The End of 2019 Tax Filing is in Sight; So Are Tax Liabilities

The extended September 30 filing deadline hasn’t arrived yet. But, according to the most recent processing statistics from the CRA, there are still 2019 returns outstanding.  And, with this unusual tax season soon to be behind us, top-of-class tax and financial advisors must start immediately to help Canadians manage tax debts, maximize remaining social benefit payments and plan to reduce taxes payable in 2020. It’s a tall order.

First, to  this year’s tax filing statistics. According to the CRA 29,463,346 million 2019 tax returns were filed by September 8, compared to  30,346,932 2018 returns filed last year.  The average refund on just over 19 million returns was $1,846, while 6,071,570 returns had balances due averaging $6,133.  Those amounts must be paid by September 30 to avoid interest costs, at a compounding rate of 5% expected for the last quarter of this year (the prescribed interest rate plus 4%).

Action items to add to year end conversations between advisors and clients:

Non-filers will lose more: Aside from the late filing penalties and interest, non-filers after September 30 will lose access to the refundable and social benefits they may qualify for as low- and middle-income earners.  That is, these tax-free income sources will suddenly stop. Many families will not understand why.  Tax and financial advisors should be proactive in communicating this to their clients.

Worse, in fact, in some cases, families may be required to repay Canada Child Benefits or GST/HST credits, if 2019 net family income was higher than the 2018 income that the extended benefits paid from July to September was based on.

In addition, non-filers will miss out on the opportunity to increase their social benefits and credits, should family net income have dropped in 2019.  They will not have logged their 2019 RRSP contribution room, and they may have missed out on logging valuable carry over balances – capital and non-capital losses. 

And, with only 3 months left in 2020, there are tax efficient investments to make:  RRSP top-ups to reduce 2020 net income levels, for example.  This is critical to those age-eligible taxpayers with RRSP. room, who wish to keep all or most of their CERB and new Canada Recovery Benefits, their EI benefits and their OAS payments and maximize both refundable and non-refundable tax credits.  

Learn more about how to help with six financial planning conversations to initiate as the end of tax season closes in. Sign up for the Financial Fallout Course and September 30 Virtual CE Summit to earn up to 10 CE credits, and learn invaluable tools to assist your clients with the financial effects of an unprecedented year.