As we approach the tax filing season, many Canadians are eager to minimize their tax liability and ideally collect a tax refund. There are many deadlines and slips to gather to accurately report your taxes. Missing any can lead to under or over reporting income and further headaches. This blog will help summarize some of the key items to keep in mind this tax season.
The first thing is to mark down some important dates on your calendar.
RRSP Contribution Deadline
The deadline for you to contribute to a registered retirement savings plan (RRSP) that can be claimed as a 2023 tax deduction is February 29, 2024. For those that may be short on cash for their RRSP contribution, one option is to make an in-kind contribution of eligible securities from a non-registered account to your RRSP spousal RRSP. Just keep in mind that if those securities have unrealized gains, you will realize those gains upon contribution. Moreover, if the position is at a loss, you will not be able to claim that loss upon contribution.
If you would like to use your 2024 contribution room to maximize the time that your contribution can be invested in a tax-deferred manner, you will need to estimate your 2024 RRSP deduction limit. The official limit will not be verified until you receive your 2023 notice of assessment (NOA).
2023 Personal Tax Return Deadlines
April 30, 2024, is the last day to file your 2023 personal tax return without penalty, and if you are self-employed, this deadline is June 17, 2024.
Those clients that have had a resident status change during the year will also need to keep the following in mind:
Foreign Currency Tax Slips
If you receive a tax slip in a foreign currency, you will need to convert the amounts to Canadian dollars. For the conversion, you can reference the average annual exchange rates for various currencies as per the Bank of Canada, which is available online.
Non-resident tax on Canadian income trust unit and split-share corporations
Taxation for non-resident accounts holding Canadian income trust units and split-share corporations is deferred until the taxable breakdown for the units is determined at the end of the calendar year. A one-time charge for the full year is generated once the taxable nature of the trust’s distribution is determined, and the charge will be processed in April 2024.
Here are some other common tax slips and their descriptions.
T4 Slip - The main one that you’ve likely seen is your T4. Employers issue T4 slips to employees to report employment income, including salaries, wages, bonuses, and commissions, as well as deductions for taxes, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.
T4A Slip - T4A slips are issued for various types of income outside of employment, such as pensions, annuities, retirement income, and certain types of scholarships, bursaries, and grants. For example, a RESP beneficiary will receive a T4A for EAP (Educational Assistant Payments) and /or an accumulated Income payment.
T5 Slip - T5 slips are issued to mainly report investment incomes earned on investments held in stocks, bonds, mutual funds or interest on credit balances during the calendar year.
T3 Slip - T3 slips are provided to report income from trusts, including income distributions from mutual funds, real estate investment trusts (REITs), ETFs and other investment funds.
T5013 Slip - Partnerships issue T5013 slips to report income, deductions, and other tax information for each partner in a limited partnership.
RRSP Contribution Receipt - These receipts will report the amount you have contributed to your RRSP in any given year.
T4RSP/T4RIF - Individuals who withdraw funds from their Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) receive T4RSP or T4RIF slips to report the amount withdrawn as income.
T4FHSA - New for 2023 tax year, this slip will report the amount you have contributed to your FHSA in any given year.
T2202A - Educational institutions issue T2202A slips to students for tuition, education, and textbook amounts that are eligible for tax credits.
T5008 - This slip is used to report the sale of securities, such as stocks, bonds, mutual funds, and options, within non-registered investment accounts.
The tax slips above will be sent to you by your financial institutions, either virtually or by mail depending on the selections you’ve made.
Tax reporting is the final step of your year-round efforts, and keeping mind of the points above can ensure that nothing falls through the cracks. Should you or your accountant have any questions or would like assistance in generating a summary report of investment income and net gains, please contact your investment advisor.