CRA

What you need to file your income tax return

March 15, 2018

When you file your income tax return you want to make sure you have all the receipts and income records you need to make sure you get every tax receipt and deduction you are entitled to.

By the end of February T4 (income from employment), T4A (pension and other income) and T5 (statement of investment income) slips you require to complete and file your income tax return must be in the mail. However, unlike most other tax slips, Canadian T3 tax slips, or Statement of Trust Income Allocations and Designations (income from mutual funds in non-registered accounts) and T5013 slips (Statement of Partnership Income) do not have to be sent out until the last day of March in the year after the calendar year to which these tax slips apply.

So even if you are anxious to get your income tax return off your desk and see your tax return deposited to your account, wait an extra week or two to ensure you have all the slips you need before filing or you may have to pay additional taxes later on when your tax return is assessed or re-assessed. Many financial institutions provide a check list so you can check off slips as you receive them.

However, if you have to file a return for 2017, file it on or before April 30, 2018 even if some slips or receipts are missing. You are responsible for reporting your income from all sources to avoid possible interest and/or penalties that may be charged.

If you have not received, or have lost or misplaced a slip for 2017 ask your employer, or the issuer of the slip, for a copy. If you know you will not be able to get a slip on time to file your return, or you do not receive it and you are registered for the CRA My Account for Individuals service, you may be able to view your tax information online. Otherwise, attach a note to your paper return stating the payer’s name and address, the type of income involved, and what you are doing to get the slip.

Use your pay stubs or statements to estimate the income to report and any related deductions and credits you can claim. Attach a copy of the pay stubs or statements to your paper return and keep the original documents. If you are filing electronically, keep all of your documents in case CRA asks to see them later.

You can also obtain Old Age Security (OAS), Employment Insurance (EI) and Canada Pension Plan (CPP) tax slips electronically for current and prior years. This secure service can be accessed found by visiting Service Canada.

Certain slips such as T2202As for tuition deductions, T5008s for capital gains and losses and RRSP contributions are not always processed by the CRA. While the rules differ across the various types of tax forms, some slips can be generated independently and don’t have to go through the CRA’s system first.

In that case you will have to track them down from the source provider since the CRA won’t have them on file. For example, if you know you’re meant to receive a tuition credit, call the school to request your form. If you’ve made some stock trades in the year, call your bank to obtain a gains and losses report.  Unfortunately there’s no fool-proof way to know that you’ve got all these types of slips – you’ll just need to remember!

If you missed a significant slip that the CRA does not have on file such as a tuition slip, you can file an adjustment to your return down the road if you’re able to track it down. Before you file your return, double checking that you’ve got all your slips covered will mean a faster refund, no interest and less stress.

You can find a checklist of other slips, receipts and documentation you may require to file your return here.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

SPP contribution levels rise, says General Manager Katherine Strutt*

February 5, 2018

 

Click here to listen
Click here to listen

Today, I’m very pleased to be talking to Katherine Strutt, general manager of the Saskatchewan Pension Plan. She has some exciting news to share with us about enhancements to the program, including an increase to the SPP maximum annual contribution level effective immediately for the 2017 tax year.

SPP is the only plan of its kind in Canada — a retirement savings plan, which does not require an employee/employer relationship. As a result, it can be of particular benefit to individuals with little or no access to a pension plan.

Welcome, Katherine.

Thank you, Sheryl.

Q: For the last seven years the maximum annual contribution SPP members with RRSP contribution room could make was $2,500. How has that changed?
A: As you indicated, the maximum annual contribution limit was increased to $6,000 effective January 29, 2018, and it can be used for the 2017 tax year. However, members must still have available RRSP room in order to contribute the full $6,000 but the limit is now indexed as well, starting in 2019.

Q: If a member contributes $6,000 until age 65 how much will his or her pension be?
A: We estimated that someone contributing for 25 years and retiring at age 65 can end up with a pension of about $2,446 a monthbased on an 8% return over the period. However, we encourage people to use the wealth calculator on our website because they can insert their own assumptions. And if they want a more detailed estimate they can call our office.

Q: Can a spouse contribute for his or her partner if that person doesn’t have earned income and how much can the contribution be?
A: The SPP is a unique pension plan in that spousal contributions are acceptable. So, for instance, my spouse has to be a member. But I can contribute to his account and my account up to $6,000 each if I have the available RRSP room. If I’m making a spousal contribution, the money goes into his account, but I get the tax receipt. Other pension plans don’t offer that option. You could have a spousal RRSP, but with SPP you can actually have a spousal pension plan.

