Form T1032, Joint Election to Split Pension.

Slide 14

If you are eligible for the disability tax credit or DTC, you may be able to claim the disability amount. The disability amount is a non-refundable tax credit that a person with a severe and prolonged impairment in physical or mental functions may be able to claim to reduce the amount of income tax they have to pay in a year. All or part of this amount can also be transferred to a spouse or common-law partner, or to another supporting person.

If the person with a disability is under 18 years of age, the person claiming the disability amount may be able to claim the supplement.

To apply for the disability amount, fill in Part A of Form T2201, Disability Tax Credit Certificate. Then, take your form to a medical practitioner who can certify the sections that apply. After the medical practitioner has filled in and signed Part B of Form T2201, send the whole form to your tax centre for approval.

For more information, read Guide RC4064, Disability-Related Information, or go to cra.gc.ca/disability

Slide 15

If your spouse or common-law partner does not need to claim some or all of certain non-refundable tax credits to reduce his or her federal tax to zero, you may be able to transfer these unused amounts to your return. These credits include:

• the age amount (if your spouse or common-law partner was 65 years of age or older);
• family caregiver amount for children under 18 years of age;
• the pension income amount;
• the disability amount; and
• tuition, education, and textbook amounts that your spouse or common-law partner designates to you, up to $5,000, minus the amounts that he or she uses.

Slide 16

You can claim on line 330 the total eligible medical expenses you or your spouse or common-law partner paid for:

• yourself;
• your spouse or common-law partner; and
• your, or your spouse's or common-law partner's, children born in 1999 or later.

You can claim the amount of eligible medical expenses that is more than $2,237 for 2016 or 3% of your net income for the year, whichever is less.

You can claim eligible medical expenses paid within any 12-month period ending in the calendar year, which have not been already claimed.

You can also claim on line 331 the part of eligible medical expenses you or your spouse or common-law partner paid for the following persons who depended on you for support:

• your or your spouse's or common-law partner's children born in 1998 or earlier, or grandchildren; or
• your or your spouse's or common-law partner's parents, grandparents, brothers, sisters, uncles, aunts, nephews, or nieces who were residents of Canada at any time in the year.

For a detailed list and more information on allowable medical expenses, see Guide RC4065, Medical Expenses.

Slide 17

The goods and services tax/harmonized sales tax credit or GST/HST credit is a tax-free quarterly payment that helps individuals and families with low or modest incomes offset all or part of the GST or HST that they pay. To know if you are eligible, you have to file an income tax and benefit return for the year, even if you have not received income in the year. The CRA will determine your eligibility and tell you if you are entitled to receive the GST/HST credit.

The credit is calculated based on your family situation, so if you have a spouse or common-law partner, be sure to fill in the information concerning your spouse or common-law partner on your income tax and benefit return.

Slide 18

You may be eligible to claim the home accessibility tax credit for expenses that are directly attributable to a qualifying renovation of an eligible dwelling for a qualifying individual or an eligible individual making a claim for a qualifying individual.

You could claim up to $10,000 per year in eligible renovation expenses for changes to your home such as adding a ramp or making the bathroom more accessible.

This could result in a non-refundable tax credit of up to $1,500.

The claim must be made for work performed and/or goods acquired during the tax year.

For eligibility requirements please consult line 398 of the guide or on the website.

If you are eligible to claim the credit, report it on Schedule 12 and then take the amount on line 4 of Schedule 12 and claim it on line 398 of Schedule 1.

Slide 19

Section 3

Pension income splitting

Slide 20

You may be able to jointly elect with your spouse or common-law partner to split your eligible pension income if you meet certain requirements. You can allocate up to half of your eligible pension income to your spouse or common-law partner.

Remember that whatever amount you choose to allocate to your partner, you're also allocating the equivalent amount of tax that was deducted at source. This means that you're also reducing the amount of tax deducted that you claim on your return.

You can split your pension income, regardless of your spouse's or common law partner's age.

To split eligible pension income, you and your spouse or common-law partner must fill out Form T1032, Joint Election to Split Pension Income, each year you want to split pension income.

If you are filing your return electronically, keep the signed form in case the CRA asks to see it.

If you are filing a paper return, fill out and sign the form, attach copies to both your and your spouse's or common-law partner's returns, and send them to your tax centre by your filing due dates. The information on both forms must be the same.

