Mark Your Calendar: Critical Deadlines for May and June

Tax season never truly ends, it seems, as there are many more upcoming tax filing, investment planning and education milestones to discuss with your clients over the next six months. Check out our handy checklist below and then test yourself – what are the conversation openers you’ll use and with which clients? It’s your opportunity to shine with every member of the household:

CRA reports that of the 24.5 million returns they have received as of May 31, 15.9 million were filed using EFILE, NETFILE, or TELEFILE, compared to 15.2 million last year. Paper filing continues to decrease in popularityójust over 8.5 million returns were filed on paper so far, compared to 9.1 million at the same time last year. Convenience is a big factor, and so is speed of deposit, especially during a postal strike. This is the subject of Evelyn Jacks' blog this week. Here are the figures: 2011 filing season statistics as of May 31, 2011   2010 2011 Change Returns received 24,365,078 24,512,273 0.60% Paper 9,132,581 8,569,627 -6.16% NETFILE 4,741,021 5,025,772 6.01% TELEFILE 387,694 353,482 -8.82% EFILE 10,103,782 10,563,392 4.55% A complete list of electronic options for individuals, businesses and tax preparers may be found by checking out Canada Revenue Agency E-Services. ADDITIONAL EDUCATIONAL RESOURCES: Master Your Taxes

In difficult times, activity concerning bankruptcies, consumer proposals and debt restructuring increases. If interest is, or would be, deductible to the debtor, then a debt is considered to be commercial in nature. When commercial debt is forgiven, the forgiven amount is given special tax treatment. CRA has recently updated two of its tax forms that deal with commercial debt. The debt forgiveness rules are summarized by CRA on form T2154 Application of Designated Forgiven Debt Under Section 80. In essence, when a commercial debt is settled for less than its principal amount, the forgiven amount must be applied to reduce any losses that have been carried forward. Any amount remaining may be applied to reduce other amounts such as capital cost, cumulative eligible capital and adjusted cost bases of capital properties. If not designated, any unapplied forgiven amount will be included in income. The forms that have just been updated are: 1. T2153 Designations with Respect to Forgiven Debt Under Paragraph 80(2)1 When you as the debtor settle more than one commercial obligation at the same time, use this form to designate the order the obligations were settled under the debt forgiveness rules. If the order is not designated then CRA will make the choice for you. 2. T2155 Alternative Treatment of Capital Gains Arising Under Section 80.03 on Settlement of Debt When you as the debtor surrender certain capital properties you will be considered to have a capital gain from the disposition at that time. You can treat the capital gain as a forgiven amount for the purposes of the debt forgiveness rules. You have to designate the amount using this form, and file it with your income tax return for the tax year when the disposition occurred. There are maximum amounts of designated forgiven debt allowed. Another form, T2156 Transfer Agreement for Transferer of Forgiven Debt Under Section 80.04, allows the debtor to transfer unapplied forgiven amounts to an eligible transferee, as agreed by both parties. An eligible transferee is a corporation or partnership to which the debtor is related. These debt forgiveness rules from Section 80 of the Income Tax Act are explained in greater detail in EverGreen Explanatory Notes. The rules are complex, so please consult a tax professional for advice and guidance. Planning and preparation will improve any situation when there are difficult decisions to be made. ADDITIONAL EDUCATIONAL RESOURCES:  Debt and Cash Flow Management - pre-order now!  

Revised payroll deduction tables are now available from CRA for use by HR departments, bookkeepers and payroll clerks, who will want to ensure, at the same time that they distribute staff memos, that they highlight any changes to the rules and encourage employees to make adjustments to their TD1 Tax Credit returns. The federal payroll deductions have not changed since January, 2011, but the provinces of Manitoba, Nova Scotia and Saskatchewan have made adjustments effective July 1, 2011. Make sure that you use the updated TD1 forms for new hires in these provinces after July 1st. Even though the changes have not been legislated into law, CRA recommends that the new payroll formulas be used to calculate withholding tax beginning with the first payroll in July. The new provincial amounts and formulas, once they become law, will be retroactive to July 1, 2011. Form T1213 Request for Reduction in Tax Deductions at Source may be used for any deductions or non-refundable tax credits that are not part of the TD1.   ADDITIONAL EDUCATIONAL RESOURCES:  Advanced Payroll for Professional Bookkeepers   