Q: Oh, that’s really fantastic. So actually, in effect, in a one-income family, the wage earner would get $12,000 contribution room for the year.
A: Yes, as long as they have available RRSP room, that’s for sure.

Q: That’s a really neat feature. And to confirm, members can contribute the full $6,000 for the 2017 tax year?
A: Yes, they can. Because we’re in the stub period right now, any contribution made between now and March 1st can qualify for the 2017 tax year.

Q: Have you had any feedback on the increased contribution level? If members are just finding out about the increase now, how much of an uptake do you expect given that, you know, maybe they haven’t saved the money or they haven’t allowed for it?

A: We’ve already had some members that have done it. I can’t tell you how many, but I was checking some deposits yesterday, and I saw that some people have already topped up their contributions. We anticipate that people who contribute on a monthly basis will start increasing their monthly contributions because they have an opportunity to do so. But it will be really hard to know until after March 1st how many people actually topped up their 2017 contributions.

The response has been very, very positive from members. They have wanted this for a long time. The new indexing feature is also very attractive as the $6,000 contribution will increase along with changes to the YMPE (yearly maximum pensionable earnings) every year.

Q: How much can a member transfer into the plan from another RRSP? Has that amount changed?
A: No, that amount has not changed. That remains at $10,000. But the board is continuing to lobby to get that limit raised.

Q: Another change announced at the same time is that work is beginning immediately on a variable pension option at retirement. Can you explain to me what that means and why it will be attractive to many members?
A: We have a lot of members who want to stay with us when they retire, but they’re not particularly interested in an annuity because annuity rates are low, and they do not want to lock their money in. They prefer a variable benefit type of option, but until now their only way of getting one has been to transfer their balance out of the SPP to another financial institution.

The new variable benefit payable directly out of our fund will be similar to  prescribed registered retirement income funds, to which people currently can transfer their account balances.

It will provide members with flexibility and control over when and how much retirement income to withdraw, and investment earnings will continue to grow on a tax-sheltered basis. Those members who want to stay and get the benefit of the low MER and the good, solid returns I think will be attracted to this new option.

Some members may wish to annuitize a portion of their account and retain the balance as a variable benefit. This will ensure they have some fixed income, but also the flexibility to withdraw additional amounts for a major expense like a trip, for instance.

Q: Now, what’s the difference between contributing to an RRSP and SPP?
A: In some respects, they’re very similar in that contributions to the SPP are part of your total RRSP contribution limit. One of the biggest advantages I think that SPP has is it is a pure pension plan. It’s not a temporary savings account. It’s meant to provide you income in your retirement.

All of the funds of the members, are pooled for investment purposes, and you get access to top money managers no matter what your account balance is or how much you contribute. Typically those services are only available to higher net worth individuals, but members of SPP get that opportunity regardless of their income level.

And the low MER (management expense ratio) that in 2017 was 83 basis points, or 0.83 is a significant feature of SPP. Solid returns, and the pure pension plan, I think those are things that make us different from an RRSP. We are like a company pension plan, if you are lucky enough to have access to a company pension plan. That’s what we provide to people regardless of whether or not their employer is involved.

Q: If a member still has RRSP contribution room after maxing out SPP contributions, can he or she make additional RRSP contributions in the same year?
A: You bet. Your limit is what CRA gives you, and how you invest that is up to you. So for instance, people that are part of a pension plan might have some additional available RRSP room left over. They can also then contribute to the SPP and get a benefit from their own personal account, in addition to what they are getting from their workplace pension.

Q: MySPP also went live in late January. Can you tell me some of the features of MySPP, and what member reaction has been to gaining online access to SPP data?
A: The reaction from members has been very positive. They’ve been asking for this for a while, and we did a bit of a soft roll out the end of January with a great response. Then members are going to be getting information with their statements, and we expect an even bigger uptake.

Once they’ve set up an account, they can go in and see the personal information we have on file for them, who they’ve named as their beneficiary, when the last time was that they made a contribution and what their account balance is. Furthermore, if they’ve misplaced a tax receipt or can’t find their statement, they can see those things online.

Retired members can get T4A information and see when their pension payments went into their accounts. So it’s a first step, and we think it’s a really positive one, and we’re getting some really good feedback from our members.