If you and your spouse or common-law partners have eligible pension income, you will have to decide which one of you will allocate part of their eligible pension income to his or her spouse or common law partner.

Slide 21

Eligible pension income is generally the total of the following amounts received by the pensioner in the year:

• the taxable part of life annuity payments from a superannuation or pension fund or plan; and
• as a result of the death of a spouse or common-law partner, or if the pensioner is 65 years of age or older at the end of the year, the pensioner receives:
  • annuity and RRIF payments (including life income fund);
  • RRSP annuity payments; and
  • certain amounts received under a retirement compensation arrangement.

Slide 22

The pensioner must deduct the elected split-pension amount on his or her income tax and benefit return. The pension transferee, who is the person to whom part of the pension income is allocated to, must report the amount on his or her return.

For more information on pension income splitting, go to cra.gc.ca/pensionsplitting.

Slide 23

The CRA may allow you to make a late, amended, or revoke an election within three calendar years after the filing-due date for the year that the election applies. You and your spouse or common-law partner must agree to the amendment or revocation of the election.

If you want to amend an amount elected previously, or make any changes to the previously reported pension income, a new fully filled out and jointly signed Form T1032 would be required.

If you want to revoke the election to split pension income, you have to send a letter to the CRA requesting to revoke the election, and the letter must be signed by you and your spouse or common-law partner.

Slide 24

Section 4

RRSP options when you turn 71

Slide 25

December 31 of the year you turn 71 is the last day on which you can make a contribution to your RRSP. However, you can contribute to your spouse's or common-law partner's RRSP until he or she turns 71.

In the year you turn 71, you can choose one of the three following options for your RRSPs.

Slide 26

Option 1 – You can withdraw the funds from your RRSPs.

In this case, your issuer will withhold tax on the amount you withdraw.

Slide 27

Option 2 – You can transfer funds to a registered retirement income fund, or RRIF for short.

A RRIF is an arrangement between you and a carrier, which can be an insurance company, a trust company, or a bank; that the CRA registers.

You transfer funds to the carrier and the carrier pays you a minimum amount each year based on the value of the RRIF and your age.

The minimum amount must be paid to you in the year following the year the RRIF is entered into. Earnings in a RRIF are tax-free, but amounts paid out of a RRIF are taxable on receipt.

Enter these payments as income on your return for the year you receive them.

Slide 28

Option 3 – You can use your RRSPs to purchase an annuity.

An annuity is a plan that makes payments to you on a regular basis, for life or for a specified period. It might be a general annuity, a payment from a RRIF, or a variable pension payment. These payments are part of your total income and must be reported on your income return.

Slide 29

After December of the year you turn 71, you can contribute to a spousal RRSP or common-law partner RRSP, if they are 71 or younger on December 31 of the year you make the contribution.

Remember that contributions you make to a spousal or common-law partner RRSP reduce your RRSP deduction limit.

Slide 30

If you did not deduct all of the contributions you made to your RRSP or your spouse's or common-law partner's RRSP in 1991 and later years, you have two options:

• you can leave the unused contributions in the plan; or
• you can withdraw them.

If you withdraw the unused contributions, you have to include them as income on your return. However, you may be able to deduct an amount equal to the withdrawn contributions that you include in your income.

Slide 31

Section 5

OAS Repayment

Slide 32

You may have to repay old age security benefits if your net income before adjustments is more than $73,756 in 2016.

If you have an OAS repayment for 2016, tax may be withheld from your monthly OAS pension for 2017.

The amount deducted will be included on your T4A(OAS) slip for 2017. Claim that amount on your return for the 2017 tax year. Similarly, if you have an OAS repayment for 2017, tax may be withheld starting with your July 2018 OAS payment.

Slide 33

Section 6

Working at 60 and over

Slide 34

If you work while receiving your Canada Pension Plan or CPP retirement pension, you are considered a CPP working beneficiary. As a CPP working beneficiary, you have to pay CPP contributions, unless:

• you are an employee working in Quebec. In this case, your employment income is not subject to the CPP;
• you are self-employed and a resident of Quebec; or
• you are at least 65 years of age, but under 70, and have elected to stop paying CPP contributions.

