It's Your Money  

Tax-filing myths, 3

With the tax filing deadline fast approaching, I have devoted my columns over the past few weeks to clear up common tax filing myths.

In the final column of this series, I am going to look at four more common myths that I hear on a regular basis.

The first myth I want to dispel is:

that gifts you receive from your employer are tax free.

While Canada has very generous gifting rules for family members, these provisions do not apply to a gift that you receive from your boss or company.

A cash gift from an employer is always considered taxable income as are other perks such as social events exceeding $100 per employee.

Non-cash gifts of less than $500 per year aren’t taxable if they are given to mark a “special occasion” and an employer can also give a non-cash gift worth up to $500 once every five years to mark length of service milestones.   

Myth No. 2:

is that some employment insurance (EI) benefits, such as income received during a maternity leave, are not taxable.

Unfortunately, this is not true. All EI benefits are taxable and, in most cases, Service Canada will withhold less tax from these payments than you will likely owe.

When you are receiving EI benefits, it is very important to calculate the approximate taxes that will be due and set aside enough money to pay these taxes at the end of the year.

Myth No. 3:

is that your odds of being audited are higher if you file your taxes online.

When the CRA flags a file for audit, it is generally due to several different criteria and has nothing to do with how the filing was completed.

Once you’ve filed, the CRA may reach out to verify an item or ask for supporting documentation. It is important to understand the difference between this and an audit though as the request for copies or more information is simply routine verification and not necessarily a sign that an audit will follow.

The final myth for this series is:

that “barter transactions” are not taxable.

The CRA considers a swap or trade of goods and services to be the same as a cash transaction and therefore subject to taxation. The value of any goods or services you offer must be added into your income if they are the types of things that you normally earn income from.

For example, let’s say you’re a lawyer and you offer someone free legal work in exchange for a new set of snow tires for your car. You would need to add the amount that you would normally charge for that legal work to your income for the year.      

The above issues are a few of the many tax myths floating around.

Canada’s tax rules are complex and ever changing and it is probably time to stop getting your tax advice from your family and friends. Seek out the guidance of a financial professional who will be up to date on all of the latest rules and benefits available to you.

With tax laws changing so quickly and often, it can be very hard to keep up on the latest rules. While filing your own taxes might seem appealing, you could be missing out on potential credits that could easily more than offset the cost savings of not using a professional.          

Tax-filing myths, 2

Last week, I wrote the first in a series of columns attempting to clear up common tax-filing myths.

In the second of this three-part series, I am going to look at three more common myths that I hear on a regular basis.

For this week, Myth No. 1:

The false belief that CRA has agreed with the information you have submitted in your tax return if they send you back a notice of assessment with no mention of disputing your claims.

CRA generally has three years after the notice of assessment to review your file.

When you submit your return each spring, CRA often does only a quick assessment to fix any mathematical errors and look for general mistakes.

This does not mean that they have examined everything in detail and closed that particular case.

Once the busy tax filing season is over, they then have more time to go back and look over files more carefully.

Any particular claims that might be a little more “questionable” are not necessarily approved and you could get a call down the road on these issues.

Myth No. 2:

That you don’t need to file a tax return if you don’t make enough money to pay taxes.

Unfortunately, you can’t get away that easily and you probably don’t want to.

In addition to being required to file your returns, there may be some real benefits to you for doing so. There are refundable provincial credits, child tax credits, GST credits and many other benefits you could be missing out on.

If you don’t file your taxes, you could be giving up on some great assistance programs and miss out on earning RRSP room.

While filing your return may seem like an unpleasant task and a big hassle, once completed these benefits may turn the effort into a much more rewarding one.    

Myth No. 3:

That you can’t file your return on time since you are missing a T4 slip. The requirement to file on time is up to you and if you are late, CRA will impose a five per cent penalty.

The requirement to provide a T4 slip on time (they must be sent by the end of February) is the responsibility of your employer.

If you don’t have a missing slip by mid-March, contact whoever issued it and ask for a duplicate.

If your request goes unanswered, your best bet is to estimate how much you earned and attach a note to your return saying that you were unable to obtain your tax slip and provide the name and address of the person responsible for providing this to you.

The CRA can penalize employers who issue slips after the deadline as well.    

The above issues are a few of the many tax myths floating around.

Canada’s tax rules are complex and ever changing and it is probably time to stop getting tax advice from your family and friends.

Seek out the guidance of a financial professional who can make sure your financial plans are as tax efficient as possible.

For those low-income earners who feel they can’t afford professional help, look into CRA’s “Community Volunteer Income Tax Program” for groups that will provide free assistance in each community.

Watch for next week’s edition for the third and final column of my common tax myths feature.         

Tax myths exposed

The personal tax filing deadline is fast approaching, and I thought I’d take the next few weeks to dispel a couple of the most common tax myths that have formed over the years.

In the first of this three-part column, I am going to look at two common myths that I hear on a regular basis.

Often the most frustrating myth I hear repeated is over people’s fear of being “bumped into the next tax bracket.”