Q: Finally, to summarize in your own words, why do you think the annual increase in the SPP contribution level, introduction of a variable benefit and MySPP makes Saskatchewan Pension Plan a better pension plan than ever for Canadians aged 18 to 71?
A: Well, I think that by having an increased contribution limit that is indexed, the program might be more relevant to people. It certainly will be a bonus I think to employers who wanted to match their employee contributions but were running up against the old limit. This will give them more opportunity to do so.

It will also improve the sustainability of SPP over the long term as people are investing more. The variable benefit we’ve introduced will give retiring members more options, and it will allow them to keep going with this tried and true organization well into their retirement.

MySPP  allows members access to their account information whenever they wish, 24/7 on all their devices. That will be attractive to younger prospective members.

Exciting times. Thank you, Katherine. It’s been a pleasure to chat with you again.

Thanks so much, Sheryl.

*This is an edited transcript of an interview recorded 1/31/2018.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Changing coverage for medical marijuana

December 28, 2017

Health Canada statistics reveal the number of Canadians with prescriptions for medical marijuana more than tripled between the fall of 2015 and 2016 from 30,537 people to nearly 100,000 individuals. And with legalized marijuana for recreational use slated to come into effect July 1, 2018, it is expected that use of the drug will soar.

In response to the proliferation of legal marijuana use, life and health insurance companies have had to rethink several aspects of their pricing and coverage including whether or not:

  • Individual life insurance applicants using marijuana must pay smokers’ rates
  • Benefit plans will reimburse clients for the cost of medical marijuana.

Smoker/Non-smoker rates
Until the last several years, marijuana users applying for individual life insurance had to pay smokers’ rates. For example, a man in his 30s could expect to pay about two to three times as much for a policy than a non-smoker. A smoker in his 40s could expect to pay three to four times as much.

Insurance companies charged this massive price increase because smokers have a much higher risk of death than non-smokers. In addition, smokers often have other health problems like poor diets or an inactive lifestyles.

Within the last two years, the following insurers in Canada announced their plans to begin underwriting medical and recreational marijuana users as non-smokers, including:

  • Sun Life
  • BMO Life Insurance
  • Canada Life
  • London Life
  • Great-West Life

Sun Life is taking the most comprehensive approach, saying it will treat anyone who consumes marijuana but doesn’t smoke tobacco as a non-smoker. BMO Life Insurance is more restrained, limiting non-smoker status to people using only two marijuana cigarettes per week. Canada Life, London Life, and Great-West Life issued a joint statement which said that “clients who use marijuana will no longer be considered smokers, unless they use tobacco, e-cigarettes or nicotine products.”

This change won’t affect group benefits as coverage is not individually underwritten. An article on Advisor.ca includes a chart comparing where a series of major Canadian life insurers stand on pot use.

Drug plan coverage
So, what about coverage for medical marijuana under your benefits plan?

If your coverage includes a health care spending account (HCSA), you are in luck. Medical marijuana is an eligible expense under HCSAs because the Canada Revenue Agency (CRA) allows it to be claimed as a medical expense on income tax returns. Note that only marijuana is eligible under CRA medical exempt items, not vaporizers or other items used to consume it.

However, even though physicians are prescribing cannabis and people are using it for medical reasons, it is not currently covered under almost all traditional drug benefits. That’s because Health Canada hasn’t reviewed it for safety and effectiveness or approved it for therapeutic use the way it reviews and approves all other prescription drug products.

This means marijuana hasn’t been assigned a drug identification number (DIN), which the insurance industry usually requires before a drug can be covered. Until there is research that can be reviewed by Health Canada, marijuana will remain an unapproved drug and unlikely to be covered by your plan.

However several recent events suggest that it may be only a matter of time until group and individual drug plans offer at least limited coverage for medicinal marijuana.

Jonathan Zaid, a student at the Umiversity of Waterloo is the executive director of the group Canadians for Fair Access to Medical Marijuana. He has a rare neurological condition that causes constant headaches, along with sleep and concentration problems. Zaid said he was sick for five years before even considering medical cannabis. He tried 48 prescription medications, along with multiple therapies, all of which were covered by his insurer without question – except for medical cannabis.

After eight months of discussions, the student union (who administers the student health plan) came to the conclusion that they should cover it because it supports his academics and should be treated like a medication.

