New measures to assist Canadians during COVID-19

December 04, 2023 | Metkel Kebede


Share

RRIF minimum payment proposed to be reduced by 25% for 2020 and income tax filing and payment extensions

RRIF minimum payment proposed to be reduced by 25% for 2020 and income tax filing and payment extensions

 

Both 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.

 

Canadian tax deadlines (other than Quebec)

 

The following table summarizes various 2019 tax filing deadlines :

 

 

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.