Slide 35

If you are at least 65 years of age, but under 70, you can elect to stop contributing to the CPP by filling out Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election.

If you elected to stop contributing to the CPP in a previous year and you want to start contributing again, you have to revoke your election. Note that you cannot revoke an election in the same calendar year that you elected to stop contributing to the CPP.

For more information on CPP working beneficiaries, see the CRA webpage at cra.gc.ca/cpp.

Slide 36

As a CPP working beneficiary, you may increase your retirement income with a lifetime benefit called the post-retirement benefit, or PRB for short.

You might be eligible if you are:

• 60 to 70 years of age;
• working and contributing to the CPP; and
• receiving a retirement pension from the CPP or the QPP.

To get this benefit, you and your employer have to make CPP contributions. If you are self-employed, you have to pay both the employee and the employer parts of the CPP contributions.

Once you reach 70, you will stop making CPP contributions toward the PRB.

Slide 37

Section 7

Snowbirds

Slide 38

If you spend part of the year outside of Canada—for example, in the United States—and still maintain significant residential ties in Canada, the CRA generally considers you to be a factual resident of Canada.

As a factual resident, the CRA taxes your world income (income from all sources both inside and outside Canada) as though you had lived in Canada for the whole year.

As such, you should also continue to claim deductions and credits that apply to you.

You may also be able to claim a foreign tax credit on taxes paid in the foreign country to alleviate double taxation.

Slide 39

If you own or hold specified foreign property, special rules may apply if, at any time in 2016, you owned or held foreign property with a total cost amount of more than 100,000 Canadian dollars.

If this is the case, you also have to file Form T1135, Foreign Income Verification Statement.

For the year 2015 and subsequent tax years, the CRA has implemented changes to Form T1135.

The changes will allow taxpayers, who held specified foreign property with a total cost amount of less than 250,000 Canadian dollars, throughout the year, to report under a new simplified reporting method rather than providing the detail of each such property.

The current detailed reporting method will continue to apply to those taxpayers who, at any time during a year, held specified foreign property with a total cost of 250,000 Canadian dollars or more.

The completed Form T1135 must be filed either electronically or attached to your paper return. Even if you do not have to file a return, you must file Form T1135 on or before your filing due date.

For more information, see form T1135, Foreign Income Verification Statement.

Slide 40

Section 8

Paying your income tax by instalments

Slide 41

If you earn income that does not have enough tax withheld for more than one year, you may have to pay tax by instalments.

Instalments are periodic income tax payments that individuals have to pay to the CRA on certain dates to cover tax that they would otherwise have to pay in a lump sum on April 30 of the next year.

Slide 42

You have to pay your income tax by instalments if your net tax owing is more than $3,000 in the current year; AND in either of the two previous years.

If you lived in Quebec on December 31st of a year, use a limit of $1,800 instead of $3,000 for that year.

For more information, go to cra.gc.ca/instalments.

Slide 44

The total of your instalment payments for the previous tax year will be provided on the back of Form INNS1, Instalment Reminder, or on Form INNS2, Instalment Payment Summary, which the CRA issues in February of each year.

Claim this amount as a tax paid by instalments credit on line 476 when you file your return. If you made an instalment payment that is not shown on your instalment reminder or your payment summary, include that amount as a credit on your return as well.

Slide 45

The CRA charges instalment interest if all of the following conditions apply:

• you received an instalment reminder that shows an amount to pay;
• you have to make instalment payments; and
• you did not make instalment payments, or you made payments that were late or less than the required amount.

If you realize during the year that you paid less than your required instalment payment, or that you did not pay it on time, you can reduce or avoid an instalment interest charge by overpaying your next instalment payment or by paying it early.

Slide 46

You may have to pay a penalty if your instalment payments are late or less than the required amount. However, the CRA applies this penalty only if your instalment interest charges are more than $1,000.

Slide 47

Instead of paying by instalments, you can ask to have more tax deducted at source.

Slide 48

To have more income tax deducted from old age security or Canada Pension Plan benefits, send a filled out Form ISP-3520, Request for Income Tax Deductions, to your Service Canada office.

You can get this form on the Service Canada website at servicecanada.gc.ca or by calling 1 800 277 9914.