Similarly, the Nova Scotia Human Rights Board ruled in early 2017 that Gordon Skinner’s employee insurance plan must cover him for the medical marijuana he takes for chronic pain following an on-the-job motor vehicle accident. Inquiry board chair Benjamin Perryman concluded that since medical marijuana requires a prescription by law, it doesn’t fall within the exclusions of Skinner’s insurance plan.

Perryman said the Canadian Elevator Industry Welfare Trust Plan contravened the province’s Human Rights Act, and must cover his medical marijuana expenses “up to and including the full amount of his most recent prescription.”

And at least one major company is covering employees for medical marijuana in very specific circumstances. In March 2017, Loblaw Companies Limited and Shoppers Drug Mart announced in an internal staff memo that effective immediately it will be covering medical pot under the employee benefit plan up to a maximum of $1,500 per year for about 45,000 employees.

Claims to insurance provider Manulife “will be considered only for prescriptions to treat spasticity and neuropathic pain associated with multiple sclerosis and nausea and vomiting in chemotherapy for cancer patients,” said Basil Rowe, senior vice-president of human resources at Loblaw Companies Ltd., owner of Shoppers, in the memo.

“These are the conditions where the most compelling clinical evidence and literature supports the use of medical marijuana in therapy,” explained Loblaw/Shoppers spokesperson Tammy Smitham. “We will continue to review evidence as it becomes available for other indications (conditions).”

Since cannabis does not yet have a Drug Identification Number recognized by insurers, it isn’t covered under typical drug spending. However, it will be covered through a special authorization process where plan members will pay and submit their claim after, said Smitham.

The move could trickle down to other Canadian employers and their benefit plans and even set a precedent, Paul Grootendorst, an expert on insurance and reimbursement and director of the division of social and administrative pharmacy in the Leslie Dan Faculty of Pharmacy at the University of Toronto told the Toronto Star.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Dec 18: Best from the blogosphere

December 18, 2017

It seems impossible that is our last Best from the Blogosphere for the year. The next one is slated for January 8, 2018! I wish all savewithspp.com readers a very happy, healthy holiday season and a new year full of promise and exciting adventures.

If you are starting to think about tax season already, you will really appreciate Janine Rogan’s Professional CRA Hacks. With only 36% of calls actually answered it’s no wonder Canadians are frustrated with the tax system. Furthermore, up to 30% of the time the tax information you receive from an agent may be incorrect, which is as concerning for taxpayers as it is for professionals. A few of her hints are:

  • Hit redial 10x in a row.
  • Call the French line but ask for help in English.
  • Ask for your agent’s direct number and agent ID.

On another income tax-related matter, Andy Blatchford reports in The Toronto Star that during the election campaign, the Liberals promised to expand the Home Buyers’ Plan to allow those affected by major life events — death of a spouse, divorce or taking in an elderly relative — to borrow a down payment from their RRSPs without incurring a penalty.

However, a June briefing note for Finance Minister Bill Morneau ahead of his meeting with the Canadian Real Estate Association lays out the government’s concerns that low interest rates and rising home prices have encouraged many Canadians to amass high levels of debt just so they can enter the real-estate market. “Policies to further boost home ownership by stimulating demand would also exert more pressure on house prices,” says the memo,

Firecracker writes about The Five Stages of Early Retirement on Millenial Revolution. According to the self-styled youngest retiree in Canada (age 31), these stages are:

  • Stage 1: The Count Down (1-2 years before early retirement)
  • Stage 2: Honeymoon (0 – 6 months after retirement)
  • Stage 3: Identity Crisis (7 months – 1.5 years after retirement)
  • Stage 4: The New You (1-2 years after retirement)
  • Stage 5: Smooth Sailing (2+ years after retirement)

The Globe and Mail’s Rob Carrick considers the new retirement era and questions How many years past 65 will you work? Carrick says, “Retiring later is bound to be seen as negative, but it’s actually quite unremarkable unless you have a physically demanding job or hate your work. Previous generations may have retired at 65 and lived an extra 10 or 15 years. Retire at 70 today and you might look forward to another 15 or 20 years.”   

