I know that most of you have filed your 2016 tax returns by now, and you have likely received your Notice of Assessment (NA) and perhaps a refund.
In a moment, we will talk about the info that your NA can provide, why you might not have received one, and some things you can do with your refund.
First, though, let’s look at some of the tax deadlines presented by the magic date of June 15.
For self-employed people, or anyone with self-employment income, June 15 is the deadline for filing your tax return. Many people in this situation still use April 30 as their deadline, because this is the date on which any income taxes owing must be paid.
I won’t be the one to point out to the Canada Revenue Agency that the mixture of these two gates does not actually make sense.
June 15 is also the due date for the second quarterly tax instalment.
Each year, Canadian Snowbirds have an obligation to file a form with the US government, if they have established a “substantial presence” in the US. The filing deadline is June 15 each year. The reason for filing IRS Form 8840 is to avoid a possible demand from the IRS to file a US tax return. I recommend doing this.
The current filing refers to the amount of time a person spent in the US in 2016, 2015 and 2014. If you spent more than 121 days in the US in each of those years, then this absolutely applies to you.
A Canadian has a “substantial presence” in the US by spending 31 days or more in the US in 2016 and a total of 183 days during 2016, 2015and 2014, counting all of the days of physical presence in 2016, one-third of the days of presence in 2015 and one-sixth the number of days in 2014.
So, what do you do if you have a “substantial presence” in the US? You avoid having to file an actual US tax return by filing Form 8840, the “Closer Connection Exception Statement for Aliens,” to show that you have a “closer connection” to Canada than to the US.
Form 8840 is on the IRS website at www.irs.gov/pub/irs-pdf/f8840.pdf
Notice of Assessment
After you file your income tax return in Canada, the CRA assesses it, decides whether they agree with you or not, and sends you your Notice of Assessment. These were radically improved in format and clarity starting in 2014, and have always been mailed in paper form.
However, this year many people will not receive a paper NA. Anyone who has registered for the CRA My Account online access service will simply receive an email alerting them to the presence of information in their online account. The person must then login to access the information.
The Notice provides some very valuable information, starting with telling you if your return was assessed as you filed. If not, it pays to determine if you made a mistake, or if CRA has. If you have failed to file a T-slip, make sure it doesn’t happen two years in a row. RRSP contribution room is also reported here, and carryforward items like unused capital losses. The Notice is a big part of educating yourself in your ongoing effort to minimize your taxes legally.
By the way, 87% of all personal returns filed up to last week were filed electronically.
Now, let’s talk about your tax refund. If you use it to make an RRSP contribution, then you will again reduce your taxes next year.
Paying off high interest, non-deductible debt may be another way to significantly improve your financial situation.
By all means, use some of it on yourself for immediate consumption, but please do me a favour, and use most of it in the best manner to improve your long-term prospects.
Now enjoy the gradually improving weather.
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIM is recipient of the FELLOW OF FPSCTM Distinction, a portfolio manager and senior advisor with Christianson Wealth Advisors, a Senior Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.