Slide 49

To have more tax withheld from employment income or from pension benefits from an employer sponsored pension plan, provide a filled out Form TD1, Personal Tax Credits Return, to your employer or pension plan administrator.

You can get this form on the CRA website at cra.gc.ca/forms or by calling 1-800-959-8281.

Slide 50

Section 9

Payment methods

Slide 51

There are many payment methods available to choose from.

You may be able to pay online:

• through your financial institution's online or telephone banking services,
• through a Third-party service provider who may offer different payment options, including credit cards,
• by setting up pre-authorized debit agreement through the CRA's My Account service, or
• through the CRA's My Payment service which allows you to make payments directly to the CRA through a participating Canadian financial institution online banking account.

You can contact your financial institution or a Third-Party service provider to see which services they offer.

Slide 52

You can also pay in person at your Financial Institution in Canada. To do so, you have to use a remittance form, which you can request at cra.gc.ca/myaccount or by contacting the CRA.

Slide 53

Section 10

In this section we look at some of the resources, programs and tools that CRA has in order to assist you.

Slide 54

The CRA website contains information and publications specifically for seniors at cra.gc.ca/seniors.

Slide 55

The CRA has a number of tax information videos for individuals, including "Preparing Your Income Tax and Benefit Return" and "Tax Measures for Persons with Disabilities." To watch these videos, go to cra.gc.ca/videogallery.

Slide 56

The Community Volunteer Income Tax Program, or CVITP for short, is a collaboration between the CRA and community organizations that host tax preparation clinics and arrange for volunteers to prepare income tax and benefit returns free of charge.

The objective of the CVITP is to prepare returns for eligible individuals who have a modest income and simple tax situations.

For more information and to find out if you're eligible, go to cra.gc.ca/volunteer.

Slide 57

My Account lets you track your refund, view or change your return, check your benefit and credit payments, check your RRSP limit, set up direct deposit, and so much more.

My Account is convenient, easy to use, fast, and secure.

With My Account you can access and manage your tax and benefit information online, seven days a week.

To register or log in to My Account, go to cra.gc.ca/myaccount.

Slide 58

Taxpayer information is confidential. The CRA needs your authorization to deal with another person, such as your spouse or common-law partner, other family member, friend, or accountant, who may act as your representative for income tax matters.

You can give a person authorization through My Account or by filling out Form T1013, Authorizing or Cancelling a Representative, and sending it to your tax centre where you send your return.

You will have to fill out the same form if you want to cancel authorization for a representative.

Slide 59

The Canada Revenue Agency (CRA) has introduced a new service that allows individuals to receive some of their correspondence from the CRA directly in My Account, called Online mail.

Once you are registered for online mail, eligible correspondence will no longer be printed and mailed to you. Instead, an email notification will be sent to the email address you provide when new mail is available for you to view in My Account. For security reasons, the email notification does not contain any links.

For more information go to cra.gc.ca/online mail.

Slide 60

Auto-fill my return is a new secure CRA service that allows you or your authorized representatives to automatically fill in parts of a current-year return.

CRA will have most tax information slips and other tax-related information, such as T4, RRSP information and carry forward amounts which will be used to auto-fill parts of your return.

To use this service you must be registered with My Account and be using a certified software product that offers this service. For more information, go to cra.gc.ca/auto-fill.

Slide 61

The NETFILE service lets you file your personal income tax and benefit return directly to the CRA using the Internet. For more information on NETFILE, go to cra.gc.ca/netfile.

Tax returns filed with NETFILE must first be prepared using a NETFILE-certified product. There are free certified products available for taxpayers to file their return online. Some software developers have enhanced their software products for seniors. For a list of NETFILE-certified software, go to cra.gc.ca/netfilesoftware.

Slide 62

The CRA can deposit your refunds, as well as your credit and benefit payments, directly into your account at a financial institution in Canada.

Direct deposit is convenient, reliable, and secure.

In other words, you get faster access to your money, your payment will always be on time, and there is virtually no risk of your payment being lost, stolen, or damaged.

To start direct deposit or to change banking information that you have given the CRA, go to cra.gc.ca/myaccount or call 1 800 959 8281.

For more information or to get the Canada Direct Deposit Enrolment Form, go to cra.gc.ca/directdeposit or call 1 800 959 8281.

Slide 63

Thank you.