And finally, Tom Drake at maplemoney goes back to basics and provides a Guide to Guaranteed Investment Certificates. GICs are a form of investment where you agree to lend money to a bank for a set amount of time. The bank agrees to pay you a certain percentage of interest to borrow this money. You are guaranteed a return as long as you keep your money in the bank for a specified period. Terms on GICs generally run from as little as 90 days to as much as 10 years. “It’s important to weigh the pros and cons of GICs. While you probably don’t want to  build an entire portfolio of GICs (especially if you are trying to build a nest egg), they do have their place in a diversified portfolio,” Drake says.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

End of year retirement savings checklist

November 9, 2017

You have finally paid off the credit card bills incurred on your summer vacation. Black Friday is coming up and you are starting to get serious about Christmas shopping. But before you do, pay yourself first and top up your retirement savings.

Here are some suggestions:

  1. Saskatchewan Pension Plan: If you are already a member of SPP, make sure you have contributed the maximum $2,500 for 2017. Also transfer up to $10,000/year into the plan from a Registered Retirement Savings Plan before the end of the year. If you are not a member, it’s never too late to sign up. Historically SPP has had 8% average returns, a 1% or less fund management fee and contributions are tax deductible. Your money will be professionally managed by independent investment firms and you can set up a flexible pension contribution schedule. When you join SPP, you name a beneficiary for your account, which can be changed at any time. If you die before retiring from the Plan, the funds in your account are paid to your named beneficiary. If your beneficiary is your spouse, financially dependent child or grandchild, CRA allows for tax-deferred transfer options.
  2. RRSP: Avoid the end of February rush and top up your contributions now, before you are tempted to indulge in excessive holiday spending. Your RRSP contribution limit for 2017 is 18% of earned income you reported on your tax return in the previous year, up to a maximum of $26,010. You may also have unused contribution room carried forward from previous years. If you have a company pension plan or you contribute to SPP, your RRSP contribution limit will be reduced accordingly. Contributions are tax deductible and your RRSP investments are tax sheltered until withdrawn. At that time, 100% of the contributions plus interest are taxable at your incremental rate.
  3. Tax free savings account: A TFSA is a flexible investment account that can help you meet both your short- and long-term goals. Contributions are made with after tax dollars. However, investment income in a TFSA — whether you’re earning interest, dividends or capital gains — is not taxed, even when withdrawn. The contribution room for 2017 is $5,500. Contributions can be carried forward, and contribution room since the program’s inception in 2009 has been $52,000. Money withdrawn from a TFSA can also be replaced in the subsequent calendar year.
  4. Set up a spousal account: If your spouse is earning much less than you and therefore cannot make significant RRSP contributions, consider setting up a spousal RRSP. A spousal RRSP is simply a plan that you contribute to, but your spouse owns. Making contributions to a spousal RRSP provides you, the contributor, with a tax deduction provided you have sufficient RRSP contribution room, but your spouse will pay tax on the withdrawals from the plan. You may also set up a spousal SPP plan and contribute all or part of your annual maximum $2,500 contribution to your partner’s account. Normally, you can’t contribute to an RRSP in the year after you turn 71 even if you’re still working. But if you have a spouse who is 71 or under, you can contribute to a spousal RRSP and still get a tax break.
  5. Find a “side hustle:” If you are having trouble making ends meet but you want to top up your retirement savings, the holiday season is the ideal time to look for a side hustle, or part-time job. For example, major retailers hire additional sales help. December is one of the busiest months for shipping companies. Catering companies need chefs, bartenders and servers. Market research companies need Canadians to join their consumer survey panels. You can rent your empty bedroom or apartment on Air BnB to extended families who visit parents living in small apartments, Friends or neighbours who travel are always looking for reliable dog or cat sitters

If you have not already done so, set up  automatic withdrawal plans with SPP and your RRSP and TFSA providers. In this way, by late November 2018 you will be able to concentrate on the upcoming holiday season, secure in the knowledge that your retirement savings are on autopilot.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Nov 6: Best from the blogosphere

November 6, 2017

We are again going to sample recent material from a series of bloggers who participated in The Canadian Financial Summit in September.

This week headlines across the country blared that CRA has changed their position on allowing diabetics to claim lucrative disability tax credits in certain cases.

On Your Money, Your Life, accountant Evelyn Jacks discusses why these changes are being made and how audit-proofing strategies must be implemented by tax professionals and their diabetic clients.

Andrew Daniels writes at Family Money Plan about how he paid off his mortgage in 6 years. Five of the 28 things he and his wife gave up to quickly pay down his mortgage are noted below:

  • Eating out, largely due to food sensitivities and allergies with the added bonus that they saved big bucks.
  • For the first five years of the pay down period they gave up travel.
  • They went without cell phones for four of the six years of paying off their mortgage
  • They opted to repair their old cars as required rather than buying new ones.

