The Canadian and United States (U.S.) governments have introduced a number of measures to help alleviate financial hardship for Canadian resident and U.S. taxpayers brought on by COVID-19. Both countries have introduced measures to postpone certain tax filings and in some cases, payment deadlines. While these extensions may come as a relief during this stressful time, you may want to consider filing as early as possible if you are expecting a tax refund. Further, if you are entitled to the Canada Child Benefit and/or the GST credit, the Canadian government encourages you to not delay your tax filings so that your 2020-2021 benefits are properly determined.
Proposed temporary reduction of RRIF minimum withdrawals
The Canadian government has announced a proposal to reduce Registered Retirement Income Fund (RRIF) minimum withdrawals by 25% only for 2020. Your RRIF minimum payment for each year, after the year your RRIF is established, is calculated by multiplying the fair market value (FMV) of your RRIF at the end of the previous year by a prescribed percentage factor. The prescribed percentage depends on your age or your spouse’s or common-law partner’s age (if applicable) at the end of the previous year (depending on whose age you elected at the time
the RRIF was established).
Note it is possible to take a RRIF payment by transferring investments in-kind from your RRIF directly into your non-registered account. It is not necessary for your RRIF investments to mature or to be liquidated before you transfer them.
The reduction in minimum payment will apply to individuals receiving variable benefit payments under a defined contribution registered pension plan. As locked-in plans are subject to the same tax legislation as regular registered plans (such as RRIFs), the proposed legislation will also apply to life income funds (LIFs) and prescribed registered retirement income funds (prescribed RRIFs). A LIF or prescribed RRIF is similar to a RRIF to the extent that an individual must receive at least the annual minimum payment from the plan.
Additional details on how this change is to be administered should be included in draft legislation which is expected to be released shortly.
Canadian tax deadlines (other than Quebec)
The following table summarizes various 2019 tax filing deadlines:
Currently, the government has not commented with respect to the extension of partnership filing deadlines. It should also be noted that the government’s extension of the trust income tax return filing deadline to May 1 may mean that trust beneficiaries and unit holders will have to delay filing their tax returns until they receive their T3 tax slips.
Payment of taxes
The Canada Revenue Agency will allow all taxpayers, including individuals, trusts, and corporations, to defer the payment of any income tax amounts and tax instalments that may become owing on or after March 18, 2020 and before September 2020 until September 1, 2020. For example, personal income taxes that would normally need to be paid by April 30, can be delayed until September 1, 2020. As well, any personal tax instalment payment that would normally need to be made by June 15, 2020 can be made as late as September 1, 2020.
US individual federal tax returns filing deadline and payment of taxes
If you are a U.S. person (U.S. citizen or green card holder) living in Canada, you may still have U.S. tax obligations. Normally, you must file your U.S. federal income tax return by April 15. The U.S. government is extending the 2019 income tax filing deadline to July 15, 2020. Note, if you reside outside the U.S. on April 15 and your main place of business or employment is outside the U.S., the filing deadline is automatically extended to June 15. At the time of writing this article, we do not know if this tax filing deadline for these individuals will also be extended to July 15. You may also be able to request an additional extension to file your U.S. income tax return by October 15.
Regardless of your filing deadline date, any U.S. federal tax owed must normally be paid by April 15. The U.S. government is extending the federal tax payment deadline on up to $1 million dollars in taxes to July 15, 2020.
If you are subject to U.S. state tax, you will need to check
with your state to see if there are any extensions.
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This article may contain strategies, not all of which will apply to your particular financial circumstances. The information in this article is not intended to provide legal, tax or insurance advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified tax, legal and/or insurance advisor before acting on any of the information in this article.