The Bank of Canada summarized exchange rates for the first week of June in its most recent Weekly Financial Statistics. The Canadian dollar effective exchange rate index (CERI) continues to hold at approximately 1.21. The CERI has replaced the C-6 index as the Bank of Canada's new measure of the value of the Canadian dollar compared to the currencies of its most important trading partners. June 8th saw the Canadian dollar valued at $1.0207 against the U.S. greenback, $1.4266 as compared to the Euro, $1.6020 for 1 British pound, $1.1687 Swiss francs and 0.012240 as measured in Japanese Yen. ADDITIONAL EDUCATIONAL RESOURCES: Elements of Real Wealth Management

Interest rates for the third calendar quarter have been announced by Canada Revenue Agency and there are no changes from the previous quarter. These prescribed annual interest rates will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from July1, 2011 to September 30,2011. The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%. The interest rate to be paid on corporate taxpayers overpayments will be 1%. The interest rate to be paid on non corporate taxpayers overpayments will be 3%. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%. The interest rates on overdue and overpaid remittances are as follows: Tax, duty, or other charges Overdue remittances Overpaid remittances Corporate taxpayers Non corporate taxpayers Goods and Services Tax (GST) 5% 1% 3% Harmonized Sales Tax (HST) 5% 1% 3% Air Travellers Security Charge 5% 1% 3% Excise Tax (non GST/HST 5% 1% 3% Excise Duty (except brewer licensees) 5% 1% 3% Excise Duty (brewer licensees) 3% N/A N/A Softwood Lumber Products Export Charge 5% 1% 3% Old Age Security and Canada Pension Plan rates for the third quarter are not yet available ñ stay tuned! ADDITIONAL EDUCATIONAL RESOURES: Essential Tax Facts: 2012 Edition

The federal budget reintroduced on June 6 contains important and interesting measures that address issues as diverse as mandatory retirement and new EI provisions, all of which need to be discussed with business owners. As the T1 tax filing season is officially over for proprietorships on midnight June 15, be sure to set up time to discuss these provisions and their impact on both small and larger businesses before the summer hiatus: For Business Owners: Budget 2011 announces a two year extension of the temporary accelerated capital cost allowance treatment for investment in machinery and equipment in the manufacturing and processing sector. Funding of $20 million over two years has been announced for The Canadian Youth Business Foundation to assist young entrepreneurs through mentorship, learning resources and start-up financing. BizPal is a free online service that allows small business owners to create a tailored list of permits and licenses that are required from all levels of government to operate their specific business. Budget 2011 provides $3 million per year to make BizPal permanent and allow the program to upgrade its technology infrastructure.  Hiring credit for small business ñ this is a temporary hiring credit of up to $1000 in increased EI premiums from 2010 to 2011 due to new hires. This is limited to employers whose total annual EI premiums in 2010 were $10,000 or lower. For Employees: Changes to EI benefits:Work-sharing program extended to October, 2011 ñ this offers EI benefits to workers who are willing to reduce their hours in order to accommodate employers who otherwise would have to layoff staff. The Extra 5 Weeks EI pilot is renewed until 2012. Working While on Claim renewed until August, 2012 ñ this allows increased earnings while receiving EI benefits.  Best 14 Weeks Project renewed until June 2012 ñ this allows EI recipients in 25 high unemployment regions to have EI benefits calculated on the highest 14 weeks of earnings in the year preceding the claim. Targeted Initiative for Older Workers ñ supports unemployed older workers in vulnerable communities with training and employment programs in order to secure new employment. The Wage Earner Protection Program (WEPP) provides compensation of up to $3,400 in 2011 to workers for unpaid wages, vacation pay, severance and termination pay earned in the six months preceding an employer bankruptcy or receivership. WEPP is being extended to cover workers for whom their former employer's attempted restructuring takes longer than six months and does not end successfully. Mandatory retirement - The Government proposes to introduce amendments to the Canadian Human Rights Act and the Canada Labour Code to prohibit federally regulated employers from setting a mandatory retirement age unless there is a bona fide occupational requirement. This would allow Canadians to choose how long they wish to remain activein the labour force. For Consumers: Unsolicited credit card cheques will be banned ñ these often arrive in the mail with low introductory rates designed to encourage additional indebtedness. The terms and conditions for prepaid gift cards will be investigated and monitored in order to protect consumers. The government will introduce legislation that will formalize mortgage insurance arrangements with CMHC and private mortgage insurers in order to strengthen oversight of the mortgage industry. For more information, consult EverGreen Explanatory Notes as new legislation is introduced! ADDITIONAL EDUCATIONAL RESOURCES: FINDEPENDENCE DAY