Jonathan Chevreau, CEO of the Financial Independence Hub notes in the Financial Post that Only a quarter of Canadians have a rainy day fund, but more than half worry about rising rates.

This is based on a survey of 1,350 voting-age adults by Forum Research Inc. conducted after the Bank of Canada raised its benchmark overnight rate from 0.75% to 1% on Sept. 6, the second increase in three months. That said, 17% believe rate hikes will have some positive aspects: Not surprisingly, debt-free seniors welcome higher returns on GICs and fixed-income investments. Another 38% don’t think it will have an effect either way.

Do you know how long it will take to double the money you have invested? MapleMoney blogger Tom Drake explains the rule of 72 which take into account the impact of compound interest and  allows you to get a quick idea of what you can achieve with your money.

For example, if you were expecting a rate of return of 7% you would divide 72 by 7, which tells you it would take about 10.3 years to double your money at that rate. If you want $50,000, you would need to invest $25,000 today at 7% and let it sit for 10.3 years.

Kyle Prevost explores 5 stupid reasons for not getting life insurance on lowestrates.ca. If your rationale is that you are healthy and never get sick, Prevost says, “Glass half-full thinking is a positive thing, but pretending that your full glass is indestructible is a recipe for disaster.”

And if you have avoided buying life insurance because you have so many other bills you can’t afford it, he says, “You seriously need to ask yourself what sort of situation you’d leave behind if tragedy struck. Those bills that look daunting right now would look downright insurmountable.”

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

What you need to know about residential care for seniors in Saskatchewan

October 26, 2017

Whether you are a member of the “sandwich generation” with young children and older parents or you are a senior yourself, sooner or later you will need to understand the residential care options in Saskatchewan for individuals who can no longer live at home, and how much they cost.  Typically, residential facilities are characterized as either retirement homes or government-subsidized nursing homes. In the discussion below we distinguish between the two, the services provided and how much they cost.

Retirement home/residence 
A retirement home in Saskatchewan is a multi-residence housing facility that provides accommodation and services such as meals and cleaning for older people. Retirement homes in the province are privately owned and operated and not administered by the provincial government. Each facility usually provides a private or semi-private room or complete living suite as well as common living quarters, including a lounge area, a common dining room, recreation rooms, cleaning services, social and/or religious programs and some basic health care services.

The unit can be paid for on a monthly fee basis, like an apartment, or can in some instances be bought the same way as a condominium. Admission, fees and waiting lists for retirement homes are controlled by the homes themselves, not by the government. Admission usually depends on the ability to pay and absence of serious medical conditions that require professional nursing care. Residents are responsible for paying their own fees and government subsidies are not available for accommodation in a retirement residence.

Costs for Retirement Homes*

Type of Accommodation Provincial Median Provincial Range Regina Median Regina Range Saskatoon Median Saskatoon Range
Private Rooms(per month) $2,475 $1,500 – $5,500 $2,850 $1,800 – $5,500 $2,425 $1,600 – $4,000
1 Bedroom Suites (per month) $3,415 $1,580 – $4,170 $3,750 $3,500 – $4,100 $3,150 $1,580 – $4,042

*As reported in Long Term Care in Saskatchewan 2016

Government-Subsidized Nursing Homes**
Nursing homes or special care homes, as they are called in Saskatchewan, are residential long term care facilities that provide 24-hour professional nursing care and supervision for people who have complex care needs and can no longer be cared for in their own homes.

These facilities are owned and operated by municipalities, religiously affiliated organizations and private, for-profit organizations. However, nursing home fees are set by the Saskatchewan Ministry of Health.

Admissions to residential long term care facilities are managed by local Regional Health Authorities (RHAs). An intake coordinator or social worker from the RHA conducts an in-home assessment with clients and their families to assess care needs and program options, to coordinate access, explain fees and coordinate placement into long-term care facilities.

A report of the assessment is sent to the Regional Committee, who decides on acceptance. Clients who are eligible for access to a long term care bed generally access the first available bed in the system and then transfer to a facility of choice. A chronological wait list is maintained by the RHA to ensure fair and equitable access to a facility of choice.