Many people fear earning too much income because they feel it will push them into a higher tax bracket and they mistakenly think that this means they will pay this higher tax rate on their entire income.

All the money you earn below the new tax bracket remains taxed at the lower rates. It is only the amount over the threshold that is taxed at the higher rate. For 2018, there are five federal tax brackets:

  • Up to $46,605 = 15 per cent
  • $46,606-93,208 = 20.5 per cent
  • $93,209-144,489 = 26 per cent
  • $144,490-205,842 = 29 per cent
  • $205,843 and up = 33 per cent

Let’s assume that you earn $95,000 of net income in 2018. You would not pay 26 per cent on your entire income but instead that 26 per cent tax rate would only apply to the last $1,792 you earned. So, don’t go refusing that pay raise or bonus this year (yes, people actually do this for fear of the dreaded “bump up” in tax brackets)!

The one big catch to the above statement is that in certain situations, you may lose out on government pension or other benefits if your income is above a certain point. As always, it is best to consult with a financial professional to maximize the tax efficiency of your financial plan.

The second myth I wanted to dispel today relates to the rules surrounding the RRSP Home Buyer’s Plan (HBP). Many people think that the HBP is for first-time home buyers only and that if you or your spouse have ever owned a home before, you cannot qualify.

While Ottawa does state that the plan is intended for first-time buyers, you need to look at how they define these people.

The rules state that you will be considered a first-time buyer (and therefore qualify for the plan) if neither you or your spouse or common law partner has owned a home that you used as a principal residence in the last five calendar years.

If your last ownership was outside of the five-year window, you may be able to qualify again. There is also the possibility that one partner qualifies even if the other does not. In addition, CRA adds exceptions to the HBP qualification rules when purchasing a home if you or the person you are assisting is disabled.

These days, it is very difficult to save up enough for a down payment on a home and the HBP may be a great resource to help achieve that dream. Before simply assuming you can’t qualify, make sure to read up on the rules which just might surprise you.

The above examples are just two of the many tax myths floating around. Canada’s tax rules are complex and ever changing and it is probably time to stop getting tax advice from your family and friends.

Seek out the guidance of a financial professional who can make sure your financial plans are as tax efficient as possible. Watch for next week’s column where I will continue with part two of my common tax myths feature.         



There are only five days (including today) left to get your RRSP contributions in and save on some taxes.

If your RRSP money isn’t in by market close on March 1, you’ll miss your last chance to offset some of your 2018 taxable income.

A few weeks ago, I dedicated my column to dispelling some of the most common tax myths that still exist, even though the program has been in existence for over 60 years.

Interestingly enough, the comment section for that column proved that these myths are still common.

I took the time to reply to one person and provide some specific examples on how these myths were misleading people and I thought that since we have a few days left in this year’s RRSP season, I’d share those examples with the rest of my readers as well.

The first comment I addressed was one that said a TFSA was much more flexible than an RRSP and the person stated that it made more sense to use a TFSA to save up for buying a home.

While this may be true for some situations, I illustrated how properly using an RRSP and the RRSP Home Buyer’s Plan (HBP) could put you farther ahead:

For this example, we used an assumption of $75,000 per year of income. If that person put $15,000 into an RRSP, they would pay no taxes at this time on that amount and would be able to pull the full $15,000 back out under the HBP to use for a down payment.

With the TFSA route, they wouldn’t get the $15,000 tax credit for the RRSP contribution so would need to pay taxes on that income.

In B.C., that would amount to $4,230 of extra tax which would leave them with only $10,770 for their down payment.

The second comment I addressed was about the myth that you would pay higher taxes on growth in an RRSP account than you would for money invested in a TFSA. For this example, I explained that yes, the RRSP taxes growth, but it also allows you to put more money in.

Using the same scenario as my first example with $75,000 of income, you would be able to invest $15,000 into an RRSP or only $10,770 into a TFSA.

We will assume that both accounts grow at six per cent per year for 20 years and then all money is pulled out and taxes are paid on the RRSP.

When the RRSP is cashed in, we will assume a 20 per cent tax rate on that money, and you would be left with $39,722 ($49,653 account value minus $9,930 of tax).

The comparable TFSA account would have grown to $35,651 and no tax would be owing.

The real winner in this race will depend on your tax rate now and your rate when you retire and start pulling RRSP money out.

The RRSP program is not the best choice for everyone but it is likely the best option for most Canadians. For many, the ideal strategy is to contribute a portion of your savings money to both RRSPs and TFSAs each year.

Instead of listening to bad advice or believing the many myths and misconceptions that still exist, consider asking a professional financial planner to help build a plan that’s right for you.

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About the Author

Designated as a chartered investment manager and certified financial planner, Brett holds life insurance and investment licenses in B.C., Alberta and Ontario.

In addition to being the owner of Kelowna-based SPEIR Wealth Management Inc., Brett also serves as the vice-chair of the Financial Planning Standards Council of Canada’s board of directors. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations for the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FPSC board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected].

For more information or to see a database of previous columns, visit www.speirwealth.com.

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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