Eligibility/Requirements for Admission 
To be eligible for subsidized care services, a client must:

  • Be a Canadian citizen or permanent resident over 18 years of age.
  • Require ongoing care (usually 24 hour care, seven days a week) due to age, disability, injury from accidents, or long-term illness.
  • Hold a valid Saskatchewan Health Services card, or be in the process of establishing permanent residence in Saskatchewan and have applied for a Saskatchewan Health Services card.

Income/Asset Test
The client’s income is assessed by Saskatchewan Health.  Income Tax returns of applicants are reviewed once the Regional Committee has approved the admission of the client into a nursing home. The client’s application is sent by the RHA to the nursing home, which in turn sends it to Saskatchewan Health for income assessment.

A resident pays the standard resident charge ($1,086 at July 1, 2017) plus 57.5% of the portion of their income between $1,413 and $4,200. For married residents, including common law couples, the couple’s income is combined, divided equally and then the above formula is applied.

The resident and spouse (if applicable) are required to provide:

  • The most recent year’s Notice of Assessment(s) from CRA, or
  • Pages 1 to 3 of Income Tax Return(s) upon admission and annually thereafter.

If income information is not provided, the resident charge will be assessed at the maximum rate.

A resident admitted for temporary care must pay the income-tested resident charge if their stay is more than 60 consecutive days.

Examples of resident charges at various income levels

Monthly Income Monthly Resident Charge
$1,413 $1,086 (minimum)
$2,000 $1,423
$2,500 $1,711
$3,500 $2,286
$4,200 $2,689 (maximum)

 

Married residents living in separate special care homes 
Married residents who live in separate dwellings for reasons beyond their control may choose to complete an Optional Designation Form.

  • With this designation, only the resident’s income is considered when calculating the charge.
  • Choosing this designation does not change a couple’s marital status.

Additional charges
In addition to the resident charge, there is an additional cost for prescriptions, medications, incontinence supplies, and certain medical and personal supplies and services.

There is also a $21.25 monthly supply charge for personal hygiene items, such as shampoo, conditioner, soap, denture cream, toothpaste, mouthwash, etc. This charge is adjusted annually based on increases to Old Age Security and Guaranteed Income Supplement benefits

** As reported in Special Care Homes

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Don’t be fooled by CRA’s record of your TFSA contribution room

September 21, 2017

Several months after my husband and I filed our 2016 income tax returns and got our refunds, we received identical ominous envelopes from CRA.  They contained Notices of Assessment reporting that each of us had over-contributed $5,500/month for the last five months of the year, resulting in a $28,201 over-contribution to our TFSA accounts. Yet further down on the notices, it said the contributions to each of our accounts in 2016 totaled only $10,859.79.

Upon reviewing our bank statements, it appeared that one contribution of $5,500 was made in early March and a second amount was transferred into each TFSA in August 2016. When my husband checked our CRA accounts online mid-year, they said we still had $5,500 of contribution room in each account, so he made the second deposits in August.

However, upon calling CRA for clarification, we learned that unlike online banking records which are updated daily, CRA only receives information once a year by January 1st when financial institutions are required to report TFSA transactions for the prior calendar year. Therefore, because we made contributions after January 1, 2016, when we checked later in the year, they were not reflected in the total TFSA contribution room that could be viewed on CRA’s My Account feature.

The good news is that the total excess TFSA amount of $28,201.05 recorded in the first part of the Notice of Assessment was incorrect due to a programming error which totaled the overpayment at the end of each month instead of recording it as one amount of $5,500 for the balance of the year.

However, the bad news is that we had to withdraw $5,500 from each of our TFSA accounts and each pay $298.11 taxes and penalties. The tax payable for excess contributions to a tax-free savings account is 1% per month, for any month in which there is an excess amount at any time in the month.  This means there will be a tax payable even if the excess amount is withdrawn in the same month in which it is contributed.

While we could have appealed the penalties because the over contribution was due to a genuine misunderstanding, we decided to just pay the amounts and learn from our experience.

So the moral of the story is it is important to track TFSA contributions yourself. There is no deadline for contributions to a TFSA, as the unused contribution room is carried forward into the next year.  However, a withdrawal in any year does not increase the TFSA room until the following calendar year.  Thus, if you are thinking of making a withdrawal close to year end, make sure it is done by December 31st, in order to have the withdrawal amount added back to the TFSA room sooner.

The history of annual limits for each year is shown in the table below. The first year that contributions could be made was 2009.  At the current rate of inflation, the TFSA contribution limit will increase to $6,000 per year in 2019.

Years TFSA Annual Limit Cumulative Total
2009-2012 $5,000 $20,000
2013 $5,500 $25,500
2014 $5,500 $31,000
2015 $10,000 $41,000
2016 $5,500 $46,500
2017 $5,500 $52,000

 

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

What if your tax return is late?

May 4, 2017

By Sheryl Smolkin

You left filing your 2016 income tax return to the last minute and a huge project came up at work. You look at the calendar and suddenly realize you have missed the May 1st deadline. Or you have been working outside Canada for several years and didn’t file a return because you thought you didn’t have to.

What happens if your tax return is late and what can you do about it? Here’s what the Canada Revenue Agency has to say:

Interest
If you have a balance owing , CRA charges compound daily interest starting May 1, 2017, on any unpaid amounts owing for 2016. This includes any balance owing if they reassess your return. In addition, they will charge you interest on the penalties starting the day after your return is due.

The rate of interest charged can change every three months. For the first quarter of 2017 the interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums was 5%. However, if you overpaid your personal taxes, the interest rate paid to you is 3%. See Prescribed interest rates.

If you have amounts owing from previous years, CRA will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.

Late-filing penalty
If you owe tax for 2016 and do not file your return for 2016 on time, CRA will charge you a late-filing penalty. The penalty is 5% of your 2016 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

If you were charged a late-filing penalty on your return for 2013, 2014, or 2015 your late-filing penalty for 2016 may be 10% of your 2016 balance owing, plus 2% of your 2016 balance owing for each full month your return is late, to a maximum of 20 months.

That’s why even if you cannot pay your full balance owing on or before April 30, 2017 you should have filed the return on time to avoid the late-filing penalty.

Repeated failure to report income penalty
If you failed to report an amount on your return for 2016 and you also failed to report an amount on your return for 2013, 2014, or 2015, you may have to pay a federal and provincial or territorial “repeated failure to report income penalty.” If you did not report an amount of income of $500 or more for a tax year, it will be considered a failure to report income.

The federal and provincial or territorial penalties are each equal to the lesser of:

  • 10% of the amount you failed to report on your return for 2016; and
  • 50% of the difference between the understated tax (and/or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to note on your return.

However, if you voluntarily tell CRA about an amount you failed to report, they may waive these penalties. For more information, see Voluntary Disclosures Program.

False statements or omissions penalty
In addition, you may have to pay a penalty if you, knowingly or under circumstances amounting to gross negligence, have made a false statement or omission on your 2016 return.

The penalty is equal to the greater of:

  • $100; and
  • 50% of the understated tax and/or the overstated credits related to the false statement or omission.

However, if you voluntarily tell CRA about an amount you failed to report and/or credits you overstated, they may also waive this penalty.

Cancel or waive penalties or interest
The CRA administers legislation, commonly called the taxpayer relief provisions, that gives them the  discretion to cancel or waive penalties or interest when taxpayers are unable to meet their tax obligations due to circumstances beyond their control.

The CRA’s discretion to grant relief is limited to any period that ended within 10 calendar years before the year in which a request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2017 must relate to a penalty for a tax year or fiscal period ending in 2007 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2017 must relate to interest that accrued in 2007 or later.

To make a request fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. For more information about relief from penalties or interest and how to submit your request, go to Taxpayer relief provisions.


April 24: Best from the blogosphere

April 24, 2017

By Sheryl Smolkin

It’s show time again! For your viewing pleasure, in this monthly feature we present links to a selection of personal finance videos.

For students who may be filing an income tax return for the first time (and there is still one week left), CRA offers a series of 10 short videos. For example, Segment 2: Do I have to file is geared towards helping Canadian students determine whether or not they need to file an income tax and benefit return.

Globe and Mail columnist Rob Carrick shares four steps for millennials to get started as  investors, including where to put savings for a home down payment and where not to invest  savings.

Preet Bannerjee, author of Stop Over-Thinking Your Money: The Five Simple Rules of Financial Success (Portfolio Penguin, 2014) offers five simple rules of financial success. Rule #1 is to “disaster-proof” your life.

And finally, a video from the Canada Deposit and Insurance Company interviews three couples about their financial hopes and dreams and ways that they are protecting their hard-earned money.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.